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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 1, 1999
REGISTRATION NO. 333-71369
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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SAGENT TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7372 94-3225290
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(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
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800 W. EL CAMINO REAL, SUITE 300
MOUNTAIN VIEW, CA 94040
(650) 815-3100
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
KENNETH C. GARDNER
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SAGENT TECHNOLOGY, INC.
800 W. EL CAMINO REAL, SUITE 300
MOUNTAIN VIEW, CA 94040
(650) 815-3100
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
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COPIES TO:
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ARTHUR F. SCHNEIDERMAN THERESE A. MROZEK
HERBERT P. FOCKLER NORA L. GIBSON
STEPHEN E. KIM DAVID A. MAKARECHIAN
PATRICK S. CHUNG KIMBERLEY E. HENNINGSEN
WILSON SONSINI GOODRICH & ROSATI BROBECK, PHLEGER & HARRISON LLP
PROFESSIONAL CORPORATION TWO EMBARCADERO PLACE
650 PAGE MILL ROAD 2200 GENG ROAD
PALO ALTO, CA 94304 PALO ALTO, CA 94303
(650) 493-9300 (650) 424-0160
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
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Common stock, $0.001 par value..... 5,750,000 $9.00 $51,750,000 $14,387(2)
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(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o).
(2) Previously paid.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE> 2
SUBJECT TO COMPLETION -- APRIL 1, 1999
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PROSPECTUS
, 1999 LOGO
5,000,000 SHARES OF COMMON STOCK
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SAGENT TECHNOLOGY, INC.:
- - We develop and sell software designed to address organizations' rapidly
growing, Web-based information access, analysis and delivery needs.
- - Sagent Technology, Inc.
800 W. El Camino Real
Suite 300
Mountain View, CA 94040
(650) 815-3100
TRADING SYMBOL & MARKET:
- - SGNT/NASDAQ
THE OFFERING:
- - We are offering 5,000,000 shares of our common stock.
- - The underwriters have an option to purchase an additional 750,000 shares from
us to cover over-allotments.
- - This is our initial public offering, and no public market currently exists for
our shares. We anticipate that the initial public offering price will be
between $7.00 and $9.00.
- - We plan to use the proceeds from this offering for working capital, potential
acquisitions, repayment of long-term indebtedness and other general corporate
purposes.
- - Closing: , 1999.
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Per Share Total
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Public offering price: $ $
Underwriting fees:
Proceeds to Sagent:
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THIS INVESTMENT INVOLVES RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 6.
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Neither the Securities and Exchange Commission nor any state securities
commission
has approved or disapproved of these securities or determined if this prospectus
is
truthful or complete. Any representation to the contrary is a criminal offense.
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DONALDSON, LUFKIN & JENRETTE
HAMBRECHT & QUIST
U.S. BANCORP PIPER JAFFRAY
The undersigned is facilitating Internet distribution.
DLJDIRECT INC.
WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY U.S. FEDERAL SECURITIES LAW TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
<PAGE> 3
TABLE OF CONTENTS
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Page
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Prospectus Summary............... 3
Risk Factors..................... 6
Use of Proceeds.................. 16
Dividend Policy.................. 16
Corporate Information............ 16
Capitalization................... 17
Dilution......................... 18
Selected Consolidated Financial
Data........................... 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...... 20
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Page
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Business......................... 30
Management....................... 44
Certain Transactions............. 53
Principal Stockholders........... 57
Description of Capital Stock..... 60
Shares Eligible for Future
Sale........................... 63
Underwriting..................... 65
Legal Matters.................... 67
Experts.......................... 67
Available Information............ 68
Index to Financial Statements.... F-1
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<PAGE> 4
PROSPECTUS SUMMARY
This summary highlights only selected information contained elsewhere in
this prospectus. The other information is important, so please read this entire
prospectus carefully. Unless stated otherwise, the information contained in this
prospectus assumes that the underwriters' over-allotment option to purchase an
additional 750,000 shares of common stock from us is not exercised.
SAGENT TECHNOLOGY, INC.
We develop, market and support software products that gather, analyze, and
deliver information throughout an organization. Our products provide a way for
an organization's employees, customers and partners to access and examine
important corporate information using the World Wide Web. We refer to our
products as "Enterprise Intelligence" software because they enable organizations
to use software to help them make more informed, intelligent decisions and to
spread that ability across the enterprise.
Today, information about an organization's customers, products and
operations is one of its most important strategic assets. In particular, as
organizations have begun to pursue more complex operational strategies, their
need for timely information has increased. In addition, as businesses continue
to streamline their organizational structures to improve time to market and
responsiveness to rapidly changing market conditions, decision making authority
is expected to become more distributed, thus heightening the need for broader
dissemination of information throughout the enterprise. Most recently, the rapid
adoption of the Internet and the Web has given organizations the ability to
share information internally and externally on a cost-effective basis and has
dramatically increased the number of people who can receive and access
information.
Our main product, the Sagent Data Mart Solution, or DMS product suite,
gathers data from a variety of sources, such as relational databases, mainframe
databases, and the Internet, and organizes that data into a common structure or
repository known as a data mart. A data mart is used to more efficiently manage
a subset of corporate data focused on the needs of a specific group of users.
Once data is organized into our data mart, the Sagent DMS product suite allows
organizations to more efficiently analyze the data and provides access to the
information through personal computers, reports, and, importantly, through Web
browsers over the Internet. We also provide design, systems engineering and
education services to facilitate successful customer implementations.
Customers purchase the Sagent DMS product suite for three primary reasons.
First, it combines in one integrated product key functions that a customer
requires, such as extracting information from multiple data sources. This saves
time and money otherwise spent combining many different products from many
different vendors. Second, the Sagent DMS product suite can handle a very large
number of users and a very large amount of data. This allows our Sagent DMS
product suite to scale to the increasing numbers of employees or customers who
need access to information from inside organizations or through the Internet.
Third, the Sagent DMS product suite is designed for the Internet. Sagent has
invested significant resources in technology to rapidly distribute information
over the Web.
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We intend to be a leading provider of Enterprise Intelligence software
solutions. Key elements of our strategy include:
- Focusing on the demand for Web-based Enterprise Intelligence solutions
- Extending our product functionality and technology leadership
- Offering pre-built Enterprise Intelligence applications for specific
industries
- Providing high quality services to our customers through our Professional
Services Group
- Continuing development of products that leverage Microsoft's Windows NT
computer technology
We currently have more than 200 customers worldwide in a variety of
industries, including financial services, telecommunications, technology, health
care, retail and others. Our customers include Barnesandnoble.com, Bell
Communications Research, Inc., BellSouth Cellular Corp., J.P. Morgan & Co.,
Incorporated, Jiffy Lube International, Inc., MCI WorldCom, Inc., and Nordstrom,
Inc. We market our software and services through our direct sales force, and
through resellers and international distributors. We also sell our software
through strategic partnerships with Automatic Data Processing, Inc., Advent
Software Inc. and Siebel Systems, Inc., each of which has integrated our product
suite into its software applications.
THE OFFERING
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Common stock offered by us............ 5,000,000 shares
Common stock to be outstanding after
the offering........................ 23,669,377 shares
Use of proceeds....................... Working capital, potential
acquisitions, repayment of long term
indebtedness and other general
corporate purposes.
Nasdaq National Market symbol......... SGNT
</TABLE>
This table is based on shares outstanding as of December 31, 1998. This
table excludes:
- 5,134,835 shares of our common stock that have been set aside under our
stock option plans, director option plan and employee stock purchase plan
- 235,623 shares of our common stock that have been set aside in connection
with warrants to purchase common stock
4
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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
You should read the following summary consolidated financial data together
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our Consolidated Financial Statements and Notes thereto included
elsewhere in this prospectus.
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THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, DECEMBER 31,
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1996 1997 1998 1997 1998
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STATEMENT OF OPERATIONS DATA:
Revenues, net:
Licenses................................ $ 240 $ 5,728 $ 10,459 $ 1,842 $ 3,618
Services................................ 39 1,350 6,584 583 2,128
------- ------- -------- ------- -------
Total revenues, net................... 279 7,078 17,043 2,425 5,746
Gross profit............................... 32 6,205 11,977 1,957 4,385
Loss from operations....................... (7,231) (6,908) (13,684) (2,235) (1,943)
Net loss................................... $(7,039) $(6,900) $(13,701) $(2,214) $(1,988)
Historical basic net loss per share........ $ (2.67) $ (2.41) $ (3.47)
======= ======= ========
Historical diluted net loss per share...... $ (2.67) $ (2.41) $ (3.68)
======= ======= ========
Number of shares used in calculation at
historical basic net loss per share..... 2,637 2,860 3,951
Number of shares used in calculation of
historical diluted net loss per share... 2,637 2,860 3,722
Pro forma net loss per share, basic........ $ (0.74)
========
Pro forma net loss per share, diluted...... $ (0.75)
========
Shares used in calculation of pro forma net
loss per share, basic................... 18,495
Shares used in calculation of net loss per
share, diluted.......................... 18,266
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AS OF DECEMBER 31, 1998
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED
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BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 3,093 $ 37,843
Working capital........................................... 1,122 35,872
Total assets.............................................. 13,196 47,946
Long-term obligations, net of current portion............. 3,346 1,596
Total stockholders' equity................................ 1,671 38,171
</TABLE>
See Note 2 of Notes to Consolidated Financial Statements for information
concerning the calculation of shares used in computing pro forma net loss per
share.
Pro forma as adjusted reflects the conversion of our outstanding preferred
stock to common stock, which will occur upon the closing of the offering, the
sale of 5,000,000 shares of common stock in the offering and the application of
the net proceeds from the offering, after deducting underwriting discounts and
commissions and estimated offering expenses. See "Use of Proceeds" and
"Capitalization."
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RISK FACTORS
Before you invest in our common stock, you should become aware of various
risks, including those described below. You should carefully consider these risk
factors, together with all of the other information included in this prospectus,
before you decide whether to purchase shares of our common stock. The risks set
out below may not be exhaustive.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE OUR OPERATING HISTORY IS LIMITED
It is difficult to evaluate our business and our prospects because our
revenue and income potential is unproven. We commenced operations in June 1995
but we did not begin selling our first products until the fourth quarter of
1996, and a number of new products and new versions of existing products were
introduced in 1997. As a result, we have experienced the risks and difficulties
frequently encountered by early stage companies, particularly companies in new
and rapidly evolving markets.
WE HAVE INCURRED LOSSES SINCE INCEPTION AND WE MAY NOT BE ABLE TO ACHIEVE
PROFITABILITY
We incurred net losses and losses from operations for the period ended
December 31, 1995 and each of the years ended December 31, 1996, 1997 and 1998,
and we may not be able to achieve profitability in the future. As of December
31, 1998, we had an accumulated deficit of approximately $28.6 million. Since
inception, we have funded our business primarily by borrowing funds and from the
sale of our stock, not from cash generated by our business. Although revenues
grew significantly in recent periods, you should not rely on past performance as
any indication of future growth rates or operating results. We expect to
continue to incur significant sales and marketing, research and development and
general and administrative expenses. As a result, we may experience losses and
negative cash flows. If we do achieve profitability, we may not be able to
sustain or increase profitability on a quarterly or annual basis in the future.
OUR FUTURE OPERATING RESULTS MAY NOT FOLLOW PAST TRENDS DUE TO MANY FACTORS AND
ANY OF THESE COULD CAUSE OUR STOCK PRICE TO FALL
We believe that quarter-to-quarter comparisons of our operating results are
not a good indication of future performance. Although our operating results have
generally improved from quarter to quarter in the past, our future operating
results may not follow any past trends. It is likely that in some future quarter
our operating results may be below the expectation of public market analysts and
investors due to factors beyond our control, and as a result, the price of our
common stock may fall.
Factors which may cause our future operating results to be below
expectations and cause our stock price to fall include:
- The demand for and acceptance of our products, product enhancements and
services
- The maintenance and development of our strategic relationships with
enterprise application vendors, resellers and distributors
- The introduction, timing and competitive pricing of our products and
services and those of our competitors
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<PAGE> 8
- The expansion and rate of success of our direct sales force and indirect
distribution channels both domestically and internationally
- The attraction and retention of key personnel, particularly in our sales,
services and support groups
- The commercialization of our products incorporating advanced technologies
- The growth of the market for Enterprise Intelligence solutions
- The timing and successful integration of and costs related to
technologies and businesses we may acquire in the future
We plan to significantly increase our operating expenses to expand our
administration, consulting and training, maintenance and technical support,
research and development and sales and marketing groups. Our operating expenses
are based on our expectations of future revenues and are relatively fixed in the
short term. If revenues fall below our expectations in any quarter and we are
not able to quickly reduce our spending in response, our operating results would
be lower than expected and our stock price may fall.
WE MAY LOSE EXISTING CUSTOMERS OR BE UNABLE TO ATTRACT NEW CUSTOMERS IF WE DO
NOT DEVELOP NEW PRODUCTS
If we are not able to maintain and improve our product line and develop new
products that keep pace with competitive product introductions and technological
developments, satisfy diverse and evolving customer requirements and achieve
market acceptance, we may lose existing customers or be unable to attract new
customers. For example, we are developing the next version of the Sagent DMS
product suite, which is scheduled for release in the first half of 1999. We may
not be successful in developing and marketing this new version, other product
enhancements or new products that respond to technological advances by others on
a timely or cost-effective basis, or that these products, if developed, will
achieve market acceptance.
We have experienced delays in releasing new products and product
enhancements and may experience similar delays in the future. These delays or
problems in the installation or implementation of our new releases may cause
customers to forego purchases of our products to purchase those of our
competitors.
CHANGES IN INTERNET TECHNOLOGY AND OPERATING SYSTEM STANDARDS MAY IMPEDE MARKET
ACCEPTANCE FOR OUR PRODUCTS
Rapidly changing Internet technology and operating system standards may
impede market acceptance for our products. We have a software application known
as WebLink that allows users to query, analyze and report business information
from a Web browser. This product has been designed based upon prevailing
Internet technology. If new Web technologies emerge that are incompatible with
deployment of our WebLink applications, our WebLink product may become obsolete
and existing and potential new customers may seek alternatives to our products.
We may not be able to quickly adapt our products to any new Internet technology.
Additionally, our products allow connectivity to databases on a variety of
operating systems, including mainframes, AS/400, UNIX and Windows NT. However,
our application server component currently runs only on the Windows NT operating
system. Therefore, our ability to increase sales of our products will depend on
the continued acceptance of the Windows NT operating system. To the extent that
potential customers use UNIX operating systems as their application server, we
would need to
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develop a UNIX product. The development of a UNIX product would require us to
commit a substantial investment of resources, and we may not successfully
introduce such a product on a timely or cost-effective basis, or at all, which
could lead potential customers to choose alternatives to our products.
THE GROWTH OF OUR BUSINESS DEPENDS ON THE GROWTH OF THE MARKET FOR ENTERPRISE
INTELLIGENCE SOFTWARE
Since all of our revenues are attributable to the sale of Enterprise
Intelligence software and related maintenance, consulting and training services,
if the market for Enterprise Intelligence software does not grow, our business
will not grow. We expect Enterprise Intelligence software and services to
account for substantially all of our revenues for the foreseeable future.
Although demand for Enterprise Intelligence software has grown in recent years,
the market may not continue to grow or, even if the market does grow, businesses
may not adopt our products.
We are focusing our selling efforts on large, enterprise-wide
implementations of our products, and we expect such sales to constitute an
increasing portion of any future revenue growth. While we have devoted
significant resources to promoting market awareness of our products and the
problems such products address, we do not know whether these efforts will be
sufficient to support significant growth in the market for Enterprise
Intelligence products.
IF OUR RELATIONSHIPS WITH CHANNEL PARTNERS ARE NOT SUCCESSFUL AND IF WE CANNOT
RECRUIT ADDITIONAL CHANNEL PARTNERS WE MAY NOT BE ABLE TO EXPAND OUR SALES
In addition to our direct sales force, we rely on successful relationships
with a variety of channel partners, such as enterprise application vendors,
resellers and distributors, for licensing and support of our products in the
United States and internationally. If we cannot maintain successful
relationships with these partners and cannot recruit additional strategic
partners, we believe that we will have difficulty expanding the sales of our
products. Our enterprise application vendor partners resell our products
incorporated in their own software application. In addition, our channel
partners offer products of several different companies, including, in some
cases, products that compete with our products. These strategic partners may not
develop or customize our applications to their needs or devote adequate
resources to selling our products.
We intend to expand our relationships with strategic partners and to
increase the proportion of our customers licensed through these indirect
channels. We may not be able to maintain strategic partnerships and attract
additional strategic partners that will market our products effectively and will
be qualified to provide timely and cost-effective customer support and service.
Further, our relationships with our strategic partners may not generate enough
royalty revenue to offset the significant resources used to develop these
channels. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Sales and Marketing."
WE NEED TO EXPAND OUR MANAGEMENT SYSTEMS AND CONTROLS TO SUPPORT OUR ANTICIPATED
GROWTH
Our growth has placed, and our anticipated future growth will continue to
place, a significant strain on our management systems and controls. If we cannot
effectively
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establish and improve our processes we may not be able to manage our growth
successfully or sustain and manage the growth rates we have experienced in the
past.
We have grown rapidly and will need to continue to grow in all areas of
operation in order to execute our business strategy. Our total number of
employees grew from 87 on December 31, 1997 to 152 on December 31, 1998, and we
anticipate further significant increases in the number of employees. Sustaining
our growth has placed significant demands on management as well as on our
administrative, operational and financial resources and controls. In particular,
we need to substantially upgrade our enterprise resource planning functions,
including accounting, order entry and customer entry, which will become
insufficient as we grow. We also will need to institute new systems such as
human resource management and time and billing. See "Business -- Sales and
Marketing."
WE INTEND TO EXPAND INTERNATIONAL OPERATIONS BUT WE MAY ENCOUNTER A NUMBER OF
PROBLEMS IN DOING SO WHICH COULD LIMIT OUR FUTURE GROWTH
We may not be able to successfully market, sell, deliver and support our
products and services internationally. Our failure to manage our international
operations effectively could limit the future growth of our business.
International sales represented approximately 8.4% of our total revenue for the
year ended December 31, 1998. We conduct our international sales through local
subsidiaries in Japan and Canada and through distributor relationships in
France, Germany, Japan, South Africa and the United Kingdom. The expansion of
our existing international operations and entry into additional international
markets will require significant management attention and financial resources to
open additional international offices and hire international sales personnel.
Localizing our products is difficult and may take longer than we anticipate due
to difficulties in translation and delays we may experience in recruiting and
training international staff. In addition, we currently have limited experience
in developing local versions of our products, as well as marketing, selling and
supporting our products and services as overseas. See "Business -- Sales and
Marketing."
OUR MARKETS ARE HIGHLY COMPETITIVE AND COMPETITION COULD HARM OUR ABILITY TO
SELL PRODUCTS AND SERVICES AND REDUCE OUR MARKET SHARE
Competition could seriously harm our ability to sell additional software
and maintenance and support renewals on prices and terms favorable to us.
Additionally, if we cannot compete effectively, we may lose market share. The
markets for our products are intensely competitive and subject to rapidly
changing technology. We compete against providers of decision support software,
data warehousing software and enterprise application software. We also compete
with providers of e-Business software, which allows for the electronic delivery
of products and services that enable commerce among businesses and end users.
Companies in each of these areas may expand their technologies or acquire
companies to support greater Enterprise Intelligence functionality and
capability, particularly in the areas of query response time and the ability to
support large numbers of users. We may also face competition from vendors of
products and turn-key solutions for e-Business applications that include
Internet based information functionality.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing or other resources, or greater name
recognition than we do. Our
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competitors may be able to respond more quickly than we can to new or emerging
technologies and changes in customer requirements. See
"Business -- Competition."
OUR OPERATING RESULTS MAY VARY SIGNIFICANTLY DUE TO OUR LENGTHY SALES AND
IMPLEMENTATION CYCLES FOR OUR PRODUCTS WHICH COULD CAUSE OUR STOCK PRICE TO FALL
Because our products and services have lengthy sales and implementation
cycles, it is difficult for us to forecast the timing and recognition of
revenues from sales of our products and services. Since we are unable to control
many of the factors that will influence our customers' buying decisions, the
lengthy sales cycle could cause our operating results to be below the
expectations of analysts and investors, which could cause our stock price to
fall.
A key element of our strategy is to market our products and services to
large organizations with significant data management and access needs. These
customers take an extended time evaluating our products before purchasing them.
The period of time between initial customer contact and a purchase order may
span six months or more. Our products have had, and we expect them to continue
to have, an even longer sales cycle in international markets than in the United
States and Canada. During the evaluation period, a variety of factors may lead
customers to not purchase or scale down orders of our products including:
- Reductions in demand for Enterprise Intelligence solutions
- Introduction of new products by competitors or pricing pressures
- Changes in our customers' budgets and purchasing priorities
- Diversion of resources and management's attention to other information
technology issues, such as year 2000 issues
In addition, we often must provide a significant level of education to our
prospective customers regarding the use and benefit of our products, which may
cause additional delays during the evaluation and acceptance process. See
"Business -- Sales and Marketing."
OUR EXECUTIVE OFFICERS AND KEY PERSONNEL ARE CRITICAL TO OUR BUSINESS AND THESE
OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH US IN THE FUTURE
Our future success depends upon the continued service of our executive
officers and other key employees as well as our ability to hire a significant
number of new employees. We are particularly dependent on the continued services
of employees in our professional services and sales groups. Competition for
these individuals is intense, and we may not be able to attract, assimilate or
retain additional highly qualified personnel in the future.
In particular, it would be difficult for us to replace the services of
Kenneth C. Gardner, our co-founder, President and Chief Executive Officer, John
E. Zicker, our co-founder, Executive Vice President, Technology, and Chief
Technology Officer, Thomas M. Lounibos, our Executive Vice President, Sales and
Marketing, and W. Virginia Walker, our Executive Vice President, Finance and
Administration and Chief Financial Officer. We do not maintain "key-person" life
insurance policies covering any of our employees.
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OUR ACQUISITIONS COULD BE DIFFICULT TO INTEGRATE, DISRUPT OUR BUSINESS AND
DILUTE STOCKHOLDER VALUE
We intend to make investments in or acquire complementary companies,
products and technologies. We have limited organizational experience in these
matters and will need to develop the relevant skills if we are to be successful
in any such endeavor. Any development of these skills could consume management's
time and other resources. If we buy a company, we could have difficulty in
assimilating that company's operations. In addition, we may be unsuccessful in
retaining the key personnel of the acquired company. Moreover, we currently do
not know and cannot predict the accounting treatment of any such acquisition, in
part because we cannot be certain what accounting regulations, conventions or
interpretations may prevail in the future. If we acquire complementary
technologies or products, we could experience difficulties assimilating the
acquired technology or products into our operations. These difficulties could
disrupt our ongoing business, distract our management and employees and increase
our expenses. Furthermore, we may have to incur debt or issue equity securities
to pay for any future acquisitions, the issuance of which could be dilutive to
our existing stockholders, and adversely affect the price of our common stock.
FAILURE OF COMMERCIAL USERS TO ACCEPT INTERNET SOLUTIONS COULD LIMIT OUR FUTURE
GROWTH
A key element of our strategy is to offer users the ability to access,
analyze and report information from a data server through a Web browser. Our
growth would be limited if businesses do not accept Internet solutions or
perceive them to be cost-effective. Continued viability of the Internet depends
on several factors, including:
- Third parties' abilities to develop new enabling technologies in a timely
manner
- The Internet's ability to handle increased activity
- The Internet's ability to operate as a fast, reliable and secure network
- Potential changes in government regulation
Moreover, critical issues concerning the commercial use of the Internet,
including data corruption, cost, ease of use, accessibility and quality of
service, remain unresolved and may negatively affect commerce and communication
on the Internet. These issues will need to be addressed in order for the market
for our products and services to grow.
OUR PROPRIETARY TECHNOLOGY MAY BE SUBJECTED TO INFRINGEMENT CLAIMS OR MAY BE
INFRINGED UPON AND TIMELINE, INC. HAS FILED AN INFRINGEMENT SUIT AGAINST US
Our intellectual property is important to our business. We expect that we
could be subject to intellectual property infringement claims as the number of
our competitors grows and the functionality of our applications overlaps with
competitive offerings. These claims, even if not meritorious, could be expensive
and divert our attention from operating our company. If we become liable to
third parties for infringing their intellectual property rights, we would be
required to pay a substantial damage award and to develop noninfringing
technology, obtain a license or cease selling the applications that contain the
infringing intellectual property. We may be unable to develop noninfringing
technology or obtain a license on commercially reasonable terms, or at all. In
addition, we may not be able to protect against misappropriation of our
intellectual property. Third parties may
11
<PAGE> 13
infringe upon our intellectual property rights, we may not detect this
unauthorized use and we may be unable to enforce our rights. See
"Business -- Intellectual Property."
On March 19, 1999, we received written notice from Timeline, Inc. alleging
that the Sagent DMS product suite infringes one or more of the claims of a
Timeline patent. On March 22, 1999, Timeline filed suit against us in the United
States District Court for the Western District of Washington alleging patent
infringement. Other than the filed complaint, we have not received information
or documentation regarding this claim and therefore cannot fully evaluate it.
Pursuing potential litigation with Timeline could be costly and could divert
management and our technical staff from operating our company, regardless of the
outcome. See "Business -- Legal Proceedings."
IF WE LOSE KEY LICENSES WE MAY BE REQUIRED TO DEVELOP OR LICENSE ALTERNATIVES
WHICH MAY CAUSE DELAYS OR REDUCTIONS IN SALES
We rely on software that we have licensed from Opalis S.A. to perform key
functions of our Sagent Automation product which automates common tasks in
managing data. We also rely on software we have licensed from Microsoft
Corporation to allow users to be able to customize the user interface provided
by our Sagent Design Studio product. These licenses may not continue to be
available to us on commercially reasonable terms. The loss of either of these
licenses could result in delays or reductions of shipments of our product suite
until equivalent software could be developed, identified, licensed and
integrated. If customers require the automation and/or the user interface
customization features when licenses for either of those is not available, they
may delay or decline to purchase our product suite.
IF WE DISCOVER SOFTWARE DEFECTS WE MAY HAVE PRODUCT-RELATED LIABILITIES WHICH
MAY LEAD TO LOSS OF REVENUE OR DELAY IN MARKET ACCEPTANCE FOR OUR PRODUCTS
Our software products are internally complex and may contain errors,
defects or failures, especially when first introduced or when new versions are
released. We test our products extensively prior to releasing them; however, in
the past we have discovered software errors in some of our products after their
introduction. Despite extensive testing, we may not be able to detect and
correct errors in products or releases before commencing commercial shipments,
which may result in loss of revenue or delays in market acceptance.
Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. All
domestic and international jurisdictions may not enforce these limitations.
Although we have not experienced any product liability claims to date, we may
encounter such claims in the future. Product liability claims, whether or not
successful, brought against us could divert the attention of management and key
personnel and could be expensive to defend.
POTENTIAL YEAR 2000 PROBLEMS WITH OUR PRODUCTS OR INTERNAL SYSTEMS MAY INVOLVE
SIGNIFICANT TIME AND EXPENSE AND MAY REDUCE OUR FUTURE SALES
Many currently installed computer systems and software products store dates
using only the last two digits of the calendar year. As a result, such systems
may not be able to distinguish whether "00" means 1900 or 2000, which may cause
system failures or erroneous results. Year 2000 problems could subject us to
liability claims and disrupt our customers' purchasing patterns, either of which
could harm our business.
12
<PAGE> 14
Our products operate in complex network environments and directly or
indirectly interact with a number of other hardware and software systems that we
cannot adequately evaluate for year 2000 compliance. We may face claims based on
year 2000 problems in other companies' products, or issues arising from the
integration of multiple products within an overall system. Although we have not
been a party to any litigation or arbitration proceeding involving our products
or services related to year 2000 compliance issues, we may in the future be
required to defend our products or services in such proceedings, or to negotiate
resolutions of claims based on year 2000 issues. Defending and resolving year
2000-related disputes, regardless of the merits of such disputes, and any
liability we have for year 2000-related damages, including consequential
damages, could be expensive to us. In addition, we believe that customers and
potential customers limit purchases of new systems due to year 2000 issues as
companies expend significant resources to correct or upgrade their current
software systems for year 2000 compliance. These expenditures may result in
reduced funds available to purchase our products. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
OUR OFFICERS, DIRECTORS AND AFFILIATED ENTITIES WILL HAVE SIGNIFICANT CONTROL
OVER US AND MAY APPROVE OR REJECT MATTERS CONTRARY TO YOUR VOTE
We anticipate that our executive officers and directors, together with
their affiliates, will beneficially own an aggregate of approximately 48.5% of
our outstanding common stock following the completion of the offering. These
stockholders, if acting together, will be able to significantly influence all
matters requiring approval by our stockholders, including the election of
directors and the approval of mergers or similar transactions even if other
stockholders disagree. See "Principal Stockholders."
WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN ACQUISITION OF OUR
COMPANY
Provisions of our certificate of incorporation, bylaws, other agreements
and Delaware law could make it more difficult for a third party to acquire us,
even if doing so would be beneficial to our stockholders. See "Description of
Capital Stock."
OUR UNDESIGNATED PREFERRED STOCK MAY INHIBIT POTENTIAL ACQUISITION BIDS FOR US,
CAUSE THE MARKET PRICE FOR SAGENT COMMON STOCK TO FALL AND DIMINISH THE VOTING
RIGHTS OF THE HOLDERS OF OUR COMMON STOCK
If our board of directors issues preferred stock potential acquirers may
not make acquisition bids for us, our stock price may fall and the voting rights
of existing stockholders may diminish as a result. Sagent's board of directors
has the authority to issue up to 5,000,000 shares of preferred stock in one or
more series. The board of directors can fix the price, rights, preferences,
privileges and restrictions of the preferred stock without any further vote or
action by our stockholders. Sagent has no current plans to issue any shares of
preferred stock. See "Description of Capital Stock -- Preferred Stock."
WE HAVE BROAD DISCRETION TO USE THE OFFERING PROCEEDS AND HOW WE INVEST THESE
PROCEEDS MAY NOT YIELD A FAVORABLE RETURN
We intend to use the proceeds from the offering for general corporate
purposes, including working capital, capital expenditures and repayment of long
term indebtedness,
13
<PAGE> 15
and may use a portion of proceeds to acquire other businesses, products or
technologies. Our management may spend the proceeds from the offering in ways
with which the stockholders may not agree. Pending any such uses, we plan to
invest the net proceeds of the offering in investment-grade, interest-bearing
securities. We cannot predict that such investments will yield a favorable
return. See "Use of Proceeds."
OUR SECURITIES HAVE NO PRIOR MARKET AND WE CANNOT ASSURE YOU THAT OUR STOCK
PRICE WILL NOT DECLINE AFTER THE OFFERING
Our common stock has never been sold in a public market. An active trading
market for our common stock may not develop or be sustained after completion of
the offering. We are negotiating the initial offering price of the common stock
with the underwriters. However, the initial offering price may not be indicative
of the prices that will prevail in the public market after the offering, and the
market price of the common stock could fall below the initial public offering
price. In addition, the stock market has experienced extreme price and volume
fluctuations, which have particularly affected the market prices of many
computer software companies and which have often been unrelated to the operating
performance of such companies. See "Underwriting."
SHARES ELIGIBLE FOR FUTURE SALE AFTER THE OFFERING COULD CAUSE OUR STOCK PRICE
TO FALL
If our stockholders sell substantial amounts of our common stock in the
public market following the offering, the market price of our common stock could
fall. Such sales also might make it more difficult for Sagent to sell equity or
equity-related securities in the future at a time and price that we deem
appropriate.
Based upon the number of our shares outstanding as of December 31, 1998,
upon completion of the offering, we will have outstanding 23,669,377 shares of
common stock, assuming no exercise of the underwriters' over-allotment option
and no exercise of outstanding options or warrants after December 31, 1998. Of
these shares, the 5,000,000 shares sold in the offering will be freely tradable.
18,404,766 shares of common stock will be available for sale in the public 180
days after the date of this prospectus or afterwards.
After the offering, the holders of approximately 14.5 million shares of
common stock and warrants to purchase common stock, which represent 61.4% of our
outstanding stock after completion of the offering, will be entitled to certain
rights to have the resale of their shares registered under the Securities Act of
1933. If these holders, by exercising their registration rights, cause a large
number of securities to be registered and sold in the public market, such sales
could materially and adversely affect the market price for our common stock. In
addition, if we were to include in a registration statement shares held by these
holders pursuant to the exercise of their registration rights, such sales may
impede our ability to raise needed capital. See "Shares Eligible for Future
Sale" and "Underwriting."
WE DO NOT INTEND TO PAY DIVIDENDS AND YOU MAY NOT EXPERIENCE A RETURN ON
INVESTMENT WITHOUT SELLING SHARES
We have never declared or paid any cash dividends on our capital stock.
Therefore, you will not experience a return on your investment in our common
stock without selling your shares since we currently intend on retaining future
earnings to fund our growth and do not expect to pay dividends in the
foreseeable future. See "Dividend Policy."
14
<PAGE> 16
NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION
If you purchase shares of our common stock, you will incur immediate and
substantial dilution in pro forma net tangible book value. Investors
participating in the offering of our common stock will pay a price per share
which substantially exceeds the value of our assets after subtracting our
liabilities. These investors will contribute 56.5% of the total amount paid to
fund us but will own only 21.1% of our outstanding shares. If the holders of
outstanding options or warrants exercise those options or warrants, you will
suffer further dilution. See "Dilution."
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS BECAUSE THEY ARE INHERENTLY
UNCERTAIN
You should not rely on forward-looking statements in this prospectus. This
prospectus also contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify such
forward-looking statements. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
described below and elsewhere in this prospectus.
15
<PAGE> 17
USE OF PROCEEDS
The net proceeds to Sagent from the sale of 5,000,000 shares of common
stock in the offering at an estimated initial public offering price of $8.00 per
share, after deducting estimated expenses of $700,000 and underwriting discounts
and commissions of $2,800,000, are estimated to be approximately $36,500,000 and
approximately $42,080,000 if the underwriters' over-allotment option is
exercised in full. Sagent expects to use the net proceeds from this offering for
general corporate purposes, including working capital, capital expenditures and
repayment of $1,750,000 of outstanding long-term indebtedness. The outstanding
long-term indebtedness is under an accounts receivable credit facility with
Venture Banking Group, which matures on January 15, 2000. Interest under the
credit facility is payable at the prime rate on the average daily balance under
the credit facility. A portion of the proceeds may also be used to acquire,
license or invest in complementary businesses or products, although there are no
current plans, negotiations or discussions relating to any such transactions.
Pending use of the net proceeds for the above purposes, Sagent intends to invest
such funds in short-term, interest-bearing, investment grade obligations.
DIVIDEND POLICY
Sagent has never declared or paid any cash dividends on its common stock or
other securities. Sagent currently anticipates that it will retain all of its
future earnings for use in the expansion and operation of its business and does
not anticipate paying any cash dividends in the foreseeable future.
CORPORATE INFORMATION
Sagent was incorporated in California in April 1995 under the name Savant
Software, Inc. In June 1995, Sagent changed its name to Sagent Technology, Inc.
Sagent was reincorporated in Delaware in September 1998. References in this
prospectus to "Sagent," "we," "our" and "us" refer to Sagent Technology, Inc.
and its subsidiaries, unless the context otherwise requires. Sagent's principal
executive office is located at 800 W. El Camino Real, Suite 300, Mountain View,
California 94040, and Sagent's telephone number at that office is (650)
815-3100. Sagent's World Wide Web address is www.sagent.com. Information
contained in Sagent's Web site does not constitute part of this prospectus.
SAGENT and INFORMATION STUDIO are registered trademarks of Sagent. Sagent
is in the process of registering SAGENT DESIGN STUDIO as a trademark. Any
trademark, trade name or service mark of another company appearing in this
prospectus belongs to its holder.
16
<PAGE> 18
CAPITALIZATION
The table below sets forth the actual capitalization of Sagent as of
December 31, 1998. The pro forma column gives effect to the conversion of all
outstanding shares of preferred stock into shares of common stock. The pro forma
as adjusted column gives effect to the sale of 5,000,000 shares of common stock
at an assumed initial public offering price of $8.00 per share in this offering,
less underwriting discounts and commissions and estimated offering expenses
payable by Sagent.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1998
------------------------------------
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................... $ 3,093 $ 3,093 $ 37,843
======== ======== ========
Current portion of capital lease
obligations............................... $ 1,181 $ 1,181 $ 1,811
======== ======== ========
Long-term portion of capital lease
obligations............................... $ 3,346 $ 3,346 $ 1,596
Stockholders' equity:
Preferred stock, $0.001 par value,
15,555,555 authorized, 14,544,258
issued and outstanding, actual;
5,000,000 shares authorized, no shares
outstanding, pro forma and as
adjusted............................... 15 -- --
Common stock, $0.001 par value, 25,000,000
shares authorized; 4,125,119 shares
outstanding, actual; 18,669,377 shares
outstanding, pro forma; 23,669,377
shares outstanding, as adjusted........ 4 19 24
Additional paid-in capital................ 30,699 30,699 67,194
Notes receivable from stockholder......... (522) (522) (522)
Cumulative translation adjustment......... 101 101 101
Accumulated deficit....................... (28,626) (28,626) (28,626)
-------- -------- --------
Total stockholders' equity............. 1,671 1,671 38,171
-------- -------- --------
Total capitalization................. $ 5,017 $ 5,017 $ 39,767
======== ======== ========
</TABLE>
This table excludes the following shares:
- 5,134,835 shares of common stock that have been set aside under Sagent's
stock option plans, director option plan and employee stock purchase plan
- 235,623 shares of common stock set aside in connection with warrants to
purchase common stock
See "Management -- Employee Benefit Plans."
17
<PAGE> 19
DILUTION
The pro forma net tangible book value of Sagent as of December 31, 1998 was
$1.4 million or $0.08 per share of common stock, after giving effect to the
conversion of Sagent's outstanding preferred stock. Pro forma net tangible book
value per share represents total tangible assets less total liabilities, divided
by the number of outstanding shares of common stock.
Dilution in net tangible book value per share represents the difference
between the amount per share paid by purchasers of shares of Sagent's common
stock in this offering and the net tangible book value per share of Sagent's
common stock immediately afterwards. After giving effect to our sale of the
5,000,000 shares of common stock offered by this prospectus and after deducting
estimated underwriting discounts and commissions and estimated offering expenses
payable by Sagent, Sagent's net tangible book value at December 31, 1998 would
have been $37,903,271 or $1.60 per share. This represents an immediate increase
in net tangible book value to existing stockholders of $1.52 per share to
existing stockholders and an immediate dilution to new public investors of $6.40
per share. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...... $ 8.00
Pro forma net tangible book value per share as of
December 31, 1998............................... $ 0.08
Increase per share attributable to new public
investors....................................... 1.52
--------
Pro forma net tangible book value per share after
offering........................................... 1.60
--------
Dilution per share to new public investors........... $ 6.40
========
</TABLE>
The following table sets forth on a pro forma basis as of December 31, 1998
the difference between the number of shares of common stock purchased from
Sagent, the total price paid, and the average price per share paid by existing
stockholders and new public investors before deducting estimated underwriting
discounts and commissions and offering expenses payable by Sagent, using an
annual initial public offering price of $8.00 per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing 18,669,377 78.9% $30,769,753 43.3% $1.65
stockholders.......
New public 5,000,000 21.1 40,000,000 56.5 8.00
investors..........
---------- ----- ----------- -----
Total...... 23,669,377 100.0% $70,769,753 100.0%
========== ===== =========== =====
</TABLE>
If the underwriters' over-allotment option is exercised in full, the number
of shares held by new investors will increase to 5,750,000, or 23.5%, of the
total shares of common stock outstanding after the offering.
18
<PAGE> 20
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data are qualified by
reference to, and should be read in conjunction with, Sagent's Consolidated
Financial Statements and related notes thereto and Management's Discussion and
Analysis of Financial Condition and Results of Operations included elsewhere in
this prospectus. The selected consolidated balance sheet data as of December 31,
1997 and 1998 and selected consolidated statement of operations data for the
years ended December 31, 1996, 1997 and 1998 have been derived from the audited
consolidated financial statements of Sagent and the notes included elsewhere in
this prospectus. The consolidated balance sheet data as of December 31, 1995 and
1996 and selected consolidated statements of operations data for the period from
April 12, 1995 (inception) through December 31, 1995 have been derived from the
audited consolidated financial statements of Sagent not included.
<TABLE>
<CAPTION>
PERIOD FROM APRIL 12, 1995 YEARS ENDED DECEMBER 31,
(INCEPTION) THROUGH ------------------------------
DECEMBER 31, 1995 1996 1997 1998
-------------------------- ------- ------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues, net:
Licenses............................ $ -- $ 240 $ 5,728 $ 10,459
Services............................ -- 39 1,350 6,584
------- ------- ------- --------
Total revenues, net............... -- 279 7,078 17,043
Cost of revenues:
Licenses............................ -- 120 194 143
Services............................ -- 127 679 4,923
------- ------- ------- --------
Total cost of revenues............ -- 247 873 5,066
------- ------- ------- --------
Gross profit........................... -- 32 6,205 11,977
Operating expenses:
Sales and marketing................. 198 2,727 5,929 12,037
Research and development............ 469 3,425 4,969 6,013
General and administrative.......... 363 1,111 2,215 5,186
Acquired in-process technology...... -- -- -- 2,425
------- ------- ------- --------
Total operating expenses.......... 1,030 7,263 13,113 25,661
------- ------- ------- --------
Loss from operations................... (1,030) (7,231) (6,908) (13,684)
Other income (expense), net............ 44 192 8 (17)
------- ------- ------- --------
Net loss............................... $ (986) $(7,039) $(6,900) $(13,701)
======= ======= ======= ========
Historical basic net loss per share.... $ (2.67) $ (2.41) $ (3.47)
======= ======= ========
Historical diluted net loss per
share............................... $ (2.67) $ (2.41) $ (3.68)
======= ======= ========
Number of shares used in calculation of
historical basic net loss per
share............................... 2,637 2,860 3,951
Number of shares used in calculation of
historical diluted net loss per
share............................... 2,637 2,860 3,722
Pro forma net loss per share, basic.... $ (0.74)
========
Pro forma net loss per share,
diluted............................. $ (0.75)
========
Shares used in calculation of pro forma
net loss per share, basic........... 18,495
Shares used in calculation of pro forma
net loss per share, diluted......... 18,266
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------------
1995 1996 1997 1998
------ ------ ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................ $5,026 $4,575 $3,813 $ 3,093
Working capital...................................... 4,927 3,715 2,201 1,122
Total assets......................................... 5,453 6,326 7,185 13,196
Long-term obligations, net of current portion........ 114 544 627 3,346
Total stockholders' equity........................... 5,160 4,649 3,123 1,671
</TABLE>
See Note 2 of Notes to Consolidated Financial Statements for information
concerning the calculation of shares used in computing pro forma net loss per
share.
19
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
All statements, trend analysis and other information contained in the
following discussion relative to markets for Sagent's products and trends in
revenues, gross margins and anticipated expense levels, as well as other
statements including words such as "anticipate," "believe," "plan," "estimate,"
"expect," "intend" and other similar expressions constitute forward-looking
statements. These forward-looking statements are subject to business and
economic risks and uncertainties, and Sagent's actual results of operations may
differ materially from those contained in the forward-looking statements.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Risk Factors" as well as other risks and
uncertainties referenced in this prospectus.
OVERVIEW
Sagent develops, markets and supports Enterprise Intelligence software
designed to address organizations' rapidly growing information access, analysis
and delivery needs. Sagent also provides design, systems engineering and
education services to facilitate the successful implementation of its Sagent DMS
product suite. Sagent was incorporated in April 1995, commenced operations in
June 1995 and began selling the first products of the Sagent DMS product suite
during the fourth quarter of 1996. Sagent's revenues increased from $279,000 in
1996, to $7.1 million in 1997, the first full year of product shipments, and to
$17.0 million in 1998. Sagent had net losses of $7.0 million, $6.9 million and
$13.7 million in 1996, 1997 and 1998, respectively, and had an accumulated
deficit of approximately $28.6 million as of December 31, 1998. Although
Sagent's revenues have grown significantly during these periods, there can be no
assurance that such growth will continue, nor that Sagent can achieve or sustain
profitability in the future.
Sagent's revenues are derived from two sources, product license revenues
and service revenues. License revenues are derived from product sales to end
users, resellers, distributors and enterprise application vendors as well as
royalties from enterprise application vendors. License revenues are based upon
the number and capacity of servers on which a product is installed, as well as
on a per user basis. Service revenues are derived from providing consulting and
training, maintenance and support services to end users.
Sagent recognizes revenues in accordance with the American Institute of
Certified Public Accountants Statement of Position No. 97-2. License revenues
from sales to end users are recognized upon shipment of the product, if a signed
contract exists, the fee is fixed and determinable and collection is deemed
probable. If an acceptance period is provided, revenue is recognized upon the
earlier of customer acceptance or the expiration of that period. Sagent
recognizes royalties as revenues based on an enterprise application vendor's
sell-through of Sagent's products. Fees for services are charged separately from
licenses. Service revenues from consulting and training are recognized upon
completion of the work to be performed. Revenues from maintenance and support
agreements which includes product updates are deferred and recognized on a
straight-line basis as service revenues over the term of the related agreement,
which is typically one year.
Sagent sells its products outside of the United States through distributors
located in France, Germany, Japan, South Africa and the United Kingdom. In
December 1997, Sagent established a subsidiary, Sagent Technology Japan KK, to
address the Asia Pacific market. Revenues from licenses and services to
customers outside the United States were insignificant prior to 1998 and
represented approximately $1.4 million in 1998. Historically,
20
<PAGE> 22
as a result of the relatively small amount of international sales, fluctuations
in foreign currency exchange rates have not had a material effect on Sagent's
business, financial condition and operating results. Sagent has agreements with
its United Kingdom distributor and the parent company of its French and German
distributors, under each of which the Sagent has an option to acquire such
distributors. In the event of a change of control of Sagent, Sagent could be
required to acquire the German distributor. Any such acquisition may have the
effect of diluting existing stockholders, reducing Sagent's available cash for
working capital and other purposes, requiring substantial management attention,
increasing annual amortization expense or imposing costs on Sagent associated
with integrating the acquired entity.
On February 28, 1998, Sagent acquired Talus, Incorporated, a privately held
company that has significant experience in the design and implementation of
Enterprise Intelligence applications. The total purchase price was $3.5 million,
and the acquisition was recorded under the purchase method of accounting. In
connection with the acquisition, Sagent expensed $2.4 million of in-process
technology in the quarter ended March 31, 1998. In addition, Sagent recorded
other intangible assets of $587,000 which are being amortized on a straight-line
basis over the six months to three years following the acquisition. See
"-- Acquired In-Process Technology" and Note 7 of Notes to Consolidated
Financial Statements.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of total revenues for the periods indicated:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1996 1997 1998
-------- ----- -----
<S> <C> <C> <C>
Revenues, net:
Licenses.......................................... 86.0% 80.9% 61.4%
Services.......................................... 14.0 19.1 38.6
-------- ----- -----
Total revenues, net............................ 100.0 100.0 100.0
-------- ----- -----
Cost of revenues:
Licenses.......................................... 43.0 2.7 0.8
Services.......................................... 45.5 9.6 28.9
-------- ----- -----
Total cost of revenues......................... 88.5 12.3 29.7
-------- ----- -----
Gross profit........................................ 11.5 87.7 70.3
Operating expenses:
Sales and marketing............................... 977.4 83.8 70.6
Research and development.......................... 1,227.6 70.2 35.3
General and administrative........................ 398.2 31.3 30.4
Acquired in-process technology.................... -- -- 14.2
-------- ----- -----
Total operating expenses....................... 2,603.2 185.3 150.6
-------- ----- -----
Loss from operations................................ (2,591.8) (97.6) (80.3)
Other income (expense), net......................... 68.8 0.1 (0.1)
-------- ----- -----
Net loss............................................ (2,522.9)% (97.5)% (80.4)%
======== ===== =====
</TABLE>
21
<PAGE> 23
FISCAL YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
REVENUES
Total revenues. Sagent's revenues were $279,000, $7.1 million and $17.0
million in 1996, 1997 and 1998, respectively, representing increases of $6.8
million from 1996 to 1997 and $9.9 million, or 141%, from 1997 to 1998. This
increase of $9.9 million was due to a $4.7 million increase in product revenue
and a $5.2 million increase in services revenues as a result of the acquisition
of Talus, Incorporated. Two of Sagent's customers each represented 10.0% of
Sagent's revenues in 1997. Sagent had no customer that accounted for more than
10.0% of its revenues in 1996 or 1998.
License revenues. Sagent's license revenues were $240,000, $5.7 million and
$10.5 million in 1996, 1997 and 1998 respectively, representing increases of
$5.5 million from 1996 to 1997 and $4.7 million, or 83.0%, from 1997 to 1998.
The increase from 1996 to 1997 was due to the recognition of a full year of
revenues from license sales in 1997, compared to the recognition of revenues
from license sales during the fourth quarter in 1996. The increase from 1997 to
1998 was primarily due to an increase in license sales of the Sagent DMS product
suite resulting from additions to Sagent's direct sales and marketing staff.
Sagent anticipates that license revenues, which have represented a significant
portion of Sagent's total revenues in 1998, will continue to represent the
substantial majority of its revenues for the foreseeable future.
Service revenues. Service revenues were $39,000, $1.4 million and $6.6
million in 1996, 1997 and 1998, respectively, representing increases of $1.4
million from 1996 to 1997 and $5.2 million, or 388%, from 1997 to 1998. The
increase from 1996 to 1997 was primarily due to the addition of training and
consulting services. Such services generated $778,000 in revenue during 1997. In
1996, no training and consulting work was performed, and service revenues
represented only maintenance and support fees. The increase in service revenues
from 1997 to 1998 was primarily due to additional growth in training and
consulting services as a result of the Talus, Incorporated acquisition. Such
services generated $4.8 million, or a 517% increase, in service revenues in
1998.
COST OF REVENUES
Cost of licenses. Cost of revenues from license sales consists primarily of
royalties, product packaging, shipping, media and documentation. Cost of
revenues from license sales was $120,000, $194,000 and $143,000 in 1996, 1997
and 1998, respectively, representing 50.0%, 3.0% and 1.0% of license revenue in
the respective periods. The dollar increase from 1996 to 1997 was primarily due
to increased costs for documentation and royalties related to the increased
volume of licenses sold. The dollar decrease from 1997 to 1998 was due to
reductions achieved in per unit packaging costs. The percentage decreases
resulted from spreading these relatively fixed costs over an increased volume of
product licenses sold.
Cost of services. Cost of services consists primarily of personnel costs
and third-party consulting fees associated with providing software maintenance
and support and training and consulting services. Cost of services revenues was
$127,000, $679,000 and $4.9 million, in 1996, 1997 and 1998, respectively,
representing 326%, 50.0% and 75.0% of services revenue in the respective
periods. The dollar increases were primarily due to the increase in the number
of technical support staff, the increase in the number of consultants in 1997
required to support introduction of training and consulting services and the
increase in the number of consultants in 1998 providing consulting services as a
result of the Talus,
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<PAGE> 24
Incorporated acquisition. The percentage decrease from 1996 to 1997 was
primarily due to the introduction of higher margin consulting services. The
percentage increase from 1997 to 1998 was due to the increased infrastructure
costs associated with supporting the Talus, Incorporated consultant staff.
OPERATING EXPENSES
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, benefits, commissions, bonuses and travel expenses for sales and
marketing personnel as well as marketing programs and other promotion costs.
Sales and marketing expenses were $2.7 million, $5.9 million and $12.0 million
in 1996, 1997 and 1998, respectively, representing 976%, 84.0% and 71.0% of
total revenue in the respective periods. The dollar increases resulted primarily
from a $1.7 million increase in 1997 and a $3.5 million increase in 1998 in
employee-related expenses, principally due to the hiring of additional sales
personnel and to higher commissions paid as a result of Sagent's revenue growth.
In addition, during 1998 expenses related to marketing programs increased $1.7
million as a result of Sagent conducting its first user conference, expanding
its advertising campaigns and beginning its Enterprise Intelligence seminar
series. The percentage decreases were attributable to Sagent's increased
revenues. Sagent believes that as it continues to expand its direct sales and
presales support organization, its third-party partnering relationships and its
indirect channel sales organization on a worldwide basis, sales and marketing
expenses will continue to increase in absolute dollars, although such expenses
may vary as a percentage of total revenues.
Research and development. Research and development expenses consist
primarily of personnel and related costs associated with the development of new
products, the enhancement and localization of existing products, quality
assurance and testing. Research and development expenses were $3.4 million, $5.0
million and $6.0 million in 1996, 1997 and 1998, respectively, representing
1,226%, 70.0% and 34.0% of total revenues in the respective periods. The dollar
increases were primarily due to a $1.2 million increase in compensation costs in
1997 resulting from the hiring of additional developers and an $800,000 increase
in contractor costs in 1998 for the localization of Sagent's software for use in
Japan. The percentage decreases were attributable to Sagent's increased
revenues. Sagent anticipates that research and development expenditures will
continue to increase in absolute dollars, although such expenses may vary as a
percentage of total revenues.
General and administrative. General and administrative expenses consist
primarily of personnel costs for Sagent's finance, human resources, information
systems and other management departments. General and administrative expenses
were $1.1 million, $2.2 million and $5.2 million for 1996, 1997 and 1998,
respectively, representing 398%, 31.0% and 30.0% of total revenues in the
respective periods. The dollar increases were primarily due to employee-related
expenses associated with the addition of staff in senior managerial positions
and professional fees necessary to manage and support Sagent's growth. The
percentage decreases were attributable to Sagent's increased revenues. In
addition, during 1998, Sagent recorded significant legal fees associated with
two litigation matters which have both been settled. See "Risk Factors--Our
Proprietary Technology May Be Subjected to Infringement Claims or May Be
Infringed Upon" and "Business--Legal Proceedings."
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<PAGE> 25
Income Tax. As of December 31, 1998, Sagent had available net operating
loss carryforwards for federal and state income tax purposes of approximately
$20.8 and $17.8 million, respectively, which expire from 2003 to 2018. See Note
14 of Notes to the Financial Statements. The Tax Reform Act of 1986 imposes
limitations on the use of net operating loss carryforwards if certain stock
ownership changes have occurred or could occur in the future.
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<PAGE> 26
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited consolidated statements of
operations data for the eight quarters ended December 31, 1998, as well as the
percentage of Sagent's revenues represented by each item. These data have been
derived from unaudited interim consolidated financial statements prepared on the
same basis as the audited consolidated financial statements and, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, considered necessary for a full presentation of such information
when read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues, net:
Licenses.......................... $ 776 $ 1,326 $ 1,784 $ 1,842 $ 1,798 $ 2,111 $ 2,932 $ 3,618
Services.......................... 224 159 384 583 1,199 1,568 1,689 2,128
------- ------- ------- ------- ------- ------- ------- -------
Total revenues, net............. 1,000 1,485 2,168 2,425 2,997 3,679 4,621 5,746
Cost of revenues:
Licenses.......................... 30 22 26 116 36 25 61 21
Services.......................... 133 89 105 352 729 1,386 1,468 1,340
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenues.......... 163 111 131 468 765 1,411 1,529 1,361
------- ------- ------- ------- ------- ------- ------- -------
Gross profit........................ 837 1,374 2,037 1,957 2,232 2,268 3,092 4,385
Operating expenses:
Sales and marketing............... 1,343 1,184 1,494 1,908 2,203 3,007 3,188 3,639
Research and development.......... 1,191 1,122 1,217 1,439 1,516 1,401 1,649 1,447
General and administrative........ 403 540 427 845 1,199 1,321 1,424 1,242
Acquired in-process technology.... -- -- -- -- 2,425 -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses........ 2,937 2,846 3,138 4,192 7,343 5,729 6,261 6,328
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations................ (2,100) (1,472) (1,101) (2,235) (5,111) (3,461) (3,169) (1,943)
Other income(expense), net.......... 1 (24) 10 21 22 32 (26) (45)
------- ------- ------- ------- ------- ------- ------- -------
Net loss............................ $(2,099) $(1,496) $(1,091) $(2,214) $(5,089) $(3,429) $(3,195) $(1,988)
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues, net:
Licenses.......................... 77.6% 89.3% 82.3% 76.0% 60.0% 57.4% 63.4% 63.0%
Services.......................... 22.4 10.7 17.7 24.0 40.0 42.6 36.6 37.0
------- ------- ------- ------- ------- ------- ------- -------
Total revenues, net............. 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Licenses.......................... 3.0 1.5 1.2 4.8 1.2 0.7 1.3 0.4
Services.......................... 13.3 6.0 4.8 14.5 24.3 37.7 31.8 23.3
------- ------- ------- ------- ------- ------- ------- -------
Total cost of revenues.......... 16.3 7.5 6.0 19.3 25.5 38.4 33.1 23.7
------- ------- ------- ------- ------- ------- ------- -------
Gross profit........................ 83.7 92.5 94.0 80.7 74.5 61.6 66.9 76.3
Operating expenses:
Sales and marketing............... 134.3 79.7 68.9 78.7 73.5 81.7 69.0 63.3
Research and development.......... 119.1 75.6 56.1 59.3 50.6 38.1 35.7 25.2
General and administrative........ 40.3 36.4 19.7 34.9 40.0 35.9 30.8 21.6
Acquired in-process technology.... -- -- -- -- 80.9 -- -- --
------- ------- ------- ------- ------- ------- ------- -------
Total operating expenses........ 293.7 191.7 144.7 172.9 245.0 155.7 135.5 110.1
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations................ (210.0) (99.2) (50.8) (92.2) (170.5) (94.1) (68.6) (33.8)
Other income(expense), net.......... 0.1 (1.6) 0.5 0.9 0.7 0.9 (0.6) (0.8)
------- ------- ------- ------- ------- ------- ------- -------
Net loss............................ (209.9)% (100.8)% (50.3)% (91.3)% (169.8)% (93.2)% (69.2)% (34.6)%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
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<PAGE> 27
Sagent's operating expenses for the three months ended March 31, 1998
exceeded levels that Sagent has historically experienced due primarily to
acquired in-process technology expense recorded in connection with the
acquisition of Talus, Incorporated. In addition, operating expenses for the
three months ended June 30, 1998 exceeded levels that Sagent has historically
experienced due to the addition of several sales personnel and increased
advertising expenses. Sagent's quarterly operating results may vary
significantly from quarter to quarter. The timing of Sagent's revenues are
unpredictable due to several factors, including the effect of delays in customer
orders, the lack of software order backlog, the potential effect of seasonality
as international operations expand and the degree to which customers engage
Sagent's professional services. Additionally Sagent cannot predict expenses with
significant certainty given planned expansion of its business. Due to
uncertainty surrounding revenues and expenses, Sagent believes that quarter to
quarter comparison of its operating results are not a good indication of future
performance.
ACQUIRED IN-PROCESS TECHNOLOGY
On February 28, 1998, Sagent acquired Talus, Incorporated, a privately held
company with experience in the design and implementation of Enterprise
Intelligence applications. At the time of the acquisition, Talus' revenue was
associated with implementation services of outside vendor solutions. The total
purchase price was $3.5 million, consisting of approximately $1.2 million in
cash, 259,000 shares of preferred stock valued at $1.4 million and the
assumption of liabilities of $0.9 million. The acquisition was recorded under
the purchase method of accounting.
Prior to the acquisition, Talus was in the process of developing analytical
software applications to complement its design and implementation business. The
four projects under development consisted of analytical software applications
for manufacturing, food, service and hospitality, and high technology
industries. These projects are unique and complex because they integrate the
industry knowledge of Talus' consultants with advanced data mart and business
intelligence software to develop analytical software applications for specific
industries. These analytical software applications allow organizations to model
decision processes unique to their industry, such as decisions on products,
sales and distribution channels, and customers. Sagent anticipates that these
analytical software applications can be sold on a stand alone basis with
implementation assistance.
In connection with the acquisition of Talus, Sagent identified two key
intangible assets, the analytical software applications under development and an
existing assembled workforce. The method used to estimate the fair value of the
analytical software applications was a discounted cash flow model, similar to
the traditional income approach, adjusted for cost to complete and stage of
completion. Sagent first estimated revenue, cost of goods sold, and operating
expense for the analytical software applications. Since it is uncertain whether
the estimates may be achieved, the estimated earnings associated with the
analytical software applications under development were discounted at a rate of
35%. In addition, using a cost of completion method, Sagent estimated that
development was on average 55% complete at the date of acquisition. Development
is expected to be completed during 1999 through 2000, with initial revenue
expected in 1999. At the time of the acquisition Talus had incurred
approximately $2.0 million of research and development expense on development of
the analytical software applications. Sagent has incurred approximately $1.0
million of research and development expense since the date of acquisition
through December 31, 1998 and estimates that $0.8 million will be required to
complete the remaining development projects. Based on these methods, estimates,
and calculations and since the analytical software applications have not
achieved technological
26
<PAGE> 28
feasibility and since there was no alternative future use for this technology,
Sagent expensed $2.4 million of in-process technology in the quarter ended March
31, 1998. The classification of acquired in-process technology was made in
accordance with the guidance of SFAS 2, "Accounting for Research and Development
Costs," SFAS 86, "Accounting for the Costs of Computer Software to be Sold,
Leased, or Otherwise Marketed," and FIN 4, "Applicability of FASB Statement No.
2 to Business Combinations Accounted for by the Purchase Method, an
Interpretation of FASB Statement No. 2."
Sagent recorded other intangible assets of $587,000, which included the
value assigned to the Talus assembled workforce. These assets are being
amortized on a straight-line basis over periods which vary from six months to
three years following the acquisition. The method used to estimate the fair
value of the workforce was based on the estimated cost to recreate the
workforce.
The efforts required to develop the acquired in-process technology into
commercially viable products principally relate to the completion of all
planning, designing, and testing activities that are necessary to establish that
the products can meet their design requirements, including function, features,
and technical performance requirements. Sagent currently expects that the
acquired in-process technology will be successfully developed. However, these
products may not achieve commercial viability. Furthermore, future developments
in the industry, changes in technology, changes in other product offerings or
other developments may cause Sagent to alter or abandon these plans. Failure to
complete the development of these projects in their entirety, or in a timely
manner, could have an adverse impact on Sagent's business.
Sagent based its determination of the acquired in-process technology
allocation on recently issued guidance by the Securities and Exchange Commission
and considered such factors as degree of completion, technological
uncertainties, costs incurred, and projected costs to complete.
Acquired in-process technology projects continue to progress, in all
material respects, consistent with management's original assumptions used to
value the acquired in-process technology. See Note 7 to Notes to Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, Sagent had cash and cash equivalents totaling $3.1
million, a decrease of $720,000 from December 31, 1997. Since inception, Sagent
has funded its operations primarily through private sales of equity securities,
the use of equipment leases and a bank line of credit, not from cash generated
by the business. As of December 31, 1998, Sagent had raised approximately $28.6
million, net of offering costs, from the issuance of preferred stock and the
exercise of stock options, had financed equipment purchases totaling
approximately $3.3 million, and had borrowed $1.7 million under its line of
credit with a bank. Approximately $300,000 of available borrowings remain under
the line of credit at December 31, 1998.
Net cash used in operating activities was $6.3 million, $5.4 million and
$11.0 million in 1996, 1997 and 1998, respectively. For such periods, net cash
used in operating activities was primarily a result of funding ongoing
operations.
Sagent's investing activities have primarily consisted of annual purchases
of property and equipment. Capital expenditures, including those under capital
leases, totaled $1.1 million, $1.1 million and $1.2 million in 1996, 1997 and
1998, respectively. Capital leases have been used to finance the acquisition of
property and equipment, primarily
27
<PAGE> 29
computer hardware and software, and leasehold improvements and furniture
associated with Sagent's recent move into a larger facility to accommodate its
increasing employee base. In 1998, investing activities included $2.7 million
associated with the acquisition of Talus. Sagent anticipates that it will
experience an increase in its capital expenditures and lease commitments
consistent with its anticipated growth in operations, infrastructure and
personnel.
Sagent's financing activities have primarily included sales of preferred
stock and use of its equipment lease lines. Proceeds from the issuance of
preferred stock totaled $6.5 million, $5.2 million and $10.4 million in 1996,
1997 and 1998 respectively. The proceeds from equipment financing, net of
principal payments, totaled $600,000, $294,000 and $3.4 million in 1996, 1997
and 1998 respectively.
At December 31, 1998, Sagent had a revolving line of credit with a bank for
$2.0 million, which bears interest at the lending bank's prime rate. Borrowings
are limited to the lesser of 80.0% of eligible accounts receivable or $2.0
million and are secured by substantially all of Sagent's non-leased assets. The
line of credit contains certain financial restrictions and covenants. At
December 31, 1998, total borrowings available under this line were approximately
$300,000. This credit facility expires in January 2000, and Sagent expects to
extend the credit facility, although there can be no assurance that it will be
able to do so on terms acceptable to Sagent or at all. The credit line was
subsequently increased to $4.0 million effective from January 1999. Sagent was
not in compliance with certain financial covenants under its line of credit as
of December 31, 1998, and received a waiver from its lender for non-compliance
prior to December 31, 1998. Sagent is currently in compliance with its financial
covenants under such line of credit.
Sagent believes that the net proceeds from the offering, together with
existing sources of liquidity, will be sufficient to meet its working capital
and anticipated capital expenditure requirements for at least the next 12
months. Thereafter, Sagent may require additional funds to support its working
capital requirements or for other purposes, and may seek, even before such time,
to raise additional funds through public or private equity financing or from
other sources. There can be no assurance that additional financing will be
available at all, or that if available, such financing will be obtainable on
terms acceptable to Sagent or that are not dilutive to its stockholders.
RECENT ACCOUNTING PRONOUNCEMENTS
The American Institute of Certified Public Accountants issued Statement of
Position No. 98-1, "Software for Internal Use," which provides guidance on
accounting for the cost of computer software developed or obtained for internal
use. Statement of Position No. 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Sagent does not expect that the
adoption of Statement of Position No. 98-1 will have a material effect on its
business, financial condition and operating results.
YEAR 2000 ISSUES
Sagent has completed its initial assessment of the potential overall impact
of the impending century change on Sagent's business, financial condition and
operating results. Based on Sagent's current assessment, Sagent believes the
current versions of its products are year 2000 compliant -- that is, they are
capable of adequately distinguishing 21st century dates from 20th century dates.
However, Sagent's products operate in complex network environments and directly
or indirectly interact with a number of other hardware and software systems that
Sagent cannot adequately evaluate for year 2000 compliance.
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<PAGE> 30
Sagent may face claims based on year 2000 problems in other companies' products,
or issues arising from the integration of multiple products within an overall
system. Sagent has not been a party to any litigation or arbitration proceeding
involving Sagent's products or services related to year 2000 compliance issues.
Sagent may in the future be required to defend its products or services in such
proceedings, or to negotiate resolutions of claims based on year 2000 issues.
The costs of defending and resolving year 2000-related disputes, regardless of
the merits of such disputes, and any liability Sagent has for year 2000-related
damages, including consequential damages, could harm Sagent's business. In
addition, Sagent believes that the purchasing patterns of customers and
potential customers may be affected by year 2000 issues as companies expend
significant resources to correct or upgrade their current software systems for
year 2000 compliance. These expenditures may result in reduced funds available
to purchase products like those Sagent offers. To the extent year 2000 issues
cause a significant delay in, or cancellation of, decisions to purchase Sagent's
products or services, Sagent's business would suffer.
Sagent has reviewed its internal management information and other critical
business systems to identify any year 2000 problems. Sagent also has
communicated with the external vendors that supply it with material software and
information systems and with significant suppliers to determine their year 2000
readiness. Based on Sagent's vendors' representations, Sagent believes that the
third-party hardware and software Sagent uses is year 2000 compliant except for
an application Sagent uses to track technical support requests. The application
vendor is currently undertaking modification of this application for Sagent, and
Sagent estimates that the modification will be complete in the second quarter of
1999 and will cost approximately $20,000. Although Sagent does not believe that
the cost of such modifications will materially affect its operating results, if
Sagent is not able to modify the technical support application in a timely and
successful manner Sagent may not be able to process technical support reports
effectively, which may adversely affect Sagent's business. Sagent currently
anticipates conducting additional year 2000 testing in mid-1999 when it replaces
servers in its internal network.
To date, Sagent has not incurred any material costs directly associated
with year 2000 compliance efforts, except for compensation expense associated
with salaried employees who have devoted some of their time to year 2000
assessment and remediation efforts. As discussed above, Sagent does not expect
the total cost of year 2000 problems to be material to its business, financial
condition and operating results. However, during the months prior to the century
change, Sagent will continue to evaluate new versions of its products, new
software and information systems provided by third parties and any new
infrastructure systems that Sagent acquires, to determine whether they are year
2000 compliant. Despite Sagent's current assessment, Sagent may not identify and
correct all significant year 2000 problems on a timely basis. Year 2000
compliance efforts may involve significant time and expense and unremediated
problems could harm Sagent's business, financial condition and operating
results. Sagent currently has no contingency plans to address the risks
associated with unremediated year 2000 problems.
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<PAGE> 31
BUSINESS
The following description of Sagent's business should be read in
conjunction with the information included elsewhere in this prospectus. This
description contains certain forward-looking statements that are based largely
on Sagent's current expectations and are subject to a number of risks and
uncertainties. Actual results and events could differ significantly from those
discussed in the forward-looking statements as a result of certain of the
factors set forth below and elsewhere in this prospectus.
OVERVIEW
Sagent develops, markets and supports Enterprise Intelligence software
designed to address organizations' rapidly growing information access, analysis
and delivery needs. The Sagent DMS product suite gathers data from a variety of
sources, such as relational databases, mainframe databases, and the Internet,
and organizes that data into a common structure or repository known as a data
mart. A data mart is implemented to more efficiently manage a subset of
corporate data focused on the needs of a specific group of users. Once data is
organized into a Sagent data mart, the Sagent DMS product suite allows
organizations to more efficiently analyze the data and provides access to the
information through personal computers, reports, and importantly, through Web
browsers over the Internet. Sagent also provides design, systems engineering and
education services to facilitate successful customer implementations. Sagent's
products and services have been adopted in a variety of industries, including
financial services, telecommunications, technology, health care, retail, and
others. Sagent currently has more than 200 customers worldwide. Sagent markets
its software and services through its direct sales, resellers and international
distributors. Sagent also sells its software through strategic partnerships with
other software companies, each of which has integrated its product suite into
their software applications.
INDUSTRY BACKGROUND
Today, information about an organization's customers, products and
operations is one of its most important strategic assets. An organization's
ability to maximize revenues and efficiently manage operations increasingly
depends upon its ability to rapidly collect, organize, analyze and distribute
information. In particular, as organizations have begun to pursue more complex
operational strategies, their need for timely information has increased. For
example, businesses engaged in total customer management must synthesize
information regarding past purchases, service history, payment status and sales
contacts. Similarly, businesses engaged in supply chain management must manage
the information exchanged among multiple plants, sales locations, suppliers and
distribution facilities. Furthermore, as businesses continue to streamline their
organizational structures to improve time to market and responsiveness to
rapidly changing market conditions, decision making authority is expected to
become more distributed, thus heightening the need for broader dissemination of
information throughout the enterprise. Most recently, the rapid adoption of the
Internet and the World Wide Web has given organizations the ability to share
information internally and externally on a cost-effective basis and has
dramatically increased the number of people who can receive and access
information.
To meet these challenges, many organizations have purchased and implemented
data warehousing systems and decision support software. These systems were
designed to assist organizations in answering fundamental business questions
such as "Who are our best customers?" or "What are our most profitable
products?" Early data warehousing systems
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<PAGE> 32
aggregated an organization's enterprise data into a single location and
reorganized it into contextual, business-related terms. The single location has
enabled the use of query tools or other decision support software to explore and
analyze the data. The need for data warehousing and decision support software
has also been driven by the proliferation of online transaction processing
systems. These systems include packaged applications or custom and semi-custom
systems, which automate business processes such as manufacturing planning,
customer support, billing, accounting, human resources and financial services
transactions. While these multiple online transaction processing systems have
provided greater business efficiency, they have also created massive amounts of
new data, typically maintained in the form of proprietary, complex and
incompatible data models.
The demand for more useful information and the proliferation of new data
sources and data types has led to an active market for data warehousing and
decision support software. International Data Corporation estimates that the
size of the data warehouse market will grow from approximately $2.9 billion in
1997 to approximately $6.6 billion in 2001. Forrester Research projects that the
decision support segment of the data warehouse market will grow from $1.1
billion in 1997 to $3.6 billion by 2001.
As corporate data warehouses have grown in size and complexity, Sagent
believes that several challenges have prevented organizations from realizing the
promise of data warehousing systems and decision support solutions. The first
challenge has been integration. Traditional solutions have utilized discrete
data warehousing and decision support software purchased from many different
vendors, including separate data extraction tools, data cleansing tools, data
sorting packages, relational database management systems, report writers,
analysis tools and distribution packages. Integrating these point products is
difficult and often limits the capability of the overall solution. The second
challenge has been user scalability. Traditional solutions were designed to
handle a small number of users and were not designed to meet the needs of a
large number of simultaneous users with diverse, individual requirements. The
third challenge has been performance. Discrete data warehousing and decision
support software applications often have difficulty aggregating complex
enterprise data into a single business view of information, which is critical
for processing information requests efficiently. The fourth challenge has been
cost and complexity. Many large data warehousing projects cost several million
dollars and take a year or more to implement.
Most importantly, the emergence of the Internet has challenged the
continued viability of traditional data warehousing and decision support
software as the best approach to enterprise-wide information access, analysis
and delivery. The Internet provides organizations with a low-cost infrastructure
to connect their customers, suppliers, partners and employees directly with the
information they need. Organizations are using the Internet to streamline their
marketing, sales and support processes and offer enhanced customer service
capabilities. Examples of these initiatives include enabling customers to use
the Internet to research product features, order products, check order status
and obtain on-line service and support. Organizations are also using the
Internet to track key business information regarding sales, customers,
suppliers, distributors, assets and resources, and to make that information
widely available to employees when and where they need it. As the number of
Internet users continues to grow, Sagent believes that the demand for Web-based
information access, analysis and delivery will increase significantly.
International Data Corporation forecasts that total commerce on the Internet
will grow from an estimated $12.4 billion in 1997 to $237.2 billion in 2001,
with the business commerce segment of the market growing from 47% in 1997 to 60%
in 2001.
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NEED FOR A NEW SOLUTION
Sagent believes that new demands for high performance information access,
analysis and delivery, particularly through the Internet, have stretched the
capabilities of traditional data warehousing and decision support systems. Many
organizations now require a new generation of Enterprise Intelligence solutions
that can leverage Internet technologies and accommodate the rapidly growing
number of internal and external users who need to access business-critical
information. To be most effective, Sagent believes that these solutions should
satisfy four critical requirements:
- First, solutions must be capable of accessing and assembling increasing
amounts of data from multiple, disparate and complex sources into a
single business view of information for the end user.
- Second, solutions must be capable of scaling to hundreds and thousands of
concurrent users and delivering information through the bandwidth of many
Internet connections, as well as through new access devices such as
hand-held computers and alphanumeric pagers.
- Third, solutions must deliver information fast enough to meet the demands
of the new business environment, particularly the performance
requirements of e-Business and Internet applications.
- Fourth, solutions should be delivered by a single vendor that can provide
a complete, integrated product and the professional services required to
implement a working, timely solution.
THE SAGENT SOLUTION
Sagent offers a new generation of Enterprise Intelligence software
solutions designed to address organizations' rapidly growing information access,
analysis and delivery needs. The Sagent DMS product suite provides end-to-end,
fully integrated data movement, access, analysis and presentation capabilities
on all major database platforms and is specifically designed to deliver
information over the Internet. The Sagent DMS product suite utilizes a
multi-dimensional data structure known as a Star Schema and advanced dataflow
technology to construct and provide access to data marts capable of handling
some of the most complex and demanding Enterprise Intelligence requirements.
Sagent's data marts, which are data warehouses that contain a subset of specific
corporate data, provide a more detailed, single business view of information
that is focused on the needs of a specific group of users. Sagent's Web
technology enables the distribution of information throughout the organization
and gives end users the ability to access and analyze data through common Web
browsers. Sagent also offers Sagent Professional Services, which include system
and application design, and education services, to facilitate the successful
implementation of the Sagent DMS product suite.
Sagent believes its solution provides the following key benefits:
High Performance Internet Access. The Sagent DMS product suite is designed
to provide customers with the ability to access, analyze and deliver critical
information easily and rapidly over the Web. The Sagent architecture utilizes
Internet based processing capabilities to minimize the bandwidth required for
the delivery of information over the Web and other new access technologies. This
technology significantly reduces the waiting time for Web-page processing and
information delivery, thus increasing user productivity.
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Single Business View of Information. The Sagent DMS product suite utilizes
a 32-bit application server, a proprietary dataflow model and Star Schema data
structure to create a single business view of information from complex,
disparate data sources. Sagent believes this consolidated view of information
allows Sagent users to access and analyze complex data more easily and rapidly
than with traditional solutions. This approach also allows Sagent's customers to
manage the rapidly growing levels of data within their organizations.
Highly Scalable. Sagent's use of advanced bandwidth management technology,
combined with its core Star Schema data structure, enables the Sagent DMS
product suite to provide Web-based information access and data analysis
capabilities to thousands of users without degrading application performance and
availability.
Low Total Cost of Ownership. The Sagent DMS product suite is designed to
deliver low total cost of ownership by leveraging industry standards such as the
Windows NT operating system and other Microsoft technology, by providing an
integrated product suite to lower implementation time and cost, and by providing
extensive administrative functionality to reduce ongoing systems management
burdens.
STRATEGY
Sagent's objective is to become a leading provider of Enterprise
Intelligence software solutions to address organizations' rapidly growing
information access, analysis and delivery needs.
The following are key elements of Sagent's strategy:
Focus on Internet Market Opportunity. Sagent believes that the growing
global use of the Internet is driving widespread implementation of new
e-Business applications. These applications depend on the efficient access,
analysis and presentation of enterprise data. By providing a product that
delivers large amounts of highly complex data through the Web to large numbers
of simultaneous users, Sagent believes that its products can be a foundation and
enabler of Web-based Enterprise Intelligence and e-Business applications.
Extend Product Functionality and Technology Leadership. Sagent believes it
provides the first fully integrated, end-to-end Enterprise Intelligence software
solution capable of meeting the performance demanded by the emerging e-Business
environment. Sagent is currently developing the next version of the Sagent DMS
product suite, which is being designed to significantly enhance user
scalability, and which is currently scheduled for release in the first half of
1999. Sagent plans to add capabilities that broaden and complement the Sagent
DMS product suite, such as data analysis, which includes data mining,
forecasting and modeling, data visualization, data sorting, Web querying,
extraction of data from SAP applications and information broadcasting. In
addition, Sagent may introduce new international versions of its products and
may port its products to additional UNIX platforms as opportunities arise.
Although Sagent expects that certain of its new products will be developed
internally, Sagent may, based on timing and cost considerations, acquire
technology or products from third parties.
Offer Pre-Built Enterprise Intelligence Applications. Sagent believes there
is a large market for pre-built applications that utilize the underlying
analytical capabilities of the Sagent DMS product suite and offer "out of the
box" functionality in targeted vertical markets. To date, Sagent has designed,
developed and marketed such applications in conjunction with strategic partners,
including Siebel Systems, Advent Software, Inc. and Automatic Data Processing,
Inc. In the future, Sagent plans to leverage the vertical and functional
knowledge gained through these relationships and through implementations by
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its Professional Services Group to develop other pre-built Enterprise
Intelligence applications.
Broaden Distribution and Strategic Relationships. Sagent believes that it
can continue to expand its market penetration and build its brand recognition by
aggressively expanding its direct sales force; pursuing strategic relationships
with selected enterprise application vendors, consulting firms, system
integrators and development partners; and expanding its network of resellers and
distributors. To date, Sagent has entered into relationships with companies such
as Microsoft Corporation, Oracle Corporation, Siebel Systems, Automatic Data
Processing, Inc., Advent Software, and USinternetworking, Inc. Sagent also
believes that a significant opportunity exists to sell its products
internationally and intends to leverage its existing distributor relationships
in Europe and Japan and expand its direct and indirect international sales
efforts to exploit this opportunity.
Provide High Quality Services to Customers. Sagent provides comprehensive
implementation, support and training services to help customers adopt Sagent
products and build customer satisfaction, strong references and long-term
relationships. Sagent plans to continue to expand its professional services
capabilities and infrastructure. In addition, Sagent intends to expand the
education and training services it offers to its strategic partners and
resellers to help these companies market Sagent products more effectively.
Exploit Rapid Growth of Microsoft Windows NT. Sagent will continue to focus
its development efforts on the Microsoft Windows NT platform. Sagent believes
Windows NT is rapidly gaining share in the enterprise computing market due to
its ease of maintenance and cost effectiveness. International Data Corporation
projects that the installed base of Windows NT-based servers will increase from
1.6 million in 1997 to 5.9 million in 2002. Sagent Company believes that the
Sagent DMS product suite has a competitive advantage in leveraging the growth of
the Windows NT platform because it was designed to optimize Microsoft
technology.
PRODUCTS
The Sagent DMS product suite is comprised of software application servers
that handle the core components of an end-to-end solution, as well as end user
analysis applications.
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LOGO
As illustrated above, the Sagent DMS product suite consists of three core
functional areas: Data Load and Management, Data Access and Analysis, and
Administration and Design.
DATA LOAD AND MANAGEMENT
Sagent Data Load Server. The Sagent Data Load Server extracts data from
multiple client/server and mainframe databases, transforms that data into a Star
Schema data structure, and then loads that data into a Sagent data mart. The
server relies upon a 32-bit multithreaded architecture to achieve its high level
of performance.
DATA ACCESS AND ANALYSIS
Sagent Data Access Server. The Sagent Data Access Server delivers the data
loaded into a Sagent data mart to end users. The server is designed to allow
large numbers of users to access and analyze data stored in Star Schema
structures. The server relies upon a 32-bit multithreaded architecture to
achieve its high level of performance.
Sagent WebLink Server. The Sagent WebLink Server is a high performance,
scalable application server that delivers information from the Sagent Data
Access Server, allowing end users to query, analyze and report business
information from a Web browser. The server also provides management capabilities
that maintain the security and availability of Internet connections.
Sagent Statistical Calculator. The Sagent Statistical Calculator adds
advanced statistical analysis capabilities to the Sagent Data Access Server. The
calculator allows organizations to automate statistical analyses of large,
complex data sets, thereby improving the single business view of information
distributed to end users.
Sagent Information Studio. Sagent Information Studio enables users to
access and analyze an organization's information in client/server environments.
Information Studio, as well as WebLink Server, can be integrated with Microsoft
Excel to aid in exporting result sets to spreadsheets for further analysis.
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The following reporting and analysis products can be integrated with the
Sagent DMS product suite:
Sagent Reports. Sagent Reports allows end users to create, publish and view
graphically rich presentations of corporate information.
Sagent Analysis. Sagent Analysis provides a wide range of analytical
capabilities for business data, such as rankings, deciles, periodic and
exception reporting. The product's drill down analysis capabilities allow users
to view information in either cross-tabular or chart format.
StatView for Sagent. StatView for Sagent provides an end user with the
ability to create, publish and view complex statistical analyses of corporate
data in client/server environments.
ADMINISTRATION AND DESIGN
Sagent Design Studio. Sagent Design Studio provides a visual environment
for describing data and designing the flow of data for both loading and
accessing a data mart. Sagent Design Studio minimizes the requirement that users
have in-depth knowledge of databases, networks and operating systems and allows
them to concentrate on the business purpose of accessing, analyzing and
delivering information.
Sagent Admin. Sagent Admin enables administrators to manage and control one
or more Sagent DMS servers from a single location. In addition, Sagent Admin
manages user security and access privileges.
Sagent Automation. Sagent Automation automates common tasks within the
Sagent DMS product suite, such as data loading, error recovery and quality
assurance. Tasks can be initiated by events such as a pre-determined time of day
or date, reaching disk storage capacity or the availability of new data.
PROFESSIONAL SERVICES AND CUSTOMER SUPPORT
The Sagent Professional Services Group offers an extensive set of
consulting and education services to Sagent's customers. The Sagent Professional
Services Group has significant experience in the design and implementation of
Enterprise Intelligence applications using a Star Schema data architecture.
Sagent's customers are able to select an appropriate level of support for their
implementations, including project planning, design and implementation
assistance.
In addition to consulting services, the Sagent Professional Services Group
offers design and product training classes to facilitate customer success in
initial implementations and provide a foundation for expanding the use of Sagent
products in customer organizations. The Sagent Professional Services Group also
offers to third party consultants product certification training, which Sagent
believes helps develop market awareness of its product offerings.
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CUSTOMERS
The following is a representative list of Sagent's customers that have
purchased more than $75,000 in product licenses or services from Sagent since
January 1, 1997:
<TABLE>
<S> <C> <C>
ARINC DiaLogos Mashantucket Pequot Tribal
Automatic Data Processing Eddie Bauer Nation
AT&T Ernst & Young MCI WorldCom
Barnesandnoble.com Express Scripts/ValueRx Miller Freeman
Bell Communications Research Farm Credit Services NationsBanc
BellSouth Cellular General American NETCOM On-Line
BellSouth Entertainment Transportation Communication Services
CEISS/BC Ministry of Education Hoechst Marion Roussel Nordstrom
CellStar GPU Energy Nycomed
Ceridian J.P. Morgan & Co. PairGain Technologies
City of Santa Clara Jiffy Lube International Pharmaceutical Care Network
Cohn & Wells John Hopkins University Prudential Insurance
Deutsche Financial Services Kaufman & Broad Home Rohm & Haas
Kawasaki Steel Systems R&D The Application Group
</TABLE>
In 1997, Sagent received in excess of 10% of its total revenues from each
of Oracle Corporation and Automated Data Processing.
CASE STUDIES
The following case studies illustrate how certain of Sagent's customers
have utilized the Sagent DMS product suite:
PHARMACEUTICAL CARE NETWORK
Pharmaceutical Care Network is a pharmacy benefits management and
healthcare information services company.
Business Challenge. Pharmaceutical Care Network was one of the first
pharmacy benefit management companies to institute on-line, real-time claim
processing for a nationwide network of participating pharmacies. When a plan
participant presents a prescription at a Pharmaceutical Care Network
participating pharmacy, the applicable plan guidelines are referenced on-line
instantly, ensuring that a customer pays for appropriate and eligible
prescriptions at the contracted price. Pharmaceutical Care Network wanted to
leverage the information it was gathering through its nationwide network of
pharmacies to improve the level of service across its pharmaceutical care value
chain, including plan members, health care providers and plan sponsors and
affiliated pharmacies. To provide this service, Pharmaceutical Care Network
wanted to install an Enterprise Intelligence solution that would allow customers
to access and analyze the vast amounts patient care information through a Web
browser.
Solution. Pharmaceutical Care Network established MedIntelligence, a family
of information-based products for its pharmaceutical care value chain, to screen
and review prescription data, initiate notifications that identify drug therapy
problems and recommend action to improve the quality and cost of patient care.
Pharmaceutical Care Network selected the Sagent DMS product suite as the core of
MedIntelligence to integrate large amounts of disparate information within the
Pharmaceutical Care Network and to rapidly deliver MedIntelligence products over
the Web. The MedIntelligence products and the Sagent DMS product suite furnishes
healthcare providers with access to a more complete view of patient drug
regimens, which reduce the risk of harmful drug interactions, and provide health
care payers and plan administrators with the ability to monitor pharmacy related
plan costs and usage trends.
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CELLSTAR CORPORATION
CellStar Corporation is an integrated wholesaler and retailer of wireless
handsets and other wireless communication products, with operations in the
United States, Asia/Pacific, Latin America and the United Kingdom.
Business Challenge. CellStar Corporation required a solution to provide its
global sales force and key customers access to sales data for analysis and
presentation. In particular Cellstar Corporation wanted to provide it's
employees with the ability to monitor sell through, perform customer rankings
and identify high margin products. In addition CellStar Corporation wished to
provide it's key customers and vendors with worldwide data on the most popular
products by volume to maximize their revenue opportunity.
Solution. CellStar Corporation uses the Sagent DMS product suite to manage
and access CellStar Corporation data. The Sagent Analysis desktop module with
Sagent's WebLink lets users perform multidimensional analysis on the data mart
to gain sales data information either from a client/server environment for their
internal employees or through a Web browser for their global sales force,
customers and vendors. While the WebLink product is used to provide access to
data mart information to general users, Sagent's Information Studio with the
analysis module is generally utilized by internal business analysts. This
Enterprise Intelligence solution provides CellStar Corporation's manufacturers
and key customers with the ability to analyze sell-through data so that they can
determine which products are selling at acceptable margins to make better
informed channel marketing decisions.
TECHNOLOGY
Sagent has invested significant resources in developing leading
technologies and believes that utilizing a Star Schema data architecture and
Sagent's advanced dataflow technology to construct and provide access to data
marts gives it a competitive advantage over traditional solutions. Sagent also
believes that its technology maximizes the advantages of an Internet based
architecture to provide one of the most scalable solutions currently offered in
the market. The following are the key underlying technologies of the Sagent DMS
product suite:
Dataflow Technology. Sagent's dataflow technology is the foundation for the
Sagent DMS product suite load and access servers. Dataflow technology allows
users to rapidly construct processes that load and access a data mart without
writing code. These services relieve the need for users to have in-depth
knowledge of databases, networks and multithreaded operating systems and allow
them to concentrate on the application they are building. The dataflow engine
executes the processes that are visually designed by the user. The dataflow
technology is implemented using the Component Object Model standard, known as
COM, developed by Microsoft Corporation. The utilization of a modular,
language-independent component technology allows customers and resellers to
incorporate new functionality into the product via a transform software
development kit. This same development kit provides Sagent with the ability to
add new functionality to the server rapidly and send it to the customer
electronically without requiring a complete upgrade of the system.
Star Schema Design. Sagent has implemented a set of dataflow components to
support the loading and accessing of Star Schemas. Star Schemas are a database
design technique used to provide high performance for ad hoc data analysis
within a relational database by minimizing the number of relations to process in
a query. By combining query
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generation with the dataflow engine's processing capability, Sagent provides
power and speed to users accessing Star Schema structured data. In addition, the
Sagent DMS product suite provides a set of specialized dataflow components for
loading Star Schemas that significantly lowers the implementation time for the
Sagent DMS product suite.
Internet-Based Architecture. Sagent has developed an architecture that
utilizes the network of computing tiers that comprise the Web. These tiers
include browsers, Internet servers, data access servers, data load servers and
database servers. The efficient usage of CPU cycles and memory provided by these
tiers enables the Sagent DMS product suite to achieve a high degree of
scalability and performance. In addition, on-demand data delivery minimizes
bandwidth usage, improving the rate at which information is delivered to users.
SALES AND MARKETING
Sales. Sagent sells its products and services in North America primarily
through its direct sales and services organization. Sagent has domestic sales
offices in eleven states.
The direct sales process involves the generation of sales leads through
direct mail, seminars, telemarketing, advertising and the Web. Sagent's field
sales force typically conducts demonstrations and presentations of Sagent's
products to developers and management at customer sites as part of its direct
sales effort. The time between initial customer contact and an actual sales
order may span six months or more. See "Risk Factors--Our Operating Results May
Vary Significantly Due to our Lengthy Sales and Implementation Cycles for our
Products Which Could Cause our Stock Price to Fall."
Within Sagent's direct sales group, a separate group targets strategic
partnerships with industry-leading application software providers such as Siebel
Systems, Advent Software, Automatic Data Processing and Oracle Corporation.
These vendors embed all or a portion of Sagent's products within their own
applications and then sell the integrated products to their customers. Siebel
Systems, for example, embeds a portion of our product suite in Siebel Marketing
Enterprise to integrate and analyze customer interaction in sales, service and
all center environments. The enterprise application vendor's customer receives a
license to use Sagent's products solely in conjunction with the vendor's
application with which Sagent DMS products are integrated. Enterprise
application vendors provide the first level of post-sales support to customers.
Sagent also utilizes a limited number of resellers, such as Unisys Corporation,
USinternetworking, Inc. and Cap Gemini Group, that remarket Sagent's products to
their customer base. Resellers are offered discounts on Sagent's products and
sell a full use license of the product. Sagent's resellers do not provide
post-sales support. Sagent's ability to achieve revenue growth in the future
will depend in large part on its success in expanding its direct sales force and
in further establishing and maintaining relationships with enterprise
application vendors and resellers. See "Risk Factors--If our Relationships with
Channel Partners are Not Successful and if We Cannot Recruit Additional Channel
Partners We May Not Be Able to Expand our Sales."
Sagent also sells its products internationally through distributors located
in France, Germany, Japan, South Africa and the United Kingdom. These
distributors perform some or all of sales and marketing, systems integration,
software development, and ongoing consulting training and customer support
functions. In exchange for providing such services, Sagent offers its
distributors discounts on products. International sales are subject to certain
risks, including, but not limited to, costs of localizing products for foreign
countries, dependence on local vendors, currency fluctuations and greater
difficulty or delay in accounts receivable collection.
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We have agreements with our United Kingdom distributor and the parent
company of our French and German distributors, under each of which we have the
option to acquire the distributor. In the event of a change of control of
Sagent, we could be required to acquire the German distributor. In connection
with any such acquisition, we would be required to pay a purchase price. The
purchase price would be equal to the greater of a multiple of such distributor's
last 12 months' revenues as of the date of the acquisition or a minimum purchase
price specified in each agreement in cash or a combination of cash and
registered shares of our common stock. See "Risk Factors--We Intend to Expand
International Operations but We May Encounter a Number of Problems in Doing so
Which Could Limit our Future Growth."
Marketing. Sagent has a comprehensive marketing strategy which includes
public relations, user group meetings, programs to work closely with analysts
and other influential third parties, and direct mail campaigns. Sagent also
utilizes the Web for advertising campaigns on frequently visited Web sites
including those of its strategic partners. Sagent uses its Web site,
www.sagenttech.com, to establish its market presence, generate leads and extend
its program offerings to customers and strategic partners. A key element of
Sagent's marketing strategy is to leverage its relationship with Dr. Ralph
Kimball, one of Sagent's consultants and strategic partners, by sponsoring his
data mart design courses. Sagent has also invested in building a partner and
channel marketing function to recruit, train, support and offer co-marketing
opportunities to technology partners and resellers.
RESEARCH AND PRODUCT DEVELOPMENT
Sagent's research and development group is organized by product teams,
which consist of product managers, software engineers, quality assurance
engineers and technical documentation specialists. The teams are encouraged to
maintain consistent architectural standards, engineering practices, quality
goals and documentation standards across a broad product line. The product teams
use a phased development approach that monitors cost, schedule, quality, time,
functionality and customer satisfaction. Sagent has established an executive
product steering committee which reviews the progress of individual product
teams at each phase of development. In order to incorporate customer needs in
product releases, the product teams actively solicit requirements from
customers, user groups, professional services, industry analysts and technical
support.
Sagent's total expenses for research and development for the year ended
December 31, 1996, 1997 and 1998 were $3.4 million, $5.0 million and $6.0
million respectively. Sagent believes that research and development expenses
will continue to increase in the future. To date, Sagent's development efforts
have not resulted in any capitalized software development costs.
Sagent has made substantial investments in research and development. Sagent
is currently developing the next version of the Sagent DMS product suite, which
is being designed to significantly enhance user scalability, and is currently
scheduled for release in the first half of 1999. Sagent plans to add
capabilities that broaden and complement the Sagent DMS product suite, such as
data analysis, which includes data mining, forecasting and modeling, data
visualization, data sorting, Web querying, extraction of data from SAP
applications and information broadcasting. In addition, Sagent may introduce new
international versions of its products and may port its products to additional
UNIX platforms as opportunities arise. Although Sagent expects that certain of
its new products will be developed internally, Sagent may, based on timing and
cost considerations, acquire technology or products from third parties.
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Sagent believes that its future performance will depend in large part on
its ability to maintain and enhance its current product line, develop new
products that achieve market acceptance, maintain technological competitiveness
and meet an expanding range of customer requirements. Sagent's inability to
enhance its existing products and develop new ones in a timely and effective
manner, could have a material adverse effect upon Sagent's business, financial
condition and operating results. See "Risk Factors--We May Lose Existing
Customers or Be Unable to Attract New Customers if We Do Not Develop New
Products," "--Changes in Internet Technology and Operating System Standards May
Impede Market Acceptance for our Products" and "--If We Discover Software
Defects We May Have Product-Related Liabilities Which May Lead to Loss of
Revenue or Delay in Market Acceptance for our Products."
COMPETITION
The markets for Sagent's products are intensely competitive and subject to
rapidly changing technology. Sagent competes against providers of decision
support software, data warehousing software, enterprise application software and
e-Business software. The primary bases of competition in this market include
performance, scalability, ease of use, operating platform and cost of ownership.
Sagent's competitors providing traditional decision support software
include Brio Technology, Inc., Business Objects S.A., Cognos Incorporated,
Information Advantage, Inc. and MicroStrategy, Inc. Sagent's competitors
providing data warehousing software include Ardent Software, Inc., Informatica
Corporation, Information Builders, Oracle, PLATINUM Technology, Inc. and SAS
Institute, Inc. In addition, enterprise application software vendors such as
Baan Company N.V., J.D. Edwards & Company, PeopleSoft, Incorporated and SAP AG
are beginning to offer decision support and analytical modules, although each
tends to support the analysis of data only from its own operational systems. One
or more of these companies may expand its technologies to support greater
Enterprise Intelligence functionality. Sagent may also face competition from
vendors of products and turn-key solutions for e-Business applications that
could include Internet based information functionality.
Many of Sagent's competitors have longer operating histories, significantly
greater financial, technical, marketing or other resources, or greater name
recognition than we do. Sagent's competitors may be able to respond more quickly
than Sagent can to new or emerging technologies and changes in customer
requirements. Competition could seriously harm Sagent's ability to sell
additional software and maintenance and support renewals on terms favorable to
Sagent. Competitive pressures could reduce Sagent's market share or require it
to reduce the price of products, either of which could materially and adversely
affect Sagent's business, financial condition and operating results.
INTELLECTUAL PROPERTY
Sagent seeks to protect its software, documentation and other written
materials primarily through a combination of patent, trade secret, trademark and
copyright laws, confidentiality procedures and contractual provisions. For
example, Sagent licenses rather than sells its software and requires licensees
to enter into license agreements that impose certain restrictions on the
licensees' ability to utilize the software. In addition, Sagent seeks to avoid
disclosure of its trade secrets, by, among other things, requiring those persons
with access to Sagent's proprietary information to execute confidentiality
agreements with Sagent and restricting access to Sagent's source code.
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Sagent has two patent applications pending and one patent application
allowed in the United States with respect to certain aspects of its software.
None of these patents have been issued, and there can be no assurance that any
patents will be issued pursuant to these applications or that, if granted, such
patent would survive a legal challenge to its validity or provide significant
protection to Sagent. Despite Sagent's efforts to protect its proprietary
rights, unauthorized parties may attempt to copy aspects of Sagent's products or
obtain and use information that Sagent regards as proprietary. Policing
unauthorized use of Sagent's products is difficult. While Sagent is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem, particularly in foreign
countries where the laws may not protect Sagent's proprietary rights as fully as
in the United States. There can be no assurance that Sagent's means of
protecting its proprietary rights will be adequate or that Sagent's competitors
will not independently develop similar technology.
From time to time, Sagent may be involved in intellectual property
disputes. In May 1998, Acta Technology, Inc. filed suit against Sagent alleging,
among other things, copyright infringement, and Sagent filed suit against Acta
Technology, Inc. alleging misappropriation of Sagent trade secrets. The parties
settled the dispute in February 1998. Other than Acta Technology, Inc., Sagent
has not been notified that Sagent's products infringe the proprietary rights of
third parties. However, third parties in the future may claim infringement
against Sagent with respect to current or future products. Sagent expects that
software product developers will increasingly be subject to infringement claims
as the number of products and competitors in Sagent's industry segment grows and
the functionality of products in different industry segments overlaps. See "Risk
Factors--Our Proprietary Technology May Be Subjected to Infringement Claims or
May Be Infringed Upon."
Sagent relies upon certain software it has licensed from Opalis S.A. to
perform key functions of its Sagent Automation product which automates common
tasks in managing data. This license may not continue to be available to Sagent
on commercially reasonable terms. The loss of this license could result in
delays or reductions of shipments of the Sagent Automation product until
equivalent software could be developed, identified, licensed and integrated. If
customers require the automation features provided by this product, they may
delay or decline to purchase Sagent's product suite, which could materially
adversely affect Sagent's business, financial condition and operating results.
EMPLOYEES
As of December 31, 1998, Sagent had a total of 152 employees, of whom 147
were based in the United States and 4 were based internationally. Sagent's
employees were employed as follows:
- 60 were engaged in sales and marketing
- 43 in research and development
- 32 in professional services and customer support
- 17 in finance, administration and corporate operations
Sagent's future performance depends in significant part on its continuing
ability to attract, train and retain highly qualified technical, sales, service,
marketing and managerial personnel. None of Sagent's employees is represented by
a labor union. Sagent has not experienced any work stoppages and considers its
relations with its employees to be good. See "Risk Factors--Our Executive
Officers and Key Personnel are Critical to our Business and These Officers and
Key Personnel May Not Remain With Us in the Future."
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FACILITIES
Sagent's principal offices currently occupy approximately 34,000 square
feet in Mountain View, California pursuant to a lease which expires in October
2003. In addition, Sagent also leases executive suites on a short-term basis for
North American offices in:
<TABLE>
<S> <C>
- Englewood, Colorado - Wellesley, Massachusetts
- Atlanta, Georgia - New York, New York
- Orlando, Florida - Bala Cynwyd, Pennsylvania
- Plantation, Florida - Houston, Texas
- Chicago, Illinois - Alexandria, Virginia
- Toronto, Ontario
</TABLE>
Sagent believes that its facilities are adequate for the next 12 months and
that, if required, suitable additional space will be available on commercially
reasonable terms to accommodate expansion of Sagent's operations.
LEGAL PROCEEDINGS
On March 22, 1999, Timeline, Inc. filed a complaint against Sagent in the
United States District Court for the Western District of Washington at Seattle.
Timeline alleges that the Sagent DMS product suite infringes one or more of the
claims of a Timeline patent. Timeline is seeking relief in the forms of an
injunction, damages, punitive damages, attorney's fees, prejudgment and
postjudgment interest and costs. Sagent is not currently a party to any other
material legal proceedings. See "Risk Factors -- Our Proprietary Technology May
Be Subjected to Infringement Claims or May Be Infringed Upon and Timeline, Inc.
Has Filed an Infringement Suit Against Us."
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Sagent as of January 29, 1999 are
set forth below. The board of directors has appointed Mr. Luft to the board of
directors, and Mr. Luft has agreed to join, effective as of the first meeting of
the board of directors following completion of the offering.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kenneth C. Gardner........................ 48 President, Chief Executive Officer and
Director
John E. Zicker............................ 42 Executive Vice President, Technology,
Chief Technology Officer and Director
W. Virginia Walker........................ 53 Executive Vice President, Finance and
Administration, and Chief Financial
Officer
Thomas M. Lounibos........................ 42 Executive Vice President, Sales and
Marketing
Kenneth C. Holcomb........................ 49 Vice President, Operations
Michael P. Venerable...................... 36 Vice President, Professional Services
Shanda Bahles (a)(b)...................... 43 Director
Richard W. Shapero(a)(b).................. 51 Director
Jeffrey T. Webber......................... 46 Director
Klaus S. Luft............................. 57 Director designee
</TABLE>
- -------------------------
(a) Member of the Audit Committee.
(b) Member of the Compensation Committee.
Kenneth C. Gardner. Mr. Gardner has been President, Chief Executive Officer
and a director since commencement of operations in June 1995. From March 1994
until March 1995, Mr. Gardner was Vice President of Products at Borland
International, Inc., which has since changed its name to Inprise Corporation, an
enterprise applications company. From February 1992 until March 1994, Mr.
Gardner was President, Chief Executive Officer and a co-founder of ReportSmith,
Inc., a database report applications company, which was purchased by Borland in
1994. Mr. Gardner is a director of ObjectSwitch Corp., Data Sage, Inc. and
CommerceOne Inc., which are privately held companies. Mr. Gardner received his
B.S.C. degree in Finance from the University of Louisville.
John E. Zicker. Mr. Zicker has been Executive Vice President, Technology,
Chief Technology Officer and a director since Sagent's commencement of
operations in June 1995. From March 1994 until May 1995, Mr. Zicker was Director
of Client/Server Development at Borland International, Inc. From February 1992
until March 1994, Mr. Zicker was Vice President of Technology and a co-founder
of ReportSmith, Inc. Mr. Zicker has 13 years experience in software development
and image processing at NASA Ames Research Center, Lawrence Livermore
Laboratories and the Stanford Linear Accelerator Center. Mr. Zicker received his
B.S. degree in Electrical Engineering at the University of California at Davis
and his M.S. degree in Electrical Engineering from the University of Wisconsin
at Madison.
W. Virginia Walker. Ms. Walker has been Executive Vice President, Finance
and Administration, and Chief Financial Officer since January 1998. From June
1996 to January 1998, Ms. Walker pursued personal interests. From November 1995
until June 1996, Ms. Walker was Executive Vice President of Finance and
Administration, Chief
44
<PAGE> 46
Financial Officer and Secretary of JTS Corporation, a publicly traded disk drive
manufacturer. From May 1985 until September 1995, Ms. Walker worked at Scios
Nova, Inc., a publicly traded biopharmaceutical company, where she held the
positions of Vice President of Finance and Administration and Chief Financial
Officer. Ms. Walker received her B.S. degree in Business Administration,
Accounting from San Jose State University.
Thomas M. Lounibos. Mr. Lounibos has been Executive Vice President, Sales
and Marketing since January 1999. Mr. Lounibos was Sagent's Executive Vice
President, Worldwide Sales, from October 1998 until January 1999 and was
Sagent's Vice President, Sales from March 1996 until October 1998. From October
1995 until March 1996, Mr. Lounibos was Vice President of Sales for
ParcPlace-DigiTalk Incorporated, an object-oriented programming tools company,
and from November 1993 until October 1995 Mr. Lounibos was Vice President of
Sales for DigiTalk, Incorporated, which was acquired by ParcPlace Incorporated.
Prior to joining DigiTalk, Incorporated, Mr. Lounibos worked for Knowledgeware,
Incorporated, a software company, where he served as Vice President of
Sales--Western United States and Vice President of Marketing. Mr. Lounibos
received his B.S. degree in Business Economics from the University of San
Francisco.
Kenneth C. Holcomb. Mr. Holcomb has been Vice President, Operations since
March 1998. From March 1997 until February 1998, Mr. Holcomb was Vice President,
Operations of Pilot Network Services, Inc., a publicly-traded network security
company. From May 1996 until February 1997, Mr. Holcomb was Vice President,
Systems Integration of WorldCom, Inc., a publicly traded telecommunications
company. From January 1996 until May 1996, Mr. Holcomb was Vice President,
Internet Development of MFS Communications Company, Inc., a telecommunications
company. From January 1992 until December 1996, Mr. Holcomb was Senior Vice
President, Customer Service and Operations of MFS Datanet, Inc., and subsidiary
of MFS Communications, Inc. a data communications company. Mr. Holcomb received
his B.A. degree in Business Administration, Finance, from the University of
Notre Dame.
Michael P. Venerable. Mr. Venerable has been Vice President, Sagent
Professional Services since March 1998. In March 1992, Mr. Venerable founded
Talus, Incorporated, a privately held company with significant experience in the
design and implementation of Enterprise Intelligence applications, and served as
its President until February 1998, when Sagent acquired Talus, Incorporated. Mr.
Venerable received his B.S. degree in Criminal Justice from the University of
Dayton.
Shanda Bahles. Ms. Bahles has been a director of Sagent since May 1995.
Since May 1991, Ms. Bahles has been a General Partner of El Dorado Ventures, a
venture capital firm. Ms. Bahles joined El Dorado Ventures as an associate in
June 1987. From 1979 to 1985, Ms. Bahles held various engineering, marketing and
management positions with Millennium Systems, Inc., a systems integration
company, and Fortune Systems Corporation, a workstation manufacturer. Ms. Bahles
is a director of Pilot Network Services, Inc., a publicly traded company, and
Women.com Networks, Inc., Poet Holdings, Inc. and MS2, Inc., which are privately
held companies. Ms. Bahles received her B.S.E.E. and M.B.A. degrees from
Stanford University.
Richard W. Shapero. Mr. Shapero has been a director of Sagent since May
1995. Since April 1993, Mr. Shapero has been a General Partner of Crosspoint
Venture Partners, a venture capital firm. From January until June 1992, Mr.
Shapero was Chief Operating Officer of Shiva Corporation, a networking company.
Previously, he was a Vice President of Sun Microsystems, Inc., Senior Director
of Marketing of AST Research, Inc. and held marketing and sales positions at
Informatics General Corporation and UNIVAC's Communications Division. Mr.
Shapero is a director of Covad Communications Group,
45
<PAGE> 47
Inc., a publicly traded company, and Digital Island, Inc., Diamond Lane
Communications Corporation, NetBoost Corporation, Fabrik Communications, Inc.,
ObjectSwitch Corp., Jetstream Communications, Inc., AristaSoft Corporation and
iBeam Broadcasting Corporation, which are privately held companies. Mr. Shapero
received his B.A. degree in English from the University of California at
Berkeley.
Jeffrey T. Webber. Mr. Webber has been a director of Sagent since September
1995. Mr. Webber founded, and since January 1991 has served as President of,
R.B. Webber & Company, Inc., a management consulting firm. From 1987 to January
1991, he was a partner of Edgar, Dunn & Company, a management consulting firm.
Mr. Webber serves as a director of Sybase, Inc., a publicly traded company, and
CommerceOne, Inc., enCommerce, Inc., Persistence Software, Inc., Spear
Technologies, Inc. and Workwise Software, Inc., which are privately held
companies. Mr. Webber received his B.A. degree in American Studies from Yale
University.
Klaus S. Luft. Mr. Luft is the founder and President of MATCH -- Market
Access for Technology Services GmbH, a provider of sales and marketing services
to high technology companies, since February 1994. Mr. Luft is also the founder,
limited partner and President of ISAR-Vermogensverwaltung GbR mbH. Since August
1990, Mr. Luft has served as an International Advisor and Vice-Chairman of
Goldman Sachs Europe Limited, an investment bank. From March 1986 to November
1989, Mr. Luft was Chief Executive Officer of Nixdorf Computer AG, a
manufacturer of computer systems in Paderborn, Germany, where he also held
various other executive positions in marketing, manufacturing and finance for
more than 17 years. Mr. Luft is a director of Dell Computer Corporation, a
publicly traded company. Mr. Luft received his German Arbitur in Bruchsal,
Germany.
BOARD OF DIRECTORS AND COMMITTEES
Following the offering, Sagent's board of directors will consist of six
directors divided into three classes with each class serving for a term of three
years. At each annual meeting of stockholders, directors will be elected by the
holders of the common stock to succeed those directors whose terms are expiring.
Mr. Shapero and Ms. Bahles are Class I directors whose terms will expire in
2000. Mr. Webber is a Class II director whose term will expire in 2001. Messrs.
Gardner and Zicker are Class III directors whose terms will expire in 2002.
The board of directors has a compensation committee and an audit committee.
The compensation committee, which is comprised of Ms. Bahles and Mr. Shapero,
administers the amended 1995 stock option plan, the 1998 stock option plan and
the 1999 employee stock purchase plan and all matters concerning executive
compensation. The audit committee, which is comprised of Ms. Bahles and Mr.
Shapero, approves Sagent's independent auditors, reviews the results and scope
of annual audits and other accounting related services, and evaluates Sagent's
internal audit and control functions. Each of these committees was established
in February 1997.
DIRECTOR COMPENSATION
Sagent does not pay any compensation to directors for serving in that
capacity, nor does it reimburse directors for expenses incurred in attending
board meetings. The board has the discretion to grant options to non-employee
directors pursuant to the director option plan. See " -- 1999 Director Option
Plan."
46
<PAGE> 48
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee is currently comprised of Ms. Bahles and Mr.
Shapero. Neither of these individuals has at any time been an officer or
employee of Sagent. Prior to formation of the compensation committee, all
decisions regarding executive compensation were made by the full board of
directors. No interlocking relationship exists between Sagent's board of
directors or compensation committee and the board of directors or compensation
committee of any other company, nor has any such interlocking relationship
existed in the past.
LIMITATION ON LIABILITY AND INDEMNIFICATION MATTERS
Sagent's certificate of incorporation limits the liability of directors to
the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation shall not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except for:
- Any breach of the director's duty of loyalty to Sagent or its
stockholders
- Acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law
- Unlawful payments of dividends or unlawful stock repurchases, redemptions
or other distributions
- Any transaction from which the director derived an improper personal
benefit
These provisions are permitted under Delaware law.
Sagent's bylaws provide that Sagent shall indemnify its directors and
executive officers and may indemnify its other officers and employees and agents
and other agents to the fullest extent permitted by law. Sagent believes that
indemnification under its bylaws covers at least negligence and gross negligence
on the part of indemnified parties. Sagent's bylaws also permit Sagent to secure
insurance on behalf of any officer, director, employee or other agent for any
liability arising out of his or her actions in such capacity, regardless of
whether the bylaws would permit indemnification.
Sagent has entered into agreements to indemnify its directors and officers,
in addition to indemnification provided for in Sagent's bylaws. These
agreements, among other things, indemnify Sagent's directors and officers for
certain expenses, including attorneys' fees, judgments, fines and settlement
amounts incurred by any such person in any action or proceeding, including any
action by or in the right of Sagent, arising out of such person's services as a
director or officer of Sagent, any subsidiary of Sagent or any other company or
enterprise to which the person provides services at the request of Sagent. In
addition, Sagent intends to obtain directors' and officers' insurance providing
indemnification for certain of Sagent's directors, officers and employees for
certain liabilities. Sagent believes that these provisions, agreements and
insurance are necessary to attract and retain qualified directors and officers.
At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent of Sagent where indemnification will be
required or permitted. Sagent is not aware of any threatened litigation or
proceeding that might result in a claim for such indemnification.
47
<PAGE> 49
EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation that
Sagent paid during the year ended December 31, 1998 to Sagent's Chief Executive
Officer and each of Sagent's other four most highly compensated executive
officers whose salary and bonus exceeded $100,000 during such fiscal year. These
officers are referred to as Named Officers elsewhere in this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION SECURITIES
-------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS(#) COMPENSATION(A)
--------------------------- --------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Kenneth C. Gardner................ $225,000 $ 90,000 -- $366
President and Chief Executive
Officer
John E. Zicker.................... 150,000 60,000 -- 120
Executive Vice President,
Technology and Chief Technology
Officer
W. Virginia Walker................ 173,965 69,586 180,000 240
Executive Vice President,
Finance and Administration and
Chief Financial Officer
Thomas M. Lounibos................ 164,590 124,420(b) 90,000 120
Executive Vice President, Sales
and Marketing
Perry S. Mizota(c)................ 140,000 35,000 -- 72
Former Vice President, Marketing
</TABLE>
- -------------------------
(a) Consists of premiums paid on term life insurance.
(b) Consists of commissions calculated based on Sagent's revenues.
(c) Perry S. Mizota resigned from his position as Vice President, Marketing of
Sagent effective January 29, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to stock
options granted to each of the Named Officers in 1998, including the potential
realizable value over the ten-year term of the options, based on assumed rates
of stock appreciation of 5% and 10%, compounded annually. These assumed rates of
appreciation comply with the rules of the Securities and Exchange Commission and
do not represent Sagent's estimate of future stock price. Actual gains, if any,
on stock option exercises will be dependent on the future performance of
Sagent's common stock.
48
<PAGE> 50
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
------------------------------------------------------ VALUE AT ASSUMED
NUMBER ANNUAL RATES OF STOCK
OF SECURITIES % OF PRICE APPRECIATION FOR
UNDERLYING TOTAL OPTIONS EXERCISE OPTION TERM
OPTIONS GRANTED TO PRICE PER EXPIRATION -----------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
---- ------------- ------------- --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kenneth C. Gardner......... -- -- -- -- -- --
John E. Zicker............. -- -- -- -- -- --
W. Virginia Walker......... 180,000 13.12% $2.90 01/20/08 $328,283 $ 831,934
Thomas M. Lounibos......... 90,000 6.56% 7.00 12/28/08 396,204 1,004,058
Perry S. Mizota............ -- -- -- -- -- --
</TABLE>
In 1998, Sagent granted options to purchase up to an aggregate of 1,367,400
shares to employees, directors and consultants. All options were granted under
Sagent's amended 1995 stock option plan and 1998 stock option plan at exercise
prices at the fair market value of Sagent's common stock on the date of grant,
as determined in good faith by the board of directors. All options are
immediately exercisable upon grant; however, any unvested shares are subject to
repurchase by Sagent at their cost in the event of the optionee's termination of
employment. One-forty-eighth of the shares subject to Ms. Walker's option vest
monthly after January 5, 1998. One-twenty-fourth of the shares subject to Mr.
Lounibos' option vest on each monthly anniversary after July 1, 1999.
OPTION EXERCISES AND HOLDINGS
The following table sets forth for each of the Named Officers information
concerning exercisable and unexercisable options held as of December 31, 1998.
The value of in-the-money options is based on a value of $7.00 per share, the
fair market value of the common stock at December 31, 1998, as determined by the
board, and net of the option exercise price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS
SHARES VALUE 1998 AT DECEMBER 31, 1998
ACQUIRED ON REALIZED --------------------------- ---------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kenneth C. Gardner... -- -- 100,000 -- $450,000 --
John E. Zicker....... -- -- 80,000 -- 360,000 --
W. Virginia Walker... 180,000 -- -- -- -- --
Thomas M. Lounibos... 230,000 $1,244,300 208,255 51,745 624,342 $232,853
Perry S. Mizota...... -- -- 50,000 -- 225,000 --
</TABLE>
The $1,244,300 value realized by Mr. Lounibos on the exercise of options as
set forth in the table above is based on a value of $5.50 per share, the fair
market value of the common stock on the date of exercises as determined by the
board of directors, minus the exercise price. Except in the case of Mr.
Lounibos, all options were granted under the amended 1995 stock option plan. Mr.
Lounibos was granted a non plan option to purchase 268,255 shares, of which
38,255 remain unexercised and outstanding, an option to purchase 131,745 shares
under the amended 1995 stock option plan and an option to purchase 90,000 shares
under the 1998 stock option plan.
49
<PAGE> 51
EMPLOYMENT AGREEMENTS
Sagent requires each of its employees to enter into confidentiality
agreements prohibiting the employee from disclosing any confidential or
proprietary information of Sagent. In addition, the agreements generally provide
that upon termination such employee will not work for a competitor and will not
solicit Sagent customers and employees. At the time of commencement of
employment, Sagent's employees also generally sign offer letters specifying
basic terms and conditions of employment. In general, employees of Sagent are
not subject to written employment agreements. However, in connection with
Sagent's acquisition of Talus, Incorporated. Michael Venerable entered into an
employment agreement with Sagent. See "Certain Transactions--Acquisition of
Talus, Incorporated."
EMPLOYEE BENEFIT PLANS
1998 Stock Option Plan. Sagent's 1998 stock option plan provides for the
granting to employees of incentive stock options within the meaning of Section
422 of the Internal Revenue Code and for the granting to employees and
consultants of nonstatutory stock options. The stock option plan was approved by
the board of directors and the stockholders in December 1998. Unless terminated
sooner, the stock option plan will terminate automatically in December 2008. A
total of 2,440,000 shares of common stock is reserved for issuance plus annual
increases, beginning in May 2000, equal to the lesser of:
- 1,500,000 shares
- Five percent of the outstanding shares on the designated date in May or
- A lesser amount determined by the board
The stock option plan may be administered by the board of directors or a
committee of the board. The administrator has the power to determine the terms
of the options granted, including the exercise price, the number of shares
subject to each option, the exercisability thereof, and the form of
consideration payable upon exercise.
The stock option plan provides that in the event of a merger of Sagent with
or into another corporation, or the sale of substantially all of Sagent's
assets, each outstanding option will be assumed or substituted for by the
successor corporation. If the outstanding options are not assumed or substituted
for, each outstanding option will vest and become exercisable, including the
options that would not have been vested or exercisable. As of December 31, 1998,
no shares had been issued upon the exercise of stock options under the 1998
stock option plan and 218,900 shares were subject to outstanding options.
Amended 1995 Stock Option Plan. Sagent's amended 1995 stock option plan
provides for the granting to employees of incentive stock options within the
meaning of Section 422 of the Internal Revenue Code and for the granting to
employees and consultants of nonstatutory stock options. The amended 1995 stock
option plan was approved by the board of directors in July 1998 and the
stockholders in September 1998. The terms of the amended 1995 stock option plan
are substantially similar to those of the 1998 stock option plan. The board of
directors terminated the amended 1995 stock option plan as to new option grants
in December 1998. As of December 31, 1998, 1,214,443 shares had been issued upon
the exercise of stock options granted under the amended 1995 stock option plan
and 2,056,580 shares were subject to outstanding options.
50
<PAGE> 52
1999 DIRECTOR OPTION PLAN
Non-employee directors are entitled to participate in the 1999 director
option plan. The director option plan was adopted by the board of directors in
January 1999 and approved by the stockholders in February 1999, but it will not
become effective until the date of this offering. The director option plan has a
term of 10 years, unless terminated sooner by the board. A total of 150,000
shares of common stock have been reserved for issuance under the director option
plan.
The board has the discretion to grant options to non-employee directors
pursuant to the director option plan. The exercise price of all options is
required to be 100% of the fair market value per share of the common stock,
determined with reference to the closing price of the common stock as reported
on the Nasdaq National Market on the date of grant.
In the event of a merger of Sagent or the sale of substantially all of the
assets of Sagent, if the option is not assumed or substituted, each option shall
become fully vested and exercisable for a period of 15 days from the date the
board notifies the optionee of the option's full exercisability. If an option is
assumed or substituted and the optionee's service as a director is terminated,
other than upon a voluntary resignation, the option becomes fully vested.
Options granted under the director option plan must be exercised within thirty
days of the end of the optionee's termination of service to Sagent as a
director, employee or consultant, within six months after such director's
termination by death, or within twelve months after such director's termination
by death or disability, but not later than the expiration of the option's
10-year term.
1999 EMPLOYEE STOCK PURCHASE PLAN
Sagent's 1999 employee stock purchase plan was adopted by the board of
directors in January 1999 and by the stockholders in February 1999. A total of
450,000 shares of common stock has been reserved for issuance under the employee
stock purchase plan, plus annual increases every January equal to the lesser of:
- The number of shares optioned during the prior year or
- A lesser amount determined by the board
The employee stock purchase plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, contains successive 24-month offering
periods. The offering periods generally start on the first trading day on or
after May 1 and November 1 of each year, except for the first such offering
period which commences on the first trading day on or after the effective date
of this offering and ends on the last trading day on or before October 31, 1999.
Employees are eligible to participate if they are employed by Sagent or any
participating subsidiary for at least 20 hours per week and more than five
months in any calendar year. However, the following employees may not be granted
options to purchase stock under the employee stock purchase plan:
- Any employee who immediately after grant owns stock possessing five
percent or more of the total combined voting power or value of all
classes of the capital stock of Sagent or
- Any employee whose rights to purchase stock under all employee stock
purchase plans of Sagent accrues at a rate which exceeds $25,000 worth of
stock for each calendar year
51
<PAGE> 53
Participants may purchase common stock through payroll deductions of up to
20% of the participant's compensation. The maximum number of shares a
participant may purchase during a single offering period is 10,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each offering period. The price of stock
purchased under the purchase plan is 85% of the lower of the fair market value
of the common stock at the beginning of the offering period and the end of each
purchase period.
The purchase plan provides that, in the event of a merger of Sagent with or
into another corporation or a sale of substantially all of Sagent's assets, each
outstanding option may be assumed or substituted for by the successor
corporation. If the successor corporation refuses to assume or substitute for
the outstanding options, the offering period then in progress will be shortened
and a new exercise date will be set, which will occur before the proposed sale
or merger.
The purchase plan will terminate in February 2009. The board of directors
has the authority to amend or terminate the purchase plan, except that no such
action may adversely affect any outstanding rights to purchase stock.
401(K) PLAN
Sagent has a 401(k) plan covering Sagent's full-time employees located in
the United States who are at least 21 years of age. The 401(k) plan is intended
to qualify under Section 401(k) of the Internal Revenue Code. Consequently,
contributions to the 401(k) plan by employees or by Sagent, and the investment
earnings thereon, are not taxable to employees until withdrawn from the 401(k)
plan. Employees may elect to reduce up to 25% of their pre-tax earnings up to
the statutorily prescribed annual limit, which was $10,000 in 1998, and to have
the amount of such reduction contributed to the 401(k) plan. The 401(k) plan
permits, but does not require, additional matching contributions to the 401(k)
plan by Sagent on behalf of all participants in the 401(k) plan. To date, Sagent
has not made any contributions to the 401(k) plan.
52
<PAGE> 54
CERTAIN TRANSACTIONS
Since April 1995, Sagent's inception, there has not been nor is there
currently proposed any transaction or series of similar transactions to which
Sagent or any of its subsidiaries was or is to be a party in which the amount
involved exceeds $60,000 and in which any director, executive officer, holder of
more than five percent of the common stock of Sagent or any member of the
immediate family of any of the foregoing persons had or will have a direct or
indirect material interest other than (1) compensation agreements and other
arrangements, which are described where required in "Management," and (2) the
transactions described below.
EQUITY INVESTMENT TRANSACTIONS
In July, August and September 1996, Sagent sold 2,615,680 shares of its
Series C preferred stock for $2.50 per share. In August and September 1997 and
January 1998, Sagent sold 1,572,327 shares of its Series D preferred stock for
$3.18 per share. In February and March 1998, Sagent sold 1,895,370 shares of its
Series E preferred stock for $5.40 per share. Listed below are those directors,
executive officers and stockholders who beneficially own five percent or more of
Sagent's securities who participated in the above financings. Sagent believes
that the shares issued in these transactions were sold at the then fair market
value and that the terms of these transactions were no less favorable than
Sagent could have obtained from unaffiliated third parties.
<TABLE>
<CAPTION>
SERIES C SERIES D SERIES E AGGREGATE CASH
STOCKHOLDER PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK CONSOLIDATION
----------- --------------- --------------- --------------- --------------
<S> <C> <C> <C> <C>
Entities affiliated with
Crosspoint Venture
Partners................ 531,708 411,130 925,926 $7,636,664
Entities Affiliated with
El Dorado Ventures...... 531,708 411,130 485,185 5,256,662
Greylock Equity Limited
Partnership............. 480,584 371,599 437,963 4,748,145
Entities affiliated with
U.S. Venture Partners... 1,040,000 150,405 -- 3,078,288
Jeffrey T. Webber......... 6,000 58,262 46,296 450,272
Thomas M. Lounibos........ -- 45,785 -- 145,596
</TABLE>
The Crosspoint Venture Partners shares include shares purchased by
Crosspoint 1993 Entrepreneurs Fund, Crosspoint Venture Partners LS 1997 and with
Crosspoint Venture Partners 1993 which are affiliated entities. Crosspoint 1993
Entrepreneurs Fund has four general partners: Bob Hoff, Don Milder, John Mumford
and Richard W. Shapero, a director of Sagent. Each of these general partners
shares voting and investment power over the shares held by Crosspoint 1993
Entrepreneurs Fund. Crosspoint Venture Partners LS 1997 has one general partner,
Crosspoint Associates 1997, which has six general partners: Mr. Hoff, Mr.
Milder, Mr. Mumford, Mr. Shapero, Barbara Lubash and Seth Neiman. Each of these
general partners shares voting and investment power over the shares held by
Crosspoint Associates 1997. Crosspoint Venture Partners 1993 has one general
partner, Crosspoint Associates 1993, which has four general partners: Mr. Hoff,
Mr. Milder, Mr. Mumford and Mr. Shapero. Each of these general partners shares
voting and investment power over the shares held by Crosspoint Associates 1993.
Mr. Shapero disclaims beneficial ownership of the securities held by such
entities except for his proportional interest in the entities.
The El Dorado Ventures shares include shares purchased by El Dorado
Technology IV, L.P., El Dorado Ventures III, L.P., El Dorado Ventures IV, L.P.
and El Dorado Technology '98, L.P. which are affiliated entities. El Dorado
Ventures III is the general
53
<PAGE> 55
partner of El Dorado Technology IV, L.P. and El Dorado Ventures III, L.P. El
Dorado Ventures III has three general partners: Gary Kalbach, Tom Peterson and
Shanda Bahles, a director of Sagent. Each of these general partners shares
voting and investment power over the shares held by El Dorado Ventures III. El
Dorado Ventures Partners IV, LLC is the general partner of El Dorado Ventures
IV, L.P. and El Dorado Technology '98, L.P. Mr. Kalbach, Mr. Peterson and Ms.
Bahles are the managing directors of El Dorado Ventures IV, L.P. Ms. Bahles
disclaims beneficial ownership of the securities held by such entities except
for her proportional interest in the entities.
The Jeffrey Webber shares include shares purchased by The Enterpreneurs'
Fund, RBW Investments, LLC, individually, his IRA account and his wife. Jeffrey
T. Webber, a director of Sagent, is one of the managing directors of BW
Management LLC, the general partner of The Entrepreneurs' Fund, L.P. Mr. Webber
disclaims beneficial ownership of the shares held by The Entrepreneurs' Fund,
L.P., except to the extent of his proportionate interest in the entity. Mr.
Webber is the managing director of RBW Investments, LLC. Mr. Webber disclaims
beneficial ownership of the shares held by RBW Investments, LLC, except to the
extent of his proportionate interest in the entity.
RESTRICTED STOCK PURCHASE AGREEMENTS
In February 1998, Ms. Walker, Sagent's Executive Vice President, Finance
and Administration, and Chief Financial Officer, exercised two options to
purchase an aggregate of 180,000 shares of common stock and entered into
restricted stock purchase agreements regarding the shares. Ms. Walker paid the
$522,000 aggregate exercise price by delivering three-year full-recourse
promissory notes at a 5.47% per annum interest rate. The notes are secured by
the shares of common stock purchased by Ms. Walker. As of February 28, 1999,
$553,465 in unpaid principal and interest was outstanding in the aggregate under
the notes.
In February 1999, Mr. Lounibos, Sagent's Executive Vice President, Sales
and Marketing, exercised three options to purchase an aggregate of 248,255
shares of common stock and entered into restricted stock purchase agreements
regarding the shares. Mr. Lounibos paid the $933,442 aggregate exercise price by
delivering three-year full-recourse promissory notes bearing interest at the
rate of 4.66% per annum. The notes are secured by the shares of common stock
purchased by Mr. Lounibos. As of February 28, 1999, $933,442 in unpaid principal
and interest was outstanding in the aggregate under the notes.
In March 1999, Mr. Holcomb, Sagent's Vice President, Operations, exercised
an option to purchase an aggregate of 46,510 shares of common stock and entered
into a restricted stock purchase agreement regarding the shares. Mr. Holcomb
paid the $199,993 aggregate exercise price by delivering a three-year
full-recourse promissory note at a 4.62% per annum interest rate. The note is
secured by the shares of common stock purchase by Mr. Holcomb. As of March 17,
1999, $199,993 in unpaid principal and interest was outstanding in the aggregate
under the note.
ACQUISITION OF TALUS, INCORPORATED
In February 1998, Sagent and Talus, Incorporated entered into an agreement
and plan of reorganization in which Sagent acquired Talus, Incorporated for
total consideration of $1,170,000 in cash and 259,258 shares of Series E
preferred stock. Michael P. Venerable, Sagent's Vice President, Professional
Services, was President of Talus, Incorporated at the
54
<PAGE> 56
time of the acquisition. As consideration for his shares of Talus, Incorporated,
Mr. Venerable received:
- $571,051 in cash
- 109,919 shares of Series E preferred stock and
- An employment agreement with Sagent
As part of the employment agreement, Mr. Venerable received:
- A salary of $123,000
- A bonus based upon performance milestones and
- An option to purchase 150,000 shares of common stock at an exercise price
of $4.30 per share
The vesting of his option is as follows:
- 20% on the first anniversary of the agreement
- 20% on the second anniversary of the agreement
- 60% on the third anniversary of the agreement
In the event of a change of control of Sagent, the option will accelerate
and become immediately exercisable if such options are not assumed. If Mr.
Venerable's options are assumed and he is terminated for any reason other than
for cause or if he voluntarily terminates his employment for good reason, after
the change of control, the unvested portion of the option will accelerate and
become immediately exercisable. If Mr. Venerable's employment is terminated for
cause or if he resigns for any reason other than good reason, he has agreed not
to engage in a restricted business or solicit any of Sagent's employees for
three years.
EXECUTIVE CHANGE OF CONTROL POLICY
The board has adopted an executive change of control policy applicable to
key executives of Sagent. The policy provides that options granted to key
executives will be assumed upon a change of control of Sagent. Furthermore, if a
key executive remains an employee at the time of the change of control, the
vesting of that individual's key executive options will accelerate, and Sagent's
right to repurchase will lapse, as to 50% of the unvested portion of such
options. If a key executive is terminated for any reason other than for cause or
terminates employment for good reason during the one-year period after the date
of the change of control, then the remaining unvested portion of such key
executive options will accelerate and become immediately exerciseable, and
Sagent's right to repurchase the applicable portion of such shares will lapse.
TRANSACTIONS WITH ISAR
Klaus S. Luft, who has agreed to join the board as of the first meeting of
the board following completion of the offering, is a limited partner of ISAR.
Sagent has entered into an agreement with ISAR, pursuant to which ISAR
established a German company, Magnolia II, to distribute and support Sagent's
products in Germany, Austria and Switzerland. Sagent has entered into an
agreement with Magnolia II pursuant to which Magnolia II has the exclusive
right, other than with respect to value added resellers who have been or will be
granted worldwide distribution rights, to distribute Sagent's products in
Germany, Austria and Switzerland. Magnolia II has agreed to pay Sagent royalties
on sales and maintenance of Sagent's products. Sagent has a call option to
acquire Magnolia II with cash, registrable securities or a combination of cash
and registrable
55
<PAGE> 57
securities, with the acquisition price determined according to the date of the
acquisition and Magnolia II's revenues.
In May 1998, Sagent and ISAR entered into a common stock purchase agreement
in which ISAR purchased 28,000 shares of Sagent's common stock for an aggregate
purchase price of $120,960. In May 1998, Sagent granted ISAR a warrant to
purchase 22,000 shares of Sagent's common stock at an exercise price of $5.40
per share. Mr. Luft disclaims beneficial ownership of the shares and warrant
held by ISAR except to the extent of his proportionate interest in ISAR.
COMMON STOCK PURCHASE AGREEMENT
In February 1999, in order to make an investment in Sagent, Mr. Luft
entered into an agreement with Sagent to purchase 10,000 shares of Sagent's
common stock at $9.00 per share. The agreement also provides that prior to
transferring any of these shares to any third party, Mr. Luft must offer the
shares to Sagent first on the same terms and conditions as offered to the third
party. Sagent's right of first refusal expires upon the effective date of the
registration statement filed in connection with the offering.
OTHER TRANSACTIONS
Sagent has entered into indemnification agreements with each of its
executive officers and directors.
Sagent has granted options to certain of its executive officers. See
"Management--Option Grants in Last Fiscal Year."
Holders of preferred stock are entitled to certain registration rights with
respect to the common stock issued or issuable upon conversion thereof. See
"Description of Capital Stock--Registration Rights."
Sagent believes that all related-party transactions described above were on
terms no less favorable than could have been otherwise obtained from unrelated
third parties. All future transactions between Sagent and its principal
officers, directors and affiliates will be approved by a majority of the
independent and disinterested members of the board and will be on terms no less
favorable that could be obtained from unrelated third parties.
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<PAGE> 58
PRINCIPAL STOCKHOLDERS
The table below sets forth information regarding the beneficial ownership
of Sagent's common stock as of December 31, 1998, by the following individuals
or groups:
- - Each person or entity who is known by Sagent to own beneficially more than 5%
of Sagent's outstanding stock
- - Each of the Named Executive Officers
- - Each director of Sagent
- - All directors and executive officers as a group
Applicable percentage ownership in the following table is based on
18,669,377 shares of common stock outstanding as of December 31, 1998, as
adjusted to reflect the conversion of all outstanding shares of preferred stock
upon the closing of this offering, treating as outstanding all shares of common
stock issuable upon exercise of options exercisable within 60 days of December
31, 1998 held by the particular stockholder and that are included in the first
column. The numbers shown in the table below assume no exercise by the
underwriters of their over-allotment option.
Unless otherwise indicated, the principal address of each of the
stockholders below is c/o Sagent Technology, Inc., 800 W. El Camino Real, Suite
300, Mountain View, California 94040. Except as otherwise indicated, and subject
to applicable community property laws, the persons named in the table have sole
voting and investment power with respect to all shares of common stock held by
them.
<TABLE>
<CAPTION>
PERCENTAGE
OWNED
SHARES OWNED -------------------
PRIOR TO THE BEFORE AFTER
OFFERING OFFERING OFFERING
------------ -------- --------
<S> <C> <C> <C>
5% STOCKHOLDERS:
Entities affiliated with Crosspoint Venture
Partners(a).............................. 4,179,876 22.4% 17.7%
Entities affiliated with El Dorado
Ventures(b).............................. 3,739,135 20.0 15.8
Greylock Equity Limited Partnership(c)...... 3,379,034 18.1 14.3
Entities affiliated with U.S. Venture
Partners(d).............................. 1,190,405 6.4 5.0
DIRECTORS AND OFFICERS:
Kenneth C. Gardner(e)....................... 1,200,000 6.4 5.1
Jeffrey T. Webber(f)........................ 341,884 1.8 1.4
John E. Zicker(g)........................... 968,000 5.2 4.1
W. Virginia Walker(h)....................... 180,000 * *
Perry S. Mizota(i).......................... 320,000 1.7 1.4
Thomas M. Lounibos(j)....................... 434,040 2.8 2.2
Richard W. Shapero(a)....................... 4,179,876 22.4 17.7
Shanda Bahles(b)............................ 3,739,135 20.0 15.8
All directors and officers as a group
(10 persons)(k)............................. 11,809,364 61.0 48.5
</TABLE>
- -------------------------
* Represents less than one percent of the total
(a) Principal address is The Pioneer Hotel Building, 2925 Woodside Road,
Woodside, CA 94062. Number of shares includes 3,155,547 shares held by
Crosspoint Venture Partners 1993, 925,926 shares held by Crosspoint Venture
Partners LS 1997 and 98,403 shares held by Crosspoint 1993 Entrepreneurs
Fund. Crosspoint 1993 Entrepreneurs Fund has four general partners: Bob
Hoff, Don Milder, John Mumford and Richard W. Shapero, a director of
Sagent. Each of these general
57
<PAGE> 59
partners shares voting and investment power over the shares held by
Crosspoint 1993 Entrepreneurs Fund. Crosspoint Venture Partners LS 1997 has
one general partner, Crosspoint Associates 1997, which has six general
partners: Mr. Hoff, Mr. Milder, Mr. Mumford, Mr. Shapero, Barbara Lubash
and Seth Neiman. Each of these general partners shares voting and
investment power over the shares held by Crosspoint Associates 1997.
Crosspoint Venture Partners 1993 has one general partner, Crosspoint
Associates 1993, which has four general partners: Mr. Hoff, Mr. Milder, Mr.
Mumford and Mr. Shapero. Each of these general partners shares voting and
investment power over the shares held by Crosspoint Associates 1993. Mr.
Shapero disclaims beneficial ownership of the securities held by such
entities except for his proportional interest in the entities.
(b) Principal address is 2400 Sand Hill Road, Suite 100, Menlo Park, CA 94025.
Number of shares includes 3,172,773 shares held by El Dorado Ventures III
L.P., 478,658 shares held by El Dorado Ventures IV, L.P., 81,177 shares
held by El Dorado Technology IV, L.P. and 6,527 shares held by El Dorado
Technology '98, L.P. El Dorado Ventures III is the general partner of El
Dorado Technology IV, L.P. and El Dorado Ventures III, L.P. El Dorado
Ventures III has three general partners: Gary Kalbach, Tom Peterson and
Shanda Bahles, a director of Sagent. Each of these general partners shares
voting and investment power over the shares held by El Dorado Ventures III.
El Dorado Venture Partners IV, LLC is the general partner of El Dorado
Ventures IV, L.P. and El Dorado Technology '98, L.P. Mr. Kalbach, Mr.
Peterson and Ms. Bahles are the managing directors of El Dorado Ventures
IV, L.P. Ms. Bahles disclaims beneficial ownership of the securities held
by such entities except for her proportional interest in the entities.
(c) Principal address is 755 Page Mill Road, Suite A-100, Palo Alto, CA 94304.
(d) Principal address is 2180 Sand Hill Road, Suite 300, Menlo Park, CA 94025.
Number of shares includes 1,026,129 shares held by U.S. Venture Partners
IV, L.P., 124,993 shares held by Second Ventures II, L.P., 35,712 shares
held by U.S.V.P. Entrepreneur Partners II, L.P. and 3,571 shares held by
2180 Associates Fund. 2180 Associates Fund, Second Ventures II, L.P., U.S.
Venture Partners IV, L.P. and U.S.V.P. Entrepreneur Partners II, L.P. are
affiliated entities. Presidio Management Group IV, L.P. is the general
partner of Second Ventures II, L.P., U.S. Venture Partners IV, L.P. and
U.S.V.P. Entrepreneur Partners II, L.P. Presidio Management Group IV, L.P.
has eight general partners: Irwin Federman, Marc Friend, Jason Green, Steve
Krausz, Lucio Lanza, Stuart Phillips, Jonathan Root, M.D. and Phil Young.
Each of these general partners shares voting and investment power over the
shares held by Presidio Management Group IV, L.P. 2180 Associates Fund has
three general partners: Mr. Friend, Mr. Root and Jeff Kanin. Each of these
general partners shares voting and investment power over the shares held by
2180 Associates Fund.
(e) Includes 925,000 shares registered in the name of Kenneth C. Gardner and
Patricia T. Gardner, Trustees of the Gardner Family Trust u/d/t dated
September 6, 1996, 100,000 shares registered in the name of Delaware
Charter Guarantee & Trust Co., Trustee fbo Kenneth C. Gardner, IRA and
75,000 shares registered in the name of trusts. Also includes an option
granted to Kenneth C. Gardner to purchase 100,000 shares exercisable within
60 days of December 31, 1998.
(f) Includes 207,692 shares registered in the name of Jeffrey T. Webber, 91,325
shares registered in the name of The Entrepreneurs' Fund, L.P., 32,778
shares registered in the name of Mr. Webber's wife, 6,944 shares registered
in the name of RBW
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<PAGE> 60
Investments, LLC and 3,145 shares registered in the name of First Trust
Corporation fbo Jeffrey T. Webber. Jeffrey T. Webber, a director of Sagent,
is one of the managing directors of BW Management, LLC, the general partner
of The Entrepreneurs' Fund, L.P. Mr. Webber disclaims beneficial ownership
of the shares held by The Entrepreneurs' Fund, L.P., except to the extent
of his proportionate interest in the entity. Mr. Webber is the managing
director of RBW Investments, LLC. Mr. Webber disclaims beneficial ownership
of the shares held by RBW Investments, LLC, except to the extent of his
proportionate interest in the entity. Mr. Webber holds shares directly,
holds shares through his IRA account, First Trust Corporation fbo Jeffrey
T. Webber, and shares are held by his wife.
(g) Includes 788,000 shares registered in the name of John E. Zicker and
100,000 shares registered in the name of Delaware Charter Guarantee & Trust
Co., Trustee fbo John E. Zicker, IRA. Also includes an option granted to
John E. Zicker to purchase 80,000 shares, exercisable within 60 days of
December 31, 1998.
(h) Includes 138,750 shares which are subject to a repurchase option held by
Sagent as of December 31, 1998.
(i) Includes an option to purchase 50,000 shares, exercisable within 60 days of
December 31, 1998.
(j) Includes an option to purchase an aggregate of 248,255 shares exercisable
within 60 days of December 31, 1998 and 45,575 shares which are subject to
a repurchase option held by Sagent as of December 31, 1998.
(k) Includes all shares described in the above footnotes and includes shares,
of which 137,919 were outstanding as of December 31, 1998 and 218,510
shares are subject to options and warrants that are exercisable within 60
days of December 31, 1998, held by other executive officers and an
affiliate of Klaus Luft, a director designee.
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<PAGE> 61
DESCRIPTION OF CAPITAL STOCK
Upon the closing of the offering, the authorized capital stock of Sagent
will consist of 70,000,000 shares of common stock, $0.001 par value, and
5,000,000 shares of preferred stock, $0.001 par value.
The following summary of provisions of the common stock and preferred stock
does not purport to be complete and is subject to, and qualified in its entirety
by, the provisions of Sagent's certificate of incorporation, which is included
as an exhibit to the registration statement of which this prospectus is a part,
and by the provisions of Delaware law.
COMMON STOCK
After giving effect to the conversion of all previously outstanding
preferred stock into shares of common stock, as of December 31, 1998, there were
18,669,377 shares of common stock outstanding held of record by approximately
144 stockholders. There will be 23,669,377 shares of common stock outstanding,
assuming no exercise of the underwriters' over-allotment option and no exercise
of certain outstanding options or warrants, after giving effect to the sale of
common stock in the offering.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of preferred stock,
the holders of common stock are entitled to receive ratably any dividends
declared by the board of directors out of funds legally available for the
payment of dividends. See "Dividend Policy." In the event of a liquidation,
dissolution or winding up of Sagent, the holders of common stock are entitled to
share ratably in all assets, subject to prior distribution rights of the
preferred stock, if any, then outstanding. Holders of common stock have no
preemptive rights or rights to convert their common stock into any other
securities. There are no redemption or sinking fund provisions applicable to the
common stock. All outstanding shares of common stock are fully paid and
non-assessable, and the shares of common stock to be issued in the offering will
be fully paid and non-assessable.
PREFERRED STOCK
Upon the consummation of the offering of Sagent's common stock, each
outstanding share of preferred stock will automatically convert into one share
of common stock. Pursuant to Sagent's certificate of incorporation, the board of
directors has the authority, without further action by the stockholders, to
issue up to 5,000,000 shares of preferred stock in one or more series and to fix
the designations, powers, preferences, privileges, which may be greater than the
rights of the common stock. The board, without stockholder approval, can issue
preferred stock with voting, conversion or other rights that could adversely
affect the voting power and other rights of the holders of common stock.
Preferred stock could thus be issued quickly with terms calculated to delay or
prevent a change in control of Sagent or make removal of management more
difficult. Additionally, the issuance of preferred stock may have the effect of
decreasing the market price of the common stock. At present, there are no shares
of preferred stock outstanding, and Sagent has no plans to issue any preferred
stock.
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<PAGE> 62
COMMON STOCK WARRANTS
Upon completion of the offering, Sagent will have three warrants
outstanding to purchase an aggregate of 18,306 shares of common stock,
exerciseable as follows:
- 5,539 shares at an exercise price of $6.50 per share
- 9,433 shares at an exercise price of $3.18 per share
- 3,334 shares at an exercise price of $5.40 per share
These warrants expire 10 years from the date of execution or five years from the
effective date of the offering, whichever is later.
REGISTRATION RIGHTS
Upon completion of the offering, the holders of an aggregate of
approximately 14.5 million shares of common stock will be entitled to certain
rights with respect to the registration of such shares under the Securities Act
of 1933. Under the terms of the registration rights agreements, if Sagent
proposes to register any of its securities under the Securities Act of 1933,
either for its own account or for the account of other security holders
exercising registration rights, these holders are entitled to notice of such
registration and are entitled to include shares of common stock in the
registration. The rights are subject to conditions and limitations, among them
the right of the underwriters of an offering subject to the registration to
limit the number of shares included in such registration. Holders of these
rights may also require Sagent to file a registration statement under the
Securities Act of 1933 at its expense with respect to their shares of common
stock, and Sagent is required to use its best efforts to effect such
registration, subject to conditions and limitations. Furthermore, stockholders
with registration rights may require Sagent to file additional registration
statements on Form S-3, subject to conditions and limitations.
DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAWS PROVISIONS
Delaware Anti-Takeover Statute. Sagent is subject to Section 203 of the
Delaware General Corporation Law. In general, these provisions prohibit a
Delaware corporation from engaging in any business combination with any
interested stockholder for a period of three years following the date that the
stockholder became an interested stockholder, unless the transaction in which
the person became an interested stockholder is approved in a manner presented in
Section 203 of the Delaware General Corporation Law.
Generally, a "business combination" is defined to include mergers, asset
sales and other transactions resulting in financial benefit to a stockholder. In
general, an "interested stockholder" is a person who, together with affiliates
and associates, owns, or within three years, did own, 15% or more of a
corporation's voting stock.
Certificate of Incorporation. In February 1999, Sagent's stockholders
approved amendments to its certificate of incorporation, to provide:
- That the board of directors may issue, without further action by the
stockholders, up to 5,000,000 shares of undesignated preferred stock
- That any action to be taken by stockholders of Sagent must be effected at
a duly called annual or special meeting and not by a consent in writing
- For the division of the board of directors into three classes, with each
class serving for a term of three years
61
<PAGE> 63
- That vacancies on the board, including newly created directorships, can
be filled only by a majority of the directors then in office
- That directors of Sagent may be removed only for cause
- For the elimination of cumulative voting
Bylaws. In January 1999, the board approved amendments to the bylaws to
provide that special meetings of stockholders of Sagent may be called only by
the chairman of the board, the president or the board.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the board and in the policies formulated by the
board and to discourage certain types transactions that may involve an actual or
threatened change of control of Sagent. These provisions also are designed to
reduce the vulnerability of Sagent to an unsolicited proposal for a takeover of
Sagent that does not contemplate the acquisition of all of its outstanding
shares or an unsolicited proposal for the restructuring or sale of all or part
of Sagent. These provisions, however, could discourage potential acquisition
proposals and could delay or prevent a change in control of Sagent. They may
also have the effect of preventing changes in the management of Sagent.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for Sagent's common stock is ChaseMellon
Shareholder Services L.L.C.
LISTING
Sagent's common stock has been approved for listing on the Nasdaq National
Market under the trading symbol "SGNT." Sagent has not applied to list its
common stock on any other exchange or quotation system.
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<PAGE> 64
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offering, there has been no market for the common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect the prevailing market price from time to time. Furthermore,
because only a limited number of shares will be available for sale shortly after
this offering, because of contractual and legal restrictions on resale, sales of
substantial amounts of common stock in the public market after the restrictions
lapse could cause the prevailing market price of Sagent's common stock to fall
and impede Sagent's ability to raise equity capital in the future.
Upon completion of the offering, Sagent will have outstanding an aggregate
of 23,669,377 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or outstanding
warrants after December 31, 1998. Of these outstanding shares, the 5,000,000
shares sold in the offering will be freely tradeable without restriction or
further registration under the Securities Act of 1933 unless purchased by
"affiliates" of Sagent as that term is defined in Rule 144 under the Securities
Act of 1933. The remaining 18,669,377 shares of common stock outstanding upon
completion of the offering and held by existing stockholders will be "restricted
shares," as that term is defined in Rule 144 under the Securities Act of 1933.
Restricted shares may be sold in the public market only if registered or if they
qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act of 1933, which rules are summarized below,
or another exemption therefrom. Sales of the restricted shares in the public
market, or the availability of such shares for sale, could adversely affect the
market price of the common stock.
All officers, directors and certain other holders of common stock have
entered into contractual "lock-up" agreements providing that they will not
offer, sell, contract to sell or grant any option to purchase or otherwise
dispose of shares of common stock owned by them or that could be purchased by
them through the exercise of options for a period of 180 days after the date of
this prospectus without the prior written consent of Donaldson, Lufkin &
Jenrette Securities Corporation. As a result of these contractual restrictions,
notwithstanding possible earlier eligibility for sale under the provisions of
Rules 144, 144(k) and 701, additional shares will be available for sale in the
public market as follows:
- No shares of common stock will be eligible for sale as of the effective
date of the offering
- No additional shares will be eligible for sale beginning 90 days after
the effective date of the offering
- 18,404,766 additional shares will be eligible for sale beginning 180 days
after the effective date of the offering, subject in some cases to
certain volume limitations
Of the 264,611 remaining restricted shares,
- 236,611 shares are subject to a repurchase option of Sagent in the event
of termination of employment
- 28,000 shares will not be eligible for sale pursuant to Rule 144 until
the expiration of a one-year holding period in December 1999
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person, or persons whose shares are aggregated,
who has beneficially owned restricted shares for at least one year, including
persons who may be deemed to be
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<PAGE> 65
affiliates of Sagent, would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of:
- One percent of the number of shares of common stock then outstanding,
which will equal approximately 236,694 shares immediately after the
offering or
- The average weekly trading volume of the common stock as reported through
the Nasdaq National Market during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale. Sales under Rule 144 are
also subject to certain manner of sale provisions and notice requirements
and to the availability of current public information about Sagent. Under
Rule 144(k), a person who is not deemed to have been an affiliate of
Sagent at any time during the 90 days preceding a sale, and who has
beneficially owned for at least two years the restricted shares proposed
to be sold, including the holding period of any prior owner except an
affiliate, is entitled to sell such shares without complying with the
manner of sale, public information, volume limitation or notice
provisions of Rule 144.
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 permits resales of shares issued prior to the date an
issuer becomes subject to the reporting requirements of the Securities Exchange
Act of 1934, pursuant to compensatory benefit plans and contracts which meant
the requirements of Rule 701. Such resales may be made commencing 90 days after
the issuer becomes subject to the reporting requirements of the Securities
Exchange Act of 1934, in reliance upon rule 144 but without compliance with
certain restrictions, including the holding period requirements. In addition,
the Securities and Exchange Commission has indicated that Rule 701 will apply to
typical stock options granted by an issuer before it becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, along with the
shares acquired upon exercise of such options, including exercises after the
date the issuer becomes so subject. Securities issued in reliance on Rule 701
are restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this prospectus, may be sold by
persons other than affiliates subject only to the manner of sale provisions of
Rule 144, and by affiliates under Rule 144 without compliance with its one-year
minimum holding period requirement.
Sagent has agreed not to sell or otherwise dispose of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock, or enter into any swap or similar agreement that transfers, in
whole or in part, the economic risk of ownership of the common stock, for a
period of 180 days after the date of this prospectus, without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Sagent intends to file a registration statement under the Securities Act of
1933 covering the shares of common stock subject to outstanding options or
reserved for issuance under the amended 1995 stock option plan, 1998 stock
option plan, 1999 employee stock purchase plan and the director option plan.
Such registration statement is expected to be filed as early as the
effectiveness of the registration statement covering the shares of common stock
offered in this offering and will automatically become effective upon filing.
Accordingly, shares registered under such registration statement will, subject
to Rule 144 volume limitations applicable to affiliates and the expiration of a
180-day lockup period, be available for sale in the open market, except to the
extent that such shares are subject to vesting restrictions with Sagent or the
contractual restrictions described above.
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<PAGE> 66
UNDERWRITING
Subject to the terms and subject to conditions contained in an underwriting
agreement dated , 1999, the underwriters named
below, who are represented by Donaldson, Lufkin & Jenrette Securities
Corporation, Hambrecht & Quist LLC and U.S. Bancorp Piper Jaffray Inc., have
severally agreed to purchase from Sagent the respective number of shares of
common stock set forth opposite their names below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS: SHARES
------------- ---------
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.........
Hambrecht & Quist LLC.......................................
U.S. Bancorp Piper Jaffray Inc. ............................
-------
Total....................................................
=======
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase and accept delivery of the shares of common stock
offered hereby are subject to approval by their counsel of legal matters
concerning the offering and to condition precedents that must be satisfied by
Sagent. The underwriters are obligated to purchase and accept delivery of all
the shares of common stock offered hereby, other than those shares covered by
the over-allotment option described below, if any are purchased.
The underwriters initially propose to offer the shares of common stock in
part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to dealers, including the
underwriters, at such price less a concession not in excess of $ per share.
The underwriters may allow, and such dealers may re-allow, to other dealers a
concession not in excess of $ per share. After the initial offering of the
common stock, the public offering price and other selling terms may be changed
by the Representatives at any time without notice. The underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation and a member of the selling group, is facilitating the distribution
of the shares sold in the offering over the Internet. The underwriters have
agreed to allocate a limited number of shares to DLJdirect Inc. for sale to its
brokerage account holders.
Sagent has granted to the underwriters an option, exercisable for 30 days
after the date of this prospectus, to purchase, from time to time, in whole or
in part, up to an aggregate of 750,000 additional shares of common stock at the
initial public offering price less underwriting discounts and commission. The
underwriters may exercise the option solely to cover over-allotments, if any,
made in connection with the offering. To the extent that the underwriters
exercise the option, each underwriter will become obligated, subject to
conditions contained in the underwriting agreement, to purchase its pro rata
portion of
65
<PAGE> 67
such additional shares based on the underwriters' percentage underwriting
commitment as indicated in the above table.
Sagent has agreed to indemnify the underwriters against liabilities which
may arise in connection with the offering, including liabilities under the
Securities Act of 1933, or to contribute to payments that the underwriters may
be required to make.
Each of Sagent, its executive officers, directors, stockholders and option
holders has agreed not to:
- Offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any shares of common stock or any securities
convertible into or exercisable or exchangeable for common stock
- Enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the
common stock, whether any such transaction described above is to be
settled by delivery of common stock or other securities, in cash or
otherwise
Donaldson, Lufkin & Jenrette Securities Corporation may choose to release
some of these shares from such restrictions prior to the expiration of the
180-day period lock-up period, although it has no current intention of doing so.
In addition, during such 180-day period, Sagent has also agreed not to file
any registration statement with respect to, and each of its executive officers,
directors and stockholders of Sagent have agreed not to make any demand for, or
exercise any right with respect to, the registration of any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock without the prior written consent of Donaldson, Lufkin & Jenrette
Securities Corporation.
Prior to the offering, there has been no established trading market for the
common stock. The initial public offering price of the shares of common stock
offered will be determined by negotiation among Sagent and the underwriters. The
factors to be considered in determining the initial public offering price
include:
- The history of and the prospects for the industry in which Sagent
competes
- The past and present operations of Sagent
- The historical results of operations of Sagent
- The prospects for future earnings of Sagent
- The recent market prices of securities of generally comparable companies
- The general condition of the securities markets at the time of the
offering
Other than in the United States, no action has been taken by Sagent or the
underwriters that would permit a public offering of the shares of common stock
offered in any jurisdiction where action for that purpose is required. The
shares of common stock offered may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering material or
advertisements in connection with the offer and sale of any such shares of
common stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of such jurisdiction. Persons into whose possession this prospectus
comes are advised to inform themselves about and observe any restrictions
relating to the offering and the
66
<PAGE> 68
distribution of this prospectus. This prospectus does not constitute an offer to
sell or a solicitation of an offer to buy any shares of common stock offered in
any jurisdiction in which such an offer or a solicitation is unlawful.
In connection with the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot the offering,
creating a syndicate short position. The underwriters may bid for and stabilize
the price of the common stock. In addition, the underwriting syndicate may
reclaim selling concessions from syndicate members and selected dealers if they
repurchase previously distributed common stock in syndicate covering
transactions, in stabilizing transactions or otherwise. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for Sagent by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California. Arthur F. Schneiderman, a member of Wilson Sonsini
Goodrich & Rosati, is Secretary of Sagent. Mr. Schneiderman and investment
partnerships, of which members of Wilson Sonsini Goodrich & Rosati are general
partners, beneficially own an aggregate of 180,445 shares of Sagent's common
stock. Legal matters in connection with this offering will be passed upon for
the underwriters by Brobeck Phleger & Harrison LLP, Palo Alto, California.
EXPERTS
The consolidated balance sheets as of December 31, 1998 and 1997 and the
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1998 for Sagent
Technology, Inc. included in this prospectus and registration statement, have
been included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given upon the authority of such firm as experts in
accounting and auditing.
The balance sheets as of December 31, 1997 and 1996 and the statements of
operations and retained earnings and cash flows for the two years in the period
ended December 31, 1997 for Talus, Incorporated included in this prospectus and
registration statement, have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority of
such firm as experts in accounting and auditing.
67
<PAGE> 69
AVAILABLE INFORMATION
We have filed with the Securities and Exchange Commission, Washington, D.C.
20549, under the Securities Act of 1933, a registration statement on Form S-1
relating to the common stock offered hereby. This prospectus does not contain
all of the information set forth in the registration statement and the exhibits
and schedules thereto. For further information with respect to Sagent and the
shares we are offering pursuant to this prospectus you should refer to the
registration statement, including the exhibits and schedules thereto. You may
inspect a copy of the registration statement without charge at the Public
Reference Section of the Securities and Exchange Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549 or at the Securities and Exchange
Commission's regional offices at 5670 Wilshire Boulevard, 11th Floor, Los
Angeles, California 90036. The Securities and Exchange Commission maintains an
Internet site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Securities
and Exchange Commission. The Securities and Exchange Commission's World Wide Web
address is www.sec.gov.
Sagent intends to furnish holders of the common stock with annual reports
containing, among other information, audited financial statements certified by
an independent public accounting firm and quarterly reports containing unaudited
condensed financial information for the first three quarters of each fiscal
year. Sagent intends to furnish such other reports as it may determine or as may
be required by law.
68
<PAGE> 70
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
SAGENT TECHNOLOGY, INC. PAGE
<S> <C>
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets as of December 31, 1997 and
1998................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1996, 1997 and 1998....................... F-4
Consolidated Statements of Stockholders' Equity as of
December 31, 1995, 1996, 1997 and 1998................. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1997 and 1998....................... F-6
Notes to Consolidated Financial Statements................ F-7
TALUS, INCORPORATED
Report of Independent Accountants......................... F-25
Balance Sheets as of December 31, 1996 and 1997........... F-26
Statements of Operations and Retained Earnings for the
years ended December 31, 1996 and 1997................. F-27
Statements of Cash Flows for the years ended December 31,
1996 and 1997.......................................... F-28
Notes to Financial Statements............................. F-29
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
Pro Forma Consolidated Financial Statements (unaudited)... F-34
Pro Forma Consolidated Statements of Operations for the
year ended December 31, 1998 (unaudited)............... F-35
Notes to Pro Forma Consolidated Financial Statements
(unaudited)............................................ F-36
</TABLE>
F-1
<PAGE> 71
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
Sagent Technology, Inc.:
In our opinion, the accompanying consolidated balance sheets and the
related statements of operations and stockholders' equity and cash flows present
fairly, in all material respects, the financial position of Sagent Technology,
Inc. and its subsidiaries at December 31, 1997 and 1998, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
San Jose, California
January 27, 1999
F-2
<PAGE> 72
SAGENT TECHNOLOGY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Assets
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
AS OF DECEMBER 31, EQUITY AS OF
------------------- DECEMBER 31,
1997 1998 1998
-------- -------- -------------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.................... $ 3,813 $ 3,093
Accounts receivable, net of allowance for
doubtful accounts of $450 in 1997 and $508
in 1998................................... 1,603 5,376
Prepaid assets............................... 220 832
-------- --------
Total current assets...................... 5,636 9,301
Property and equipment, net.................. 1,396 3,044
Other assets................................. 153 851
-------- --------
Total assets.............................. $ 7,185 $ 13,196
======== ========
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Accounts payable............................. $ 512 $ 1,478
Accrued liabilities.......................... 1,383 4,216
Deferred revenue............................. 1,077 1,304
Current portion of capital lease
obligations............................... 463 1,181
-------- --------
Total current liabilities................. 3,435 8,179
Long-term portion of capital lease
obligations............................... 627 3,346
-------- --------
Total liabilities......................... 4,062 11,525
-------- --------
Commitments and contingencies (Note 5)
STOCKHOLDERS' EQUITY:
Convertible preferred stock, par value $.001
per share:
Authorized: 13,056 shares in 1997 and
15,556 in 1998;
Issued and outstanding: 12,390 shares in
1997 and 14,544 shares in 1998 and no
pro forma shares (unaudited)
(Liquidation value of $29,554 at
December 31, 1998)...................... 12 15 $ --
Common stock, par value $.001 per share:
Authorized: 20,000 shares in 1997 and
25,000 shares in 1998;
Issued and outstanding: 3,249 shares in
1997, 4,125 shares in 1998 and 18,669
pro forma shares (unaudited)............ 3 4 19
Additional paid-in capital................... 18,033 30,699 30,699
Notes receivable from stockholder............ (522) (522)
Cumulative translation adjustment............ 101 101
Accumulated deficit.......................... (14,925) (28,626) (28,626)
-------- -------- --------
Total stockholders' equity................ 3,123 1,671 $ 1,671
-------- -------- ========
Total liabilities and stockholders'
equity.................................. $ 7,185 $ 13,196
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 73
SAGENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
REVENUES, NET:
Licenses...................................... $ 240 $ 5,728 $ 10,459
Services...................................... 39 1,350 6,584
------- ------- --------
Total revenues, net........................ 279 7,078 17,043
------- ------- --------
COST OF REVENUES:
Licenses...................................... 120 194 143
Services...................................... 127 679 4,923
------- ------- --------
Total cost of revenues..................... 247 873 5,066
------- ------- --------
Gross profit.................................... 32 6,205 11,977
------- ------- --------
OPERATING EXPENSES:
Sales and marketing........................... 2,727 5,929 12,037
Research and development...................... 3,425 4,969 6,013
General and administrative.................... 1,111 2,215 5,186
Acquired in-process technology (Note 7)....... 2,425
------- ------- --------
Total operating expenses................... 7,263 13,113 25,661
------- ------- --------
Loss from operations............................ (7,231) (6,908) (13,684)
Interest expense................................ (65) (191) (207)
Other income.................................... 257 199 190
------- ------- --------
Net loss........................................ $(7,039) $(6,900) $(13,701)
======= ======= ========
Historical basic net loss per share............. $ (2.67) $ (2.41) $ (3.47)
======= ======= ========
Historical diluted net loss per share........... $ (2.67) $ (2.41) $ (3.68)
======= ======= ========
Number of shares used in calculation of
historical basic net loss per share........... 2,637 2,860 3,951
Number of shares used in calculation of
historical diluted net loss per share......... 2,637 2,860 3,722
Pro forma net loss per share, basic
(unaudited)................................... $ (0.74)
========
Pro forma net loss per share, diluted
(unaudited)................................... $ (0.75)
========
Shares used in computing pro forma net loss per
share, basic (unaudited)...................... 18,495
Shares used in computing pro forma net loss per
share, diluted (unaudited).................... 18,266
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 74
SAGENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE STOCKHOLDERS
--------------- --------------- PAID-IN TRANSLATION NOTE ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL ADJUSTMENT RECEIVABLE DEFICIT
------ ------ ------ ------ ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1995............. 8,122 $ 8 2,625 $2 $ 6,136 $ $ $ (986)
Issuance of common stock at $.09
per share........................... 13 1
Issuance of Series C preferred stock
at $2.50 per share for cash, net of
issuance costs of $16............... 2,616 3 6,525
Repurchase of common stock at $.045
per share........................... (18) (1)
Stock options exercised............... 14 1
Net loss.............................. (7,039)
------ --- ----- -- ------- ---- ----- --------
BALANCES, DECEMBER 31, 1996............. 10,738 11 2,634 2 12,662 -- -- (8,025)
Issuance of Series C preferred stock
at $2.50 per share for cash......... 79 198
Issuance of Series D preferred stock
at $3.18 per share for cash, net of
issuance costs of $15............... 1,573 1 4,983
Stock options exercised............... 615 1 67
Issuance of Series C preferred stock
warrant............................. 23
Issuance of common stock warrant...... 100
Net loss.............................. (6,900)
------ --- ----- -- ------- ---- ----- --------
BALANCES, DECEMBER 31, 1997............. 12,390 12 3,249 3 18,033 -- -- (14,925)
Issuance of Series D preferred stock
at $3.18 per share for cash, net of
issuance costs of $13............... 45 132
Issuance of Series E preferred stock
at $5.40 per share for cash, net of
issuance costs of $7................ 1,896 3 10,225
Issuance of Series E preferred stock
at $5.40 per share in connection
with Talus, Incorporated
Acquisition, net of issuance costs
of $1............................... 259 1,400
Stock options exercised............... 715 1 235
Repurchase of Series C preferred stock
at $2.50 per share.................. (40) (100)
Repurchase of Series D preferred stock
at $3.18 per share.................. (6) (18)
Repurchase of common stock............ (57) (20)
Issuance of Series E preferred stock
warrant............................. 18
Issuance of common stock warrants..... 96
Exercise of common stock options at
$5.50 per share..................... 10 55
Cumulative translation adjustment..... 101
Issuance of notes receivable for
common stock........................ 180 522 (522)
Exercise of stock purchase right...... 28 121
Net loss.............................. (13,701)
------ --- ----- -- ------- ---- ----- --------
BALANCES, DECEMBER 31, 1998............. 14,544 $15 4,125 $4 $30,699 $101 $(522) $(28,626)
====== === ===== == ======= ==== ===== ========
<CAPTION>
STOCKHOLDERS'
EQUITY
-------------
<S> <C>
BALANCES, DECEMBER 31, 1995............. $ 5,160
Issuance of common stock at $.09
per share........................... 1
Issuance of Series C preferred stock
at $2.50 per share for cash, net of
issuance costs of $16............... 6,527
Repurchase of common stock at $.045
per share........................... (1)
Stock options exercised............... 1
Net loss.............................. (7,039)
--------
BALANCES, DECEMBER 31, 1996............. 4,649
Issuance of Series C preferred stock
at $2.50 per share for cash......... 198
Issuance of Series D preferred stock
at $3.18 per share for cash, net of
issuance costs of $15............... 4,984
Stock options exercised............... 68
Issuance of Series C preferred stock
warrant............................. 23
Issuance of common stock warrant...... 100
Net loss.............................. (6,899)
--------
BALANCES, DECEMBER 31, 1997............. 3,123
Issuance of Series D preferred stock
at $3.18 per share for cash, net of
issuance costs of $13............... 132
Issuance of Series E preferred stock
at $5.40 per share for cash, net of
issuance costs of $7................ 10,228
Issuance of Series E preferred stock
at $5.40 per share in connection
with Talus, Incorporated
Acquisition, net of issuance costs
of $1............................... 1,400
Stock options exercised............... 236
Repurchase of Series C preferred stock
at $2.50 per share.................. (100)
Repurchase of Series D preferred stock
at $3.18 per share.................. (18)
Repurchase of common stock............ (20)
Issuance of Series E preferred stock
warrant............................. 18
Issuance of common stock warrants..... 96
Exercise of common stock options at
$5.50 per share..................... 55
Cumulative translation adjustment..... 101
Issuance of notes receivable for
common stock........................ --
Exercise of stock purchase right...... 121
Net loss.............................. (13,701)
--------
BALANCES, DECEMBER 31, 1998............. $ 1,671
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 75
SAGENT TECHNOLOGY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net loss.......................................... $(7,039) $(6,900) $(13,701)
Adjustments to reconcile net loss to net cash used
in operating activities:
Acquired in-process technology................. -- -- 2,425
Depreciation and amortization.................. 268 835 1,445
Fair value of stock warrants issued............ 123 114
Change in operating assets and liabilities, net
of acquisition:
Accounts receivable.......................... (152) (1,451) (3,773)
Prepaid assets............................... (67) (99) (550)
Other assets................................. (105) 16 (1,011)
Accounts payable............................. 513 (72) 966
Accrued liabilities.......................... 221 1,136 2,833
Deferred revenue............................. 51 1,027 227
------- ------- --------
Net cash used in operating activities............... (6,310) (5,385) (11,025)
------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturity of restricted investments................ 26 150 --
Purchase of restricted investments................ (150) --
Purchase of property and equipment................ (1,143) (1,072) (1,170)
Acquisition of Talus, Incorporated................ -- -- (2,696)
------- ------- --------
Net cash used in investing activities............... (1,267) (922) (3,866)
------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from capital lease financings............ 738 650 4,103
Payments of principal under capital lease
obligations.................................... (139) (356) (666)
Proceeds from issuance of preferred stock, net of
issuance costs................................. 6,527 5,183 10,360
Repurchase of common stock........................ (1) -- (20)
Repurchase of preferred stock..................... -- -- (118)
Proceeds from issuance of common stock............ 2 68 411
------- ------- --------
Net cash provided by financing activities........... 7,127 5,545 14,070
Effect of exchange rate changes in cash........ -- -- 101
------- ------- --------
Net decrease in cash and cash equivalents........... (450) (762) (720)
Cash and cash equivalents, beginning of year........ 5,025 4,575 3,813
------- ------- --------
Cash and cash equivalents, end of year.............. $ 4,575 $ 3,813 $ 3,093
======= ======= ========
Supplemental disclosure of cash flow information:
Cash payments for interest........................ $ 65 $ 184 $ 191
Supplemental non-cash financing activities:
Issuance of preferred stock warrants.............. -- 23 18
Issuance of common stock warrants................. -- 100 96
Issuance of common stock for notes and interest
receivable..................................... -- -- 522
Liabilities assumed in connection with acquisition
of Talus, Incorporated:
Fair value of assets acquired..................... 3,526
Cash paid......................................... (1,170)
Preferred stock issued............................ (1,400)
--------
Liabilities assumed............................ $ 956
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 76
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
1. FORMATION AND BUSINESS OF SAGENT
Sagent Technology, Inc. develops, markets and supports software designed to
address organizations' information access, analysis and delivery needs.
Sagent was incorporated under the laws of the State of California in April
1995 under the name of Savant Software, Inc. In June 1995, Sagent changed its
name to Sagent Technology, Inc. Sagent was reincorporated under the laws of the
State of Delaware in September 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Sagent
Technology, Inc. and its wholly-owned subsidiaries, Sagent Technology Japan KK
and Sagent Technology (Canada), Inc. All significant intercompany accounts and
transactions have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FOREIGN CURRENCY TRANSLATION
The functional currency of Sagent's subsidiaries is the local currency.
Accordingly, Sagent applies the current rate method to translate the
subsidiaries' financial statements into U.S. dollars. Translation adjustments
are included as a separate component of stockholders' equity in the accompanying
consolidated financial statements.
CASH AND CASH EQUIVALENTS
Sagent considers all highly liquid investments with an original or
remaining maturity of three months or less at the time of purchase to be cash
equivalents.
BUSINESS RISK AND CONCENTRATION OF CREDIT RISK
Sagent operates in one segment and its revenue is attributable to the sale
of one product line and related maintenance, consulting and training services.
Sagent's future success will depend upon its ability to continue to improve its
product and to develop new products to meet diverse and evolving customer
demands.
Financial instruments which potentially subject Sagent to concentrations of
credit risk consist primarily of temporary cash investments, including money
market accounts. Sagent places its temporary cash investments with two major
financial institutions. Sagent maintains allowances for potential credit losses
and such losses to date have been within
F-7
<PAGE> 77
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
management's expectations. There were no customers with balances due to Sagent
in excess of 10% of aggregate accounts receivable at December 31, 1998.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts of certain of Sagent's financial instruments, including
cash and cash equivalents, accounts receivable, accounts payable, accrued
expenses and other liabilities, approximate fair value due to their short
maturities. Based upon borrowing rates currently available to Sagent for loans
with similar terms, the carrying value of capital lease obligations approximates
fair value.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated on a
straight-line basis over the estimated useful lives of the related assets,
generally two to five years. Leased assets are amortized on a straight-line
basis over the lesser of the estimated useful life or the lease term. Gains and
losses upon asset disposal are taken into income in the year of disposition.
REVENUE RECOGNITION
Sagent's revenues are derived from two sources, product license revenues
and service revenues. License revenues are derived from product sales to end
users, resellers and distributors and enterprise application vendors as well as
royalties from enterprise application vendors. For enterprise application
vendors, Sagent receives quarterly reports from these vendors on sell-through of
Sagent products to end users. The reports also indicate the amount of royalty
revenue the enterprise application vendor owes to Sagent. License revenues are
based upon the number and capacity of servers on which a product is installed,
as well as on a per user basis. Service revenues are derived from providing
consulting and training, maintenance and support services to end users.
Sagent recognizes revenues in accordance with the American Institute of
Certified Public Accountants Statement of Position No. 97-2, "Software Revenue
Recognition." License revenues from sales to end users are recognized upon
shipment of the product, if a signed contract exists, the fee is fixed and
determinable and collection is deemed probable. If an acceptance period is
provided, revenue is recognized upon the earlier of customer acceptance or the
expiration of that period. Sagent recognizes royalty as revenues based on an
enterprise application vendor's sell-through of Sagent's products. Fees for
services are charged separately from licenses. Service revenues from consulting
and training are recognized upon completion of the work to be performed.
Revenues from maintenance and support agreements which includes product updates
are deferred and recognized on a straight-line basis as service revenues over
the term of the related agreement, which is typically one year.
Sagent performs ongoing credit evaluations of its customers' financial
condition and does not require collateral. Sagent maintains allowances for
potential credit losses and the amount of such losses have been within
management's expectations.
F-8
<PAGE> 78
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ADVERTISING
Sagent expenses advertising costs as incurred. Advertising costs amounted
to $137, $50, and $532 for 1996, 1997 and 1998, respectively.
INCOME TAXES
Sagent accounts for income taxes in accordance with Financial Accounting
Standards Board Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." This statement prescribes the use of the liability method
whereby deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and measured at tax rates that will be in effect when the differences are
expected to reverse. Valuation allowances are established when necessary to
reduce deferred tax assets where it is more likely than not the deferred tax
asset will not be realized.
STOCK-BASED COMPENSATION
In 1997, Sagent adopted the disclosure provisions of SFAS No. 123,
"Accounting for Stock-based Compensation." The Company has elected to continue
accounting for stock-based compensation issued to employees using Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and,
accordingly, pro forma disclosures required under SFAS No. 123 have been
presented (See Note 9). Under APB No. 25, compensation expense is based on the
difference, if any, on the date of the grant, between the fair value of Sagent's
common stock and the exercise price. Additionally, pursuant to SFAS No. 123,
stock issued to non-employees is accounted for at the fair value of the equity
instruments issued, or at the fair value of the consideration received,
whichever is more reliably measurable.
RESEARCH AND DEVELOPMENT EXPENSES
Costs related to research, design and development of products are charged
to research and development expense as incurred. Software development costs are
capitalized beginning when a product's technological feasibility has been
established and ending when a product is available for general release to
customers. To date, completing a working model of Sagent's products and general
release have substantially coincided. As a result, Sagent has not capitalized
any software development costs.
RECLASSIFICATION
Sagent has reclassified the presentation of certain prior year information
to conform to the current year presentation. These changes had no effect on
previously reported financial position or results of operations.
NET LOSS PER SHARE AND PRO FORMA NET LOSS PER SHARE
Sagent computes net loss per share in accordance with SFAS No. 128,
"Earnings per Share," and Securities and Exchange Commission Staff Accounting
Bulletin No. 98. Under the provisions of SFAS No. 128 and SAB 98, basic net loss
per share is computed
F-9
<PAGE> 79
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
by dividing the net loss available to common stockholders for the period by the
weighted average number of common shares outstanding during the period. Diluted
net loss per share is computed by dividing the net loss for the period by the
weighted average number of common and common equivalent shares outstanding
during the period. Options, warrants and convertible preferred stock were not
included in the computation of diluted net loss per share because the effect
would be antidilutive.
Pro forma net loss per share has been computed as described above and also
gives effect, even if antidilutive, to common equivalent shares from preferred
stock that will automatically convert upon the closing of Sagent's initial
public offering, under the as-if-converted method. Upon consummation of the
offering, all of the convertible preferred stock outstanding, as of the closing
date will automatically be converted into an aggregate of approximately 14,544
shares of common stock based on the shares of convertible preferred stock
outstanding at December 31, 1998. Unaudited pro forma stockholders' equity at
December 31, 1998, as adjusted for the conversion of preferred stock, is
disclosed on the balance sheet.
F-10
<PAGE> 80
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
A reconciliation of shares used in the calculation of historical and pro
forma basic and diluted net loss per share follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
HISTORICAL NET LOSS PER SHARE, BASIC AND
DILUTED:
Net loss................................. $(7,039) $(6,900) $(13,701)
======= ======= ========
Shares used in computing net loss per
share, basic.......................... 2,637 2,860 3,951
======= ======= ========
Net loss per share, basic................ $ (2.67) $ (2.41) $ (3.47)
======= ======= ========
Shares used in computing net loss per
share, diluted........................ 2,637 2,860 3,722
======= ======= ========
Net loss per share, diluted.............. $ (2,67) $ (2,41) $ (3.68)
======= ======= ========
Antidilutive securities including
options, warrants and preferred stock
not included in historical net loss
per share calculations................ 12,006 14,350 17,055
======= ======= ========
PRO FORMA NET LOSS PER SHARE:
Net loss................................. $(13,701)
========
Shares used in computing net loss per
share, basic and diluted.............. 3,951
Adjustment to reflect assumed conversion
of convertible preferred stock........ 14,544
--------
Shares used in computing pro forma net
loss per share, basic................. 18,495
Adjustment to reflect share subject to
repurchase............................ (335)
Adjustment to reflect reverse treasury
stock method.......................... 106
--------
Shares used in computing pro forma net
loss per share, diluted............... 18,266
========
Pro forma net loss per share, basic
(unaudited)........................... $ (0.74)
========
Pro forma net loss per share, diluted
(unaudited)........................... $ (0.75)
========
</TABLE>
RECENT ACCOUNTING PRONOUNCEMENTS
The American Institute of Certified Public Accountants issued Statement of
Position No. 98-1, "Software for Internal Use" which provides guidance on
accounting for the cost of computer software developed or obtained for internal
use. Statement of Position No. 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. Sagent does not expect that the
adoption of Statement of Position No. 98-1 will have a material impact on its
financial statements.
F-11
<PAGE> 81
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" SFAS No. 130 is effective for fiscal years beginning after December 15,
1997. There was no difference between Sagent's net loss and its total
comprehensive loss for the years ended December 31, 1996 and 1997. The only
component of comprehensive income for the year ended December 31, 1998 related
to a cumulative translation adjustment and amounted to $101.
During June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments
of an Enterprise and Related Information" SFAS No. 131 replaces SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise" and changes the way
the public companies report segment information. SFAS No. 131 is effective for
fiscal years beginning after December 15, 1997 and has been adopted by Sagent
for the year ending December 31, 1998. Sagent markets and sells its services
primarily in North America and operates in one business segment.
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities." This standard requires companies to expense
the costs of start-up activities and organization costs as incurred. In general,
Statement of Position 98-5 is effective for fiscal years beginning after
December 15, 1998. Sagent believes the adoption of Statement of Position 98-5
will not have a material impact on its results of operations.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
--------------------
1997 1998
------- -------
<S> <C> <C>
Office equipment................................. $ 612 $ 2,166
Computer software and equipment.................. 1,847 2,996
Leasehold improvements........................... 73 83
------- -------
2,532 5,245
Less accumulated depreciation and amortization... (1,136) (2,201)
------- -------
$ 1,396 $ 3,044
======= =======
</TABLE>
Property and equipment under capital leases consist of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1997 1998
------- --------
<S> <C> <C>
Computer equipment.................................. $1,594 $ 2,208
Office equipment.................................... 447 1,527
------ -------
2,041 3,735
Less accumulated amortization....................... (811) (1,662)
------ -------
$1,230 $ 2,073
====== =======
</TABLE>
F-12
<PAGE> 82
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
4. ACCRUED LIABILITIES
Accrued liabilities consists of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------
1997 1998
------- -------
<S> <C> <C>
Accrued employee compensation........................ $ 530 $1,198
Sales returns and allowances......................... -- 830
Accrued taxes........................................ -- 622
Accrued other........................................ 853 1,566
------ ------
$1,383 $4,216
====== ======
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
Sagent has entered into a line of credit with a leasing company and a bank.
See Note 6 of Notes to Consolidated Financial Statements. The capital lease
obligations, which expire through January 2002 are collateralized by the related
assets. Under the terms of the capital lease obligations, Sagent is responsible
for taxes, insurance and maintenance costs. Sagent also leases various
facilities under noncancelable operating leases expiring through August 2003.
Future minimum lease payments under these leases at December 31, 1998, are as
follows:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- -------
<S> <C> <C>
1999............................................... $1,771 $1,404
2000............................................... 1,623 2,831
2001............................................... 1,491 628
2002............................................... 1,536 8
2003............................................... 1,312 --
------ ------
Total minimum lease payments....................... $7,733 4,871
======
Less amount representing interest.................. (344)
------
Present value of minimum lease payments............ 4,527
Current portion.................................... 1,181
------
$3,346
======
</TABLE>
Rent expense for the years ended December 31, 1996, 1997, and 1998 was
$241, $606, and $1,112, respectively.
From time to time, Sagent may be involved in litigation relating to claims
arising out of its ordinary course of business. Sagent believes that there are
no claims or actions pending or threatened against Sagent, the ultimate
disposition of which would have a material impact on Sagent's financial position
or results of operations.
6. LINE OF CREDIT
During 1997, Sagent entered into a loan and security agreement with a bank
under which Sagent can borrow up to an aggregate amount of $4.8 million as at
December 31, 1998. The agreement is used to finance various leased assets and
(see also Note 3) includes a revolving line of credit for up to $2 million and
an equipment line of credit for up to $2.8 million. Both lines are
collateralized by all assets of Sagent, including
F-13
<PAGE> 83
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
receivables, equipment and intellectual property. Effective January 1999 Sagent
can borrow up to an aggregate amount of $7.2 million which includes a revolving
line of credit of up to $4.0 million and an equipment line of credit of up to
$3.2 million.
The revolving credit line consists of advances against eligible accounts
receivable in an aggregate amount not to exceed the lesser of, the committed
revolving line or the borrowing base, less any outstanding letters of credit.
Advances against the revolving line bear interest at the bank's prime rate,
7.75% at December 31, 1998, and are due no later than January 15, 2000. During
1998 advances totaled $1.75 million.
The equipment line of credit consists of advances for the acquisition of
equipment through May 5, 1999. Each advance bears interest at the bank's prime
rate, 7.75% at December 31, 1998, and is due in 36 monthly principal and
interest payments. The equipment line matures on May 7, 2002.
Under these agreements, Sagent is required to comply with certain
covenants, among which are minimum quick ratios, debt to net worth ratios,
tangible net worth ratios and profitability. As of December 31, 1998, Sagent was
not in compliance with certain of these covenants. Subsequent to December 31,
1998, the loan and security agreement was amended to waive the aforementioned
covenant violations through the period ending December 31, 1998.
7. ACQUISITION OF BUSINESS
In February 1998, Sagent acquired Talus, Incorporated for cash of
approximately $1.2 million, 259 shares of preferred stock amounting to $1.4
million and the assumption of certain liabilities for an aggregate purchase
price of $3.5 million. Sagent accounted for the acquisition under the purchase
method and, accordingly, the purchase price was allocated to the fair value of
tangible and intangible assets acquired and liabilities assumed.
Sagent has allocated approximately $2.4 million of the purchase price to
acquired in-process technology. Prior to the acquisition, Talus was in the
process of developing analytical software applications to complement its design
and implementation business. These projects are unique and complex because they
integrate the industry knowledge of Talus' consultants with advanced data mart
and business intelligence software to develop analytical software applications
for specific industries. These analytical software applications allow
organizations to model decision processes unique to their industry, such as
decisions on products, sales and distribution channels, and customers. The
method used to estimate the fair value of the analytical software applications
under development was a discounted cash flow model, similar to the traditional
income approach, adjusted for cost to complete and stage of completion. The
analytical software applications under development had not reached technological
feasibility as of the acquisition date and there was no alternative future use
for this technology. The classification of analytical software applications as
under development was made in accordance with the guidelines of SFAS 2,
"Accounting for Research and Development Costs," SFAS 86, "Accounting for the
Costs of Computer Software to be Sold, Leased, or Otherwise Marketed," and FIN
4, "Applicability of FASB Statement No. 2 to Business Combinations Accounted for
by the Purchase Method, an Interpretation of FASB Statement No. 2." Sagent
anticipates that these analytical software applications can be sold on a stand
alone basis with implementation assistance.
F-14
<PAGE> 84
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The determination of the acquired in-process technology allocation was
based upon recently issued guidance issued by the Securities and Exchange
Commission to the AICPA SEC Regulations Committee and considered such factors as
degree of completion, technological uncertainties, costs incurred and projected
costs to complete. The value assigned to the acquired workforce was based on the
cost to recreate the assembled work force. The allocation of the purchase price
resulted in additional intangible assets, primarily non-compete agreements and
the value of an assembled workforce of $587, which has been capitalized and is
being amortized on a straight line basis over six months to three years.
Amortization expense for the year ended December 31, 1998 was $102.
As of the date of acquisition, the Talus, Incorporated development projects
consisted of ongoing research and development efforts on four analytical
software applications for manufacturing, food service and hospitality, and high
technology. Based on management's estimates, the remaining research and
development efforts relating to the completion of the technology were expected
to be completed during 1999 through 2000, with initial revenue expected in 1999.
Accordingly, the cost to complete the in-process technology was estimated based
on the number of man months required to reach technological feasibility for the
technology, the type of professional and engineering staff involved in the
completion process and their fully burdened months' salaries.
The allocation of Sagent's aggregate purchase price to the tangible and
identifiable intangible assets acquired and liabilities assumed in connection
with this acquisition were based primarily on estimates by independent
appraisers of fair values. The allocation is summarized below:
<TABLE>
<CAPTION>
TALUS, INCORPORATED
-------------------
<S> <C>
Acquired in-process technology............ $2,425
Current assets............................ 494
Other intangibles......................... 587
Other assets.............................. 11
Goodwill.................................. 9
------
Total purchase price.................... $3,526
======
</TABLE>
The excess of the purchase price over the fair value of the net tangibles
and identifiable intangible assets acquired has been recorded as goodwill, which
is being amortized on a straight-line basis over a period of three years.
8. CONVERTIBLE PREFERRED STOCK
Holders of Series A, B, C, D and E preferred stock are entitled to
preferential noncumulative dividends at the rate of $0.04, $0.07, $0.20, $0.25
and $0.43 per share, respectively, if and when declared by the board of
directors. No dividends have been declared as of December 31, 1998. The holders
of Series A, B, C, D and E preferred stock have liquidation preferences of
$0.45, $0.90, $2.50, $3.18 and $5.40 per share, respectively, plus an amount
equal to all declared but unpaid dividends. In the event of liquidation, if the
assets of Sagent are insufficient to pay the entirety of such amounts to the
preferred stockholders, the assets shall be distributed ratably among the
preferred stockholders in proportion to their preferential amounts. Preferred
stockholders are entitled to one vote for each share of common stock into which
their preferred stock is convertible. After payment
F-15
<PAGE> 85
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
to the preferred stockholders of the full preferential amounts specified above,
the remaining assets will be distributed ratably among the holders of the common
stock.
At the option of the holder, and at any time after the date of issuance of
such share, each share of Series A, B, C, D and E preferred stock is convertible
on a one-for-one basis into shares of common stock subject to adjustment for
stock splits and certain dilutive issuances of securities. The shares will
automatically convert into common stock upon the closing of an underwritten
public offering of common stock under the Securities Act of 1933, as amended,
with minimum proceeds of $10.0 million. As of December 31, 1998, Sagent has
reserved 14,544 shares of its common stock in the event of conversion of all
preferred stock. The holders of preferred stock have certain registration
rights.
At December 31, 1998, preferred stock consists of the following:
<TABLE>
<CAPTION>
COMMON
SHARES STOCK
SHARES ISSUED AND RESERVED FOR LIQUIDATION
SERIES AUTHORIZED OUTSTANDING PROCEEDS (NET) CONVERSION VALUE
------ ---------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
A.................. 2,800 2,567 $ 1,138 2,567 $ 1,155
B.................. 5,656 5,555 4,981 5,555 5,000
C.................. 2,800 2,655 6,625 2,655 6,637
D.................. 1,800 1,612 5,100 1,612 5,127
E.................. 2,500 2,155 11,627 2,155 11,635
------ ------ ------- ------ -------
15,556 14,544 $29,471 14,544 $29,554
====== ====== ======= ====== =======
</TABLE>
9. RESTRICTED STOCK PURCHASE AGREEMENT:
Sagent has sold shares of its common stock to founders and employees of
Sagent under agreements which provide for repurchase of the shares by Sagent at
the stock's original purchase price upon termination of employment of such
persons. Sagent's right to repurchase shares generally lapses as to 1/48 of the
total shares on the date of purchase and 1/48 on the first day of each
subsequent month thereafter until the founder or employee is fully vested. At
December 31, 1998, 335 shares of common stock were subject to repurchase.
10. STOCK OPTION PLAN:
Under the 1995 stock option plan, Sagent initially reserved 1,200 shares of
common stock for issuance to employees, officers, directors and consultants of
Sagent. Sagent amended the 1995 stock option plan in 1996, 1997 and 1998 to
increase the number of shares reserved under the 1995 stock option plan to, in
the aggregate, 1,800 shares, 2,800 shares and 3,276 shares, respectively.
Under the terms of the 1995 stock option plan, incentive stock options may
be granted at prices not lower than fair market value at the date of grant,
while nonqualified options may be granted at prices not lower than 85.0% of fair
market value at the date of grant, each as determined by the board of directors.
However, if an employee or other person who, at the time of the grant of such
stock option, owns stock representing more than 10.0% of the voting power of all
classes of stock in Sagent, the exercise price may be
F-16
<PAGE> 86
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
no less than 110% of the fair market value per share on the date of grant.
Options granted under the 1995 stock option plan are exercisable immediately,
conditioned upon the optionee entering into a restricted stock purchase
agreement, and generally vest to the extent of 25.0% of the shares granted 12
months from the vesting commencement date and the remainder to the extent of
1/48 of the options granted each month thereafter, such that all options granted
will be vested four years from the vesting commencement date. Options granted
expire 10 years from the date of grant.
In December 1998, the board of directors approved the 1998 stock option
plan which authorized 2,440 shares of common stock as available for issuance to
employees, officers, directors and consultants of Sagent.
Under the terms of the 1998 stock option plan, incentive options may be
granted at prices not lower than fair market value at the date of grant, while
nonqualified options may be granted at prices as determined by the administrator
at the date of grant. However, if an employee or other person who, at the time
of the grant of such stock option, owns stock representing more than 10.0% of
the voting power of all classes of stock in Sagent, the exercise price may be no
less than 110% of the fair market value per share on the date of grant. In the
case of nonqualified options intended to qualify as performance-based
compensation, the exercise price shall be no less than 100% of fair market value
on the date of grant.
Options granted under the 1998 stock option plan are generally exercisable
one year after the vesting commencement date. Upon exercise of an option, the
optionee shall enter into a restricted stock purchase agreement. Options
generally vest to the extent of 25% of the shares granted 12 months from the
vesting commencement date and the remainder to the extent of 1/48 of the shares
granted each month thereafter, such that all options granted will be vested four
years from the vesting commencement date. Options generally expire 10 years from
the date of grant.
Upon adoption of the 1998 stock option plan, the board of directors
approved the cessation of grants under the 1995 stock option plan and determined
that all shares of common stock then reserved under the 1995 stock option plan
for the future grant of stock options were no longer reserved for issuance.
At December 31, 1998, 1,158 shares were no longer subject to repurchase. Of
the stock options exercised, 879 shares were no longer subject to repurchase.
F-17
<PAGE> 87
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes activity under the amended 1995 stock option
plan and 1998 stock option plan for the years ended December 31, 1996, 1997 and
1998:
<TABLE>
<CAPTION>
WEIGHTED
AGGREGATE AVERAGE
NUMBER OF EXERCISE PRICE EXERCISE EXERCISE
SHARES PER SHARE PRICE PRICE
--------- -------------- --------- --------
<S> <C> <C> <C> <C>
Options outstanding at January 1,
1996............................... 625 $0.05 - $0.09 $ 35 $0.06
Options granted under the amended
1995 stock option plan.......... 558 0.09 - 0.25 72 0.13
Options canceled under the amended
1995 stock option plan.......... (13) 0.09 - 0.25 (2) 0.13
Options exercised under the amended
1995 stock option plan.......... (14) 0.05 (1) 0.05
----- ------------- ------- -----
Options outstanding at December 31,
1996............................... 1,156 0.05 - 0.25 104 0.09
Options granted under the amended
1995 stock option plan.......... 1,280 0.25 - 2.80 2,309 1.80
Options canceled under the amended
1995 stock option plan.......... (146) 0.09 - 2.50 (32) 0.22
Options exercised under the amended
1995 stock option plan.......... (535) 0.05 - 0.50 (47) 0.09
----- ------------- ------- -----
Options outstanding at December 31,
1997............................... 1,755 0.05 - 2.80 2,334 1.33
Options granted under the amended
1995 stock option plan.......... 1,148 2.90 - 6.50 5,094 4.43
Options granted under the 1998
stock option plan............... 219 7.00 1,532 7.00
Options canceled under the amended
1995 stock option plan.......... (182) 0.09 - 5.50 (418) 2.30
Options exercised under the amended
1995 stock option plan.......... (665) 0.05 - 5.50 (737) 1.11
----- ------------- ------- -----
Options outstanding at December 31,
1998............................... 2,275 $0.05 - $7.00 $ 7,805 $3.43
===== ============= ======= =====
</TABLE>
At December 31, 1997 and 1998, 496 shares and 2,221 shares, respectively,
remained available for issuance.
F-18
<PAGE> 88
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table summarizes information with respect to stock options
outstanding at December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------- OPTIONS EXERCISABLE
WEIGHTED ----------------------
AVERAGE WEIGHTED WEIGHTED
NUMBER REMAINING AVERAGE NUMBER AVERAGE
RANGE OF OF SHARES CONTRACTUAL EXERCISE OF SHARES EXERCISE
EXERCISE PRICE OUTSTANDING LIFE (YEARS) PRICE EXERCISABLE PRICE
- -------------- ----------- ------------ -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.04 - $0.09 259 7.01 $ 0.07 259 $ 0.07
0.25 - 0.50 112 7.87 0.27 112 0.27
2.00 - 4.60 1,448 8.96 3.34 1,448 3.34
5.50 - 7.00 456 9.85 6.42 237 5.89
----- -----
$0.04 - $7.00 2,275 2,056
===== =====
</TABLE>
The following information concerning Sagent's stock option plans is
provided in accordance with SFAS No. 123. Sagent accounts for such plans in
accordance with APB No. 25.
The fair value of each option grant has been estimated on the date of grant
using the minimum value method with the following weighted average assumptions
used for grants:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1997 1998
------------- -------------
<S> <C> <C>
Risk-free interest rate................. 5.31% - 6.54% 5.14% - 5.94%
Expected life........................... 4 years 4 years
Dividends............................... -- --
</TABLE>
The weighted average fair value per option granted in 1996, 1997 and 1998
was $0.15, $1.20 and $4.94, respectively.
The following pro forma net loss and net loss per share information has
been prepared as if Sagent had followed the provisions of SFAS No. 123:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1997 1998
------- ------- --------
<S> <C> <C> <C>
Net loss:
As reported........................... $(7,039) $(6,900) $(13,701)
Pro forma............................. (7,042) (6,940) (13,999)
Basic and diluted net loss per share:
As reported........................... $ (2.67) $ (2.41) $ (3.47)
Pro forma............................. (2.67) (2.43) (3.54)
Diluted net loss per share:
As reported........................... $ (2.67) $ (2.41) $ (3.68)
Pro forma............................. (2.67) (2.43) (3.76)
</TABLE>
F-19
<PAGE> 89
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
11. NON-PLAN STOCK OPTIONS:
During 1996, Sagent granted options to purchase 268,255 shares to an
officer of Sagent outside of the amended 1995 stock option plan. These options
are exercisable at $0.09 per share and vest at the rate of 1/48 per month over a
four-year period. In addition, these options have certain accelerated vesting
requirements in the event of a change of control in Sagent, as defined in the
option grant agreement.
At December 31, 1998 and 1997, 38,255 and 268,255 shares of common stock,
respectively, were reserved for the exercise of non-plan stock options.
At December 31, 1998, of the non-plan stock options exercised, 45,575
shares are subject to repurchase.
The following table summarizes activity under the non-plan stock options
for the years ended December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
WEIGHTED
EXERCISE AGGREGATE AVERAGE
NUMBER OF PRICE EXERCISE EXERCISE
SHARES PER SHARE PRICE PRICE
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Options outstanding at January 1,
1996............................... -- -- -- --
Options granted.................... 268 $0.09 $ 24 $0.09
---- ----- ---- -----
Options outstanding and exercisable
at December 31, 1996............... 268 0.09 24 0.09
---- ----- ---- -----
Options outstanding and exercisable
at December 31, 1997............... 268 0.09 24 0.09
Options exercised.................. (230) 0.09 (21) 0.09
---- ----- ---- -----
Options outstanding and exercisable
at December 31, 1998............... 38 $0.09 $ 3 $0.09
==== ===== ==== =====
</TABLE>
At December 31, 1998, the remaining contractual life of these options was
7.2 years.
Sagent accounts for the fair value of its non-plan stock option grants in
accordance with APB 25. Accordingly, no compensation expense has been recognized
for these non-plan stock options.
The fair value of the options is estimated using the minimum value option
pricing method allowable for non-public companies and using the following
assumptions; dividend yield of 0.0%, volatility of 0.0%, risk-free interest rate
of 6.45% at the date of grant, and an expected term of four years.
12. STOCKHOLDER NOTES RECEIVABLE
Stockholder notes receivable represents amounts due from a stockholder in
exchange for the issuance of common stock together with interest. The notes bear
interest at a rate of 5.47% and are due February 1, 2001 but may be repaid
earlier. The notes are collateralized by a pledge of a portion of the underlying
common stock issued.
F-20
<PAGE> 90
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
13. WARRANTS
In connection with equipment leasing activity under a master lease
agreement with a leasing company, Sagent has issued warrants to the leasing
company to purchase up to 42 shares of Series A preferred stock at a price of
$0.45 per share, 61 shares of Series B preferred stock at a price of $0.90 per
share and 22 shares of Series C preferred stock at a price of $2.50 per share.
Each warrant has a seven year life and can be exercised at any time prior to
expiration, except that the warrants will immediately expire on the effective
date of an initial public offering if not exercised. The estimate fair value of
these warrants of $23 has been recorded as debt issuance costs.
In connection with a reseller and technology license agreement with another
software company, Sagent issued a warrant to purchase up to 70 shares of
Sagent's common stock. The warrant can be exercised at any time prior to
expiration. The exercise price will be equal to $7.20 per share. The warrant
expires on December 22, 2002. The estimate fair value of the warrant of $100 has
been recorded as cost of sales.
Sagent issued warrants to purchase common stock and preferred stock to
establish and increase a line of credit with a financial institution. Each
warrant can be exercised at any time prior to expiration. At December 31, 1998
such warrants were as follows.
<TABLE>
<CAPTION>
SHARES OF EXERCISE
COMMON PRICE
STOCK PER SHARE EXPIRATION DATE
--------- --------- ---------------------------
<S> <C> <C> <C>
Series D preferred stock... 93 $3.18 Later of July 16, 2007 or
five years after the
closing of an initial
public offering
Series E preferred stock... 3 5.40 Later of May 7, 2008 or
five years after the
closing of an initial
public offering
Common stock............... 6 6.50 Later of September 30, 2008
or five years after the
closing of an initial
public offering
</TABLE>
The estimate fair value of these warrants of $54 has been recorded as debt
issuance costs. In 1998, in connection with a joint venture to conduct business
in a foreign country, Sagent issued a warrant to purchase 22 shares of common
stock at a price of $5.40 per share. The warrant is immediately exercisable and
expires on the later of May 21, 2003, the closing of a business combination or
the closing of Sagent's initial public offering. The estimate fair value of the
warrant of $60 has been recorded as general and administrative expense.
The estimated fair value of these warrants has been determined based on a
Black Scholes fair value model.
F-21
<PAGE> 91
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
14. INCOME TAXES
Sagent's effective tax rate differs from the U.S. Federal statutory tax
rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
Tax benefit at statutory rate................ $(2,393) $(2,346) $(4,652)
State taxes, net of federal benefit.......... -- -- (744)
Nonrecognition of tax benefits............... 2,481 2,554 5,885
Tax credits.................................. (100) (240) (420)
Other........................................ 12 32 (69)
------- ------- -------
$ -- $ -- $ --
======= ======= =======
</TABLE>
Deferred tax assets (liabilities) are comprised of the following:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1997 1998
------- --------
<S> <C> <C>
Deferred tax assets and liabilities:
Net operating loss carry forwards............... $ 4,083 $ 7,588
Capitalized research and development costs...... 958 1,796
Research and development credit................. 516 1,080
Depreciation and amortization................... 73 68
Other........................................... 460 1,457
------- --------
6,090 11,989
Valuation allowance............................... (6,090) (11,989)
------- --------
$ -- $ --
======= ========
</TABLE>
Due to the uncertainty surrounding the realization of the deferred tax
asset in future tax returns, Sagent has placed a valuation allowance against its
net deferred tax assets. The valuation allowance increased by $2,739 and $5,899
during 1997 and 1998, respectively.
The difference between the statutory rate of approximately 40.0% (34.0%
federal and 6.0% state, net of federal benefits) and the tax benefit of zero
recorded by Sagent is primarily due to Sagent's full valuation allowance against
its net deferred tax assets.
At December 31, 1998, Sagent had available net operating loss carryforwards
for federal and state income tax purposes of approximately $20,775 and $17,819,
respectively. These carryforwards expire from 2003 to 2018. Although a
significant portion of the state net operating losses expire in 2003. At
December 31, 1998, Sagent also had available research and development credit
carryforwards for federal and state income tax purposes of approximately $741
and $514 respectively. These carryforwards expire from 2010 to 2013.
For federal and state tax purposes, a portion of Sagent's net operating
loss carryforwards may be subject to certain limitation on annual utilization in
case of a change in ownership, as defined by federal and state tax law.
F-22
<PAGE> 92
SAGENT TECHNOLOGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
15. EMPLOYEE BENEFIT PLANS
Sagent maintains a Profit Sharing Salary Deferral 401(k) plan for all of
its employees. This 401(k) plan allows eligible employees to defer up to 15%,
but no greater than the stated limitation in any plan year, of their pretax
compensation in certain investments at the discretion of the employee. Under the
401(k) plan, Sagent was not required to and has not made a contribution to the
401(k) plan for 1996, 1997 or 1998.
Sagent Professional Services maintained a separate profit sharing salary
deferral 401(k) plan for eligible employees until January 1, 1999. This plan
allowed eligible employees to defer up to 15.0%, but no greater than the stated
limitation in any plan year, of their pretax compensation in certain investments
at the discretion of the employee. Under the plan Sagent was required to make
matching contributions to the plan. Sagent could elect to make additional
contributions on the basis of (a) a percentage of the employee deferral and (b)
profit sharing. Costs related to matching contributions amounted to $0, $50 and
$51 for 1996, 1997 and 1998, respectively.
Effective January 1, 1999, all employees, including those formerly covered
by the separate profit sharing salary deferral 401(k) plan, will be included in
the Sagent plan.
16. SUBSEQUENT EVENTS
In January 1999, the board of directors adopted the director plan, which
was approved by Sagent's stockholders in February 1999, which allows Sagent to
grant up to 150 shares of common stock to non-employee directors. The exercise
price of any option granted under the director plan will be equal to the fair
market value per share of common stock on the date of grant. Each option granted
will have a term of ten years and the shares subject to the option will become
exercisable in four equal annual installments subject to the optionee's
completion of each year of board service.
In January 1999 the board of directors approved the 1999 employee stock
purchase plan, which was approved by Sagent's stockholders in February 1999. A
total of 450 shares of common stock has been reserved for issuance under the
1999 employee stock purchase plan. The number of shares reserved will be subject
to an annual increase every January equal to the lesser of the number of shares
optioned during the prior year or lesser amount determined by the board of
directors. The 1999 employee stock purchase plan permits eligible employees to
purchase common stock through payroll deductions at a price equal to 85% of the
lower of the fair market value of the common stock at the beginning or end of
each six-month offering period.
Upon the closing of Sagent's initial public offering the authorized capital
stock will be 70,000 shares of common stock, $0.001 par value per share, and
5,000 shares of preferred stock, $0.001 par value per share.
F-23
<PAGE> 93
TALUS, INCORPORATED
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Report of Independent Accountants........................... F-25
Balance Sheets.............................................. F-26
Statements of Operations and Retained Earnings.............. F-27
Statements of Cash Flows.................................... F-28
Notes to Financial Statements............................... F-29
</TABLE>
F-24
<PAGE> 94
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Sagent Technology, Inc.
and Talus, Incorporated Stockholders:
We have audited the accompanying balance sheets of Talus, Incorporated
(formerly known as InCASE Corporation) as of December 31, 1996 and 1997, and the
related statements of operations and retained earnings and cash flows for each
of the two years in the period ended December 31, 1997. These financial
statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Talus, Incorporated as of
December 31, 1996 and 1997, and the results of operations and its cash flows for
each of the two years in the period ended December 31, 1997 in conformity with
generally accepted accounting principles.
PricewaterhouseCoopers LLP
McLean, VA
February 20, 1998
F-25
<PAGE> 95
TALUS, INCORPORATED
BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
------------
1996 1997
---- ----
<S> <C> <C>
Assets
CURRENT ASSETS:
Cash...................................................... $ 13 $ 1
Accounts receivable, net.................................. 511 361
Prepaid expenses.......................................... 7 35
---- ----
Total current assets................................... 531 397
Property and equipment, net............................... 111 76
Deposits and other noncurrent assets...................... 19 8
---- ----
Total assets........................................... $661 $481
==== ====
Liabilities and Stockholders' Equity
CURRENT LIABILITIES:
Borrowings under line of credit........................... $299 $ 90
Note payable.............................................. -- 90
Accounts payable and accrued expenses..................... 97 63
Accrued vacation.......................................... 41 36
Accrued retirement contributions.......................... 49 50
Due to stockholders....................................... 17 --
---- ----
Total current liabilities.............................. 503 329
Accrued bonus to stockholders............................. 105 105
---- ----
Total liabilities...................................... 608 434
---- ----
Commitments (Note 5)
STOCKHOLDERS' EQUITY:
Common stock; par value $.01 per share; authorized 200
shares; issued and outstanding 102 shares.............. 1 1
Additional paid-in capital................................ 4 4
Retained earnings......................................... 48 42
---- ----
Total stockholders' equity............................. 53 47
---- ----
Total liabilities and stockholders' equity............. $661 $481
==== ====
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 96
TALUS, INCORPORATED
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1997
------ ------
<S> <C> <C>
Gross revenue............................................... $2,667 $2,830
Cost of revenues............................................ 1,238 1,178
------ ------
Gross profit................................................ 1,429 1,652
Operating expenses:
Sales and marketing....................................... 161 140
Research and development.................................. 573 627
General and administrative................................ 686 857
------ ------
Total operating expenses............................... 1,420 1,624
------ ------
Income from operations...................................... 9 28
Interest expense............................................ (22) (30)
Loss on investment.......................................... (2) --
Loss on disposal of property and equipment.................. -- (4)
------ ------
Net loss.................................................... (15) (6)
Retained earnings, beginning of year........................ 63 48
------ ------
Retained earnings, end of year.............................. $ 48 $ 42
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 97
TALUS, INCORPORATED
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1996 1997
------ -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (15) $ (6)
Adjustments to reconcile net losses to net cash provided
by (used in) operating activities:
Depreciation and amortization.......................... 43 40
Provision for doubtful accounts and writeoff of
uncollectible accounts............................... 40 41
Loss on sale of property and equipment................. -- 4
Changes in operating assets and liabilities:
Accounts receivable.................................. (176) 109
Prepaid expenses..................................... -- (28)
Deposits............................................. (10) 10
Accounts payable and accrued expenses................ (14) (34)
Accrued vacation..................................... -- 1
Accrued retirement contributions..................... 7 (4)
Accrued stockholders bonus........................... (45) --
------ -----
Net cash provided by (used in) operating activities......... (170) 133
------ -----
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....................... (12) (9)
Sales of property and equipment........................... -- 1
------ -----
Net cash used in investing activities....................... (12) (8)
------ -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit........................... 1,112 769
Repayments on line of credit.............................. (940) (978)
Proceeds from issuance of stockholder note................ 17 --
Repayment of stockholder note............................. -- (17)
Proceeds from note payable................................ -- 100
Repayments of note payable................................ -- (11)
Distributions to stockholders............................. -- --
------ -----
Net cash (used in) provided by financing activities......... 189 (137)
------ -----
Net increase (decrease) in cash............................. 7 (12)
Cash at beginning of year................................... 6 13
------ -----
Cash at end of year......................................... $ 13 $ 1
====== =====
Supplemental disclosure of cash flow information:
Cash paid for interest.................................... $ 21 $ 30
Write-off of investment received in exchange for
services............................................... 2 --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 98
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. DESCRIPTION OF BUSINESS
Talus, Incorporated, previously known as InCASE Corporation, was formed to
provide advanced information technology services to both governmental and
commercial customers. Talus, Incorporated was incorporated in Virginia in 1992
and is owned by two stockholders. The primary activities of Talus, Incorporated
consist of design and implementation of Enterprise Intelligence applications.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
ACCOUNTS RECEIVABLE
Accounts receivable include amounts billed and unbilled costs and fees
recoverable under contracts. Included in unbilled costs and fees at December 31,
1997 and 1996 are amounts currently billable in accordance with specified
contract terms. Of the stated amounts, $224 and $331 were billed by December 31,
1997 and 1996, respectively.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and depreciated using the
straight-line method over the estimated useful lives of the respective assets as
follows:
<TABLE>
<CAPTION>
DESCRIPTION YEARS
----------- -----
<S> <C>
Furniture and fixtures...................................... 7
Software.................................................... 3
Office equipment............................................ 5
</TABLE>
Expenditures for repairs and maintenance are charged to expense as
incurred. The costs of major improvements are capitalized and depreciated over
their estimated useful lives. The cost and related accumulated depreciation of
property and equipment are removed from the accounts upon disposition and any
resulting gain or loss is reflected in operations at that time.
REVENUE RECOGNITION
Talus, Incorporated's revenue is derived primarily from time and materials
contracts. Revenue on time and material contracts is recognized based on actual
hours performed at the contracted hourly rate plus the costs of any direct
materials provided.
INCOME TAXES
The Company has elected to be treated as an "S" Corporation under the
Internal Revenue Code of 1986. Accordingly, the income or loss of Talus,
Incorporated is taxable to the stockholders and Talus, Incorporated is not
liable for federal and state income taxes.
F-29
<PAGE> 99
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
MAJOR CUSTOMERS
During 1997 and 1996, Talus, Incorporated's revenue was primarily derived
from three major customers, each of which contributed more than 10.0% of total
revenues. These customers accounted for 55.0% and 48.0% of gross revenue for
1997 and 1996, respectively. As of December 31, 1997 and 1996, these customers
had accounts receivable balances totalling $147 and $140, respectively.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
EMPLOYEE BONUSES
Talus, Incorporated adopted a bonus plan in 1994 which provided that 83.0%
of Talus, Incorporated's income before bonuses be allocated to a bonus pool. Of
this amount, 40.0% was allocated to employee performance, 40.0% to sales
performance and 20.0% to the two stockholders of Talus, Incorporated. In 1994
the two stockholders earned $63 in sales performance bonuses, approximately
50.0% of the total sales performance bonuses, and $25 in direct stockholder
bonuses, and in 1995 they earned $17 in direct stockholder bonuses. The two
stockholders have agreed to defer collection of these bonuses, totaling $105,
until Talus, Incorporated is able to operate with less debt. It is not
anticipated that these bonuses will be paid during 1998.
3. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
------------
1996 1997
---- ----
<S> <C> <C>
Billed and unbilled receivables......................... $537 $389
Allowance for doubtful accounts......................... (26) (28)
---- ----
Accounts receivable, net................................ $511 $361
==== ====
</TABLE>
F-30
<PAGE> 100
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
------------
1996 1997
---- ----
<S> <C> <C>
Furniture and fixtures.................................. $ 33 $ 23
Computers and equipment................................. 158 163
Computer software....................................... 22 27
---- ----
213 213
Less accumulated depreciation........................... 102 137
---- ----
Property and equipment, net............................. $111 $ 76
==== ====
</TABLE>
Depreciation expense for the years ended December 31, 1997 and 1996 was $40
and $42, respectively.
5. COMMITMENTS
LEASE OBLIGATIONS
Talus, Incorporated leases its office space and various equipment under
noncancelable operating leases with original terms in excess of the year. Future
minimum payments on noncancelable operating leases were as follows at December
31, 1997:
<TABLE>
<S> <C>
1998.................................................... $120
1999.................................................... 113
2000.................................................... 85
----
Total......................................... $318
====
</TABLE>
Rental expense was $116 and $126 for the years ended December 31, 1997 and
1996, respectively.
6. LINE OF CREDIT AND NOTE PAYABLE
In March 1995, Talus, Incorporated entered into a revolving credit facility
agreement with maximum borrowings of $150 subject to certain borrowing base
restrictions which matured on March 24, 1996. Interest was at the prime rate
plus 1.5% per annum, a total of 10.15% at December 31, 1995. Borrowings were
collateralized by Talus, Incorporated's eligible accounts receivable. Talus,
Incorporated's two principal stockholders and one other member of management
were guarantors on the credit facility.
In March 1996, Talus, Incorporated entered a credit facility agreement with
maximum borrowing of $300 subject to certain borrowing base restrictions.
Interest was at the prime rate plus 1.5% per annum, a total of 9.75% at December
31, 1996. In April 1997, the agreement was amended to decrease the maximum
borrowings to $200, amended to increase the interest rate to prime rate plus
2.0% per annum, a total of 10.5% at December 31, 1997, and extended through May
1998.
F-31
<PAGE> 101
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
In July 1997, Talus, Incorporated entered into a term loan agreement with
the same financial institution of $100 due July 24, 2001. Interest is at the
prime rate plus 2.0% per annum, a total of 10.5% at December 31, 1997.
These agreements contain certain restrictive terms and covenants, the most
restrictive of which requires Talus, Incorporated to maintain a specified
liabilities to tangible net worth ratio. Talus, Incorporated was not in
compliance with this restrictive covenant as of December 31, 1997. Accordingly,
the entire balance of the note payable as of December 31, 1997 has been
classified as current. Borrowings are collateralized by Talus, Incorporated's
eligible accounts receivable. Talus, Incorporated's two principal stockholders
and one other member of management are guarantors on the loan agreement.
In 1996, majority stockholders loaned Talus, Incorporated $17 bearing
interest at 10.0%. The loans were repaid during 1997.
7. RETIREMENT PLAN
In 1995, Talus, Incorporated established a qualified salary reduction
simplified employee pension plan (SARSEP) for all eligible employees. Talus,
Incorporated was required to contribute 3.0% of eligible salaries to the SARSEP
each year. Because of restrictions imposed by the Internal Revenue Code of 1986,
the 3.0% contribution for the highly compensated employees could not be made to
the SARSEP. Accordingly, Talus, Incorporated adopted a policy that any amount
that could not be funded to the SARSEP due to these restrictions would be paid
directly to those highly compensated employees as additional compensation. As of
December 31, 1996, six employees were deemed to be highly compensated. The
compensation provided for such employees was $17. The total Talus, Incorporated
contributions for 1996 for all eligible employees, as defined by the Internal
Revenue Code of 1986, were $32. The SARSEP was terminated during 1997.
During 1997 Talus, Incorporated established a 401(k) plan for the benefit
of all eligible employees. Employees may make contributions to the plan, subject
to certain limitations contained in the Internal Revenue Code of 1986. Talus,
Incorporated matches up to 50.0% of the first 6.0% of compensation deferred
under the plan. Employees vest 50.0% in the employer contributions after one
year and 100% after two years of employment at Talus, Incorporated Employer
contributions to the plan were $50 for the year ended December 31, 1997.
8. COMMON STOCK, ADDITIONAL PAID-IN CAPITAL AND STOCK OPTIONS
At Talus, Incorporated's inception in 1992, 25 shares of common stock with
$0.10 par value per share were authorized and 10 shares were issued. In 1996,
the Articles of Incorporation were amended to authorize 200 shares of common
stock with a $0.01 par value per share. A stock split was effective in 1996
increasing the number of issued and outstanding shares to 102.
A stock option plan, which was adopted in 1996, provides for the granting
of stock options to employees. The agreements provide the participants an option
to purchase shares of Talus, Incorporated's common stock generally based on
certain time vesting requirements. On June 21, 1996, Talus, Incorporated granted
7 options with an exercise
F-32
<PAGE> 102
TALUS, INCORPORATED
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
price of $1.00 per share. On May 31, 1997, Talus, Incorporated granted 11
options with an exercise price of $4.77 per share. As of December 1997, options
for 7 shares are exercisable.
The effects of applying SFAS No. 123 are immaterial as the application of
SFAS No. 123 would not result in a significant difference from reported net
loss. Accordingly, the following disclosures are omitted: (1) pro forma net
income, (2) weighted-average grant date fair value of options granted during the
year and (3) description of method and assumptions used to estimate fair value
of options.
9. SUBSEQUENT EVENTS
Talus, Incorporated is currently negotiating a merger agreement with Sagent
Technology, Inc.
F-33
<PAGE> 103
SAGENT TECHNOLOGY, INC.
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The following financial statements present the Sagent Technology, Inc. pro
forma consolidated statements of operations for the year ended December 31,
1998.
Sagent's acquisition of Talus, Incorporated has been accounted for under
the "purchase" method of accounting, which requires the purchase price to be
allocated to the acquired assets and liabilities of Talus, Incorporated on the
basis of their estimated fair values as of the date of acquisition. The
following pro forma consolidated statements of operations for the year ended
December 31, 1998 give effect to the acquisition of Talus, Incorporated as if it
occurred on January 1, 1998, and include adjustments directly attributable to
the acquisition of Talus, Incorporated and expected to have a continuing impact
on the combined company.
The pro forma information is based on historical financial statements. The
pro forma results of operations for the year ended December 31, 1998 includes
the results of operations of Talus, Incorporated from January 1, 1998 to
February 28, 1998. The assumptions give effect to the business combination with
Talus, Incorporated under the purchase method of accounting. The information has
been prepared in accordance with the rules and regulations of the Securities and
Exchange Commission and is provided for comparative purposes only. The pro forma
information does not purport to be indicative of the results that actually would
have occurred had the combination been effected at the beginning of the periods
presented.
F-34
<PAGE> 104
SAGENT TECHNOLOGY, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
------------------------------------------------
PURCHASE PRO FORMA
SAGENT TALUS ADJUSTMENTS CONSOLIDATED
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
Total revenues, net....................... $ 17,043 $ 452 $ -- $ 17,495
Cost of revenues.......................... 5,066 167 (102) 5,131
-------- -------- -------- --------
Gross profit.............................. 11,977 285 102 12,364
Operating expenses:
Sales and marketing..................... 12,037 383 12,420
Research and development................ 6,013 283 6,296
General and administrative.............. 5,186 342 5,528
Acquired in-process technology.......... 2,425 (2,425) --
-------- -------- -------- --------
Total operating expenses............. 25,661 1,008 (2,425) 24,244
-------- -------- -------- --------
Loss from operations...................... (13,684) (723) (2,527) (11,880)
Interest expense.......................... (207) (207)
Other income.............................. 190 190
-------- -------- -------- --------
Net loss.................................. $(13,701) $ (723) $ (2,527) $(11,897)
======== ======== ======== ========
Pro forma net loss per share.............. $ (0.75) $ (0.66)
======== ========
Weighted average shares used in
computation of pro forma net loss per
share................................... 18,160 18,160
</TABLE>
See accompanying notes.
F-35
<PAGE> 105
SAGENT TECHNOLOGY, INC.
NOTES TO PRO FORMA
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS)
1. BASIS OF PRESENTATION
On February 28, 1998, Sagent acquired Talus, Incorporated, a privately held
company that has experience in the design and implementation of Enterprise
Intelligence applications.
The unaudited pro forma information presented is not necessarily indicative
of future consolidated results of operations of Sagent or the consolidated
results of operations that would have resulted had the acquisition taken place
on January 1, 1998. The unaudited pro forma consolidated statements of
operations for the year ended December 31, 1998 reflect the effects of the
acquisition, assuming the related events occurred as of January 1, 1998 for the
purposes of the unaudited pro forma consolidated statements of operations.
2. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL ADJUSTMENTS
The unaudited pro forma consolidated financial statements reflect a total
purchase price of $3.5 million, and the acquisition was recorded under the
purchase method of accounting. In connection with the acquisition, Sagent
expensed $2.4 million of in-process technology in the quarter ended March 31,
1998. In addition, Sagent recorded other intangibles of $587, which are being
amortized on a straight-line basis over six months to three years following the
acquisition. The determination of the acquired in-process technology allocation
was based upon recently issued guidance issued by the Securities and Exchange
Commission and considered such factors as degree of completion, technological
uncertainties, costs incurred and projected costs to complete. In-process
technology charges have not been reflected in the pro forma consolidated
financial statements of operations for the year ended December 31, 1998 as they
are considered a non-recurring charge.
3. UNAUDITED PRO FORMA CONSOLIDATED NET LOSS PER SHARE
The net loss per share and shares used in computing the net loss per share
for the year ended December 31, 1998 is based upon the historical weighted
average common shares outstanding. The Sagent common stock issuable upon the
exercise of the stock options and warrants have been excluded as the effect
would be antidilutive. In addition to the shares used in computing the net loss
per share above, pro forma net loss per share is calculated using the
convertible preferred stock outstanding as if such shares were converted to
common stock at the time of issuance.
4. PURCHASE ADJUSTMENTS
Pro forma adjustments have been prepared to reflect the elimination of the
non-recurring one-time charge for acquired in-process technology and to reflect
the amortization of capitalized technology and other intangible assets.
F-36
<PAGE> 106
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Stockholders and Board of Directors of
Sagent Technology, Inc.:
In connection with our audits of the consolidated financial statements of
Sagent Technology, Inc. as of December 31, 1997 and 1998, and for each of the
three years in the period ended December 31, 1998, which financial statements
are included in the Prospectus, we have also audited the financial statement
schedule listed in Item 16(b) herein. In our opinion, this financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly, in all material respects, the information required to
be included therein.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
January 27, 1999
F-37
<PAGE> 107
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
, 1999
LOGO
5,000,000 SHARES OF COMMON STOCK
-------------------------
PROSPECTUS
-------------------------
DONALDSON, LUFKIN & JENRETTE
HAMBRECHT & QUIST
U.S. BANCORP PIPER JAFFRAY
------------------------
DLJDIRECT INC.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made pursuant to this prospectus after the date of this prospectus shall
create an implication that the information contained in this prospectus or the
affairs of Sagent have not changed since the date of this prospectus.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 1999 (25 days after the date of this prospectus), all
dealers that effect transactions in these shares of common stock may be required
to deliver a prospectus. This is in addition to the dealer's obligation to
deliver a prospectus when acting as an underwriter and with respect to their
unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE> 108
[SAGENT LOGO OVER GRAPHIC OF GLOBE APPEARS HERE]
CAPTION: A Leading Provider of Enterprise Intelligence Software Solutions
[Logo]
[SIDEBAR]
The Sagent DMS Product Suite gathers data from a variety of sources and
organizes that data into a repository known as a data mart. The Sagent DMS
Product Suite allows organizations to more efficiently analyze the data and
provides access to the information through personal computers, reports and
importantly, through the Internet.
[Schematic depicting the Sagent Data Mart and its components: Input into Sagent
Data Load Server: Data Sources and Mainframe. Input into Data Mart: Sagent Data
Load Server, Data Mart: Sagent Design Studio, Sagent Automation and Sagent
Admin. Output from Data Mart: Sagent Data Access Server to Sagent Web Link
Server and Sagent Information Studio. Output from Sagent Web Link Server:
Analysis, Reports and Excel. Output from Sagent Information Studio: StatView,
Analysis, Reports and Excel.]
[GRAPHIC DEPICTING A SCREEN SHOT OF A BALANCE SHEET REPORT] Caption: Sagent
Reports allows end users to create, publish and view graphically rich
presentations of corporate information.
[GRAPHIC DEPICTING A SCREEN SHOT OF A Z ANALYSIS VS GOAL REPORT] Caption: Sagent
Analysis provides a wide range of analytical capabilities for business data.
[GRAPHIC DEPICTING A SCREEN SHOT OF A DATA FLOW REPORT] Caption: Sagent Design
Studio provides a visual environment for describing data and designing the flow
of data for both loading and accessing a data mart.
[GRAPHIC DEPICTING A SCREEN SHOT OF A STATISTICS REPORT] Caption: StatView
provides an end user with the ability to create, publish and view complex
statistical analysis of corporate data in client/server environments.
[Logo]
<PAGE> 109
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in connection
with the sale of common stock being registered. All amounts are estimates except
the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE
PAID
--------
<S> <C>
Registration Fee............................................ $ 11,120
NASD Fee.................................................... 5,100
Nasdaq Listing Fee.......................................... 90,000
Legal Fees and Expenses..................................... 325,000
Accounting Fees and Expenses................................ 150,000
Blue Sky Fees and Expenses.................................. 10,000
Transfer Agent Fees......................................... 10,000
Miscellaneous............................................... 98,780
--------
Total............................................. $700,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law, the
registrant's certificate of incorporation includes a provision that eliminates
the personal liability of its directors for monetary damages for breach or
alleged breach of their duty of care. In addition, as permitted by Section 145
of the Delaware General Corporation Law, the bylaws of the registrant provide
that: (1) the registrant is required to indemnify its directors and executive
officers and persons serving in such capacities in other business enterprises at
the registrant's request to the fullest extent permitted by Delaware law,
including in those circumstances in which indemnification would otherwise be
discretionary; (2) the registrant may, in its discretion, indemnify employees
and agents in those circumstances where indemnification is not required by law;
(3) the registrant is required to advance expenses, as incurred, to its
directors and executive officers in connection with defending a proceeding
(except that it is not required to advance expenses to a person against whom the
registrant brings a claim for breach of the duty of loyalty, failure to act in
good faith, intentional misconduct, knowing violation of law or deriving an
improper personal benefit; (4) the rights conferred in the bylaws are not
exclusive, and the registrant is authorized to enter into indemnification
agreements with its directors, executive officers and employees; and (5) the
registrant may not retroactively amend the bylaw provisions in a way that it
adverse to such directors, executive officers and employees in these matters.
The registrant's policy is to enter into indemnification agreements with
each of its directors and executive officers that provide the maximum indemnity
allowed to directors and executive officers by Section 145 of the Delaware
General Corporation Law and the bylaws, as well as certain additional procedural
protections. In addition, such indemnification agreements provide that the
registrant directors and executive officers will be indemnified to the fullest
possible extent not prohibited by law against all expenses (including attorney's
fees) and settlement amounts paid or incurred by them in any action
II-1
<PAGE> 110
or proceeding, including any derivative action by or in the right of the
registrant, on account of their services as directors or executive officers of
the registrant or as directors or officers of any other company or enterprise
when they are serving in such capacities at the request of the registrant. The
registrant will not be obligated pursuant to the indemnification agreements to
indemnify or advance expenses to an indemnified party with respect to
proceedings or claims initiated by the indemnified party and not by way of
defense, except with respect to proceedings specifically authorized by Sagent's
board of directors or brought to enforce a right to indemnification under the
indemnification agreement, the registrant's bylaws or any statute or law. Under
the agreements, the registrant is not obligated to indemnify the indemnified
party (1) for any expenses incurred by the indemnified party with respect to any
proceeding instituted by the indemnified party to enforce or interpret the
agreement, if a court of competent jurisdiction determines that each of the
material assertions made by the indemnified party in such proceeding was not
made in good faith or was frivolous; (2) for any amounts paid in settlement of a
proceedings unless the registrant consents to such settlement; (3) with respect
to any proceeding brought by the registrant against the indemnified party for
willful misconduct, unless a court determines that each of such claims was not
made in good faith or was frivolous; (4) on account of any suit in which
judgment is rendered against the indemnified party for an accounting of profits
made from the purchase or sale by the indemnified party of securities of the
registrant pursuant to the provisions of sec.16(b) of the Securities Exchange
Act of 1934 and related laws; (5) on account of conduct by the indemnified party
that is finally adjudged to have been knowingly fraudulent or deliberately
dishonest, or to constitute willful misconduct or a knowing violation of the
law; (6) on account of any conduct from which the indemnified party derived an
improper personal benefit; (7) on account of conduct the indemnified party
believed to be contrary to the best interests of the registrant or its
stockholders; (8) on account of conduct that constituted a breach of the
indemnified party's duty of loyalty to the registrant or its stockholders; or
(9) if a final decision by a court having jurisdiction in the matter determines
that such indemnification is not lawful.
The indemnification provision in the bylaws and the indemnification
agreements entered into between the registrant and its directors and executive
officers may be sufficiently broad to permit indemnification of the registrant's
officers and directors for liabilities arising under the Securities Act of 1933.
Reference is made to the following documents filed as exhibits to this
registration statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
EXHIBIT
DOCUMENT NUMBER
-------- -------
<S> <C>
Form of Underwriting Agreement.............................. 1.1
Certificate of Incorporation of Registrant, as amended...... 3.1
Form of Amended and Restated Certificate of Incorporation of
Registrant, to be filed prior to closing of the
offering.................................................. 3.2
Bylaws of Registrant........................................ 3.3
Form of Indemnification Agreement entered into by the
Registrant with each of its directors and executive
officers.................................................. 10.1
</TABLE>
II-2
<PAGE> 111
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since January 1, 1996, the registrant has issued and sold the following
securities:
(a) From January 1, 1996 to March 15, 1999, the registrant sold in the aggregate
of 1,739,208 shares of unregistered common stock to 56 directors, officers,
employees, former employees and consultants at prices ranging from $0.045 to
$5.50 per share, for aggregate consideration of $1,939,266. Such shares were
sold pursuant to the exercise of options granted by the board. As to each
director, officer, employee, former employee and consultant of the
registrant who was issued such securities, the registrant relied upon Rule
701 of the Securities Act of 1933. Each such person purchased securities of
the registrant pursuant to a written contract between such person and the
registrant. In addition, the registrant met the conditions imposed under
Rule 701(b).
(b) On January 17, 1996 and February 25, 1997, the registrant sold in the
aggregate 92,500 shares of unregistered common stock at a price per share of
$0.09 to a director and a price per share of $0.25 to a group of investors,
respectively, for aggregate cash consideration of $21,125. These shares were
sold pursuant to restricted stock purchase agreements between the registrant
and the director and such stockholders. As to each person issued such
securities, the registrant relied upon section 4(2) of the Securities Act of
1933.
(c) In July, August and September 1996, the registrant sold in the aggregate
2,615,680 shares of unregistered Series C preferred stock at a price per
share of $2.50 to certain investors for aggregate cash consideration of
$6,539,200. The registrant relied upon Section 4(2) of the Securities Act of
1933 and Regulation D, Rule 506, thereunder in connection with the sale of
these shares. The sale of Series C preferred stock was made in compliance
with all of the terms of Rules 501 and 502 of Regulation D, there were no
more than 35 investors (as calculated pursuant to Rule 501(e) of Regulation
D), and each investor who was not an accredited investor represented to the
registrant that he or she had such knowledge and experience in financial and
business matters that he or she was capable of evaluating the merits and
risks of the investment.
(d) On March 17, 1997, the registrant issued and sold in the aggregate 40,000
shares of unregistered Series C preferred stock at a price per share of
$2.50 to a director for aggregate cash consideration of $100,000. These
shares were sold pursuant to a Series C preferred stock purchase agreement
between the registrant and the director. Such issuance was made in reliance
upon Section 4(2) of the Securities Act of 1933. The registrant repurchased
the shares at a price per share of $2.50 in April 1998.
(e) On June 16, 1997, the registrant issued and sold in the aggregate 39,178
shares of unregistered Series C preferred stock at a price per share of
$2.50 to a consultant for aggregate cash consideration of $97,945. These
shares were sold pursuant to a Series C preferred stock purchase agreement
between the registrant and the consultant. Such issuance was made in
reliance upon Section 4(2) of the Securities Act of 1933.
(f) In August and September 1997, the registrant sold in the aggregate 1,572,327
shares of unregistered Series D preferred stock at a price per share of
$3.18 to certain investors for aggregate cash consideration of $5,000,000.
The registrant relied upon Section 4(2) of the Securities Act of 1933 and
Regulation D, Rule 506, thereunder in connection with the sale of these
shares. The sale of Series D preferred stock was
II-3
<PAGE> 112
made in compliance with all of the terms of Rules 501 and 502 of Regulation
D, there were no more than 35 investors (as calculated pursuant to Rule
501(e) of Regulation D), and each investor who was not an accredited
investor represented to the Registrant that he or she had such knowledge and
experience in financial and business matters that he or she was capable of
evaluating the merits and risks of the investment.
(g) In January 1998, the registrant sold in the aggregate 45,785 shares of
unregistered Series D preferred stock at a price per share of $3.18 to an
officer of the registrant for aggregate cash consideration of $145,596.
These shares were sold pursuant to a Series D preferred stock purchase
agreement between the registrant and the officer. Such issuance was made in
reliance upon Section 4(2) of the Securities Act of 1933.
(h) In February and March 1998, the registrant sold in the aggregate 1,895,370
shares of unregistered Series E preferred stock at a price per share of
$5.40 to certain investors for aggregate cash consideration of $10,234,998.
The registrant relied upon Section 4(2) of the Securities Act of 1933 and
Regulation D, Rule 506, thereunder in connection with the sale of these
shares. The sale of Series E preferred stock was made in compliance with all
of the terms of Rules 501 and 502 of Regulation D, there were no more than
35 investors (as calculated pursuant to Rule 501(e) of Regulation D), and
each investor who was not an accredited investor represented to the
registrant that he or she had such knowledge and experience in financial and
business matters that he or she was capable of evaluating the merits and
risks of the investment.
(i) On May 21, 1998, the registrant sold in the aggregate 28,000 shares of
unregistered common stock at a price per share of $4.32 to a distributor of
the registrant's products for aggregate cash consideration of $120,960.
These shares were sold pursuant to a stock purchase agreement between the
registrant and the distributor. Such issuance was made in reliance upon
Section 4(2) of the Securities Act of 1933.
(j) On September 14, 1998, the registrant sold in the aggregate 10,000 shares of
unregistered common stock at a price per share of $5.50 to a consultant for
aggregate cash consideration of $55,000. These shares were sold pursuant to
a stock purchase agreement between the registrant and the consultant. Such
issuance was made in reliance upon Section 4(2) of the Securities Act of
1933.
(k) On February 28, 1999, the registrant sold 10,000 shares of unregistered
common stock at a price per share of $9.00 to a director nominee for
aggregate consideration of $120,960. These shares were sold pursuant to a
stock purchase agreement between the registrant and the director nominee.
Such issuance was made in reliance upon Section 4(2) of the Securities Act
of 1933.
Appropriate legends were affixed to the share certificates issued in the
transactions described above. All recipients had adequate access, through their
relationships with the registrant, to information about the registrant.
II-4
<PAGE> 113
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
1.1+ Form of Underwriting Agreement.
3.1+ Certificate of Incorporation of Registrant.
3.2+ Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed prior to the closing of the offering
made under the Registration Statement.
3.3+ Bylaws of Registrant.
4.1 Form of Registrant's Common Stock Certificate.
4.2+ Sixth Amended and Restated Registration Rights Agreement,
dated as of February 24, 1998, between the Registrant and
the parties named therein.
4.3+ Common Stock Registration Rights Agreement, dated as of
September 14, 1998, between the Registrant and Robert Hawk.
5.1+ Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1+ Form of Indemnification Agreement entered into by Registrant
with each of its directors and executive officers.
10.2+ Amended and Restated 1995 Stock Plan and related agreements.
10.3+ 1998 Stock Plan and related agreements.
10.4+ 1999 Employee Stock Purchase Plan and related agreements.
10.5+ 1999 Director Option Plan and related agreements.
10.6+ Master Equipment Lease Agreement, dated August 7, 1995,
between the Registrant and Lighthouse Capital Partners, L.P.
10.7+ Master Lease Agreement, dated as of September 26, 1998,
between the Registrant and Dell Financial Services L.P.
10.8+ Loan and Security Agreement, dated as of July 16, 1997,
between the Registrant and Venture Banking Group, a division
of Cupertino National Bank, and amendments thereto.
10.9+ Standard Office Lease, dated June 1, 1998, by and between
the Registrant and Asset Growth Partners, Ltd., and the
First Amendment thereto.
10.10**+ Development and Licensing Agreement, dated January 22, 1997,
between the Registrant and Abacus Concepts, Inc.
10.11**+ Microsoft License and Distribution Agreement, dated August
23, 1996, between the Registrant and Microsoft Corporation.
10.12**+ Value-Added Reseller Agreement, effective June 26, 1997,
between the Registrant and Automatic Data Processing, Inc.
10.13**+ Sagent KK Non-Exclusive Japanese Distribution Agreement,
dated as of December 17, 1997, between Sagent KK Japan and
Kawasaki Steel Systems R&D Corporation.
10.14**+ Exclusive Distribution Agreement, effective as of January 1,
1998, by and between the Registrant and Sagent U.K. Ltd.
10.15 Joint Venture Agreement, entered into as of April 8, 1998,
between the Registrant and ISAR-Vermogensverwaltung GbR mbH
and related agreements.
10.16**+ Exclusive Concession Agreement, effective as of November 21,
1997, by and between the Registrant and Sagent France S.A.
10.17**+ Value-Added Reseller/OEM Agreement, effective December 30,
1997, between the Registrant and Advent Software, Inc.
</TABLE>
II-5
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
10.18+ Form of Sagent Technology, Inc. End User Software License
Agreement.
10.19**+ OEM Software License Agreement, effective March 31, 1998,
between the Registrant and Siebel Systems, Inc.
10.20+ Form of Sagent Technology, Inc. Software Maintenance and
Technical Support Agreement.
10.21+ Form of Sagent Technology, Inc. Agreement for Consulting
Services.
10.22+ Form of Sagent Technology, Inc. Agreement for Subcontractor
Consulting Services.
10.23+ Form of Evaluation Agreement.
10.24+ Note, dated February 1, 1998, of W. Virginia Walker.
10.25+ Note, dated February 1, 1998, of W. Virginia Walker.
10.26**+ Solution Provider Agreement, effective June 27, 1997,
between the Registrant and Unisys Corporation.
10.27+ Consulting Agreement, dated as of April 7, 1997, between the
Registrant and Ralph Kimball.
10.28+ Executive Change of Control Policy.
10.29+ Agreement and Plan of Reorganization, dated as of February
27, 1998, by and among Sagent Technology, Inc., Talus
Acquisition Corp., Talus, Incorporated and Certain
Shareholders of Talus, Incorporated.
10.30+ Employment and Non-Competition Agreement, dated as of
February 27, 1998, between the Registrant and Michael P.
Venerable.
10.31**+ Software License and Services Agreement, dated March 31,
1998, between the Registrant and Siebel Systems, Inc.
10.32+ Common Stock Purchase Agreement, dated February 28, 1999,
between the Registrant and Klaus S. Luft.
10.33+ Notes, dated February 5, 1999, between the Registrant and
Tom Lounibos.
10.34+ Note, dated March 15, 1999, of Kenneth C. Holcomb.
10.35+ Nonexclusive International Software Value Added Reseller
("VAR") Agreement, dated December 8, 1997, between the
Registrant and Opalis S.A.
21.1+ Subsidiaries of the Registrant.
23.1+ Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.3 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.4+ Consent of Klaus S. Luft.
24.1+ Power of Attorney (See page II-8).
27.1+ Financial Data Schedule (available in EDGAR format only).
</TABLE>
- -------------------------
** Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
+ Previously filed.
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II. Valuation and Qualifying Accounts
II-6
<PAGE> 115
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions referenced in Item 14 of this registration
statement or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-7
<PAGE> 116
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amendment to the registration statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Mountain View, State of California, on this 1st day of April 1999.
SAGENT TECHNOLOGY, INC.
By: /s/ KENNETH C. GARDNER
-----------------------------------
Kenneth C. Gardner
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<C> <S> <C>
* President and Chief Executive April 1, 1999
- --------------------------------------------- Officer (Principal Executive
Kenneth C. Gardner Officer)
/s/ W. VIRGINIA WALKER Vice President of Finance and April 1, 1999
- --------------------------------------------- Administration, Chief
W. Virginia Walker Financial Officer (Principal
Financial and Accounting
Officer)
* Director April 1, 1999
- ---------------------------------------------
John E. Zicker
* Director April 1, 1999
- ---------------------------------------------
Shanda Bahles
* Director April 1, 1999
- ---------------------------------------------
Richard W. Shapero
* Director April 1, 1999
- ---------------------------------------------
Jeffrey T. Webber
*By: /s/ W. VIRGINIA WALKER
---------------------------------------
W. Virginia Walker
Attorney-in-fact
</TABLE>
II-8
<PAGE> 117
SCHEDULE II
SAGENT TECHNOLOGY, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT (REDUCTIONS) BALANCE AT
BEGINNING IN COSTS END OF
OF PERIOD AND EXPENSES WRITE-OFFS PERIOD
---------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31,
1996.. $ -- $ -- $-- $ --
1997.. -- 450 -- 450
1998.. 450 58 -- 508
Valuation allowances for deferred
tax assets:
Year ended December 31,
1996.. $ -- $3,351 $-- $ 3,351
1997.. 3,351 2,739 -- 6,090
1998.. 6,090 5,899 -- 11,989
</TABLE>
<PAGE> 118
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1+ Form of Underwriting Agreement.
3.1+ Certificate of Incorporation of Registrant.
3.2+ Form of Amended and Restated Certificate of Incorporation of
Registrant to be filed upon the closing of the offering made
under the Registration Statement.
3.3+ Bylaws of Registrant.
4.1 Form of Registrant's Common Stock Certificate.
4.2+ Sixth Amended and Restated Registration Rights Agreement,
dated as of February 24, 1998, between the Registrant and
the parties named therein.
4.3+ Common Stock Registration Rights Agreement, dated as of
September 14, 1998, between the Registrant and Robert Hawk.
5.1+ Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1+ Form of Indemnification Agreement entered into by Registrant
with each of its directors and executive officers.
10.2+ Amended and Restated 1995 Stock Plan and related agreements.
10.3+ 1998 Stock Plan and related agreements.
10.4+ 1999 Employee Stock Purchase Plan and related agreements.
10.5+ 1999 Director Option Plan and related agreements.
10.6+ Master Equipment Lease Agreement, dated August 7, 1995,
between the Registrant and Lighthouse Capital Partners, L.P.
10.7+ Master Lease Agreement, dated as of September 26, 1998,
between the Registrant and Dell Financial Services L.P.
10.8+ Loan and Security Agreement, dated as of July 16, 1997,
between the Registrant and Venture Banking Group, a division
of Cupertino National Bank, and amendments thereto.
10.9+ Standard Office Lease, dated June 1, 1998, by and between
the Registrant and Asset Growth Partners, Ltd., and the
First Amendment thereto.
10.10**+ Development and Licensing Agreement, dated January 22, 1997,
between the Registrant and Abacus Concepts, Inc.
10.11**+ Microsoft License and Distribution Agreement, dated August
23, 1996, between the Registrant and Microsoft Corporation.
10.12**+ Value-Added Reseller Agreement, effective June 26, 1997,
between the Registrant and Automatic Data Processing, Inc.
10.13**+ Sagent KK Non-Exclusive Japanese Distribution Agreement,
dated as of December 17, 1997, between Sagent KK Japan and
Kawasaki Steel Systems R&D Corporation.
10.14**+ Exclusive Distribution Agreement, effective as of January 1,
1998, by and between the Registrant and Sagent U.K. Ltd.
10.15 Joint Venture Agreement, entered into as of April 8, 1998,
between the Registrant and ISAR-Vermongensverwaltung GbR mbH
and related agreements.
10.16**+ Exclusive Concession Agreement, effective as of November 21,
1997, by and between the Registrant and Sagent France S.A.
10.17**+ Value-Added Reseller/OEM Agreement, effective December 30,
1997, between the Registrant and Advent Software, Inc.
10.18+ Form of Sagent Technology, Inc. End User Software License
Agreement.
</TABLE>
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.19**+ OEM Software License Agreement, effective March 31, 1998,
between the Registrant and Siebel Systems, Inc.
10.20+ Form of Sagent Technology, Inc. Software Maintenance and
Technical Support Agreement.
10.21+ Form of Sagent Technology, Inc. Agreement for Consulting
Services.
10.22+ Form of Sagent Technology, Inc. Agreement for Subcontractor
Consulting Services.
10.23+ Form of Evaluation Agreement.
10.24+ Note, dated February 1, 1998, of W. Virginia Walker.
10.25+ Note, dated February 1, 1998, of W. Virginia Walker.
10.26**+ Solution Provider Agreement, effective June 27, 1997,
between the Registrant and Unisys Corporation.
10.27+ Consulting Agreement, dated as of April 7, 1997, between the
Registrant and Ralph Kimball.
10.28+ Executive Change of Control Policy.
10.29+ Agreement and Plan Reorganization, dated as of February 27,
1998, by and among Sagent Technology, Inc., Talus
Acquisition Corp., Talus, Incorporated and Certain
Shareholders of Talus, Incorporated
10.30+ Employment and Non-Competition Agreement, dated as of
February 27, 1998 between Registrant and Michael P.
Venerable.
10.31**+ Software License and Services Agreement, dated March 31,
1998, between Registrant and Siebel Systems, Inc.
10.32+ Common Stock Purchase Agreement, dated February 28, 1999,
between the Registrant and Klaus S. Luft.
10.33+ Notes, dated February 5, 1999, between the Registrant and
Tom Lounibos.
10.34+ Note, dated March 15, 1999, of Kenneth C. Holcomb.
10.35+ Nonexclusive International Software Value Added Reseller
("VAR") Agreement, dated December 8, 1997, between the
Registrant and Opalis S.A.
21.1+ Subsidiaries of the Registrant.
23.1+ Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.3 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.4+ Consent of Klaus S. Luft.
24.1+ Power of Attorney (See page II-8).
27.1+ Financial Data Schedule (available in EDGAR format only).
</TABLE>
- ------------------------------
** Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the Securities
and Exchange Commission.
+ Previously filed.
<PAGE> 1
EXHIBIT 4.1
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
[SAGENT LOGO]
[NUMBER SEAL] [SHARE SEAL]
SGN _________ ____________
COMMON STOCK COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE CUSIP 786693 10 1
IN KANSAS CITY, MISSOURI OR SEE REVERSE FOR CERTAIN DEFINITIONS
NEW YORK, NEW YORK
THIS CERTIFIES that
is the owner of
FULLY PAID AND NON-ACCESSIBLE SHARES OF THE PAR VALUE OF $.001 EACH OF THE
COMMON STOCK OF
SAGENT TECHNOLOGY, INC. (the Corporation), transferable on the books of the
Corporation by the holder hereof, in person or by duly authorized Attorney,
upon surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are subject to the laws of Delaware, and to the
Certificate of Incorporation and By-Laws of the Corporation as now or hereafter
amended. This certificate is not valid unless countersigned and registered by
the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
/s/ Arthur F. Schneiderman [SEAL] /s/ Kenneth C. Gardner
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
<PAGE> 2
SAGENT TECHNOLOGY, INC.
The Corporation will furnish without charge to each stockholder who so
requests a copy of the powers, designations, preferences and relative,
participating, optional or other special rights to each class of stock or series
thereof, and the qualifications, limitations, or restrictions of such
preferences and/or rights.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ___________ Custodian ___________
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of under Uniform Trans to Minors Act
survivorship and not as tenants _________________________________
in common (State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
FOR VALUE RECEIVED, ________________________ hereby sell, and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------
represented by the within Certificate, and do hereby irrevocably constitute and
appoint
Attorney
- --------------------------------------------------------------------------------
to transfer the said shares on the books to the within named Corporation with
full power of substitution in the premises.
Dated
-------------------
NOTICE: X
THE SIGNATURE[S] TO THIS ASSIGNMENT ----------------------------------
MUST CORRESPOND WITH THE NAME[S] AS (SIGNATURE)
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR, X
WITHOUT ALTERATION OR ENLARGEMENT ----------------------------------
OR ANY CHANGE WHATEVER. (SIGNATURE)
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
SEC. RULE 17Ad-15.
SIGNATURE(S) GUARANTEED BY:_____________________________________________
<PAGE> 1
EXHIBIT 10.15
JOINT VENTURE AGREEMENT
This Joint Venture Agreement is entered into as of April 8, 1998 (the EFFECTIVE
DATE") between Sagent Technology, Inc. with offices at 2225 East Bayshore Road,
Suite 100, Palo Alto, CA 94303, ("SAGENT") and ISAR-VERMOGENSVERWALTUNG GBR MBH
a German limited liability partnership within the meaning of the German Civil
Code with the following address at Gut Keferloh 1B, D-85630 Grasbrunn/Munich,
Germany ("INVESTOR").
RECITALS
A. WHEREAS the Investor is a German limited liability partnership which
desires to incorporate and invest in a new German Company, referred to
herein as "JVC" which will distribute the software and services of a
software company in the Territory.
B. WHEREAS Sagent is a software company which seeks expanded distribution
of its software and its related services in the Territory.
C. WHEREAS the Investor, will incorporate the JVC, and the JVC will
receive a license for the Territory from Sagent to (i) resell Sagent
products, (ii) provide authorized maintenance, training and consulting
services and (iii) manage new VARs and Resellers.
D. WHEREAS the Investor's responsibilities related to the JVC will
include: (1) proper incorporation of the JVC (2) the provision of
start-up and operating capital for the JVC, (3) appointing three
appropriate and responsible individuals of the Advisory board of the
JVC and (4) voting of stock shares of the JVC.
E. WHEREAS Investor and Sagent have expressed a desire to work together
to create the JVC which shall be governed by its Shareholder
Agreement, its board, and the Exclusive Software Distribution
Agreement and to have the JVC granted rights and privileges to
distribute the software and services of Sagent in the Territory.
NOW THEREFORE, in consideration of the mutual covenants contained herein and for
other good and valuable consideration the receipt and adequacy of which is
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1 DEFINITIONS
1.1 "DISTRIBUTION AGREEMENT" shall mean the Exclusive Distribution
Agreement executed on April 8, 1998 between Sagent and JVC.
1.2 Intentionally left blank.
1.3 "JVC" shall mean the company which is incorporated by Investor
pursuant to the terms and conditions of this Agreement.
<PAGE> 2
1.4 "RULES OF PROCEDURE FOR THE ADVISORY BOARD" shall mean the Rules of
Procedure for the Advisory Board of the JVC which are set out as
Exhibit D hereto.
1.5 "SHAREHOLDERS' AGREEMENT" shall mean the Shareholders' Agreement of
JVC which is set out as Exhibit C hereto.
1.6 "TERRITORY" shall mean those countries / accounts set out in the
Distribution Agreement.
1.7 "SAGENT PRODUCT AND SERVICES" shall mean those products and services
developed or licensed by Sagent and provided by Sagent from time to
time and which are distributed by the JVC in the Territory pursuant to
the Terms and Conditions of the Distribution Agreement.
1.8 "SAGENT VISITING DIRECTOR" shall be that person appointed by Sagent
that Investor shall establish as a visiting board member of the JVC
Advisory Board. When used in this Agreement the term "approval of
Sagent's Visiting Director of the JVC's Advisory Board" or similar
term shall mean the affirmative approval of the Sagent Visiting
Director and accordingly the failure of the Sagent Visiting Director
to attend or vote will preclude the required approval.
1.9 "COMPETITOR" shall mean a Data Mart and/or Data Warehouse company or
company that sells Data Access and/or Data Movement tools such as but
not limited to Informatica, Microstrategy, Information Advantage,
Brio, SAS.
"INDIRECT COMPETITOR" shall mean any other software company providing
Database tools or any other business competing with JVC for the same
customers in Data Warehousing tools licensing transactions.
"NON-COMPETITOR COMPANY" shall mean any company which is not a
"Competitor" or an "Indirect Competitor".
ARTICLE 2 FORMATION OF JVC
2.1 INCORPORATION Promptly after the Effective Date of this Agreement, the
Investor shall cause the JVC to be incorporated in the form of a
German GmbH (Gesellschaft mit beschrankter Haftung), or be
incorporated by using an existing German GmbH. In connection with the
foregoing action the Investor shall cause the JVC to adopt the charter
documents (GmbH Shareholders' Agreement and Rules of Procedure for the
Advisory Board) which shall include but not be limited to the identity
and voting rights of the Advisory Board and Shareholders of the JVC
and which are substantially in the form of Exhibits D and E hereto.
2
<PAGE> 3
2.2 FUNDING OF INITIAL CAPITALIZATION. The Investor agrees to provide
sufficient funding up to a maximum of one and a half million Deutsche
Marks (DM 1,500,000) over a three year period to enable JVC to hire
personnel, obtain space and otherwise conduct its business. In no
event shall Investor be required to increase its investment or have
any other liability or responsibility to JVC other than the funding
requirements in this section and as otherwise provided in this
Agreement.
2.3 EXCEPTION. Investor shall not be required to meet its investment
obligations and JVC shall not be required to meet its minimum royalty
payment obligation if (i) Sagent has materially defaulted in any of
its obligations set out in this Agreement between the parties and such
default is not cured within ten (10) days of Investor's written notice
to Sagent; or (ii) Sagent's overall revenues, commencing on the
Effective Date, and excluding European revenue do not grow by at least
thirty (30) percent annually or (iii) Sagent does not continue to make
all reasonable commercial efforts in its pursuit of becoming a
publicly traded entity.
2.4 FUNDING REQUIREMENTS.
(a) JVC shall carry all expenses related to the foundation/incorporation
of JVC including but not limited to notary and legal fees. Sagent
shall carry all expenses related to the acquisition of JVC including,
but not limited to notary and legal fees.
(b) The Investor expects that the above investment amount will be
sufficient, however it shall have the right to invest more if
necessary but shall not be obligated to do so.
(c) Sagent shall have the right to lend funds in the form of subordinated
loans to JVC if the Investor has reached its maximum limit.
(d) Apart from disbursements which are normally required in the ordinary
course of business, during the first three (3) years of JVC's
operation the approval of the Advisory Board of JVC and in particular
the Sagent Visiting Director shall be required prior to the Investor
taking any money or other asset out of JVC in any form including but
not limited to cash, profits or dividends. Without approval of the
Sagent Visiting Director, investor shall be entitled to withdrawal of
amounts it has loaned to JVC.
(e) Any amounts lent by Sagent shall bear prevailing market rates of
interest and otherwise comply with all US laws.
3
<PAGE> 4
2.5 STRUCTURE OF JVC
(a) The Advisory Board of JVC will have three Members of the Advisory
Board, one of whom shall be nominated by Sagent and two by the
Investor. The Board will meet at least quarterly in person or by
telephone with at least five (5) days advance written notice of all
meetings.
(b) At the outset of the Agreement, one hundred percent of the
shareholdings of the JVC will be owned by Investor, however the
Sagent Visiting Director shall have the right to approve or reject
alternative ownership. Further, any transfer is subject to Sagent's
right of first refusal found elsewhere in this Agreement.
(c) Decisions of JVC for which the approval of Sagent's appointed member
of JVC's Advisory Board is required shall be set out in the Rules of
Procedures, the Shareholders Agreement and in the Actions requiring
Approval set out in Exhibits C, D and E hereto.
ARTICLE 3 MANAGEMENT OF THE JOINT VENTURE COMPANY
3.1 MANAGEMENT GENERALLY. The JVC shall be managed and administered in
accordance with the applicable provisions of its charter documents.
The JVC shall be managed in a manner consistent with prudent business
practices.
3.2 INTENT. The parties will agree to guide JVC to achieve the
objectives of Sagent in the "Territory" and the desire by the
Investor to achieve a substantial return from its efforts.
3.3 INVESTOR RESPONSIBILITY. The Investor shall use its best efforts as
the sole shareholder of JVC to ensure that the General Manager of the
JVC understands and works diligently to fulfill all of JVC's
obligations under the Distribution Agreement between JVC and Sagent
which is dated April 8, 1998.
3.4 The advisory board of Sagent GmbH will provide a person acceptable to
Sagent as General Manager of Sagent GmbH.
ARTICLE 4 ALLOCATIONS, DISTRIBUTIONS AND OTHER FISCAL MATTERS
4.1 AUDITORS. The firm of Coopers & Lybrand is hereby designated as the
initial Auditors for the JVC; Auditors shall not be changed without
the approval of the Sagent Visiting Director.
4.2 INFORMATION AND ACCESS. The JVC shall keep its accounting and Tax
records on Sagent's fiscal year (calendar year) basis and shall
provide Sagent with financial statements (to include a balance sheet,
income statement, and
4
<PAGE> 5
statement of cash flows) no less frequently than within 21 days after
the end of each calendar quarter. JVC shall also provide Sagent with
a personnel roster at such time, listing each employee and significant
consultant of the JVC by name, position held and salary. Sagent shall
have the right at any time to inspect JVC's books records and
facilities and to talk with the officers, Members of the Advisory
Board, employees and consultants of the JVC.
4.3 LIMITATION ON LIABILITY. In the event of termination by either party
in accordance with any of the provisions of this Agreement, neither
party shall be liable to the other, because of such termination for
compensation, reimbursement or investments, leases or commitments in
connection with the business or goodwill of Sagent or JVC. Termination
shall not, however, relieve either party of obligations incurred prior
to the termination.
4.4 Regardless of whether any remedy fails of its essential purpose, in no
event will either party be liable to the other party for incidental,
indirect, special or consequential damages, notwithstanding being
aware of the possibility of such damages. Neither party's liability
for any damages or claims shall exceed US $ 500,000 or DM 900,000
whichever amount is lower.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES
Each party hereby severally represents and warrants to each other party as
follows:
5.1 DUE ORGANIZATION AND EXISTENCE.
(a) In the case of the Investor, that it is a limited liability
partnership duly organized, validly existing and in good standing
under the laws of Germany.
In no event shall Investor be required to increase its investment or
have any other liability or responsibility other than the investment
and as otherwise provided in this Agreement.
(b) In the case of Sagent, that it is a corporation duly organized and
validly existing in accordance with the laws of California, USA.
5.2 QUALIFICATION. The parties acknowledge that each of them are duly
qualified, licensed or registered to transact business and is in good
standing under the laws of each jurisdiction in which the nature of
its business or the location of its assets requires it to be so
qualified.
5.3 POWER AND AUTHORITY. The parties warrant that each has all requisite
power and authority to transact the business in which it is currently
engaged or proposes to engage, to own or hold under lease its
properties and assets, and to execute and deliver, and to perform its
obligations under this Agreement.
5.4 NO CONFLICT. Neither the Agreement's execution and delivery of other
documents contemplated hereunder, (a) requires or will require
approval of its
5
<PAGE> 6
equity owners or the holders of any of its indebtedness or
obligations, (b) contravenes or will contravene any law applicable to
or binding upon it or any of its properties, (c) contravenes or will
contravene any provision of its charter documents, (d) does or will
contravene or result in a breach of or constitute a default under any
instrument, indenture, agreement or other obligation to which it is a
party or by which it or any of its assets may be bound, or (e)
requires or will require the consent or approval of, the giving of
notice to, the registration with, the recording or filing of any
document with, or the taking of any other action by or in respect of,
any governmental commission, authority or agency, or any other person
or entity whether foreign or domestic the violation of which would
have a material effect on the transaction contemplated herein.
5.5 EXECUTION, DELIVERY AND PERFORMANCE. Each party warrants that it has
duly executed and delivered this Agreement, and this Agreement
constitutes a legal, valid and binding obligation enforceable against
it in accordance with the terms hereof.
5.6 ABSENCE OF LITIGATION. Each party warrants that there are no
actions, suits or proceedings pending or, to the best of its
knowledge, threatened against or affecting it or any of its assets.
5.7 NO LIABILITIES OR OBLIGATIONS. Investor warrants that it has not
incurred any liabilities or obligations on behalf of the JVC, other
than liabilities or obligations required by German law.
5.8 NON COMPETITION. During the first three years of the Agreement, JVC
will not sell any products except the Sagent Products and Services.
During this three-year period, Investor and any of its companies where
investor is the majority shareholder shall have the right to otherwise
conduct their business, however in no event may Investor and its
companies sell or otherwise promote the products of a Competitor or
Indirect Competitor of Sagent without Sagent's prior written
permission and if such permission is granted by Sagent, Investor and
its companies will be responsible for making sure that any affiliate
who may be working with competitors will not receive any confidential
information of Sagent.
ARTICLE 6 ADDITIONAL COVENANTS AND AGREEMENTS
6.1 EXCLUSIVE DEALING. The parties shall work together exclusively to
develop this venture. No party may unilaterally take any action or
enter into any agreement granting any rights to or associated with
this venture to any person or entity that is not a party hereto.
6.2 RESTRICTIONS ON TRANSFERABILITY OF EQUITY INTEREST IN JVC. Except
for transfers or other dispositions to other wholly owned companies,
Investor may not sell, assign, pledge or otherwise dispose of its
equity interest in the JVC, in whole or in part, unless Investor (the
"TRANSFERRING PARTY") has received a
6
<PAGE> 7
bona fide offer it is willing to accept for such interest (or part
thereof), and Investor thereafter offers Sagent (the "NON-TRANSFERRING
PARTY") a right of first refusal to purchase such interest (or part
thereof) (the "OFFERED INTEREST") at the same price and upon the same
terms and conditions as the bona fide offer, in accordance with the
following procedure:
(a) The Transferring Party shall provide notice to the Non-Transferring
Party, which notice shall (i) state that the Transferring Party
received a bona fide third party offer for the Offered Interest, (ii)
state the price offered for the Offered Interest, on a per-share or
other unitary basis, and (iii) describe the terms and conditions to
which the bona fide offer is subject (the "OFFER NOTICE") and shall
provide the Non Transferring Party with any other information it
reasonably requests regarding the Offer, or JVC.
(b) If the Non-Transferring Party elects to exercise its right of first
refusal, notice of such election (an "ELECTION NOTICE") shall be given
to the other party within sixty (60) days following the date on which
the Office Notice was given. The closing of the purchase and sale
transaction shall take place on the sixty (60th) day after expiration
of the initial sixty day period. At the closing, the Transferring
Party shall sell, and the Non-Transferring Party or Parties shall
purchase, the Offered Interest at the price and upon the terms and
conditions set forth in the Offer Notice. If the offer price is in
other than cash, the Non Transferring Party may elect to pay the
consideration in fair market value in cash.
(c) If rights of first refusal are not timely exercised with respect to
the entire Offered Interest, or are waived, the Transferring Party may
thereafter dispose of the Offered Interest at a price equal to or
greater, and upon terms and conditions equal to or more favorable to
the Transferring Party, than those set forth in the Offer Notice.
However, if the Offered Interest is not so disposed of within ninety
(90) days after the date on which the Offer Notice was given, or if
the Transferring Party elects to dispose of the Offered Interest at a
lower price, or upon terms and conditions less favorable to the
Transferring Party, than those set forth in the Offer Notice, then
this Section 6 shall again become applicable to the Offered Interest.
(d) Notwithstanding anything to the contrary in this Section 6, as a
condition precedent to any sale, assignment or other disposition of an
equity interest in JVC, in whole or in part, the intended transferee
of such interest shall become a party to this Agreement, and shall
give the representations and warranties contained herein and be
subject to all obligations herein including section 7. Additionally,
under no circumstances can any interest be transferred to a Direct or
Indirect Competitor of Sagent except as provided in Section 7.4.
(e) If the Transferring Party sells, assigns, pledges or otherwise
disposes of any interest in JVC, whether in whole or in part, in
violation of this Section 6, such disposition shall be null and void
ab initio. Each party acknowledges that the restrictions on
transferability set forth in this Section are of unique value to the
other parties hereto, and that the payment of monetary damages could
not
7
<PAGE> 8
adequately compensate the other parties for any breach of the
obligations set forth in this Section. Accordingly, the rights of the
parties set forth herein shall be specifically enforceable in
accordance with their terms.
(f) Nothing herein shall limit Sagent's Buy-Out Option under Article 7.
6.3 PUBLIC DISCLOSURE. No party shall make any public disclosure
regarding confidential terms of this venture without the prior written
consent of the other parties hereto, except as required by law,
including the requirement of the United States Securities and Exchange
Commission. Confidential terms shall include all of the terms and
conditions of this Agreement, however the business relationship
between the parties and JVC necessary to carry out distribution of
products and other obligations under the Distribution and Trade mark
Agreement shall not be confidential.
6.4 CONFIDENTIALITY. Each party shall keep confidential all information
and documents received from the other parties in connection with the
transactions contemplated hereby, and shall not disclose the same to
any third party without the prior written consent of the party that
might be affected thereby. The limitations set forth in this Section
shall not apply to (a) information that is or becomes generally
available to the public other than as a result of a disclosure by any
person in breach of this Agreement, (b) information already in a
party's possession without restriction on disclosure, (c) information
that comes into a party's possession from a third party without
restriction on disclosure, other than through a breach of an agreement
with the original disclosing party, and (d) information the disclosure
of which is compelled by force of law.
6.5 NAME CHANGE OF JVC. In accordance with Sections 13.3 and 13.6 of the
Exclusive Software Distribution Agreement executed as of April 8, 1998
between Sagent and JVC, Investor as shareholder of JVC shall promptly
pass the resolution required to effect the name change and shall use
its best efforts to effect the legal name change of JVC.
ARTICLE 7 BUY OUT
7.1 In the event that Sagent is sold, (the is, a controlling interest is
sold to another firm that expects to operate Sagent rather than an
investment firm) by written notice the Investor can require Sagent to
purchase JVC at the Formula Price determined pursuant to section 7.3
herein within sixty (60) days following completion of the sale of
Sagent. Sagent may elect to purchase JVC as further described in
Section 7.2. The sale price shall be paid in cash or a combination of
cash and stock of Sagent, if stock is acceptable to Investor.
7.2 At any time, but not earlier than eight (8) months after the
incorporation of JVC, Sagent may elect to purchase JVC at the Formula
Price determined below in cash, or a combination of cash and stock by
giving written notice to Investor. If Sagent elects to purchase JVC
in exchange for stock, Investor may decide to have these shares
directly transferred to its individual partners.
8
<PAGE> 9
7.2.1 If Sagent is privately held, the value of the shares issued in
connection with any stock purchase shall be at the value declared by
an independent party knowledgeable in business valuation acceptable to
both parties as the fair market value on the date Sagent provides
notice of its desire to purchase JVC. Sagent and the Investor shall
share equally in the cost of the valuation. If Sagent is a publicly
reporting company, the share value shall be the average closing sales
price (or closing bid, if no sales are reported) of Sagent common
stock for the three (3) business days prior as well as three (3)
business days following the date on which written notice is provided
by Sagent for purchase of JVC.
7.2.2 In the case an SEC rule 144 transaction is applicable with respect to
the shares, Sagent shall fully support Investor's/the Partners'
efforts in this transaction.
7.3 FORMULA PRICE:
7.3.1 In the event that the proposed Buy-out Date is on or before the last
day of the first 12-month period of operation, the Purchase Price
shall be equal to the amount of [*] dollars (US $[*]).
In the event that the proposed Buy-out Date is after the last day of
the first 12-month period and on or before the last day of the second
12-month period of operation, the Purchase Price shall be equal to the
higher amount of [*] dollars (US $[*]) or the Gross Product Revenues
multiplied by the applicable monthly Revenue Multiple, less (i)
accounts receivable due greater than sixty (60) days after the Buy-out
Date and (ii) lease commitments or contingent liabilities, with the
exception of office space lease commitments, extending more than six
(6) months past the Buy-out Date. Accounts receivable that are
recovered within 120 days after the Buy-Out Date shall be added back
to the Purchase Price. Gross Product Revenues shall equal the
aggregate licensing, sale revenues from the distribution of Sagent
products recognized by Company during the twelve-month period
immediately preceding the Buy-out Date in accordance with the revenue
recognition policy of Sagent then in effect. The month during which
Sagent gives notice of the desired acquisition shall be accounted for
in the buy-out formula.
In the event that the proposed Buy-out Date is after the last day of
the second 12-month period of operation, the Purchase Price shall
equal the Gross Product Revenues multiplied by the applicable monthly
Revenue multiple.
7.3.2 REVENUE MULTIPLE: The Revenue Multiple in the first month of the
second 12-month period shall be equal to [*] ([*]) and shall be
increased each month by [*] until it reaches [*] ([*]).
7.3.3 Investor shall have the right to withdraw dividends after the third
year without change to the buyout price, provided that such dividends
do not exceed the amount invested in common equity pursuant to Section
2.2 (withdrawals
9
<PAGE> 10
exceeding this amount to be deducted from the buyout price). JVC's
retained earnings for the current or prior fiscal years shall be
included in the buy-out price and in that respect. Investor waives its
rights to revert to Article 102 BGB (German Civil Code). Exhibit B
attached hereto provides an example of the buyout amounts based on the
projections set out in Exhibit A.
7.3.4. During the thirty (30) day period following the notice of
acquisition, Sagent shall have the right to audit the buy-out price
and operations of JVC prior to closing of the buy-out. The audit may
be conducted by Sagent or a third party accounting firm hired by
Sagent. The Investor shall correct all errors noted by Sagent through
recalculation of the buy-out price. In the event there are material
errors or accounting deficiencies, Sagent may delay the closing
pending rectification of the material problems noted.
7.3.5. Notwithstanding the foregoing, the purchase price to be paid by
Sagent shall be reduced by any liabilities or obligations to which
the JVC is subject at the time of the buyout that are not necessary
to fulfill its intended business objectives.
7.3.6. The amount to be paid by Sagent shall be calculated (and if
applicable, paid) in US dollars. For the purpose of calculating the
buy-out price, the monthly revenues of the JVC shall be converted at
the respective average monthly exchange rates of German Marks/Euros
to US dollars in accordance with US GAAP.
7.3.7. Subject to 7.3.4, Sagent shall promptly complete the acquisition
following resolution of all audit or other issues disclosed, but in
no event shall the acquisition be completed later than ninety (90)
days after Sagent's written notice to buy JVC.
7.4 Intentionally left blank
7.5 REGISTRATION RIGHTS. If Sagent issues shares of common stock or
securities convertible into common stock to Investor in the future
pursuant to this Agreement, Sagent shall give Investor mutually
agreed-upon registration rights related to that common stock.
7.6 The rights to be granted to Sagent in this Section 7 can be exercised
also by a nominee named by Sagent, whereby such nominee shall be a
Sagent controlled company.
ARTICLE 8 GOVERNING LAW AND DISPUTE RESOLUTION
8.1 GOVERNING LAW. The rights and obligations of the parties under this
Agreement shall not be governed by the U.N. Convention on Contracts
for the International Sales of Goods; rather such rights and
obligations shall be governed and construed under the laws of the
State of California, without reference to conflict of laws and
principles. The jurisdiction of the courts of Germany is expressly
excluded to the maximum extent permitted by law.
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8.2 ARBITRATION. In the event of any dispute, controversy or claim
arising out of or relating to this Agreement, or to the breach or
termination hereof (a "DISPUTE"), the parties agree to resolve the
same as follows:
(a) The parties to the Dispute shall initially attempt to resolve it
through consultations and negotiations.
(b) If the Dispute has not been resolved amicably within thirty (30) days
after any party provides notice thereof, unless the parties agree
otherwise, the Dispute shall be resolved by final and binding
arbitration in Zurich, Switzerland, in accordance with the
Arbitration Rules of the United Nations Commission on International
Trade Law ("UNCITRAL"), as in effect on the date of this Agreement.
The language to be used in the arbitration proceeding shall be
English. The International Chamber of Commerce shall serve as the
appointing authority. The arbitrators shall render a written award
stating the reasons for the decision. An arbitration award or
decision may be entered by any court of competent jurisdiction, or
application may be made to such a court for judicial acceptance of
the award or decision and any appropriate order, including
enforcement.
(c) Each of the parties hereto consents to the submission of any Dispute
for settlement by final and binding arbitration in accordance with
paragraph (b) above. Such consent shall satisfy the requirements for
an "agreement in writing" pursuant to Article II of the United
Nations Convention on the Recognition and Enforcement of Foreign
Arbitration Awards, done at New York on June 10, 1958.
(d) Each of the parties hereby undertakes to carry out without delay the
provisions of any arbitration award or decision.
ARTICLE 9 TERM AND TERMINATION
9.1 TERM. This Agreement runs concurrently with, and will terminate
automatically with the termination of the Distribution Agreement,
unless terminated earlier under the provisions of this Section 9.
9.2 RESIGNATION OF SAGENT VISITING DIRECTOR. After three years JVC may
request the resignation of the Sagent nominated Visiting Director
from JVC's board provided that Sagent continues to be promptly
supplied with all relevant sales and distribution information related
to the continuing distribution of Sagent products and services by JVC.
9.3 INVESTOR'S RIGHT TO TERMINATE FOR CAUSE. The Investor shall have the
right to terminate the Agreement (i) if following investment totaling
DM 1,500,000 in JVC, it shall not have created a self-sustaining
entity, which cannot operate on its own without additional
contribution of outside funds, and it (and or Sagent) is not willing
to advance additional funds to continue operations or (ii) other
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<PAGE> 12
material default of a provision of this Agreement by Sagent, however
if the default is such that it reasonably may be cured within 60 days
and Sagent restores its performance, the Agreement shall continue.
9.4.1 EFFECT OF TERMINATION PURSUANT TO SECTION 9.3: Following termination
under section 9.3 (which shall also act to terminate the Distribution
Agreement), the Investor shall have the right to liquidate JVC,
however if it does so, it shall allow Sagent to hire JVC employees
directly or through a third party to provide support to existing
customers.
9.4.2 In no event will the Investor be required to maintain the corporate
existence of JVC following termination.
9.5 TERMINATION FOR INSOLVENCY. Either party may terminate the Agreement
in the event of JVC's or Sagent's dissolution and liquidation or
inability financially to reasonably complete its responsibilities
under the Distribution Agreement.
9.6 SALE OF EQUITY INTEREST IN JVC. These may be an allowed sale of JVC
that will not invalidate this agreement, if Sagent has passed on its
right of first refusal. Either party may terminate this Agreement in
the event the other party ceases to hold a direct or indirect equity
interest in the JVC.
9.7 Intentionally left blank.
9.8 SURVIVAL. Notwithstanding anything to the contrary in this Agreement,
the provisions of Sections 2.4(a), 3.3, 5, 6.3, 6.4, 7.5, 8, 9, and 10
shall remain in full force and effect upon termination of this
Agreement.
ARTICLE 10 MISCELLANEOUS
10.1 NOTICES. Any and all notices and other communications that are
required or permitted to be given pursuant to this Agreement shall be
in writing, and shall be deemed given (a) upon personal delivery, or
(b) upon the sender's receipt of electronic confirmation of
transmission, if sent by telex or facsimile, or (c) upon 2 business
days after delivery to a recognized courier, fees prepaid. The
parties designate the following addresses for the foregoing legal
effects:
To Investor:
Isar-Vermogensverwaltung GbR mbH
c/o Buro Klaus Luft
Gut Keferloh 1B
D - 85630 Grasbrunn/Munich, Germany
Attention: Petra Beyer, Managing Partner
Facsimile number: (49-89) 464483
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<PAGE> 13
To Sagent:
Sagent Technology, Inc.
2225 East Bayshore Road, Suite 100
Palo Alto, CA 94303
USA
Attention: W. Virginia Walker, Chief Financial Officer
Facsimile number: (650) 493-1290
The parties may amend the above-mentioned data by notice to all other
parties, as provided in this Section.
10.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties contained in this Agreement or in any
certificate delivered pursuant hereto shall survive the termination of
this Agreement and shall remain in full force and effect.
10.3 SPECIAL, INDIRECT, PUNITIVE AND CONSEQUENTIAL DAMAGES. No party shall
be liable to any other party in contract, tort or otherwise (including
negligence, warranty or strict liability) for any incidental, special,
indirect, punitive or consequential damages arising out of or in
connection with this Agreement or the transactions contemplated
hereby.
10.4 BINDING EFFECT; NONASSIGNABILITY. This Agreement shall be binding
upon and inure to the benefit of the parties hereto, and their
respective successors and assigns; provided, however, that neither
this Agreement, nor any rights or obligations hereunder, may be
assigned, delegated or otherwise conveyed by any party hereto without
the prior written consent of the other parties. The sale of Sagent
shall not be considered a violation of this section. The sale of JVC
following Sagent's passing on the right of first refusal shall not be
considered a violation of this section.
10.5 NO THIRD-PARTY BENEFICIARIES. This Agreement is for the sole benefit
of, and may be enforced only by, the parties hereto. Neither the JVC
nor any other third party claiming through either of them or otherwise
shall have standing to enforce any provision of this Agreement.
10.6 SEVERABILITY. If one of the provisions of this Agreement should be,
or become invalid, or if this Agreement should have an omission, this
shall not affect the validity of the remaining provisions. In such an
event, the parties are obliged to assist in the incorporation of
provisions which form the closest possible economic equivalent to that
which the parties would have agreed if they had been aware of the
invalidity or if they had considered the point.
10.7 AMENDMENT. No modification of this Agreement shall be binding unless
made in writing and duly executed by the parties.
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<PAGE> 14
10.8 WAIVER. The waiver by any party of a breach of any provision of this
Agreement shall not be deemed a continuing waiver or a waiver of any
subsequent breach, whether of the same or any other provision hereof.
10.9 RELATIONSHIP OF PARTIES. The relationship of the parties under this
Agreement shall be solely that of independent contractors. The
parties retain complete control over and responsibility for their own
respective operations and employees. Nothing contained in this
Agreement shall be construed to make any party a partner, agent,
employee or other representative of any other party, or to otherwise
authorize any party to represent or bind any other party.
10.10 COUNTERPARTS. This Agreement may be executed by one or more of the
parties hereto in any number of separate counterparts, each of which
when so executed shall be deemed an original, and all of said
counterparts taken together shall be deemed to constitute but one and
the same instrument.
10.11 ENTIRE AGREEMENT. This Agreement, including its Exhibits, which form
an integral part hereof, constitutes the entire agreement of the
parties with respect to the subject matter hereof, and supersedes any
and all prior negotiations, correspondence, understandings and
agreements relating to the subject matter hereof, including without
limitation the Letter of Intent signed by the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
as of the date first written above.
"SAGENT"
SAGENT TECHNOLOGY, INC.
By: /s/ THOMAS M. LOUNIBOS
-----------------------
Name: Thomas M. Lounibos
---------------------
Title: EVP OF SALES
---------------------
Date: April 8, 1998
---------------------
"INVESTOR"
ISAR-VERMOGENSVERWALTUNG GBR mbH
By: /s/ PETRA BEYER
-----------------------
Name: Petra Beyer
---------------------
Title: Managing Partner
--------------------
Date: April 8, 1998
---------------------
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<PAGE> 15
EXHIBIT A
SAGENT GMBH - BUSINESS PROJECTIONS
15
<PAGE> 16
EXHIBIT B
BUY-OUT EXAMPLE
Date of written Notice: June 10, 1999
12-month Trailing Revenue: US$1,682,000
(-- July 1998 - including June 1999)
Monthly Revenue Multiplier: 1.541667
Buy-out Price: US$2,593,083
Minus Accounts Receivable
due greater than 60 days: US$153,000
Minus contingent liabilities or lease
commitments extending more than
6 months past the Buy-out Date: US$0
Plus recovered Accounts Receivable
within 120 days after the Buy-out Date: US$150,000
TOTAL BUY-OUT PRICE: US$2,590,083
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EXHIBIT C
SHAREHOLDERS' AGREEMENT
(ARTICLES OF INCORPORATION)
SECTION 1
COMPANY NAME AND REGISTERED OFFICE
(1) The name of the company shall be Magnolia II Vermogensverwaltung GmbH.
(2) The company's registered office shall be in Grasbrunn.
SECTION 2
PURPOSE OF THE ENTERPRISE
(1) The purpose of the enterprise is to produce and distribute software of all
kinds; also to offer consulting and technical services such as installation,
maintenance, and training. Further it manages and administers its own assets.
(2) Within these limits the company is authorized to perform all business
activities and steps that appear necessary or expedient to achieve the purpose
of the company, such as creating branch offices domestically and abroad.
(3) In particular, the company may acquire or obtain participating interests
in enterprises with the same or similar purposes.
SECTION 3
FISCAL YEAR AND DURATION
(1) The company existence is not limited to a certain length of time.
(2) The company's fiscal year shall coincide with the calendar year.
SECTION 4
SHARE CAPITAL AND COMPANY SHARES
(1) The company's share capital is DM 50,000 (fifty thousand German marks).
(2) Fully paid shares of a shareholder may be consolidated into a uniform
share through resolution of the shareholders.
(3) It is hereby precluded that further payments above and beyond the initial
capital contribution should be required.
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SECTION 5
REPRESENTATION
(1) The company shall have one or more general manager (Geschaftsfuhrer). If
only one general manager has been appointed, then he shall represent the company
alone. If more than one general manager has been appointed, then the company
shall be jointly represented by two general managers or a general manager and an
executive vested with a power of commercial representation under German law
(Prokura).
(2) Any general manager may be authorized through a shareholders' resolution to
represent the company without restriction when performing legal transactions
with himself in his own name or as representative of a third party.
(3) Any general manager may be empowered through a shareholders' resolution to
represent the company alone in case several general managers have been
appointed.
SECTION 6
RESOLUTIONS OF THE SHAREHOLDERS' MEETING
(1) Resolutions of the shareholders' meeting shall be adopted by simple
majority unless a larger majority or unanimity is required by law or these
articles of incorporation.
(2) Each DM 100 (one hundred German marks) in a share give one vote.
(3) Resolutions of the shareholders' meeting may be challenged through legal
action only within a period of one month after being adopted.
(4) Shareholders' resolutions may also be adopted in writing or by telephone
or telefax or electronic mail without holding a shareholders' meeting unless
another method is required by law and insofar as all shareholders approve of
the method. Resolutions adopted by telephone must be recorded in writing
immediately.
(5) A shareholder shall also be entitled to vote in matters concerning him
directly. This does not apply to resolutions concerning formal approval of his
actions, release from a liability, initiation or settlement of a legal dispute
against him, calling in his company share, or transfer of same to the
shareholders or to third parties.
SECTION 7
ACTIONS REQUIRING APPROVAL
Internally, the general managers must obtain the approval of the shareholders
for legal transactions designated as requiring approval by the shareholders'
meeting.
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SECTION 8
ADVISORY BOARD
(1) The shareholders' meeting may resolve to create an advisory board. The
number of its members should always be uneven. Members of the advisory board
may also be persons who are not shareholders.
(2) The advisory board shall be responsible for matters assigned to it by the
shareholders' meeting. It shall adopt resolutions by simple majority unless the
rules of procedure require another method in an individual instance.
SECTION 9
CALLING IN COMPANY SHARES
It is permissible to call in shares of the company with the consent of the
affected shareholder.
SECTION 10
PROHIBITION FROM COMPETITION
The shareholders are not subject to any competitive clause. General Managers
can be released of any competitive clause through a shareholders' resolution.
SECTION 11
NOTICES
To the extent public notices are required by law, they shall appear in the
Bundesanzeigar [Federal Gazette].
SECTION 12
MISCELLANEOUS PROVISIONS
(1) The provisions of the law regarding companies with limited liability shall
apply as supplements to the present Shareholders' Agreement (Articles of
Incorporation).
(2) Should any provision of this agreement be or become unenforceable or
should the agreement contain a loophole, the legal validity of the remaining
provisions shall remain unaffected thereby. In such cases the shareholders
shall be obligated to replace the invalid arrangement with a valid one
approximating as closely as possible the intended purpose of the invalid
provision. The same applies by analogy if this agreement should contain
loopholes.
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EXHIBIT D
RULES OF PROCEDURE FOR THE ADVISORY BOARD
SECTION 1. COMPOSITION OF THE ADVISORY BOARD AND
SELECTION OF ITS MEMBERS
(1)
The company shall have an Advisory Board consisting of three members.
(2)
Members of the Advisory Board shall be appointed through resolution of the
shareholders, one visiting member being nominated by Sagent and the other two
members being nominated from among the ISAR shareholders. Directors and
managerial employees or executives of the company or enterprises dependent on
the company are ineligible for membership on the Advisory Board.
(3)
The office of an Advisory Board member shall end upon closure of the
shareholders' meeting that resolves on the approval of actions for the second
fiscal year following the appointment, unless a shorter period of office is set
at the time of such appointment. The fiscal year during which the appointment
was made is not counted.
(4)
Advisory Board members may be dismissed without statement of cause before
expiration of their term of office through a shareholders' resolution. Any
Advisory Board member may resign from office without statement of cause before
expiration of his term of office through a written statement to the company. To
do so, the member must notify the company in writing three months in advance.
(5)
If an Advisory Board member leaves the Advisory Board prior to expiration of
his term of office, then a new member must be elected to the Advisory Board
without delay. Substitute appointments are for the retired member's remaining
term of office.
SECTION 2. CHAIRMANSHIP
(1)
The Advisory Board shall have a chairman appointed through resolution of the
shareholders.
(2)
The chairman represents the Advisory Board for issuing and receiving statements
and declarations.
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SECTION 3. RESPONSIBILITIES OF THE ADVISORY BOARD
(1)
As an institution of the company the Advisory Board shall execute the
responsibilities given to it through the Shareholders' Agreement, by the present
Rules of Procedure for the Advisory Board, and through resolution of the
shareholders. In particular, these include monitoring and advising the company's
management and approval of the annual financial statements.
(2)
In accordance with section 8 of the Shareholders' Agreement, the Advisory Board
is empowered to appoint and dismiss general managers and if appropriate to
adopt rules of procedure for the company's management. Appointments,
dismissals, and adoption of rules of procedure shall require the approval of
two-thirds of the Advisory Board members.
(3)
To perform his responsibilities, the chairman of the Advisory Board may at any
time require the general managers to report to the Advisory Board regarding the
company's affairs, in particular regarding the progress of business, the status
as to assets and liabilities, profitability, and liquidity, as well as the
intended business policies and other basic matters of future management of the
company.
(4)
The Advisory Board may inspect and examine the company's records and
correspondence; it may appoint individual members or experts to do so.
SECTION 4. MEETINGS OF THE ADVISORY BOARD
(1)
Meetings of the Advisory Board are to be held as required by the needs of the
company or when called for by the chairman or a majority of the Advisory Board
members or the company's management. A meeting should take place during each
quarter. The Advisory Board must convene at least twice during the fiscal year.
(2)
The general managers generally attend meetings of the Advisory Board. In cases
regarding personal matters, the Board may exclude the general managers.
(3)
Meetings of the Advisory Board are called by the chairman or a general manager
designated by the chairman.
(4)
Meetings of the Advisory Board shall be called in writing, by telefax,
telegram, telex or electronic mail with two weeks' notice. Shorter notice is
permitted only with the consent of all members. The agenda must be announced in
the invitation.
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(5)
The Advisory Board shall meet at the location of company's registered office.
The chairman may also call a meeting elsewhere in agreement with the company's
management. Meetings by telephone are also permitted if no member objects.
(6)
The chairman shall conduct meetings of the Advisory Board. A record of meetings
shall be made. It must be signed and kept by the chairman, and copies sent to
the other Advisory Board members.
SECTION 5. RESOLUTIONS
(1)
The Advisory Board shall make decisions through resolution. A quorum shall be
present only if all members take part in the resolution.
(2)
The Advisory Board adopts resolutions with a majority of the votes cast. In
case of a tie the resolution is considered to have been rejected. Consent of
the Visiting Board member nominated by Sagent shall be required for the
following resolutions in addition to the actions listed in the Annex entitled
"Actions requiring approval":
o Payments of any kind whatsoever to the shareholders
o Appointment and dismissal of general managers
(3)
Resolutions may be adopted in writing, by telex, telegram, telefax, electronic
mail or by telephone if no member objects.
SECTION 6. TRANSACTIONS REQUIRING APPROVAL
The affairs of management going beyond the normal business operations of the
company and requiring the approval of the Advisory Board in accordance with
sections 7 and 8, paragraph 2, of the Shareholders' Agreement particularly
include the activities listed in the Annex entitled "Actions requiring
approval".
Such approval shall require a two-thirds majority of Advisory Board members.
The list of actions requiring approval may be changed by resolution of the
shareholders.
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SECTION 7. REMUNERATION OF THE ADVISORY BOARD
(1) The members of the Advisory Board shall receive no remuneration for their
activities. The shareholders' meeting may adopt different arrangements.
(2) Members of the Advisory Board may not assert reimbursement claims for their
expenses. The shareholders may make an exception if a member does not perform an
active function either at Sagent or at the company or with the shareholder.
SECTION 8. FINAL PROVISIONS
(1) The rights of the Advisory Board shall devolve upon the shareholders'
meeting in case the Advisory Board should be either not available or not able
to function for some reason.
(2) The provisions governing supervisory boards of stock corporations (section
52, German Law on Limited-Liability Companies) are not applicable.
(3) These rules of procedure shall enter into force and effect today.
City, date
Signatures
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EXHIBIT E
Annex to JVC's Rules of Procedure for the Advisory Board
ACTIONS REQUIRING APPROVAL
I. ACTIONS OF JVC'S MANAGEMENT WHICH REQUIRE THE PRIOR APPROVAL OF
SAGENT'S VISITING BOARD MEMBER OF JVC'S ADVISORY BOARD
a) Moving the registered office of and selling the company in to or in
part.
b) Creating and discontinuing branch offices.
c) Establishing, acquiring, and selling other companies or participating
interests in other companies.
d) Starting and discontinuing a line of business.
e) Acquiring, selling, encumbering real estate property and equivalent
rights, and associated transactions creating an obligation.
f) Undertaking retirement benefit obligations.
g) Granting employees an interest in the assets of the company.
h) Rules regarding the granting of employee interests in profits or sales.
i) Mass dismissals, i.e. changing the number of employees by more than ten
percent within one month or more than 1 person per month whatever is
larger.
j) Providing guarantees and undertaking obligations on bills of exchange,
as well as taking loans exceeding DM 30,000 individually, excepting
conventional customer and supplier credits and excepting loans defined
in paragraph w) of the Actions requiring Approval. Purchasing or
selling securities (including derivative instruments) of any kind
whatsoever; carrying out foreign-exchange transactions, excepting
conventional payment transactions with customers, suppliers, and
associated or related companies, moreover excepting cash management in
the form of short-term money-market instruments.
k) Concluding, canceling, or modifying agreements with persons related by
blood or marriage or close friendship (e.g. spouse) to a partner or
general manager.
l) Business with interested parties.
m) Sale of additional stock.
n) Liquidation of the company.
o) Approval of the annual business plan.
p) Approval of General Manager.
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II. ACTIONS OF JVC'S MANAGEMENT WHICH REQUIRE THE PRIOR APPROVAL OF THE
ADVISORY BOARD BY MAJORITY VOTE
q) Investment and operations maintenance measures exceeding DM 15,000
individually, as well as leasing objects with individual purchase
prices exceeding DM 15,000.
r) Concluding loan or rental agreements lasting more than one year or
involving a monthly liability of more than DM 5,000.
s) Hiring, promoting, and dismissing management personnel (apart from
General Manager).
t) Granting security of any kind (such as pledges, transfers of ownership
by way of security) and approving loans outside conventional business
transactions, as well as assuming third-party liabilities. Exceptions
are loans to employees of the company not exceeding DM 10,000
individually or a total of DM 50,000 in the fiscal year.
u) Concluding, modifying, and terminating license and cooperation
agreements.
v) Initiating litigation for disputed values exceeding DM 50,000
individually.
w) Granting and revoking powers of commercial representation or other
commercial authority.
x) Issuance of debt to finance accounts receivables up to eighty per cent
(80%) of total accounts receivables and fixed assets up to one hundred
per cent (100%) of total fixed assets (e.g. leasing contracts).
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ADDITIONAL AGREEMENTS ACCOMPANYING THE JOINT VENTURE AGREEMENT AND THE
EXCLUSIVE SOFTWARE DISTRIBUTION AGREEMENT
1. In order to accelerate and facilitate the start-up of Sagent Germany,
the company Magnolia II Vermogensverwaltung GmbH will serve as Joint
Venture Company. ISAR-Vermogensverwaltung GbR mbH incorporated Magnolia
II Vermogensverwaltung GmbH in Munich, Germany on March 26, 1997 and
since its date of incorporation Magnolia II has not been active.
As soon as the required documentation has been received from Sagent,
Inc., the name of Magnolia II Vermogensverwaltung GmbH will be changed
to Sagent Technology GmbH.
2. Concerning Article 3.2. of the Exclusive Software Distribution
Agreement, the 30-day period for the development of a business plan
shall start on May 1, 1998 since the General Manager of Sagent Germany
will not join the company before this date.
3. The Trade Mark License Agreement has been signed under the assumption
that Sagent will promptly complete the respective exhibits.
4. All Agreements were signed under the assumption that a previously
discussed purchase of Sagent stock for key employees of Sagent Germany
and ISAR Partnership will be approved by the Board of Sagent, Inc.
Date: April 8, 1998
/s/ TOM LOUNIBOS
- --------------------
Tom Lounibos
Vice President of Sales, Sagent Technology, Inc.
/s/ PETRA BEYER
- --------------------
Petra Beyer
Managing Partner, ISAR-Vermogensverwaltung GbR mbH
/s/ INES BERGHOF
- --------------------
Ines Berghof
General Manager, Magnolia II Vermogensverwaltung GmbH
<PAGE> 27
EXCLUSIVE SOFTWARE DISTRIBUTION AGREEMENT
This Exclusive Software Distribution Agreement (the "AGREEMENT") is entered into
effective as of April 8, 1998 (the "EFFECTIVE DATE"), between Sagent Technology,
Inc., a California corporation with principal offices at 2225 East Bayshore
Road, Suite 100, Pala Alto, CA 94303 ("SAGENT") and Magnolia II
Vermogensverwaltung GmbH with offices at Gut Keferloh IB, D-85630
Grasbrunn/Munich, Germany ("DISTRIBUTOR").
RECITALS
A. Sagent is the owner or authorized licensor of the Software described
in Exhibit A hereto (as it may be amended in accordance with this
Agreement).
B. Distributor is a company formed concurrently with the signing of this
agreement that will hire sales, support and managerial personnel for
the purposes of distribution of Sagent Software products and provision
of Sagent services within the Territory.
C. The Parties agree to have Distributor distribute the Sagent product and
provide the Sagent services in the Territory and Distributor will
manage Sergeant's Existing Distributors in the Territory to the benefit
of the Existing Distributors, Distributor and of Sagent.
IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED HEREIN, THE PARTIES AGREE AS
FOLLOWS:
1. DEFINITIONS.
1.1. "ANNIVERSARY DATE" shall mean the day of the month in which the
Software was shipped to an End-User, VAR or Reseller by Distributor and
the same day in any subsequent year.
1.2. "APPLICATION" shall mean software programs which are deployed by a
Licensee and which consist of one of Sagent's software components.
1.3. "DOCUMENTATION" shall mean any manual(s) shipped by Sagent with the
Software and manuals made available through the Internet and on other
electronic media.
1.4. "END USER" shall mean any third party which licenses Software in order
to fulfill its own data processing needs.
1.5. "END USER LICENSE" shall mean a standard evaluation or run time license
agreement, as the case may be, approved and accepted by Sagent in
accordance with this Agreement, pursuant to which End Users are granted
the right to utilize Software on terms substantially similar to those
which are from time to time included on the then current Sagent
standard End-User License Agreements which are set out in Exhibit G,
and provided that the language relating to the Grant of License and the
related Definitions shall provide no more rights and are expressed as
closely as reasonably possible in the applicable local language as that
used by Sagent in the relevant agreement.
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1.6 Intentionally left blank.
1.7 "JOINT VENTURE AGREEMENT" shall mean the Agreement executed between
Sagent and ISAR-Vermogensverwaltung GbR mbH on April 8, 1998.
1.8.1 "LICENSE(S)" shall mean an End-User License, a Reseller Agreement
or a VAR License, as applicable.
1.8.2 "LICENSEE" shall mean any party which executes a License with
Distributor.
1.9 "MAINTENANCE" shall mean telephone consultation during Sagent's
normal business hours, bug fixes, error corrections and work-arounds,
as well as updates and new releases, if any, which are not separately
priced, that Sagent makes to the Software.
1.10 "MARKETING" shall mean all sales promotion activities by Distributor,
and conducted by or for Distributor in the Territory.
1.11 "RESELLER" shall mean any reseller which markets Software for resale
provided that this definition does not include VAR.
1.12 "RESELLER AGREEMENT" shall mean Distributor's Reseller agreements
related to the Software. Sagent shall approve the standard form of
Distributor's Reseller Agreement prior to execution by any Reseller.
1.13 "REVENUE" shall mean revenue regularly recognized, net of discounts,
and returns. The term "Revenue" may apply to Sagent's Revenue or
Distributor's revenue as the context requires.
1.14 "SOFTWARE" shall mean Sagent's Software Modules set out in Exhibit A
hereto.
1.15 "STRATEGIC PLANS" shall include but shall not be limited to those
plans established by Distributor for the overall marketing
distribution and sales direction of the Software and services in the
Territory including but not limited to the provision of product
maintenance, consulting and training services.
1.16 "TERRITORY" shall mean those countries set out in Exhibit B of this
Agreement.
1.17 "VAR" shall mean a Value Added Reseller who has integrated or
embedded Sagent's product in its own product offering and who has
executed a VAR Agreement.
1.18 "VAR LICENSE" shall mean Distributor's Standard VAR Agreements which
contain terms substantially similar to those which are from time to
time included on the then current Sagent Standard VAR Agreements,
which are set out as Exhibit H hereto, and provided that the language
relating to the Grant of License and the related Definitions shall
provide no more rights and are expressed as closely as reasonably
possible in the applicable local language to those used by Sagent.
1.19 "WHOLLY OWNED COMPANY(IES)" shall mean those companies which are
controlled by Distributor and which are used by Distributor to fulfill
Distributor's obligations under this Agreement. "Controlled shall
mean that Distributor owns all of the shares of
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such company (nominal share holdings which may be required by local
law are allowed) and is responsible for the day to day actions of the
company.
1.20 All references in this Agreement to the "sale" of or "selling" of
Software shall mean the sale of a license to use such Software. All
references in the Agreement to the "purchase" of or "purchasing" of
Software shall mean the purchase of a license to use such Software.
2. LICENSE TO DISTRIBUTOR.
2.1 GRANT OF EXCLUSIVE LICENSE FOR SOFTWARE. Subject to the terms and
conditions of this Agreement, Sagent hereby grants and Distributor
accepts a royalty-bearing, exclusive, nontransferable, nonassignable,
right and license to copy and distribute Licenses of the Software in
the Territory during term of this Agreement. Distributor shall not
engage in sales activities relating to the Software outside of the
Territory and shall not seek customers, or maintain a branch or
distribution facility outside of the Territory. Except as expressly
permitted herein, Distributor shall not copy, distribute or
sub-license the software except to the extent that such activities may
not be restricted under applicable law.
2.2 Intentionally left blank.
2.3 SUB LICENSE TO VAR. Subject to the terms and conditions of this
Agreement, Sagent hereby grants and Distributor accepts a
royalty-bearing, exclusive nontransferable, nonassignable right to sub
license the right to license and distribute Software through VAR
Agreements in the Territory provided that no VAR agreements granted
pursuant to this section shall remain in effect for a period longer
than five (5) years. Distributor may grant VAR Licenses which shall
be effective for longer periods provided that Sagent agrees in
writing. In any case the VAR agreements have to include maintenance
provisions from Sagent.
2.4 SUB LICENSE TO RESELLERS. Subject to the terms and conditions of this
Agreement, Sagent hereby grants and Distributor accepts a
royalty-bearing, exclusive nontransferable, nonassignable right to sub
license the right to license and distribute Software through Reseller
Agreements in the Territory. Resellers are explicitly not granted the
right to copy any of the Software. Distributor shall ensure that
Reseller shall not engage in active sales activities relating to the
Software outside of the Territory and shall not seek customers outside
of the Territory. Reseller Agreements granted pursuant to this
section shall remain in effect for a period no longer than five (5)
years from the Effective Date of this Agreement.
2.5 WHOLLY OWNED COMPANY. In order to fulfill its obligations under this
Agreement, Distributor may create Wholly Owned Companies within the
Territory provided that each Wholly Owned Company executes a written
agreement with Distributor acceptable to Sagent in its sole discretion
pursuant to which Wholly Owned Company is subject to the terms and
conditions of this Agreement and in no case shall a Wholly Owned
Company receive greater rights than are granted to Distributor
hereunder.
2.6 MAINTENANCE. Sagent shall grant to Distributor the right to sell
Software maintenance to end users of the Software provided that
Distributor shall provide maintenance
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services in compliance with Sagent guidelines for providing
maintenance services. These guidelines are attached as Exhibit J
hereto. A royalty will be paid to Sagent for each maintenance
contract which should be sold on a prepaid annual basis to end users.
Sagent will supply product updates, new versions, new releases and 2nd
line technical support. Distributor will provide first line customer
support to all customers in the Territory and all product distribution
to End Users required under the maintenance contracts.
2.7 REPRODUCTION OF COPIES. Subject to the terms and conditions of the
Agreement, Distributor may reproduce at no charge a reasonable
quantity of Software to be used solely for Software marketing purposes
by Distributor, Wholly Owned Companies or Resellers ("MARKETING
COPIES") provided that Distributor shall keep accurate records of all
copies made and such record shall be made available to Sagent at
Sagent's reasonable request. Distributor, acting reasonably, will
determine the number of Marketing Copies. Distributor shall ensure
that Wholly Owned Companies and Resellers are not permitted to retain
possession of Marketing Copies except pursuant to a written License
agreement.
2.8 SAGENT'S RESERVED RIGHTS.
(a) CUSTOMERS OUTSIDE TERRITORY. Distributor shall not have exclusivity
and shall receive no payment with respect to Sagent's End User
customers from locations outside the Territory that deploy
Applications within the Territory or VARs from outside the Territory
that sell proprietary end user applications that include Sagent
Software in the Territory. Sagent shall supply to Distributor a list
of multinational companies with which Sagent conducts sales in the US
or elsewhere such list may be updated at any time. Distributor shall
have the right to solicit direct business from those divisions or
subsidiaries of such companies that are located in the Territory, and
the Split policy, as set out in section 5.4 of this Agreement will
apply to situations of joint efforts.
(b) CHANGES IN SOFTWARE. Sagent reserves the right, from time to time,
in its sole discretion and without liability to Distributor, to add to
or delete from Exhibit A the Software which Distributor is authorized
to distribute. Sagent agrees to give Distributor ninety (90) days
notice prior to deleting Software from Exhibit A. Sagent cannot
delete from Exhibit A a product, and shall also add any product which
is directly or indirectly sold somewhere else, including but not
limited to new Software releases.
(c) Notwithstanding anything to the contrary in this Agreement, Sagent
will not be treated as in breach of its exclusivity obligations in the
event of Software sales from outside the Territory to inside the
Territory, by multi-national companies, whose importation Sagent is
unable to preclude by reason of application of law or which any third
party is entitled to make.
2.9 TITLE. Distributor acquires only the rights expressly granted in
this Agreement. All rights not expressly granted herein are reserved
by Sagent. Nothing contained in this Agreement shall be construed as
conferring upon Distributor, by implication, estoppel or otherwise,
any license or other right except the license and rights expressly
granted herein. The licenses granted herein are granted solely to
Distributor, and not, by implication or otherwise, to any parent or
affiliate of Licensee. Except to the extent the
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following activities may not be restricted under applicable law,
Distributor shall not create derivative works of, disassemble,
decompile or otherwise reverse-engineer the Software, and shall
prohibit its end users, Resellers and VARs from doing the same. All
right, title and interest in and to the Software and Documentation
delivered to Distributor, and all intellectual property rights therein
and related thereto, shall at all times remain the property of Sagent
or Sagent's licensors.
2.10 INDEPENDENT CONTRACTORS.
Distributor's relationship with Sagent during the terms of this
Agreement will be that of an independent contractor. Distributor will
not have, and will not represent that it has, any authority to bind
Sagent to assume or create any obligation, express or implied, to
enter into any agreements, or to make any warranties or
representation, on behalf of Sagent or in Sagent's name other than as
expressly authorized herein. Additionally, nothing in this Agreement
shall be construed to constitute the parties as partners, joint
venturers, co-owners or otherwise as participants in a joint or common
undertaking. The parties acknowledge and agree that neither
Distributor nor any Reseller is or will at any time be a "commercial
agent" within the meaning of EC Council Directive of 18 December 1986
on the coordination of the laws of the Member States relating to self
employed commercial agents of any related legislation.
3. DEVELOPMENT AND IMPLEMENTATION OF ANNUAL BUSINESS PLAN
3.1 Sagent and Distributor will develop an annual written business plan
that sets forth: (1) the initial hiring of Distributor personnel in
conformity with Exhibit C hereto; (2) selling and other revenue
activity by Distributor in conformity with Exhibit D hereto; (3)
marketing advertising and other promotion plans related to this
agreement; (4) establish German based consulting and training services
for the Software; (5) establish maintenance and technical support for
the Software in the Territory; and (6) all other activities of
Distributor contemplated by this Agreement.
3.2 The first annual business plan shall be finalized by the parties
within thirty (30) days of the Effective Date of this Agreement and
shall be incorporated herein as Exhibit D. The parties will meet
during Sagent's usual budget cycle to establish the annual business
plans for subsequent years. Each annual business plan will take into
account the projections set out in Exhibits C and D hereto.
Distributor shall use its best efforts to fully implement the plans.
3.3 The Advisory Board of Distributor must approve every annual business
plan before it is implemented as the requirement is set out in
specific detail in Exhibit E of the Joint Venture Agreement.
4. BUSINESS OPERATION OF DISTRIBUTOR
4.1 GENERAL MANAGER. The Distributor will provide a person acceptable to
Sagent as General Manager of Distributor.
4.2 AUTHORITY OF GENERAL MANAGER. The General Manager shall have the
authority to make all general business operation decisions related to
the day to day operations of Distributor.
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4.3 STRATEGIC PLANS. During the first three (3) years of Distributor's
operation the General Manager of Distributor shall review with Sagent
all Strategic Plans of Distributor. Sagent shall assist with the
Strategic Plans through suggestion and coordination with programs used
in other parts of the world.
4.4 DISTRIBUTOR TO BE OPERATIONAL WITHIN 90 DAYS. The General Manager of
Distributor shall use his best efforts to have Distributor in full
operation (sales and support functions in place) within 90 days
following the Effective Date of this Agreement.
4.5 SAGENT'S DUTIES AFTER INCORPORATION OF DISTRIBUTOR.
Sagent shall:
(a) turn over to Distributor all sales leads applicable to the Territory
and thereafter all sales transactions for the Territory shall be
quoted and invoiced by Distributor (or applicable VARs) to the end
user customers, Resellers and VARs.
(b) Sagent shall notify all Resellers, VARs and end user customers and
prospects in the Territory of the changes in responsibility.
(c) Sagent shall supply Distributor with a list of all current
maintenance customers in the Territory. Distributor shall have the
right to renew maintenance for such customers in the Territory.
(d) Sagent and Distributor shall negotiate local support for such
customers in the Territory during the remaining period of the
maintenance contract or if negotiations fail, Sagent may provide
direct support.
4.6 USE OF INTERNATIONAL PRICE LIST. Sagent recommends that Distributor
uses Sagent's International Price List as its basis for pricing under
this Agreement for distribution of Software and Services pursuant to
this Agreement. However, Distributor shall be absolutely free in
defining its resale prices and shall in no event be bound to follow
Sagent's price recommendation. Prices may be translated into German
Marks/Euros from time to time. Sagent shall periodically consult with
the General Manager as to the form and content of the International
Price List.
4.7 DISCOUNTING AUTHORITY OF GENERAL MANAGER. While Distributor shall be
absolutely free in deciding on whether and which discounts to grant to
customers, Sagent recommends that the General Manager of Distributor
authorizes the same discounts from the list prices (as set forth in
Sagent's then current International List Prices) as are allowed to
Sagent's sales department in Sagent's nonstandard pricing terms and
conditions procedure (hereinafter the "Pricing Policy") which is
attached as Exhibit F for strategic software licensing customers.
4.8 ACCESS TO SAGENT PRICING COMMITTEE. The General Manager may consult
with Sagent's pricing committee regarding the justification of larger
discounts than are recommended under Section 4.7, and or other sales
accommodation and to end users, on a case by case basis. Sagent and
Distributor agree to use their best efforts to ensure all requests for
additional discounts or other pricing accommodations are promptly
attended to. In those instances in which General Manager (in good
faith) must act without first seeking discount advice under the
Pricing Policy, Sagent shall honor the
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discount actually provided. However in no event will Sagent be
obligated to honor such discount (and the royalty payment shall be so
adjusted) if the discount provided exceeds two (2) times the allowable
discount expressed in the Pricing Policy.
4.9 HIRING BY DISTRIBUTOR. Distributor shall provide resumes of Key
Persons it plans to hire for review and approval by Sagent. If Sagent
shall not have objected within four (4) business days to any proposed
hire, then Sagent shall be deemed to have accepted the candidate. In
order that Sagent may assist in the hiring of all sales, technical and
consulting personnel, Distributor may at its option send candidates at
its expense to the US for interview. Any expenses of Sagent personnel
assisting the hiring process either in the US or Germany will be paid
by Sagent. For the purposes of this section the term "Key Persons"
shall mean all sales, systems engineer and marketing staff.
4.10 STAFFING LEVELS. Distributor and Sagent have agreed on a plan
regarding the appropriate staffing levels in order to sell and offer
the related services in the Territory. This staffing plan is set
out in Exhibit C hereto and should serve as a guideline only.
4.11 ASSESSMENT OF DISTRIBUTOR EMPLOYEES. Sagent shall participate in the
ongoing assessment of all employees of Distributor. Sagent may
provide written comment to the General Manager of Distributor
indicating that a particular employee(s) is/are not performing
employee's job in a manner acceptable to Sagent. Distributor shall
take active steps to remedy all such situations identified by Sagent
either through raising the employee's level of performance or
termination.
4.12 WRITTEN ASSESSMENTS. Distributor shall provide to the Sagent member
of Distributor's Advisory Board, on going written assessments at three
(3) month intervals for employees identified by Sagent as
non-performing.
4.13 SAGENT TO KEEP DISTRIBUTOR INFORMED OF PLANS. Sagent will keep the
Management of Distributor fully informed of developments within Sagent
and trends that it sees in the US and other world markets (including
Sagent business plan). Once Sagent is public, no information should
be provided to Distributor which could lead to insider knowledge.
4.14 ATTENDANCE AT SAGENT MEETINGS. Distributor's General Manager will be
allowed to participate in all major and relevant Sagent meetings
concerning trends, markets, products and strategy like a General
Manager of a Sagent subsidiary participating in Sagent's General
Manager meetings. Distributor may be excluded from any meeting if, in
the sole discretion of the President of Sagent it would be
inappropriate for a representative of Distributor to attend.
4.15 DISTRIBUTOR TO PROVIDE SALES AND MARKET INFORMATION TO SAGENT.
Distributor will promptly provide similar information to Sagent.
Samples of all marketing and advertising materials prepared by one
party will be promptly provided to the other with rights to use such
materials to further jointly the sales of Sagent products.
4.16 PROVISION OF QUARTERLY FINANCIAL REPORTS. Distributor will provide
Sagent a quarterly financial report of its operations including but
not limited to its balance sheet and income statement prepared in
accordance with generally accepted accounting principles (USA), and a
personnel roster by name, position held and location with new
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hires and termination's identified, and Distributor will keep its
books on a calendar-year basis.
4.17 PROVISION OF REVENUE PROCEDURES TO DISTRIBUTOR. Sagent will provide
to Distributor copies of its accounting and revenue recognition
procedures and Distributor will comply with these procedures to the
extent that it is able under German law. This provision also applies
to section 4.16 of this Agreement.
4.18 ANNUAL AUDIT OF DISTRIBUTOR. At its expense, Distributor will have
an annual audit by Coopers & Lybrand results of which will be promptly
supplied to Sagent.
4.19 PROVISION OF MONTHLY SALES REPORTS. Distributor shall also promptly
provide to Sagent monthly sales and a three month forecast of expected
orders, including identification of the top five revenue potential
projects, for Sagent products and services in a Sagent approved
format.
4.20 MARKET AND SALES STRATEGY. Distributor shall utilize the general
market and sales strategies used by Sagent. This strategy currently
has a focus on consumer goods industries, telecommunications and the
financial services industry, however the strategy may change from time
to time and is not an exclusive strategy.
4.21 COMPLIANCE WITH U.S. FOREIGN CORRUPT PRACTICES ACT. The Distributor
shall be managed so as to observe the following requirements in all
transactions: (a) No action shall be taken by or on behalf of the
Distributor which violates any applicable law or regulation of the
United States, or any country in the Territory; (b) no expenditure for
other than lawful purposes shall be made by or on behalf of the
Distributor; and (c) no payments shall be made and nothing of
value shall be given to government officials by the Distributor or any
of their respective agents, except such payments as are required by
law and made to such officials in other than their individual
capacities; or (d) otherwise taken any action that would constitute a
violation of the U.S. Foreign Corrupt Practices Act, 15 U.S.C. Section
78dd-1 et seq.
5. COMPENSATION.
5.1 (i) Royalties to Sagent shall be calculated based on amounts invoiced
to end users (exclusive of freight charges and any applicable sales
and consumption taxes (VAT)), and Royalties shall be adjusted for
credit invoices, using the following royalty rates:
Software Products 40%
Maintenance fees 15%
(ii) Royalties to Sagent resulting from Licenses sold through VARs and
Resellers in Territory shall amount to 40% of the then current
International Price List for Product Licenses. In case of special VAR
and Reseller deals where the General Manager uses the rules of Article
4.8. for pricing and discounting purposes, different royalties may be
negotiated with Sagent.
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5.2 Compensation to Sagent shall not be due from Distributor for
evaluations limited to thirty (30) days or less or copies used for
marketing or demonstration purposes only.
5.3 Sagent reserves the right to change its International list prices
with ninety (90) days prior written notice to Distributor.
5.4 SPLITS - "VAR Deals" and deals as defined in 2.8(a) where both Sagent
and Distributor are directly involved under this Agreement are subject
to revenue or royalty splits as agreed to by the General Manager of
Distributor and Sagent's applicable Vice President responsible for
European Sales. If no agreement is made as provided above, then the
split will be resolved by the President of Sagent following
consultation with Distributor. Splits may be appropriate in instances
where Sagent and Distributor must each provide sales and marketing
support to a customer in order to finalize an agreement. Such an
agreement would be one, which is closed outside the Territory, but
Distributor is involved in the transaction in the territory.
5.5 NO COMPENSATION FROM OUTSIDE THE TERRITORY. Distributor will receive
no compensation with respect to VAR's from outside of the Territory
that market Applications in the Territory except that Sagent or
Distributor may contract with a VAR that (i) intends to market
globally and (ii) is a major factor in its industry. In such
instance, it is necessary and desirable that Sagent and Distributor
cooperate to facilitate the entry of the VAR into respective markets
and assist such VAR in its marketing efforts. In such instances,
either Sagent or Distributor may receive a portion of the royalty paid
by the VAR, or some other negotiated payment for the services provided
in the respective territory. The amount of royalty or fee shall be
negotiated as provided for in Section 5.4 "Splits".
5.6 PAYMENT. Distributor will pay royalties bi-monthly, by wire transfer
within seven (7) days following the 15th and the end of each month,
based on payments received during the month from customers, Resellers,
and VARs. Payments to Sagent shall be due and payable from Distributor
once Distributor has received payment from a customer. Distributor
shall make all commercial efforts to ensure the credit worthiness of
each end user Licensed pursuant to this Agreement and Distributor
shall use all efforts to ensure that each customer pays all fees owed
to Distributor according to Distributor's invoice terms. Distributor
shall prepare and remit at the end of each month an Aged Receivable
document.
5.7 REPORTS. Along with each payment as described in section 5.6,
Distributor shall supply a report with copies of customer invoices,
(if possible with the name and location of the customer, and products
sold) and a calculation of the royalty due for the invoice.
5.8 MAINTENANCE. Distributor shall pay to Sagent the amounts set out in
section 5.1 of this Agreement for Maintenance provided to End Users.
Payment for Maintenance shall be made yearly in advance, and, unless
Maintenance is canceled by Distributor, Sagent or End-User, at least
thirty days before each subsequent Anniversary Date. Distributor
shall pay for Maintenance as provided in Section 5.6. Sagent policies
require that maintenance be purchased at the inception of a License
for extension of product warranties and that back maintenance is
required for reinstatement of customers that have let their
maintenance contracts lapse.
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5.9 TRAINING AND CONSULTING. Sagent shall grant to Distributor rights to
provide Sagent training courses with Distributor's own personnel to
End Users; and Distributor shall have the right to provide
Distributor's Sagent trained consultants to assist customers with use
of the Software Products. Such training and consulting shall meet
Sagent's quality standards. Distributor shall pay the reasonable
travel and living expenses for any Sagent consultants or agents
brought from the US to the Territory. For extended visits, over two
weeks, Sagent will invoice Distributor for a daily rate approximating
the compensation and benefits of the Sagent consultant or agent for
the period involved.
5.10 REPORTING. Distributor agrees to provide Sagent with a monthly sales
report in format and media reasonably requested by Sagent and also
meeting Distributor's needs, which details if possible purchase order
numbers, quantity of each type of Software licensed during the month
(including copies distributed by Distributor to Reseller, End User
orders delivered by Resellers, End-User orders delivered by
Distributor, and Marketing Copies made), machine class, unit and
extended price to Sagent the buyers' names and addresses and Reseller
numbers (if any), and any other related information reasonable
requested by Sagent. This report shall be forwarded to Sagent within
fifteen (15) days of the close of each calendar month. In addition,
Distributor shall ensure that Resellers provide similar such reports
to Distributor and that the information contained in such Reseller
reports is accurately reflected in Distributor's report to Sagent. If
Distributor orders Software directly from Sagent such information
shall be supplied on the order.
5.11 AUDIT. Distributor agrees to allow an independent auditor to review
Distributor's books and records related to the activities described in
this Agreement in order to determine the accuracy of the reports and
agrees to require Resellers to allow a similar independent auditor
review. The independent auditor will be chosen by Sagent and approved
by Distributor, whose approval shall not be unreasonably withheld.
The review will be paid by Sagent. The reviews occur at mutually
agreeable times during normal business hours and will not occur more
frequently than one time per year. The independent auditor shall be
instructed to keep all information learned strictly confidential.
5.12 WITHHOLDING TAXES. All payments by Distributor shall be made free
and clear of, and without reduction for, any withholding taxes. Any
such taxes arising in Territory which are otherwise imposed on
payments to Sagent shall be the sole responsibility of Distributor.
6. RESELLER AND END USER SERVICE.
6.1 PRODUCT SUPPORT. Distributor shall provide customer support
consistent with industry custom for all Software distributed
hereunder. Distributor shall maintain on site staff support personnel
sufficiently knowledgeable with respect to the Software to answer
Existing Distributor, Wholly Owned Company, Reseller, End User and
other customer questions regarding the use and operation of Software.
6.2 DISTRIBUTOR MAINTENANCE SUPPORT. Distributor shall ensure that all
Reseller or End User questions regarding the use or operation of
Software marketed by Distributor are initially addressed to and
answered by Distributor. Any Reseller or End-User service questions
resulting from Distributor's sales to Resellers or End-Users shall be
referred by Sagent back to Distributor.
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6.3 SAGENT SUPPORT TO DISTRIBUTOR. Sagent shall provide telephone
consultation to Distributor with respect to any Reseller/End-User
questions which Distributor cannot adequately answer. Distributor
shall not represent to any third party that Sagent is available to
answer questions from any Reseller, End-User or other customer
directly. To allow Distributor to offer proper support as Sagent for
severity 1 defects as defined in Exhibit I Distributor shall have
access to Sagent support. Sagent shall make maintenance support
available to Distributor on a 24-hour basis.
6.4 TRAINING. On the request of Distributor, Sagent will provide
training for a mutually agreed number of Distributor's technical
employees at no charge by sending them to Sagent Training Classes in
the US. Sagent Training Classes specifically requested by Distributor
in the Territory will be charged to Distributor at mutually agreed
cost.
7. WARRANTY.
7.1 Sagent warrants to Distributor that each individual Software product
for which Maintenance fees have been paid will substantially perform
the functions described in the documentation provided by Sagent for as
long a period as to enable Distributor to grant its customers the
legally required warranty (six months in Germany at the time of
signing this Agreement) so long as such Software product shall have
been properly shipped and not tampered with by Distributor. If Sagent
finds a material deviation in Software performance during the period,
as Distributor's sole and exclusive remedy, Sagent will replace,
modify, or issue a refund for the Software, at Sagent's option,
provided it is within the law, so that it performs substantially in
accordance with the documentation.
7.2 Other than as stated in this section 7, there is no representation or
warranty or condition, express or implied, as to any matter
whatsoever, including without limitation, the condition of software,
its merchantability or fitness for a particular purpose.
8. ADDITIONAL OBLIGATIONS OF SAGENT
8.1 HARMONY OF OPERATIONS. Sagent will provide to Distributor such
policies and procedures as are necessary to synchronize operations, so
that to the End User customer, Distributor would appear to be a
separate company, however closely aligned with Sagent.
8.2 CONSULTATION TO DISTRIBUTOR. Sagent will work closely with and
provide consultation to Distributor management through telephone
meetings or other appropriate manner of communication.
8.3 SAGENT COORDINATOR. Sagent agrees to appoint one person as the
designated coordinator between Distributor and Sagent. Sagent will be
responsible for ensuring that this employee will be knowledgeable in
Sagent's sales and marketing procedures.
8.4 SAGENT STAFF AT DISTRIBUTOR SITE. Sagent will provide to Distributor
persons with technical and sales knowledge to support Distributor in
the Territory during start-
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up phase with relevant direct expenses split equally between Sagent
and Distributor. The purpose of the supplied person is to "jump start"
operations of Distributor.
8.5 ISO 9001. Sagent will make its best effort to gain ISO 9001
registration within 12 months of the Effective Date of this Agreement.
8.6 RESPONSE TO INQUIRIES. Sagent shall promptly respond to all
inquiries from Distributor concerning matters pertaining to this
Agreement.
8.7 NEW RELEASES. Sagent shall promptly inform Distributor of new releases
of Software.
8.8 OTHER SOFTWARE PRODUCTS. Sagent shall offer to Distributor product
distribution rights in the Territory for all other products
distributed directly or indirectly by Sagent in accordance with
Exhibit A.
8.9 PRODUCT ANNOUNCEMENTS. Sagent shall use its best efforts to not make
or distribute product announcements related to the Software directly
to End Users in the Territory unless coordinated with Distributor.
8.10 PRODUCT RELEASE PLANS. Sagent shall use its best efforts to give
Distributor reasonable notice of plans for future software products
which Sagent intends to release for distribution during the term of
this Agreement. Sagent will provide to Distributor monthly product
release schedules and Quarterly product planning schedules.
8.11 CUSTOMER INFORMATION. Sagent will transmit to Distributor the names
and addresses of prospective customers in the Territory from whom
Sagent receives inquiries regarding the Software.
8.12 MARKETING AND TECHNICAL INFORMATION. At Distributor's request,
Sagent will either loan, or sell at Sagent's cost, to Distributor
marketing and technical information concerning the Software, as well
as catalogs and other sales aids, all in the English language, for
the use of Distributor in marketing and selling to end users.
8.13 SAGENT AND DISTRIBUTOR TO COOPERATE IN MARKETING ANNOUNCEMENTS.
Sagent shall make all reasonable efforts to consult and cooperate
with Distributor with respect to the timing and content of all
marketing, PR, and other announcements which may have an effect in
the Territory.
8.14 SAGENT OBLIGATION TO GO TO TERRITORY. Sagent employees shall not be
required to come to the Territory to support sales/marketing
activities. To the extent that both parties feel that such a visit is
in the best interest of Distributor, Distributor will pay the
reasonable travel and living expenses of the requested Sagent
Employee. For extended visits, over two weeks, Sagent will invoice
Distributor for a daily rate approximating the compensation and
benefits of the individual for the period involved. In the case of
Split deals as described at section 5.4 hereof, travel and
compensation costs will generally be considered in the split of
revenue to each party. In the case of support issues defined as
"severity 1 and 2" in Sagent's Maintenance And Technical Support
document set out as Exhibit J hereto, and for which the services of a
Sagent Employee are imperative, Sagent shall pay the relevant
expenses.
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<PAGE> 39
9. ADDITIONAL OBLIGATIONS OF DISTRIBUTOR
The following are additional obligations to be undertaken by the Distributor at
the Distributor's sole expense:
9.1 MANUFACTURE OF PRODUCTS AND TRAINING MATERIAL. Distributor will
manufacture all Software and training materials to be distributed in
accordance with the Methods and Standard of Quality set out in Exhibit
K hereto in the Territory pursuant to this Agreement and deliver such
products to End Users. Sagent will supply masters of tapes, disks and
documentation as are required for Distributor to meet its
responsibilities under this section. Distributor shall be allowed to
buy from Sagent all Software media, documentation and training
materials which Sagent makes commercially available at Sagent's cost.
9.2 ENFORCEMENT OF INTELLECTUAL PROPERTY. Distributor will use its best
efforts to protect Sagent's Intellectual Property rights in the
Software in the Territory, including but not limited to thorough use
of Non Disclosure agreements and proper contract administration of the
software license agreements, and Distributor shall promptly report to
Sagent any infringement of such rights of which Distributor becomes
aware; provided, however, that Sagent reserves the sole and exclusive
right at its discretion to assert claims against third parties for
infringement or misappropriation of its Intellectual Property Rights in
the Software in the Territory, "Intellectual Property Rights" shall
mean patent right, copyright right (including, but not limited to,
rights in software, audiovisual works and moral rights), trade secret
rights, trade mark rights and any other intellectual property rights
recognized by the law of each applicable jurisdiction.
9.3 MARKETING AND PR EFFORTS. Distributor will use its best efforts to
vigorously and aggressively market and sell the Software within the
Territory and to satisfy those reasonable criteria and policies with
respect to Distributor's obligations under this Agreement developed and
announced and communicated in writing to Distributor by Sagent from
time to time. Distributor will provide Sagent sales forecast and
pipeline information monthly and as requested by Sagent. Distributor
will develop and implement effective marketing programs to assist in
the sale of the Software including those agreed upon in annual business
plans or otherwise between the parties.
9.4 SAGENT SALES MEETINGS. Distributor shall attend Sagent's scheduled
Sales meetings which are scheduled to occur at least annually. In
addition, business review meetings should be held between the General
Manager of Distributor and the Sagent Coordinator once in a quarter.
9.5 STAFF TRAINING. Distributor agrees to provide its staff and Resellers
with adequate training regarding the use and operation of the Software,
and to also provide its staff and Resellers with regular training
regarding updates of the Software.
9.6 FINANCES. Distributor shall maintain working capital sufficient, to
allow Distributor to perform fully and faithfully its obligations under
this Agreement. Distributor shall devote sufficient financial resources
and technically qualified sales and service personnel to the Software
to fulfill its responsibilities under this Agreement.
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<PAGE> 40
9.7 STANDARD OF BUSINESS PRACTICES. Distributor shall establish and
maintain, and shall cause its Resellers, employees and agents to
establish and maintain a high standard of ethical business practices in
connection with the distribution of Software within the Territory,
including, without limitation, all applicable laws and regulations.
Distributors shall follow such applicable sales policies as are
established by Sagent from time to time.
9.8 INTELLECTUAL PROPERTY RIGHTS REGISTRATIONS AND GOVERNMENT APPROVALS.
Distributor shall promptly notify Sagent in writing of, and shall
assist Sagent with any registrations of filings required to obtain all
needed copyright, trademark or other intellectual property rights
protection, in Sagent's name, for the Software within the Territory,
and to obtain any necessary government approvals with respect to this
Agreement. Distributor agrees to promptly register this Agreement,
after notifying Sagent if the laws or regulation of any country in the
Territory require its registration for any purpose with any
governmental agency or instrumentality.
9.9 NO COMPETING PRODUCTS. During the first three years of the Agreement,
Distributor will not sell any products, for use in the Territory,
except the Software or software provided by Sagent which is later made
available under this Agreement. After three years, Distributor shall be
free to sell and service products of any manufacturer including those
products that could compete with Sagent products provided that
Distributor is otherwise in compliance with the terms of this
Agreement.
10. INDEMNIFICATION.
10.1 Sagent will defend at its expense any action brought against
Distributor to the extent it is based on a claim that the Software or
any part thereof, when used within the scope of this Agreement,
infringes a patent or copyright and Sagent will pay any settlements and
any costs, damages and attorney's fees finally awarded against
Distributor in such action which are attributable to such claim;
provided that the foregoing obligation will be subject to Distributor
notifying Sagent promptly in writing of the claim, giving Sagent the
exclusive control of the defense and settlement thereof, and providing
all reasonable assistance in connection therewith.
10.2 Notwithstanding the above, Sagent shall have no liability for any claim
of infringement of a patent or copyright based on: (i) use of a
superseded or altered release of the Software or portion thereof if
such infringement would have been avoided by the use of a current
unaltered release of the Software which Sagent provides to Distributor,
or (ii) the combination, operation or use of the Software furnished
under this Agreement with products or data not furnished by Sagent if
such infringement would have been avoided by the use of the Software
without such products or data.
10.3 In the event that the use of the Software becomes or in Sagent's
reasonable opinion is likely to become the subject of a claim of
infringement of patent or copyright rights, it is Sagent's option to
remedy the situation by: a) procuring the continuing right to use the
Software as contemplated or b) replacing or modifying the Software such
that use is no longer an infringement or c) terminating the License
and refunding the fees paid by Distributor to Sagent but prorated over
a thirty six (36) month period, to the extent that Distributor is
obligated to refund such fees to its customers.
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<PAGE> 41
10.4 The foregoing states the entire liability and obligation of Sagent
with respect to infringement or claims of infringement of any patent,
copyright, trade secret, or any other proprietary right.
11. EXPORT ADMINISTRATION.
11.1 If the Software is to be used or distributed outside of the United
States, Distributor agrees to comply fully with all relevant
regulations of the United States Department of Commerce and with the
United States Export Administration Act to assure that the Software is
not exported in violation of United States Law. Distributor agrees
that neither the Software nor any other technical data nor the direct
product thereof is intended to be used for any purpose prohibited by
the Act or regulations promulgated thereunder, including, without
limitation, nuclear proliferation or chemical/biological weapons or
missiles.
12. MAINTENANCE.
12.1 Distributor shall be solely responsible for maintenance for its own
customers.
12.2 DISTRIBUTOR CONTACT. Distributor shall appoint one person as the
principal Maintenance Contact Point for the communication of bugs and
errors to Sagent and for the receipt of bug and error fixes,
work-arounds and updates, if any. Additionally, Distributor shall
appoint another person as a back-up to the principal contact point.
12.3 SAGENT CONTACT. Sagent shall appoint one person as the principal
Maintenance Contact Point for the receipt of bugs and errors from
Distributor and for the communication to Distributor of bug and error
fixes, work-arounds and updates, if any. Additionally, Sagent shall
appoint another person as a back-up to the principal contact point.
12.4 MAINTENANCE AVAILABILITY. Maintenance is available only for the most
recent version of the Software and the preceding version for no longer
than 12 months after the current version becomes generally available.
Sagent shall ensure that Maintenance is available for the period
mandated by local law in the Territory and Distributor shall use its
best efforts to inform Sagent of any local laws which may affect
Sagent pursuant to this section.
13. TERMINATION/DEFAULT.
13.1 TERM. This Agreement shall continue in force from the Effective Date
without a specific termination date, unless terminated under the
provisions of this Section 13. This Agreement shall survive the
termination of the Joint Venture Agreement executed as of April 8,
1998 between Sagent and ISAR-Vermogensverwaltung GbR mbH, unless the
provision of said Joint Venture Agreement contemplate that this
Agreement shall automatically and immediately terminate.
13.2 DISTRIBUTOR'S RIGHT TO TERMINATE: The Distributor shall have the
right to terminate the Agreement
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<PAGE> 42
13.2.a) for Cause
(i) if Sagent shall have defaulted in a material way in its obligations to
provide and support its Software; or
(ii) if Sagent has became unable to meet its requirements under this
Agreement due to financial insolvency; or
(iii) other material default of a material provision of the Agreement.
Notwithstanding the foregoing, if Distributor desires to terminate
pursuant to this section, then Distributor shall give written notice to
Sagent that if the breach is not cured within sixty (60) days this
Agreement will be terminated. If Distributor gives such notice and the
breach is not cured during the sixty day period, then this Agreement
will terminate.
13.2.b) Furthermore, Distributor shall have the right to terminate this
Agreement upon twelve months notice following the fourth year of the
agreement.
13.3. EFFECT OF TERMINATION PURSUANT TO SECTION 13.2. Following termination
under 13.2., Distributor shall change its name and procedures to
eliminate all reference to Sagent and shall retain the right to
continue to support maintenance contracts with end users and otherwise
provide support.
13.4. SAGENT'S RIGHT TO TERMINATE.
13.4.a) for Cause:
Sagent shall have the right to terminate Distributor's exclusive distribution
rights if
(i) Distributor fails to meet its minimum royalty payment target in any
given 12-month period as set out in Exhibit E and Sagent and
Distributor also were in material disagreement with respect to the
operations or operating plan and have been unable to resolve such
disagreement; or
Sagent shall have the right to terminate the agreement if
(ii) a material number of customers or Resellers indicate substantial
dissatisfaction with Distributor's service levels; or
(iii) Distributor is financially or otherwise unable or unwilling to meet its
obligations under the Agreement; or
(iv) other material default of a material provision of the Agreement; or
(v) failure to establish during the first twelve months of the Agreement,
a training and consulting organization which functions pursuant to
standards agreed upon by Sagent and Distributor.
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<PAGE> 43
Notwithstanding the foregoing, if Sagent desires to terminate pursuant
to this section, then Sagent shall give written notice to Distributor
that if the breach is not cured within sixty (60) days this Agreement
will be terminated. If Sagent gives such notice and the breach is not
cured during the sixty day period, then this Agreement will terminate.
13.4.b) Furthermore, Sagent shall have the right to terminate this Agreement
upon twelve months notice following the fourth year of the agreement.
13.4.1 EFFECT OF TERMINATION UNDER 13.4 Following termination under section
13.4 above, the Distributor shall have the right to liquidate its
business, however, if it does so, it shall allow Sagent to hire
Distributor's former employees directly or through a third party to
provide support to existing customers.
13.4.2 Following termination under section 13.4 a) Sub sections (i), or (ii)
if Distributor continues to operate, it shall change its name and
procedures to eliminate reference to Sagent and Distributor shall
retain (a) the right to License Sagent products in the Territory on a
non-exclusive basis for a period of one year (renewable annually upon
mutual agreement) and (b) provide support to existing and new
customers through the expiration of applicable maintenance contracts.
13.5 Following termination under section 13.4 a) Sub sections (iii) or
13.4. b), all Distributor rights to License and support Sagent
products shall cease, however, Sagent shall honor new purchase orders
during a transition period which are prepaid or for which direct
payment from a credit worthy customer can be arranged.
13.6 Following termination, under section 13.4 Sub-sections (iv) or (v)
above, Distributor shall change its name as indicated above, and have
the right to provide support to existing customers through the
expiration of applicable maintenance contracts.
13.7 POST TERMINATION COOPERATION: Following terminate pursuant to
sections 13.2 and 13.4 herein, the parties agree to cooperate with
each other for an orderly transition of selling and service activity
to established customers to Sagent directly or to an authorized third
party.
13.8 PROVISIONS OF UPDATES FOLLOWING TERMINATION. In the event of
termination pursuant to this Section 13 and to enable Sagent to
continue to provide updates of the Software to End Users and
Resellers, Distributor shall provide Sagent within thirty (30) days of
the effective date of termination with a complete customer list of all
such End Users and Resellers, showing, at a minimum, names, addresses,
type and amount of Software sold.
13.9 EFFECT OF TERMINATION. Unless provided otherwise above, on
termination or expiration of this Agreement, Distributor shall (a)
immediately cease using, copying and distributing the Software, and
(b) certify to Sagent within one month after termination that
Distributor has destroyed or has returned the Software and all copies.
This requirement applies to copies in all forms, partial and
complete, in all types of media and computer memory and whether or not
modified or merged into other materials.
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13.10 ASSIGNMENT OF EXISTING AGREEMENTS. On termination or expiration of
this Agreement Distributor shall immediately take all required actions
to assign all end user, VAR and Reseller Agreements to Sagent.
Distributor agrees to ensure that all Wholly Owned Companies shall
also assign all end user and VAR agreements related to the Software
and Services to Sagent.
13.11 RETURN OF MATERIALS. All trademarks, trade names, patents, copyrights,
designs, drawings, formulas or other data, photographs and samples of
every kind pertaining to the Software and to the Documentation which
shall include any which may relate to any localization and which shall
remain the property of Sagent. Within thirty (30) days after the
termination of this Agreement, Distributor shall prepare all tangible
such items in its possession to be returned pursuant to section 13.9,
for shipment, as Sagent may direct, at Sagent's expense. Distributor
shall not make or retain any copies of any confidential items or
information which may have been entrusted to it. Effective upon the
termination of this Agreement, Distributor shall cease to use all
trademarks, marks, and trade names of Sagent.
13.12 LIMITATION ON LIABILITY. In the event of termination by either party
in accordance with any of the provisions of this Agreement, neither
party shall be liable to the other, because of such termination, for
compensation, reimbursement or investments, leases or commitments in
connection with the business or goodwill of Sagent or Distributor.
Termination shall not, however, relieve either party of obligations
incurred prior to the termination.
13.12.1 LIMITATION OF LIABILITY - TRADE MARKS: Distributor acknowledges that
Sagent is, and will remain the sole and exclusive owner of all
goodwill associated with the trade marks of Sagent. Distributor
recognizes the value of the goodwill associated with the trade marks
of Sagent, and acknowledges that such value is owned by and belongs
solely and exclusively to Sagent. Distributor waives any right it may
have to receive any compensation or reparations prior to, upon or
following termination or expiration of this agreement under the law of
the territory or otherwise.
13.13 CUSTOMER SUPPORT. Following termination of this Agreement, Sagent and
Distributor shall cooperate to make available to Resellers and End
Users Software support and maintenance by Sagent at Sagent's then
current standard rates. Distributor agrees to pay such standard rates
to Sagent or, at Distributor's option, to reimburse to such Resellers
for the duration of the stated maintenance and support period.
13.14 SURVIVAL OF TERMS. The provisions of Sections 5, 7, 9.5, 10, 11, 12,
13, 15 and 21 shall survive the termination of this Agreement for any
reason.
14. LOCALIZATIONS.
14.1 Sagent shall have the obligation (at its expense) to provide software
localization/local language documentation whenever necessary based on
Sagent's English language documentation. Distributor shall (at its
expense) provide local language marketing and promotional materials
based on the English sales collateral used by Sagent which Sagent
shall provide. Distributor shall also have the right (at its expense)
to provide such localization/documentation and materials. All such
materials shall meet Sagent's published quality standards.
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<PAGE> 45
14.2 Sagent shall retain ownership of all derivative works from its
materials and Distributor shall promptly supply copies of any
materials or documentation it prepares and executes any requested
documents necessary to perfect Sagent's ownership in the intellectual
property.
14.3 If Sagent elects to use local language Documentation or materials,
Sagent will obtain such materials from Distributor at Distributor's
cost or for a nominal royalty if Sagent has printed the material.
14.4 Distributor may suggest to Sagent Software changes that it considers
helpful in the Territory; however Sagent shall be entirely responsible
for the development and content of the Software.
14.5 Sagent may agree with Distributor to provide technical and engineering
support required to make localizations or new features to the Software
on a case by case basis as commercial conditions warrant. However, in
any case Sagent shall be required to create localizations for every
new software release.
14.6 Sagent agrees to implement as soon as is commercially reasonable any
localization or feature if License revenues in Germany will be
materially impacted if Sagent fails to do so. Due to SAP's significant
market penetration in territory. Sagent agrees to ensure access and
query capabilities to SAP data within three months from the date of a
final mutual decision on the best technical and business direction to
achieve this goal, but in any case no later than October 1, 1998.
15. NON-DISCLOSURE.
15.1 By virtue of this agreement, the parties may have access to
information that is confidential to one another ("CONFIDENTIAL
INFORMATION"). Confidential Information shall be limited to the
Software and all written information clearly marked as confidential.
Additionally, the terms and conditions of this Agreement are deemed to
be Confidential Information.
15.2 A party's Confidential Information shall not include information which
(a) is or becomes a part of the public domain through no act or
omission of the other party; or (b) was in the other party's lawful
possession prior to the disclosure and had not been obtained by the
other party either directly or indirectly from the disclosing party;
or (c) is lawfully disclosed to the other party by a third party
without restriction on disclosure; or (d) is independently developed
by the other party.
15.3 The parties agree, both during the term of this Agreement and for a
period of five (5) years after termination of the Agreement, to hold
each other's Confidential Information in confidence. The parties agree
not to make each other's Confidential Information available in any
form to any third party or to use each other's Confidential
Information for any other purpose than the implementation of this
Agreement. Each party agrees to take reasonable steps to ensure that
Confidential Information is not disclosed, distributed or used by its
employees or agents in breach of the provisions of this Agreement.
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16. GOVERNING LAW, JURISDICTION, AND COMPLIANCE WITH LAWS.
16.1 The rights and obligations of the parties under this Agreement shall
not be governed by the U.N. Convention on Contracts for the
International Sales of Goods; rather such rights and obligations shall
be governed and construed under the laws of the State of California,
without reference to conflict of laws and principles. The jurisdiction
of the courts of Germany is expressly excluded to the maximum extent
permitted by law. Distributor acknowledges that its breach of this
agreement may cause irreparable harm to Sagent for which Sagent may
obtain injunctive relief.
16.2 IMPORT LICENSES, EXCHANGE CONTROLS, OTHER GOVERNMENTAL APPROVALS.
Distributor represents and warrants that it shall, at its expense,
obtain any and all import licenses and Territory governmental
approvals that may be necessary to permit the license by Sagent and
Distributor of Software, comply with all registration requirements in
the Territory, obtain such approvals from the banking and governmental
authorities of the territory as may be necessary to guarantee payment
of all amounts due hereunder to Sagent in US dollars, and comply with
any and all governmental laws, regulations, and orders that may be
applicable to Distributor by reason of its execution of this
agreement, including but not limited to any requirement to be
registered as Sagent's independent Distributor with any governmental
authority, and including but not limited to any and all laws,
regulations or orders that govern or affect the ordering, export,
shipment, import, sale (including governmental procurement), delivery,
or redelivery of the Software in the Territory.
16.3 LIABILITY OF SAGENT. The provisions of this Agreement under which the
liability of Sagent is excluded or limited shall not apply to the
extent that such exclusions or limitations are declared illegal or
void under the laws applicable in the countries in which Software is
licensed hereunder, except to the extent such illegalities or
invalidities are cured under the laws of such countries by the fact
that the law of California governs this agreement.
17. ENTIRE AGREEMENT.
17.1 This Agreement sets forth the entire agreement and understanding of
the parties relating to the subject matter herein and merges all prior
agreements, discussions, and understandings between them. No
modification of or amendment to the Agreement, nor any waiver of any
rights under this Agreement shall be effective unless in writing
signed by an officer of Sagent and Distributor. The terms and
conditions of this Agreement shall supersede the terms and conditions
of Distributor's purchase order, if any.
18. NOTICES.
18.1 NOTICES. Any and all notices and other communications that are
required or permitted to be given pursuant to this Agreement shall be
in writing, and shall be deemed given (a) upon personal delivery, or
(b) upon the sender's receipt of electronic confirmation of
transmission, if sent by telex or facsimile, or (c) upon 2 business
days after delivery to a recognized courier, fees prepaid. The parties
designate the following addresses for the foregoing legal effects:
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<PAGE> 47
TO DISTRIBUTOR:
Magnolia II Vermogensverwaltung GmbH
c/o Buro Klaus Luft
Gut Keferloh 1 B
D - 85630 Grasbrunn / Munich
Germany
Attention: General Manager
Facsimile number: (49-89)464483
TO SAGENT:
Sagent Technology, Inc.
2225 East Bayshore Road, Suite 100
Palo Alto, CA 94303
USA
Attention:
Facsimile number: (650) 493-1290
The parties may amend the above-mentioned data by notice to all other
parties, as provided in this Section.
19. FORCE MAJEURE.
19.1 Nonperformance of either party shall be excused to the extent that
performance is rendered impossible by strike, fire, flood,
governmental acts or order or restrictions, failure of suppliers or
any other reason where failure to perform is beyond the control and
not caused by the negligence of the non-performing party.
20. LIMITATION OF LIABILITY.
20.1 Regardless of whether any remedy fails of its essential purpose, in
no event will either party be liable to the other party for
incidental, indirect, special or consequential damages,
notwithstanding being aware of the possibility of such damages.
Neither party's liability for any damages or claims shall exceed
US $0.5 million.
21 DISPUTE RESOLUTION.
21.1 The Advisory Board of Distributor shall have the general
responsibility of resolving disputes between Sagent and Distributor
that relate to major issues concerning Agreement interpretation,
operations and implementation of the joint strategy. Following failure
of the Board to resolve a dispute, either party may request mediation
or arbitration under the Agreement to be held in Zurich Switzerland.
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21.2 ARBITRATION. In the event of any dispute, controversy or claim
arising out of or relating to this Agreement, or to the breach or
termination hereof (a "Dispute"), the parties agree to resolve the
same as follows:
(a) The parties to the Dispute shall initially attempt to resolve it
through consultations and negotiations as specified in 21.1.
(b) If the Dispute has not been resolved amicably within thirty (30) days
after any party provides notice thereof, unless the parties agree
otherwise, the Dispute shall be resolved by final and binding
arbitration in the City and county of Zurich, Switzerland, in
accordance with the Arbitration Rules of the United Nations
Commission on International Trade Law ("UNCITRAL"), as in effect on
the date of this Agreement. The language to be used in the
arbitration proceeding shall be English. The International Chamber of
Commerce shall serve as the appointing authority. The arbitrators
shall render a written award stating the reasons for the decision.
Judgment on an arbitration award or decision may be entered by any
court of competent jurisdiction, or application may be made to such a
court for judicial acceptance of the award or decision and any
appropriate order, including enforcement.
(c) Each of the parties hereto consents to the submission of any Dispute
for settlement by final and binding arbitration in accordance with
paragraph (b) above. Such consent shall satisfy the requirements for
an "agreement in writing" pursuant to Article II of the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitration
Awards, done at New York on June 10, 1958.
(d) Each of the parties hereby undertakes to carry out without delay the
provisions of any arbitration award or decision.
22. NAME OF DISTRIBUTOR.
22.1 SAGENT TECHNOLOGY GMBH. Subject to Section 22.2, Distributor agrees
to perform its obligations under the name Sagent Technology GMBH or
such other name as is agreed to by the parties.
22.2 LICENSE AGREEMENT. Sagent agrees to execute a License agreement with
Distributor which will confer on Distributor limited rights to use the
appropriate Sagent trade marks and trade names for a minimum period of
three year.
22.3 CESSATION OF USE. Distributor agrees that if the License agreement
referred to in section 22.2 above terminates expires or if for any
reason Licensee breaches the License agreement, Licensee will
immediately cease using the Sagent trade marks and trademarks. This
section does not limit any other action Sagent may have against
Distributor for its breach. Distributor shall change its name
immediately to eliminate the name or reference to Sagent or its
products should it elect to sell products that compete with the
products of Sagent.
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23 SEVERABILITY.
23.1 If one of the provisions of this agreement should be or become invalid
or if this agreement should have an omission, this shall not affect
the validity of the remaining provisions. In such an event, the
parties are obliged to assist in the incorporation of provisions which
form the closest economic equivalent to that which the parties would
have agreed if they had been aware of the invalidity or if they had
considered the point.
SO AGREED BETWEEN THE PARTIES HERETO:
"SAGENT"
SAGENT TECHNOLOGY, INC:
By: /s/ THOMAS M. LOUNIBOS
------------------------------
Name: Thomas M. Lounibos
----------------------------
Title: EVP OF SALES
----------------------------
Date: April 8, 1998
----------------------------
"DISTRIBUTOR"
MAGNOLIA II VERMOGENSVERWALTUNG GMBH
By: /s/ INES BERGHOF
------------------------------
Name: Ines Berghof
----------------------------
Title: General Manager
----------------------------
Date: April 8, 1998
----------------------------
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EXHIBIT A
SOFTWARE TO BE DISTRIBUTED BY DISTRIBUTOR
Server: Data Movement Server
Web Link Server
Data Access Server
Power User Tools: Sagent Administration Tool
Sagent Design Studio Tool
Sagent Automation Tool
End-User Tools: Information Studio Tool
Analysis Tool
Reporting Tool
Crystal Reporting Tool
Statistical Tool
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EXHIBIT B
TERRITORY
The territory shall include the following countries and/or accounts:
o Germany
o Austria
o Switzerland
-- German-speaking regions
-- Nestle headquartered in Vevey/French-speaking Switzerland
-- The World Economic Forum (WEF) headquartered in
Geneva/French-speaking Switzerland.
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EXHIBIT C
DISTRIBUTOR'S HIRING PROJECTIONS
<TABLE>
<CAPTION>
1998 1999 2000
-------------------- -------------------- --------------------
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
-- -- -- -- -- -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SALES -- 1 2 3 4 4 5 5 6 6 6 6
SUPPORT -- 2 2 3 4 4 5 5 7 7 7 7
</TABLE>
26
<PAGE> 53
EXHIBIT D
BUSINESS PLAN
27
<PAGE> 54
EXHIBIT E
MINIMUM ROYALTY PAYMENT TARGETS
First 12-month period* US$250,000
Second 12-month period US$750,000
Third 12-month period US$950,000
* The first 12-month period shall start on May 1, 1998.
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EXHIBIT F
SAGENT'S NON STANDARD PRICING POLICY
Any transaction requiring a discount or non-standard pricing of greater than:
Product License Revenue: 15% Discount
Product Maintenance Revenue: 10% Discount
Professional Services Revenue: 10% Discount
must have prior written approval to Sagent's Vice President of Worldwide Sales.
Any total Transaction Revenues exceeding US$ 200,000 require that Sagent's Vice
President of Worldwide Sales has been informed prior to the closing of the
respective deal.
29
<PAGE> 56
EXHIBIT G
SAGENT'S STANDARD END USER AGREEMENTS
including their respective exhibits.
30
<PAGE> 57
SOFTWARE LICENSE AND SUPPORT AGREEMENT
This SOFTWARE LICENSE AND SUPPORT AGREEMENT (this "Agreement") is entered
into by and between (and together with its Subsidiaries (as
defined below) collectively "Customer"), and Sagent Technology, Inc. ("Sagent"),
and describes the terms and conditions pursuant to which Sagent shall license to
Customer and support certain Software (as defined below).
In consideration of the mutual promises and upon the terms and conditions
set forth below, the parties agree as follows:
1. Definitions
1.1 "Concurrent Users" means all log-ons into the Software at any one
time, as specified per Site in Schedule B.
1.2 "Confidential Information" means this Agreement and all its Schedules,
any addends hereto signed by both parties, all Software listings,
Documentation, information, data, drawings, benchmark tests,
specifications, trade secrets, object code and machine-readable
copies of the Software, source code relating to the Software, and any
other proprietary information supplied to Customer by Sagent, or by
Customer to Sagent and clearly marked as "confidential information,"
including all items defined as "confidential information" in any
other agreement between Customer and Sagent whether executed prior to
or after the date of this Agreement.
1.3 "Documentation" means any on-line help files or written instructions
manuals regarding the Use of the Software.
1.4 "Effective Date" means the later of the dates on which Customer and
Sagent have signed this Agreement.
1.5 "Equipment" means the computer system, including peripheral equipment
and operating system software, specified in Schedule B.
1.6 "Maintenance and Support" means the services described in Section 6.
1.7 "Release" means a set of the Software in which in addition to possible
corrections of detected shortcomings, (small) functional enhancements
have been included. New Releases are registered by means of a change
of the number to the right of the decimal point, e.g. Sagent 1.0 >>
Sagent 1.1.
1.8 "Response Time" means the elapsed time between the receipt of a
service call and the time when Sagent begins the Maintenance and
Support, including a verbal or written confirmation to the Customer
thereof.
1.9 "Site" means such physical location specified in Schedule B of one or
more CPU's of the Equipment at which Customer is entitled to Use the
Software.
1.10 "Software" means the computer software programs specified in Schedule
A and otherwise provided to Customer pursuant to this Agreement, and
includes without limitation the Third Party Software.
1.11 "Subsidiaries" means all current and future business entities of which
a party owns, directly or indirectly, more than fifty percent (50%)
of the equity securities or other equity interest granting such party
voting rights exercisable in electing the management of the entities,
for so long as such ownership exists.
1.12 "Support Call (priority 1)" means a reported problem in the Software
which causes a total system standstill.
1.13 "Support Call (priority 2)" means a reported problem in the Software
which causes serious disruption of a major business function and
which can not be (temporarily) solved by a workaround.
1.14 "Support Call (priority 3)" means a reported problem in the Software
for which a workaround is available.
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1.15 "Support Call (priority 4)" means general questions and wishes
pertaining to the Software and all reported problems in the
Software which are not included in Sections 1.13, 1.14 or 1.15.
1.16 "Third Party Software" means the third party software product
licensed to Sagent, if any, that is specified on Schedule A. The
Third Party Software is subject to all the terms and conditions of
this Agreement that apply to the Software except where specifically
indicated otherwise. In addition, the terms and conditions of the
Third Party Software Exhibit apply to the Third Party Software. In
the event of any conflict between the Third Party Software Exhibit
and this Agreement, the Third Party Software Exhibit shall govern.
No addendum to this Agreement shall be deemed to modify any terms
or conditions that govern the Third Party Software unless such
addendum specifically mentions the Third Party Software.
1.17 "Third Party Software Exhibit" means the exhibit, if any, which
sets forth the specific terms and conditions that apply to the
Third Party Software.
1.18 "Update" means a set of the Software in which detected
shortcomings are being remedied. Updates are registered by means of
a letter indication after the version number of the Software, e.g.
Sagent, 1.0>> Sagent 1.0A.
1.19 "Use" means loading, utilization, storage or display of the
Software by Customer (and such other entities as are expressly
permitted by Section 3(c)) by no more than the number of Concurrent
Users set forth on Schedule B, for its own internal information
processing services and computing needs (except as expressly
permitted by Section 3(c)), by copying or transferring the same
into Customer's Equipment.
1.20 "Version" means a set of the Software in which substantial new
functionalities or other substantial changes are introduced.
Versions are registered by means of a change of the number to the
left of the decimal point, e.g. Sagent 1.0>> Sagent 2.0.
2. Grant of License
2.1 Subject to the terms and conditions of this Agreement, Sagent
hereby grants to Customer during an unlimited period of time, a
non-exclusive and non-transferable license to (a) Use the Software
on the Equipment (or with prior written notice to Sagent, on
substitute, upgraded, or additional equipment) and at the Site (or
with prior written notice to Sagent on additional sites of
Customer, to be specified in Schedule B), and to make sufficient
copies as necessary for such Use, and (b) use the Documentation in
connection with Use of the Software. This license transfers to
Customer neither title nor any proprietary or intellectual property
rights to the Software, Documentation, or any copyrights, patents,
or trademarks, embodied or used in connection therewith, except for
the rights expressly granted herein.
2.2 Sagent shall issue to Customer, as soon as practicable, [ONE (1)
MACHINE-READABLE COPY] of the Software for Use at the Site only,
along with [ONE (1) COPY] of the on-line Documentation. Sagent will
provide Customer with written copies of the Documentation at
Sagent's standard charges. Customer may not copy the Documentation.
Customer acknowledges that no copy of the source code of the
Software will be provided to Customer.
2.3 If the specified Equipment is inoperable or under repair, Customer
will be entitled to transfer the Software to substitute Equipment
at the same Site using an operating system that is supported by
Sagent, provided that Customer shall promptly notify Sagent in
writing of the transfer. Customer will be responsible for any
services required if the Software has to be ported to an operating
system that is not supported by Sagent.
2.4 Customer will be entitled to make a reasonable number of
machine-readable copies of the Software for backup or archival
purposes only. Customer may not copy the Software, except as
permitted by this Agreement. Customer shall maintain accurate and
up-to-date records of the number and location of all copies of the
Software and inform Sagent in writing of such location(s).
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All copies of the Software will be subject to all terms and conditions of this
Agreement. Whenever Customer is permitted to copy or reproduce all or any part
of the Software, all titles, trademark symbols, copyright symbols and legends,
and other proprietary markings must be reproduced.
2.5 Notwithstanding the inclusion of Subsidiaries in the definition of
Customer in this Agreement, Sagent's affirmative obligations will be
limited to the entity named above. Such entity hereby guarantees the
performance of its Subsidiaries under this Agreement and shall
indemnify and hold harmless Sagent from and against all losses, costs,
liabilities and expenses arising out of or relating to any breaches by
such Subsidiaries of this Agreement.
3. License Restrictions
Customer agrees that it will not itself, or through any parent, subsidiary,
affiliate, agent or other third party:
(a) sell, lease, license or sublicense the Software or the Documentation;
(b) decompile, disassemble, or reverse engineer the Software, in whole or
in part;
(c) allow access to the Software by any Concurrent User not located at the
Site other than Customer's employees and employees of Customer's
customers, dealers and distributors who Use such Software (excluding
the Third Party Software) pursuant to the terms of Section 3(f) below;
(d) write or develop any derivative software or any other software program
based upon the Software or any Confidential Information;
(e) use the Software to provide processing services to third parties,
commercial timesharing, rental or sharing arrangements, or otherwise
use the Software on a 'service bureau' basis; or
(f) provide, disclose, divulge or make available to, or permit use of the
Software by any third party without Sagent's prior written consent.
4. License Fee
4.1 License Fee. In consideration of the license granted pursuant to
Section 2.1. Customer agrees to pay Sagent the License Fee specified
in Schedule A. The License Fee is due and payable in full upon the
Effective Date.
4.2 Expansion of License. Customer will have the option to expand the
license granted pursuant to Section 2.1 by increasing the authorized
number of Concurrent Users after Sagent's prior written consent and
further after Sagent's receipt of additional license fees for the
expanded Use as set forth in Sagent's then-current standard commercial
price list.
4.3 Taxes. Customer agrees to pay or reimburse Sagent for all federal,
state, dominion, provincial, or local sales, use, personal property,
payroll, excise or other taxes, fees, or duties arising out of this
Agreement or the transactions contemplated by this Agreement (other
than taxes on the net income of Sagent).
4.4 No Offset. Fees and expenses due from Customer under this Agreement
may not be withheld or offset by Customer against other amounts owed
by Customer for any reason.
[5. Escrow of Source Code
A MASTER SOURCE CODE ESCROW AGREEMENT WITH RESPECT TO THE SOFTWARE
(EXCLUDING THE THIRD PARTY SOFTWARE) HAS BEEN ESTABLISHED WITH __________.
CUSTOMER SHALL HAVE THE RIGHT TO BECOME A BENEFICIARY OF THE ESCROW
AGREEMENT PROVIDED THAT CUSTOMER AGREES TO BE BOUND BY THE TERMS OF SUCH
ESCROW AGREEMENT.]
6. Maintenance and Support
For so long as Customer is current in the payment of all Maintenance Fees
(described below), Customer will be entitled to Maintenance and Support as
specified in this Section 6.
6.1 Term and Termination. Sagent's provision of Maintenance and Support to
Customer will commence on the Effective Date and will continue for an
initial term of one (1) year. Maintenance and Support will
automatically renew at the end of the initial term and any
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subsequent term for a renewal term of one (1) year unless Customer has provided
Sagent with a written termination notice of its intention not to renew the
Maintenance and Support at least ninety (90) days prior to the termination
expiration of the then-current term. Termination of Maintenance and Support upon
failure to renew will not affect the license of the Software.
6.2 Maintenance and Support Services. Maintenance and Support will be
provided only with respect to versions of the Software that are being
supported by Sagent, according to the following schedule: (a) a
Version will be supported for [five (5) years] after the commercial
release of the next Version, provided always that Customer makes use
of the last Release and Update of the first mentioned Version; (b) a
Release will be supported for [one (1) year] after the commercial
release of the next Release, provided always that Customer makes use
of the last Update of the related Version; and (c) an Update will be
supported for [six (6) months] after the commercial release of the
next Update.
6.3 Levels of Maintenance and Support. [MAINTENANCE AND SUPPORT IS
AVAILABLE AT THE FOLLOWING RESPONSE TIMES: (I) SUPPORT CALL (PRIORITY
10): ONE (1) HOUR; (II) SUPPORT CALL (PRIORITY 20): TWO (2) HOURS;
(III) SUPPORT CALL (PRIORITY 30): FOUR (4) HOURS; AND (IV) SUPPORT
CALL (PRIORITY 40): EIGHT (8) HOURS.]
6.4 Definition. Maintenance and Support means that Sagent will provide
during Sagent's standard hours of service: (i) Updates and Releases,
when and if available, and related on-line Documentation, and (ii)
telephone assistance with respect to the Software, including (a)
clarification of functions and features of the Software; (b)
clarification of the Documentation; (c) guidance in the operation of
the Software; and (d) error verification, analysis and correction to
the extent possible by telephone. Sagent's standard hours of service
are Monday through Friday [,8:30 A.M. TO 5:00 P.M., LOCAL SITE TIME,]
except for holidays as observed by Sagent.
6.5 On-site Assistance. At Sagent's discretion, Sagent can decide to
provide Maintenance and Support at the Customer Site. In such event
Customer will reimburse Sagent for all related traveling expenses and
costs for board and lodging.
6.6 Installation and Conversion. Upon Customer's request, Sagent or a
designated Sagent partner can perform the installation and/or
conversion of the Software. Unless otherwise agreed, the costs hereof
shall be invoiced to Customer on the basis of Sagent's then-current
rates.
6.7 Causes which are not attributable to Sagent. Maintenance and Support
will not include services requested as a result of, or with respect to
causes which are not attributable to Sagent. These services will be
billed to Customer at Sagent's then-current rates. Causes which are
not attributable to Sagent include but are not limited to:
(a) accident; unusual physical, electrical or electro-magnetic
stress; neglect; misuse; failure or fluctuation of electric
power, air conditioning or humidity control; failure of rotation
media not furnished by Sagent; excessive heating; fire and smoke
damage; operation of the Software with other media and hardware,
software or telecommunication interfaces not meeting or not
maintained in accordance with the manufacturer's specifications;
or causes other than ordinary use;
(b) improper installation by Customer or use of the Software that
deviates from any operating procedures established by Sagent in
the applicable Documentation;
(c) modification, alteration or addition or attempted modification,
alteration or addition of the Software undertaken by persons
other than Sagent or Sagent's authorized representatives;
(d) software programs made by Customer, Sagent or other parties.
6.8 Responsibilities of Customer. Sagent's provision of Maintenance and
Support to Customer is subject to the following:
(a) [CUSTOMER SHALL PROVIDE SAGENT WITH ACCESS TO CUSTOMER'S
PERSONNEL AND EQUIPMENT DURING NORMAL BUSINESS HOURS. THIS ACCESS
MUST INCLUDE THE ABILITY TO DIAL-IN TO THE EQUIPMENT ON WHICH THE
SOFTWARE IS OPERATING AND TO OBTAIN THE SAME ACCESS TO THE
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Equipment as those of Customer's employees having the highest privilege or
clearance level. Sagent will inform Customer of the specifications of the modem
equipment and associated software needed, and Customer will be responsible for
the costs and use of said equipment.]
(b) Customer shall provide supervision, control and management of the
Use of the Software. In addition, Customer shall implement
procedures for the protection of information and the
implementation of backup facilities in the event of errors or
malfunction of the Software or Equipment.
(c) Customer shall document and promptly report all errors or
malfunctions of the Software to Sagent. Customer shall take all
steps necessary to carry out procedures for the rectification of
errors or malfunctions within a reasonable time after such
procedures have been received from Sagent.
(d) Customer shall maintain a current backup copy of all programs
and data.
(e) Customer shall properly train its personnel in the Use and
application of the Software and the Equipment on which it is
used.
6.9 Maintenance Fee. The Maintenance Fee for each calendar year of
Maintenance and Support will be 15% of the list price for the
Software, as set forth in Sagent's price list in effect as of the
Effective Date. The Maintenance Fee is due and payable in full in
advance within thirty (30) days after the date of delivery of the
Software. Any amounts not paid within thirty (30) days will be subject
to interest of 1% per month, which interest will be immediately due
and payable. Each calendar year, the Maintenance Fee may be modified
by Sagent due to general price increases and/or general inflation
increases which are reflected in the Consumer Price Index, but shall,
for a period of four years from the Effective Date, in no event exceed
five percent (5%) plus the increase in the Consumer Price Index for
the applicable time period, by written notice to Customer at least
thirty (30) days prior to the end of the then-current term. In the
event of a modification of the Maintenance Fee, Customer may
discontinue Maintenance and Support. If Customer elects not to renew
Maintenance and Support, Customer may re-enroll only upon payment of
the annual Maintenance Fee for the coming year and fifty (50) per cent
of all Maintenance Fees that would have been paid had Customer not
terminated Maintenance and Support, which entitles Customer to all
Updates and Releases of the Software which have been released during
the same period.
6.10 Assignment of Duties. Sagent may assign its duties of Maintenance and
Support to a third party, provided that Sagent will remain responsible
for the actions of such third party. Any such assignment is subject to
Customer's consent, which consent shall not be unreasonably withheld
or delayed.
7. Limited Warranty and Limitation of Liability
7.1 Sagent warrants that the Software will perform in substantial
accordance with the Documentation for a period of one (1) year from
the Effective Date. If during this time period the Software does not
perform as warranted, Sagent shall undertake to correct the Software,
or if correction of the Software is reasonably not possible, replace
such Software free of charge. If neither of the foregoing is
commercially practicable, Sagent shall terminate this Agreement and
refund to Customer the License Fee. In addition, Sagent warrants that
the media on which the Software is distributed will be free from
defects in materials and workmanship under normal use for a period of
ninety (90) days from the Effective Date. Sagent will replace any
defective media returned to Sagent within the 90-day period. The
foregoing are Customer's sole and exclusive remedies for breach of
warranty. The warranty set forth above is made to and for the benefit
of Customer only. The warranty will apply only if:
(a) the Software has been properly installed and used at all times
and in accordance with the instructions for Use; and
(b) no modification, alteration or addition has been made to the
Software by persons other than Sagent or Sagent's authorized
representative (except pursuant to the authorized Use of the
Sagent Tools specified in Schedule A); and
(c) Customer has not requested modifications, alterations or
additions
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to the Software that cause it to deviate from the Documentation.
7.2 Except as set forth above, Sagent makes no warranties, whether
express, implied, or statutory regarding or relating to the Software
or the Documentation, or any materials or services furnished or
provided to Customer under this Agreement, including Maintenance and
Support. Sagent specifically disclaims all implied warranties of
merchantability and fitness for a particular purpose with respect to
the Software, Documentation, and said other materials and services,
and with respect to the use of any of the foregoing. In addition,
Sagent disclaims any warranty with respect to, and will not be liable
or otherwise responsible for, the operation of the Software if
programs are made through the use of non-Sagent software that change,
or are able to change, the data model of the Software.
7.3 In no event will Sagent be liable for any loss of profits, loss of
use, business interruption, loss of data, cost of cover or indirect,
special, incidental or consequential damages of any kind in connection
with or arising out of the furnishing, performance or use of the
Software or services performed hereunder, whether alleged as a breach
of contract or tortious conduct, including negligence, even if Sagent
has been advised of the possibility of such damages. In addition,
Sagent will not be liable for any damages caused by delay in delivery
or furnishing the Software or said services. Sagent's liability under
this Agreement for direct, indirect, special, incidental and/or
consequential damages of any kind, including, without limitation,
restitution, will not, in any event, exceed the License Fee paid by
Customer to Sagent under this Agreement.
7.4 Customer shall indemnify and hold Sagent harmless from and against any
costs, losses, liabilities and expenses (including reasonable
attorneys fees) arising out of third party claims related to Customers
Use of the Software under this Agreement.
7.5 Any pre-production versions of the Software distributed to Customer
are delivered "as-is," without any express or implied warranties.
7.6 The provisions of this Section 7 allocate risks under this Agreement
between Customer and Sagent. Sagent's pricing reflects this allocation
of risks and limitation of liability.
7.7 No action arising out of any breach or claimed breach of this
Agreement or transactions contemplated by this Agreement may be
brought by either party more than one (1) year after the cause of
action has accrued. For purposes of this Agreement, a cause of action
will be deemed to have accrued when a party knew or reasonably should
have known of the breach or claimed breach.
7.8 No employee, agent, representative or affiliate of Sagent has
authority to bind Sagent to any oral representations or warranty
concerning the Software. Any written representation or warranty not
expressly contained in this Agreement will not be enforceable.
8. Indemnification for Infringement
8.1 Sagent shall, at its expense, defend or settle any claim, action or
allegation brought against Customer that the Software infringes any
patent, copyright, trade secret or other proprietary right of any
third party and shall pay any final judgments awarded or settlements
entered into; provided that Customer gives prompt written notice to
Sagent of any such claim, action or allegation of infringement and
gives Sagent the authority to proceed as contemplated herein. Sagent
will have the exclusive right to defend any such claim, action or
allegation and make settlements thereof at its own discretion, and
Customer may not settle or compromise such claim, action or
allegation, except with prior written consent of Sagent. Customer
shall give such assistance and information as Sagent may reasonably
require to settle or oppose such claims. In the event any such
infringement, claim, action or allegation is brought or threatened,
Sagent may, at its sole option and expense:
(a) procure for Customer the right to continue Use of the Software or
infringing part thereof; or
(b) modify or amend the Software or infringing part thereof, or
replace the Software or infringing part thereof with other
software having substantially the same or better capabilities;
or, if neither of the foregoing is commercially practicable.
(c) terminate this Agreement and repay to Customer a portion, if any,
of the License Fee equal to the amount paid by
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Customer less one-forty-eighth (1/48) thereof for each month or portion thereof
that this Agreement has been in effect. Sagent and Customer will then be
released from any further obligation to the other under this Agreement, except
for the obligations of indemnification provided for above and such other
obligations that survive termination.
8.2 The foregoing obligations shall not apply to the extent the
infringement arises as a result of modifications to the Software made
by any party other than Sagent or Sagent's authorized representative.
The foregoing obligations shall not apply to the Third Party Software.
8.3 The foregoing states the entire liability of Sagent with respect to
infringement of any patent, copyright, trade secret or other
proprietary right.
9. Confidential Information
9.1 Each party acknowledges that the Confidential Information constitutes
valuable trade secrets and each party agrees that it shall use
Confidential Information solely in accordance with the provisions of
this Agreement and will not disclose, or permit to be disclosed, the
same, directly or indirectly, to any third party without the other
party's prior written consent. Each party agrees to exercise due care
in protecting the Confidential Information from unauthorized use and
disclosure. However, neither party bears any responsibility for
safeguarding information that (i) is publicly available, (ii) already
in the other party's possession and not subject to a confidentiality
obligation, (iii) obtained by the other party from third parties
without restrictions on disclosure, (iv) independently developed by
the other party without reference to Confidential Information, or (v)
required to be disclosed by order of a court or other governmental
entity. Nothing herein will prevent routine discussions by the parties
that normally take place in a "user group" context.
9.2 In the event of actual or threatened breach of the provisions of
Section 9.1, the non-breaching party will have no adequate remedy at
law and will be entitled to immediate and injunctive and other
equitable relief, without bond and without the necessity of showing
actual money damages.
10. Term and Termination
10.1 This Agreement will take effect on the Effective Date and will remain
in force until terminated in accordance with this Agreement.
10.2 This Agreement may be terminated by Customer upon thirty (30) days'
prior written notice to Sagent, with or without cause, provided that
no such termination will entitle Customer to a refund of any portion
of the License Fee or Maintenance Fee.
10.3 Sagent may, by written notice to Customer, terminate this Agreement if
any of the following events ("Termination Events") occur, provided
that, except as set forth in Section 10.3(d) below, no such
termination will entitle Customer to a refund of any portion of the
License Fee or Maintenance Fee:
(a) Customer fails to pay any amount due to Sagent within thirty (30)
days after Sagent gives Customer written notice of such
non-payment; or
(b) Customer is in material breach of any non-monetary term,
condition or provision of this Agreement, which breach, if
capable of being cured, is not cured within thirty (30) days
after Sagent gives Customer written notice of such breach; or
(c) Customer (i) terminates or suspends its business activities, (ii)
becomes insolvent, admits in writing its inability to pay its
debts as they mature, makes an assignment for the benefit of
creditors, or becomes subject to direct control of a trustee,
receiver or similar authority, or (iii) becomes subject to any
bankruptcy or insolvency proceeding under federal or state
statutes; or
(d) Sagent elects to refund Customer's fees in accordance with
Section 7.1 or Section 8.1(c).
If any termination Event occurs, termination will become effective
immediately or on the date set forth in the written notice of
termination. Termination of this Agreement will not affect the
provisions regarding Customer's or Sagent's treatment of Confidential
Information, provisions relating to the payment of amounts due, or
provisions limiting or disclaiming Sagent's liability, which
provisions will survive termination of this Agreement.
10.4 Within fourteen (14) days after the date of termination or
discontinuance of this Agreement for any reason whatsoever, Customer
shall return the Software, derivative works and all copies
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thereof, in whole or in part, all related Documentation and all copies thereof,
and any other Confidential Information in its possession. Customer shall
furnish Sagent with a certificate signed by an executive officer of Customer
verifying that the same has been done.
11. Non-assignment/Binding Agreement
Neither this Agreement nor any rights under this Agreement may be assigned
or otherwise transferred by Customer, in whole or in part, whether
voluntary or by operation of law, including by way of sale of assets,
merger or consolidation, without the prior written consent of Sagent, which
consent will not be unreasonably withheld. Subject to the foregoing, this
Agreement will be binding upon and will inure to the benefit of the parties
and their respective successors and assigns.
12. Notices
Any notice required or permitted under the terms of this Agreement or
required by law must be in writing and must be (a) delivered in person, (b)
sent by first class registered mail, or air mail, as appropriate, (c) sent
by overnight air courier, or (d) by facsimile, in each case properly posted
to the appropriate address set forth below. Either party may change its
address for notice by notice to the other party given in accordance with
this Section. Notices will be considered to have been given at the time of
actual delivery in person, three (3) business days after deposit in the
mail as set forth above, one (1) day after delivery to an overnight air
courier service, or one (1) day after the moment of transmission by
facsimile.
13. Miscellaneous
13.1 Force Majeure. Neither party will incur any liability to the other
party on account of any loss or damage resulting from any delay or
failure to perform all or any part of this Agreement if such delay or
failure is caused, in whole or in part, by events, occurrences, or
causes beyond the control and without negligence of the parties. Such
events, occurrences, or causes will include, without limitation, acts
of God, strikes, lockouts, riots, acts of war, earthquakes, fire and
explosions, but the inability to meet financial obligations is
expressly excluded.
13.2 Waiver. Any waiver of the provisions of this Agreement or of a
party's rights or remedies under this Agreement must be in writing to
be effective. Failure, neglect, or delay by a party to enforce the
provisions of this Agreement or its rights or remedies at any time,
will not be construed and will not be deemed to be a waiver of such
party's rights under this Agreement and will not in any way affect
the validity of the whole or any part of this Agreement or prejudice
such party's right to take subsequent action. Except as expressly
stated in this Agreement, no exercise or enforcement by either party
of any right or remedy under this Agreement will preclude the
enforcement by such party of any other right or remedy under this
Agreement or that such party is entitled by law to enforce.
13.3 Severability. If any term, condition, or provision in this Agreement
is found to be invalid, unlawful or unenforceable to any extent, the
parties shall endeavor in good faith to agree to such amendments that
will preserve, as far as possible, the intentions expressed in this
Agreement. If the parties fail to agree on such an amendment, such
invalid term, condition or provision will be severed from the
remaining terms, conditions and provisions, which will continue to be
valid and enforceable to the fullest extent permitted by law.
13.4 Entire Agreement. This Agreement (including the Schedules and any
addenda hereto signed by both parties) contains the entire agreement
of the parties with respect to the subject matter of this Agreement
and supersedes all previous communications, representations,
understandings and agreements, either oral or written, between the
parties with respect to said subject matter, except as provided in
Section 1.3 with respect to the definition of "Confidential
Information."
13.5 Standard Terms of Customer. No terms, provisions or conditions of any
purchase order, acknowledgment or other business form that Customer
may use in connection with the acquisition or licensing of the
Software will have any effect on the rights, duties or obligations of
the parties under, or otherwise modify, this Agreement, regardless of
any failure of Sagent to object to such terms, provisions or
conditions.
13.6 Amendments to this Agreement. This Agreement may not be amended,
except by a writing signed by both parties.
13.7 Sagent's prior consent. Unless expressly provided otherwise in this
Agreement, any prior consent of Sagent that is required before
Customer may take an action may be granted or withheld in Sagent's
sole and absolute discretion.
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13.8 Export of Software. Customer may not export or re-export the Software
without the prior written consent of Sagent and without the
appropriate United States and foreign government licenses.
13.9 Public Announcements. Customer acknowledges that Sagent may desire to
use its name in press releases, product brochures and financial
reports indicating that Customer is a customer of Sagent, and
Customer agrees that Sagent may use its name in such a manner.
13.10 Counterparts. This Agreement may be executed in counterparts, each
of which so executed will be deemed to be an original and such
counterparts together will constitute one and the same agreement.
13.11 Applicable law. This Agreement will be interpreted and construed in
accordance with the laws of the State of California and the United
States of America, without regard to conflict of law principles.
13.12 Headings. Section and Schedule headings are for ease of reference
only and do not form part of this Agreement.
13.13 Non-solicitation. Customer acknowledges and agrees that the employees
and consultants of Sagent who perform the Maintenance and Support
Services or other services are a valuable asset to Sagent and are
difficult to replace. Accordingly, Customer agrees that, for a period
of twelve (12) months after the completion of the Maintenance and
Support Services or other services, it will not offer employment as
an employee, independent contractor, or consultant to any Sagent
employee or consultant who performs any of the Maintenance and
Support Services or other services.
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IN WITNESS WHEREOF, the parties have executed this Agreement.
(CUSTOMER) SAGENT TECHNOLOGY, INC.
- -------------------------
By: By:
-------------------------------- --------------------------------
- ----------------------------------- -----------------------------------
(print name and title) (print name and title)
Date: Date:
---------------- -----------------
Address: Address:
- ----------------------------------- -----------------------------------
- ----------------------------------- -----------------------------------
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SCHEDULE A
SOFTWARE AND LICENSE FEE
[To be completed by listing the Software
to be licensed, including language, modules,
development tools and any Third Party Software
and License Fee]
<PAGE> 68
CONSULTING SERVICES AGREEMENT
This Consulting Services Agreement ("Agreement") is entered into this ___
day of ________, 1998 (the "Effective Date"), by and between Sagent Technology,
Inc., a California corporation, having its principal place of business at 2225
E. Bayshore Road, Suite 100, Palo Alto, CA 94303 ("Sagent") and ________________
("Customer").
RECITALS
A. Sagent has developed and owns certain technology and software for
[DESCRIBE SOFTWARE] and has expertise in that field.
B. Customer wishes to engage Sagent's services on the terms set
forth below.
AGREEMENT
In consideration of the foregoing and the mutual promises contained herein
the parties agree as follows:
1. DEFINITIONS.
1.1 "Sagent Software" shall mean the object code form of any of
Sagent's software products marketed generally and any custom software
developed by Sagent.
1.2 "Customer Materials" shall mean the materials, information,
software modules, if any, owned or licensed (from third parties) by Customer
and other items specified in the Statement of Work.
1.3 "Intellectual Property" means any and all (by whatever name or
term known or designated) tangible and intangible and now known or hereafter
existing: Copyrights (including derivative works, as defined by the United
States Copyright Act, thereof), trademarks, trade names, trade secrets,
know-how, patents, any other intellectual and industrial property and
proprietary rights, of every kind and nature throughout the universe and
however designated, and including all registrations, applications, renewals,
and extensions thereof.
1.4 "Statement of Work" shall mean that document specifying the
consulting services to be provided by Sagent under this Agreement, including
setting forth specifications, deliverables, a performance schedule, Customer
Materials required and pricing and payment terms for the services provided
under this Agreement. The Statement of Work shall be mutually agreed upon,
attached as Exhibit A, and may be amended in writing by the parties from time
to time pursuant to this Agreement.
<PAGE> 69
2. CONSULTING SERVICES.
2.1 Consulting Services. Sagent shall use reasonable and diligent
efforts to provide consulting services as set forth in the Statement of Work
("Services").
2.2 Periodic Review Meetings. Each party shall appoint a project
manager who will coordinate and act as liaison with the other party with respect
to the Statement of Work. The parties' respective project managers shall
participate in project review meetings as set forth in the Statement of Work or
otherwise by mutual agreement. Such discussions shall be for information
purposes only and shall not be binding upon either party other than as
expressly set forth in this Agreement or any amendment hereto. The Project
Managers shall also have primary responsibility for coordinating all major
decisions related to this Agreement, as well as the day-to-day management of
the work to be performed under this Agreement.
2.3 Modifications. During the performance of the Services, the
parties agree to reasonably modify the Statement of Work at the request of
either party, provided that if the modifications would materially increase
either party's obligations under this Agreement (including Sagent's cost or
work effort) then changes shall be made only upon mutual written agreement of
both parties.
2.4 Customer Materials. Customer shall provide to Sagent all
Customer Materials, reasonably required for use in providing the Services as
identified in the Statement of Work and will cause any third party vendor to
cooperate with Sagent as necessary to complete the services. Customer shall
provide Sagent personnel with reasonable access throughout Customer's site and
to any equipment ("Site Materials") reasonably necessary to perform the
Services. Customer hereby grants Sagent a nonexclusive, nontransferable
license to use the Customer Materials and Site Materials and to copy and modify
the Customer Materials as may be reasonably necessary to fulfill Sagent's
obligations hereunder. Customer shall indemnify and hold Sagent harmless from
any damages, liabilities, costs and expenses (including reasonable attorneys'
fees) incurred by Sagent as a result of any claim that the Customer Materials
or the Site Materials, when used within the scope of this Agreement, infringes
or violates the rights of any third party.
2.5 Customer Delays. If Customer, or any third party acting on
Customer's behalf does not provide any required item or service to Sagent on a
timely basis in accordance with the schedule set forth in the Statement of Work,
then the dates set forth which have been directly or indirectly affected by
such delay shall be extended as necessary to account for such delay.
3. DELIVERABLES.
Sagent shall deliver any deliverable items specifically identified in the
Statement of Work ("Deliverables") to Customer in accordance with the Statement
of Work ("Delivery"). As soon as practicable following the Delivery, but in no
event more than thirty (30) days from Delivery, Customer shall review, test,
and evaluate the Deliverable for conformity with the requirements contained in
the Statement of Work and shall provide Sagent with a written acceptance
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<PAGE> 70
("Acceptance") of the Deliverable, or a written statement of defects to be
corrected. Sagent shall promptly correct such defects, if any, and return the
Deliverable to Customer for retesting, review and reevaluation, and Customer
shall, within ten (10) days of such redelivery, again provide Sagent with a list
of defects which need to be corrected, if any. The foregoing procedure shall be
repeated until Acceptance of the Deliverable or the parties mutually agree in
writing to terminate this Agreement. Failure to provide a statement of defects
within the applicable time period will be deemed Acceptance.
4. OWNERSHIP OF PROPRIETARY RIGHTS.
4.1 Existing Technology. Subject to the licenses granted herein,
each party shall have and retain exclusive ownership of its own technology,
information, data, know-how, ideas, designs, software, inventions,
documentation, resources and all other tangible and intangible items, which
exist as of the Effective Date, and all Intellectual Property related therein
and thereto ("Existing Technology").
4.2 Sagent Ownership. Customer agrees that the Sagent Software and
all software, works of authorship, data, inventions and discoveries developed,
reduced to practice, or conceived by Sagent under this Agreement, alone or in
conjunction with Customer or third parties, (collectively, "Inventions") and
Intellectual Property therein and thereto are the sole property of Sagent. To
the extent that Customer would otherwise have any such rights, Customer agrees
to assign (or cause to be assigned) and hereby does assign fully to Sagent all
worldwide right, title and interest to the Inventions and all Intellectual
Property related therein and thereto.
4.3 Further Assurances. At any time or from time to time on and
after the date of this Agreement, at the request of a party, the other party
shall (a) deliver such records, data or other documents consistent with the
provisions of this Agreement, (b) execute, and deliver or cause to be
delivered, all such assignments, consents, documents or further instruments of
transfer or license and (c) take or cause to be taken all such other actions,
as a party may reasonably deem necessary or desirable in order for such party
to obtain the full benefits of this Agreement and the transactions contemplated
hereby.
4.4 Right to Develop Independently. Customer understands and
acknowledges that Sagent is in the business of developing products and providing
consulting services similar to those provided for Customer for other parties
generally based upon the same computer software, tools and knowledge base and
Customer agrees that nothing in this Agreement will impair Sagent's right to
provide the same services or develop for itself or others deliverables
substantially similar to, or performing the same or similar functions as the
Deliverables under this Agreement, subject to Sagent's obligations under
Section 8 (Confidential Information).
5. LICENSE.
Any software provided under this Agreement shall be subject to a separate
license agreement between Customer and Sagent as identified in Exhibit B.
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<PAGE> 71
6. FEES.
6.1 Rates. In consideration for performing the Services, Customer
shall pay Sagent the fees set forth in the Statement of Work ("Fees"). If no
Fees are stated, the Services will be provided on a time and materials basis at
Sagent's current rates at the time the Services are performed. Customer shall
also reimburse Sagent for the reasonable actual travel and living expenses of
its personnel engaged in the performance of the Services hereunder at locations
other than Sagent's facilities, together with other reasonable out-of-pocket
expenses incurred by Sagent in performing the Services.
6.2 Payment Dates. Fees shall be payable upon receipt by the
Customer of the related invoice. Any amounts not paid within thirty (30) days
shall accrue interest at the rate of 1.5% per month or the highest rate
permitted by applicable law, whichever is lower. All Fees quoted and payments
made hereunder shall be in U.S. Dollars.
6.3 Taxes. Customer shall be responsible for all sales taxes, use
taxes and similar taxes and charges of any kind imposed by any federal, state
or local governmental entity for products and services provided under this
Agreement, excluding only taxes based solely upon Sagent's net income. When
Sagent has the legal obligation to pay or collect such taxes, the appropriate
amount shall be invoiced to and paid by Customer unless Customer provides
Sagent with a valid tax exemption certificate authorized by the appropriate
taxing authority.
7. LIMITATION OF LIABILITY. IN NO EVENT WILL SAGENT'S LIABILITY ARISING OUT
OF THIS AGREEMENT EXCEED THE SUM OF THE FEES ACTUALLY PAID BY CUSTOMER
HEREUNDER. IN NO EVENT SHALL EITHER PARTY HAVE ANY LIABILITY TO THE OTHER PARTY
FOR ANY LOST PROFITS OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES,
OR FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND UNDER
ANY THEORY OF LIABILITY AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE; PROVIDED, HOWEVER, THAT THIS LIMITATION SHALL NOT
APPLY TO ANY BREACH BY CUSTOMER OF ITS CONFIDENTIALITY OBLIGATIONS. THE PARTIES
AGREE THAT THIS SECTION REPRESENTS A REASONABLE ALLOCATION OF RISK.
8. CONFIDENTIALITY.
8.1 Definition. The term "Confidential Information" shall mean any
information disclosed by one party to the other party in connection with this
Agreement which is disclosed in writing, orally or by inspection and is
identified as "Confidential" or "Proprietary" or which a party has reason to
believe is treated as confidential by the other party. Any information, in
whatever form, disclosed by Sagent that relates to the Custom Software and that
is not publicly known is "Confidential Information."
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<PAGE> 72
8.2 OBLIGATION. Each party shall treat as confidential all
Confidential Information received from the other party, shall not use such
Confidential Information except as expressly permitted under this Agreement,
and shall not disclose such Confidential Information to any third party without
the other party's prior written consent. Each party shall take reasonable
measure to prevent the disclosure and unauthorized use of Confidential
Information of the other party.
8.3 EXCEPTIONS. Notwithstanding the above, the restrictions of this
Section shall not apply to information that:
8.3.1 was independently developed by the receiving party
without any use of the Confidential Information of the other party and by
employees or other agents of (or independent contractors hired by) the
receiving party who have not been exposed to the Confidential Information;
8.3.2 becomes known to the receiving party, without
restriction, from a third party without breach of this Agreement and who had a
right to disclose it;
8.3.3 was in the public domain at the time it was disclosed
or becomes in the public domain through no act or omission of the receiving
party;
8.3.4 was rightfully known to the receiving party, without
restriction, at the time of disclosure; or
8.3.5 is disclosed pursuant to the order or requirement of a
court, administrative agency, or other governmental body; provided, however,
that the receiving party shall provide prompt notice thereof to the other party
and shall use its reasonable best efforts to obtain a protective order or
otherwise prevent public disclosure of such information.
8.4 RESIDUALS. Notwithstanding this Section, each party shall have
the right to exploit and use Residuals for any purpose. "Residuals" shall mean
that confidential information which is of general application in nature and not
peculiar to the design or specification information provided by either party
which is retained by an employee of either party in an intangible form in the
normal course of their work, where no effort has been made to retain or
memorialize this information in any way, and without further reference to any
material that is written, stored in magnetic, electronic or physical form, or
otherwise fixed.
8.5 REMEDIES. Each party acknowledges that its breach of this
Section would cause irreparable harm to the other party and in addition to any
other remedies to which a party may be legally entitled, the nonbreaching party
shall have a right to obtain immediate injunctive relief in the event of a
breach of this section by the other party.
9. TERM AND TERMINATION.
9.1 TERM. The term of this Agreement shall commence on the Effective
Date and shall continue in force until terminated as follows:
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<PAGE> 73
9.1.1 If Customer fails to make any payment due within
thirty (30) days after receiving written notice from Sagent that such payment
is delinquent; Sagent may terminate this Agreement on written notice to
Customer at any time following the end of such thirty (30) day period.
9.1.2 If either party materially breaches any term or
condition of this Agreement and fails to cure that breach within thirty (30)
days after receiving written notice of the breach, the nonbreaching party may
terminate this Agreement on written notice at any time following the end of
such thirty (30) day period.
9.1.3 This Agreement shall terminate automatically without
notice and without further action by Sagent in the event Customer becomes
insolvent (i.e., becomes unable to pay its debts in the ordinary course of
business as they come due) or makes a general assignment for the benefit of
creditors.
9.2 EFFECT OF TERMINATION. Upon the termination of this Agreement for
any reason: Customer shall immediately pay to Sagent all amounts due and
outstanding as of the date of such termination or expiration; and shall return
to the other party the originals and all copies of the other party's
Confidential Information.
9.3 SURVIVAL. The following sections shall survive the termination,
for any reason, of this Agreement: 4, 6, 7, 8, 9 and 10.
10. MISCELLANEOUS.
10.1 ASSIGNMENT. Customer may not assign any of its rights or
delegate any of its obligations under this Agreement, whether by operation of
law or otherwise, without the prior express written consent of Sagent. Subject
to the foregoing, this Agreement will bind and inure to the benefit of the
parties, their respective successors and permitted assigns.
10.2 WAIVER AND AMENDMENT. No modification, amendment or waiver of
any provision of this Agreement shall be effective unless in writing and
signed by the party to be charged. No failure or delay by either party in
exercising any right, power, or remedy under this Agreement, except as
specifically provided herein, shall operate as a waiver of any such right,
power or remedy.
10.3 GOVERNING LAW; ARBITRATION. This Agreement shall be governed by
the laws of the State of California, USA, excluding conflict of laws
provisions. Any disputes arising out of this Agreement shall be resolved by
binding arbitration in San Mateo County, California in accordance with the
rules of the American Arbitration Association. The arbitrator shall have the
power to grant injunctive relief.
10.4 NOTICES. All notices, demands or consents required or permitted
under this Agreement shall be in writing. Notice shall be considered delivered
and effective when (a) personally delivered; (b) the day following transmission
if sent by telex, telegram or facsimile
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<PAGE> 74
followed by written confirmation by registered overnight carrier or certified
United States mail; or (c) one (1) day after posting when sent by registered
private overnight carrier (e.g., DHL, Federal Express, etc.); or (d) five (5)
days after posting when sent by certified United States mail. Notice shall be
sent to the parties at the addresses set forth on the first page of this
Agreement or at such other address as shall be given by either party to the
other in writing. Notices to Customer shall be addressed to the attention of the
License Administrator. Notices to Sagent shall be addressed to the attention of
Customer Service.
10.5 Independent Contractors. The parties are independent contractors.
Neither party shall be deemed to be an employee, agent, partner or legal
representative of the other for any purpose and neither shall have any right,
power or authority to create any obligation or responsibility on behalf of the
other.
10.6 Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be contrary to law, such provision shall be changed
and interpreted so as to best accomplish the objectives of the original
provision to the fullest extent allowed by law and the remaining provisions of
this Agreement shall remain in full force and effect.
10.7 Complete Understanding. This Agreement, including all Exhibits
attached hereto, constitutes the final, complete and exclusive agreement between
the parties with respect to the subject matter hereof, and supersedes any prior
or contemporaneous agreement.
10.8 Compliance with Laws. Customer shall comply with all laws and
regulations applicable to Customer's activities under this Agreement.
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<PAGE> 75
10.9 Force Majeure. Except for Customer's obligations to pay Sagent
hereunder, neither party shall be liable to the other party for any failure or
delay in performance caused by reasons beyond its reasonable control,
including but not limited to acts of God, earthquakes, strikes or shortages, of
materials.
Customer Sagent Technology, Inc.
By:________________________ By:________________________
Name:______________________ Name:______________________
Title:_____________________ Title:_____________________
Date:______________________ Date:______________________
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<PAGE> 76
EXHIBIT A
STATEMENT OF WORK
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<PAGE> 77
EXHIBIT B
SOFTWARE LICENSE
-ii-
<PAGE> 78
[SAGENT LOGO]
EVALUATION AGREEMENT
- --------------------------------------------------------------------------------
This Evaluation Agreement (No. ______) is between Sagent Technology, Inc., 2225
East Bayshore Rd. Suite 100, Palo Alto, CA 94303, U.S.A. ("us"), and
- --------------------------------------------------------------------------------
("you")
- --------------------------------------------------------------------------------
1. We license you to install and use the Software during the Evaluation
Period only.
"We," "our" and "us" mean Sagent Technology, Inc. "Software" means only our
computer program(s) listed in the Schedule, any documentation ("Documentation")
and updates that we may deliver to you, and portions and copies in any form.
"Schedule" means any schedules that you and we sign that specifically refer to
this agreement. The "Evaluation Period" is the time period listed in the
Schedule; if none if listed there, the Evaluation Period is 30 days from the
effective date of the applicable Schedule.
2. You will pay us the License Fee listed in the Schedule if applicable.
If there is a license fee for the evaluation of our Software listed in the
Schedule then you will pay us the fees net 30 days from receipt of this invoice.
3. We disclaim all representation, warranties, and liability regarding the
Software that you will be evaluating. You accept it "AS IS."
You are responsible for installing the Software, and for determining whether
the Software is suitable, secure, and reliable for your purposes. We will
provide you telephone hotline support at no extra charge during the Evaluation
Period only, but any other maintenance, support or full Software License must
be purchased separately. Telephone support hours are from 6 am to 5 pm Pacific
Standard Time. We do not warrant that the Software is error-free or that any
errors will be corrected. THE FOREGOING IS IN LIEU OF ALL WARRANTIES OR
CONDITIONS TO YOU OR ANY THIRD PARTY, EXPRESS OR IMPLIED, RELATED TO THE
SOFTWARE OR ANY SERVICES WE MAY PROVIDE, INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTY OR CONDITIONS OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE, OR ARISING BY STATUTE, LAW OR TRADE DEALING OR USAGE. We are not
liable for incidental, special or consequential damages for any reason
(including loss of data or other business or property damage), even if
foreseeable, and our liability in all events will not exceed the License Fee
that you have paid, if any. Your SOLE REMEDY for any defects in the Software is
to return the Software and all copies to us for a full refund of the License
Fee you have paid. You agree to implement backup and recovery procedures
adequate to prevent loss due to malfunction.
4. You will respect our copyright in the Software.
You may make one copy of the Software programs for back-use only. You will put
our copyright notices on all copies. You may not copy the Documentation.
5. You will respect our trade secrets and other proprietary rights in the
Software.
You agree that we have and will keep title, copyright, and all other
proprietary rights in the Software. You will keep the Software in a safe place.
You will use best efforts to ensure that your employees and others with access
to the Software comply with this agreement. You have no right to use, examine
or recreate the Software source code, which is our trade secret. You agree not
to alter, decompile, or reverse engineer the Software. You will treat our
Software and accompanying documentation as Confidential Information. You will
protect the Confidential Information from unauthorized use, dissemination or
publication. You will protect the Confidential Information by using the same
degree of care as you use to protect your own confidential information of a
like nature, but no less than a reasonable degree of care. You are not required
to protect information that (a) you possessed before you received it from us,
(b) is or becomes a matter of public knowledge through no fault of your own;
(c) you rightfully receive from a third party without a duty of
confidentiality; (d) we disclose to a third party without imposing a duty of
confidentiality; (e) you develop independently; or (f) the law requires or we
give written permission to be disclosed. You may use the Confidential
Information only for the purposes of evaluating and reviewing our Software.
<PAGE> 79
6. You may not transfer the Software.
Any attempted assignment, sub-license or transfer by you of the Software is
void without our written permission.
7. This license agreement remains in effect unless terminated.
You may terminate this agreement at any time. We may terminate this agreement
if you breach it. At the end of the applicable Evaluation Period, or upon
termination if earlier, you will return the Software, Documentation and all
copies to us. Should you not return the software, then you authorize us in our
reasonable discretion to charge you the applicable full system license fee for
any Software and or Documentation that you do not return to us in unmarked
condition, suitable for evaluation by another customer.
8. The following terms also apply.
This is the full and final agreement between you and us, and supercedes any
earlier promises, representations or agreements relating to the subject of this
agreement. This agreement may only be changed if you and our authorized
representative do so in writing. Waivers not given in writing may be revoked at
any time without liability. Invalid provisions do not affect the enforceability
of the others. We are entitled to injunctive relief for violations of our
proprietary rights. We reserve all rights not granted specifically in this
agreement.
SAGENT TECHNOLOGY, INC.
Signed:_______________________________________________________________________
Name:_________________________________________________________________________
Title:________________________________________________________________________
Effective Date: ______________________________________________________________
You:__________________________________________________________________________
Signed:_______________________________________________________________________
Name:_________________________________________________________________________
Title:________________________________________________________________________
<PAGE> 80
[SAGENT LOGO]
EVALUATION AGREEMENT SCHEDULE
- ----------------------------------
SCHEDULE #1 EVALUATION PERIOD ENDS __________
Payment and Delivery Terms if Applicable: If you do not purchase the software
you are required to return it. We will be entitled to physically repossess the
Software from your premises in the event of nonpayment or termination of the
evaluation agreement.
Contact Persons
Your Primary Contact: Name:______________ Phone:____________
Your Alternate Contact: Name:______________ Phone:____________
Our Primary Contact: Name:______________ Phone:____________
Other Applicable Terms:______________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
All terms of the evaluation agreement referred to above are incorporated herein
and will apply to your orders relating to this Schedule.
<PAGE> 81
EXHIBIT H
SAGENT'S STANDARD VAR AGREEMENT
including its respective exhibits A and B
<PAGE> 82
This Agreement is between Sagent Technology Inc. 2225 E. Bayshore Rd. Suite
100, Palo Alto, CA 94303, U.S.A. ("PROVIDER") and _________________________
________________________________________________________("Distributor").
1. PROVIDER appoints you an authorized non-exclusive distributor of the
Software in the Territory.
"We," "our" and "us" mean Sagent Technology Inc. "Software" means only our
computer program(s) listed in the Schedule and any related documentation
("Documentation"); we may change or discontinue any or all Software
products or versions at any time without notice or liability. "Schedule"
means any schedules that you and we sign that specifically refer to this
Agreement. The "Territory" means the territory set forth in the Schedule;
you agree not to sublicense or export the Software outside the Territory,
or advertise, solicit orders, or establish or maintain a branch, sales
office or distribution depot for the Software, outside the Territory. Your
appointment is non-exclusive; you understand that we may appoint or license
other distributors, Master VARs, VARs, OEMs, dealers or end-users in the
Territory directly without notice or liability to you.
2. Distributor will vigorously market the Software at your expense.
Distributor will maintain at all times full-time, trained sales, marketing,
technical and service staff, including at least one Sagent salesperson, one
dedicated Sagent systems engineer, and one Sagent technical support
engineer, and all appropriate equipment and software necessary to
demonstrate the Software, provide training and support, attend sales
events, and otherwise promote the Software to end users.
3. Distributor may demonstrate the Software at your premises or at a Customer
Location.
Distributor may install and run the Software for demonstration use on its
own computer(s) or on prospective customer's computer(s). Distributor must
remove demonstration copies of the Software from a customer's computer not
more than 60 days after installation, unless Sagent otherwise agree in
writing. Sagent will charge Distributor the applicable License Fees for
demonstration copies of the Software and/or Documentation that has not been
removed from a customer's site. Sagent reserves the right to require that
demonstration Software have a Non-Disclosure Agreement along with an
Evaluation Agreement with customers evaluating the Software.
4. Distributor may develop applications that work with the Sagent Software.
Prior to developing an application the Distributor must purchase at least
one license for the developer version of the Software from Sagent for each
development site and may purchase this copy at 50% discount of the then
current pricing. Upon purchase of a developer license, you may use that
licensed Software product in order to develop, test, verify and support
your won application software to work with the Sagent Software. Distributor
may combine Software that is subject to such a developer license with your
own application software, but you may not modify any Software and you must
maintain all Software in complete unedited form.
5. Distributor may sublicense end-users the Software.
Pursuant to the terms of this Agreement, you may market and sublicense the
Software to end-users in the Territory who would use it for internal data
processing. Distributor may sublicense the Software yourself or through
other VARs within the Territory that we have authorized in writing and that
have agreed in writing to be bound by all terms of our standard VAR
agreement. Upon our receipt and verification of a copy of each such VAR
agreement, we will provide you with a development kit for each Software
product licensed by the approved VAR. Distributor may only sublicense
developer and runtime versions of the Software for use only with the
products specified in the Schedule. Distributor may not, however,
sublicense any Software unless Distributor has already purchased their own
license. Distributor may sublicense the Software to end-users embedded in
or bundled with your hardware, systems or software applications, or as a
standalone product. Distributor will require each sublicensee to enter into
a written sublicense and warranty agreement containing substantially the
terms set forth in the Schedule. Distributor must secure an access code
from us for each customer for which the Software is sublicensed.
Distributor is free unilaterally to determine your own resale prices for
the Software and are not obligated to pay us for value added services you
create. None of our employees or other representatives
<PAGE> 83
is authorized to inhibit your pricing discretion; you agree to notify us
promptly, in writing, if they attempt to do so.
6. Distributor will make records and reports of Software installations and
sublicenses.
Distributor will make and keep, and give us not less than 10 days after the
end of each calendar month, a complete and accurate report of the type,
quantities and customer information for each copy of the Software sold,
including the Distributors, and those of sublicensees and other customers.
This report will also include the quantities of Software products
purchased, the amount of such purchases, and the name and address of each
sublicensee.
7. Distributor will pay us the License Fees listed in the Schedule.
Distributor will pay us the applicable License Fee for each developer
license or other license we give you to use the Software, and each
sublicense you grant for the Software to be used. The "License Fee" is the
applicable amount set forth in the Schedule. Sagent may change License Fees
at any time. The Software is delivered FOB our point of shipment.
Distributor is responsible for paying all taxes, duties, shipping,
insurance and other such fees on the Software, except taxes on our net
income. Distributor will pay on time: All sums are payable in United States
currency at our United States offices, and are due within thirty (30) days
after the date of our invoice. Late payments will be subject to interest at
1.5% per month, or the maximum allowable by law, if less. Sagent reserves
the right to change the License Fees in the event that the exchange rate
between local currency and the U.S. dollar fluctuates more than 10% during
any year of the term of this Agreement.
Sagent has the right to cancel orders and change credit or payment terms if
Distributor does not pay in full and on time and/or if your financial
position changes. Sagent can also cancel this Agreement and/or repossess
the Software from your premises for nonpayment and/or late payment. Sagent
or our business representatives have the right to inspect your records
relating to our Software during regular business hours to verify the
accuracy of your reports and License Fee payments. For purposes of ensuring
payment, we may at our option configure the Software so that unless we
later provide you with an access key to extend the use of the Software,
your continued use of the software will result in degradation of its
performance. Sagent will provide the Distributor with an access key upon
our receipt of timely payment.
If Distributor is required to withhold any taxes on amounts payable to us
under this Agreement, pursuant to the laws and regulations of the
Territory, the Distributor will be entitled to deduct and withhold such
taxes unless we furnish you duly executed forms sufficient under the laws
of the Territory to exempt sums payable to us hereunder from such taxes.
Distributor may not reduce any amount payable to us by any withholding
taxes unless you have provided us with a certificate of deduction and
withholding and a true copy of the governmental receipt establishing the
payment thereof. Distributor will obtain and provide to us on a timely
basis official tax receipts or such other evidence of payment as we may be
required to submit in order to establish our right to a foreign tax credit
against our U.S. federal income tax liability.
8. Our warranty and liability for the Software are limited.
The Software is provided "AS IS." Sagent does not warrant that the Software
is error-free, or that any errors will be corrected. Sagent warrants the
physical media and physical Documentation for each Software product we
provide to you (but not any media or Documentation distributed to you) to
be free of physical defects in materials and workmanship for a period of 30
days after it is first delivered to you. If Sagent receives notification
within the warranty period of such physical defects in material or
workmanship, and such notification is determined by Sagent to be correct,
Sagent will replace the defective media or Documentation. THE FOREGOING
WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES TO YOU OR ANY THIRD PARTY,
EXPRESS OR IMPLIED, RELATED TO THE SOFTWARE OR ANY SERVICES WE MAY PROVIDE,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE, OR ARISING BY STATUTE, LAW OR TRADE
DEALING OR USAGE. Sagent is not liable to you or any third party for
incidental, special or consequential damages for any reason (including loss
of data or other business or property damage), even if foreseeable, and our
liability in all events will not exceed the applicable License Fee that you
have paid. Distributor will require each sublicensee to accept similar
warranty and liability limits. Distributor may not make any warranty or
other representations to sublicensees or others on our behalf. Sagent is
not liable for defects in your
<PAGE> 84
own application software, or for your own activities in marketing and
sublicensing the Software. Distributor agrees to implement backup and
recovery procedures adequate to prevent loss due to malfunctions.
9. Distributor will support its customers, and will purchase training and
support services from Sagent.
Distributor will purchase training, technical, Hotline and update support
from us, under the terms of our standard support programs unless otherwise
agreed by you and us in writing. Distributor is solely responsible for
installing, maintaining and supporting the Software for sublicensees and
other customers unless otherwise agreed in the Schedule. Sagent has no
obligation to provide support services except under the terms of standard
support programs purchased directly from us, or to deal with any third
party directly. Sagent's support programs are subject to change from time
to time without notice from us.
10. Distributor will respect our copyright in the Software.
Distributor will not copy the Software except as required to demonstrate
and sublicense the Software and develop your applications under the
specific terms of this Agreement, and to make adequate archival copies.
Distributor will put our proprietary and copyright notices on all copies.
Distributor may not copy the Documentation.
11. Distributor will respect our trade secrets and other proprietary rights in
the Software.
Distributor agrees that we have and will keep title, copyright, trademark
and all other proprietary rights in the Software, the Documentation, and
all portions and copies in any form. All distribution of the Software is by
license only, not sale. Distributor will keep the Software in a safe place.
Distributor will use best efforts to ensure that their employees and others
with access to the Software comply with this Agreement. Distributor will
have no right to use, examine, re-create, sublicense, or transfer the
Software source code, which is our trade secret. Distributor agrees not to
alter the Software, or make any attempt to unlock or by-pass any
access-prevention device in the Software. Distributor may use our
trademarks only as necessary to market the Software.
12. Distributor will keep our Confidential Information secret.
Confidential Information means our nonpublic business, product, and
technical information that you receive or learn during the term of your
distributorship. Distributor will not use or disclose our confidential
information except as we specifically authorize in writing. Distributor
will return our confidential information and all copies upon termination of
this Agreement, or at our request, if earlier.
13. Distributor may not transfer or sublicense the Software except as
specifically allowed under this Agreement.
Distributor may not in any event export to any country under U.S. Commerce
Department restriction, or rent or electronically transmit the Software.
Any attempted assignment, delegation, sublicense or transfer by you of the
Software, this Agreement, or your rights to anyone is void and terminates
this Agreement automatically, unless we have explicitly given permission in
this Agreement or otherwise in writing.
14. This Agreement remains in effect for one year from the Effective Date
below unless otherwise terminated earlier.
After the initial term, this Agreement can renew upon Sagent's review of
the specified minimum revenue goals attained, unless otherwise terminated.
You may terminate this Agreement at any time. Either you or we may
terminate this Agreement, without liability and with or without cause, at
the end of the initial one year term, or with 90 days' written notice at
any time thereafter. Sagent will not agree to any renewal unless you have
submitted, at least 60 days prior to the end of the term, a business plan
for the following year acceptable to us. We may terminate this Agreement
immediately if you breach it, if your principals or ownership change, or if
you enter bankruptcy, insolvency, liquidation or similar proceedings. On
termination, you will return the Software and all copies to us, give us a
final accounting, and pay all outstanding License Fees and other amounts
due. You will also make no further use of the Software or our trademarks,
grant no more sublicenses, and return all copies of the Software in your
possession to us on termination. All proprietary rights automatically
revert to us. Sections 7-8 and 10-15 of this Agreement will remain in
effect. Software sublicenses properly granted and paid for prior to
termination will also remain in effect according to their terms.
<PAGE> 85
15. The following terms also apply.
This is the full and final agreement between you and us on this subject,
and supersedes any earlier promises, representations or agreements. This
Agreement may only be changed if you and our authorized representative do
so in writing. No inconsistent, additional, or preprinted terms on your
purchase order or other business form will apply. You are an independent
contractor, not our agent, partner, franchisee, joint venture or employee.
Waivers not given in writing may be revoked at any time without liability.
Invalid provisions do not affect the enforceability of the others. We are
entitled to injunctive relief for violations of our copyrights, trade
secrets or other proprietary rights. We reserve all rights not granted
specifically in this Agreement. All notices shall be in writing and in
English and may be sent by cable, telecopy, or air mail, return receipt
requested, sent to the attention of the Legal Department at the addresses
first set forth above, and shall be deemed received as follows: cable and
telecopy, 24 hours after transmission; and registered airmail, 10 days
after delivery to the postal authorities by the party serving notice. This
Agreement will be construed, interpreted and governed by the substantive
laws of the State of California. Any legal action arising out of or related
to this Agreement shall be brought only in a state or federal court of
competent jurisdiction located in California.
Sagent technology Inc. Distributor
--------------------------------- ---------------------------------
--------------------------------- ---------------------------------
--------------------------------- ---------------------------------
--------------------------------- ---------------------------------
Effective Date:
----------------------
<PAGE> 86
Schedule No.
--------------------
Non-Exclusive Sagent Software Distribution Agreement
This Schedule is part of the Non-Exclusive Sagent Software Distribution
Agreement ("Agreement") entered into on between Sagent
-----------------
Technology, Inc., 2225 E. Bayshore Rd., Suite 100, Palo Alto, CA 94303
("Sagent") and
----------------------------------------------------
- -------------------------------------------------------------- ("Distributor")
1. "Software," "Licensee Fees."
The Software products that you are permitted to use under Section 4 of
the Agreement are the products listed in the International Price List,
attached as Exhibit B, which you have received for Demonstration
purposes.
The Software that you are permitted to market and sublicense under
Section 5 of the Agreement are developer versions of the products
listed in the attached International Price List. (see Exhibit B) If
you are using a developer license you must pay the applicable License
Fee for any Software you use.
Other products and/or versions may be added to this Agreement only if
you and our authorized representative agree to do so in a written
schedule.
The License Fees you must pay us for each Software license you
purchase from us for each copy of the Software you sublicense to
others is the recommended International list price less the following
Distributor discount: fifty percent (50%).
2. Territory
The Territory is .
----------------
3. End-User License Agreement.
The basic license and warranty terms and information required with
respect to end-user sublicensees are set forth in the sample end user
software license agreement and schedule attached as Exhibit A.
4. Minimum Target Volume.
Your revenue objective for the six-month term of this Agreement is set
out below and is based on net product revenue dollars to Sagent. In
the event that our License Fee revenues from you at the end of the
six-month term are less than those specified, we have the right, in
our sole discretion, to terminate the Agreement on 30 days' written
notice to you. The minimum revenue goal in order to be considered for
renewal of Agreement, at Sagent's discretion, is 100,000 USD, at the
International Discounted List Price and net of all taxes.
5. Support Services.
Distributor will offer first-line update, Hotline and related
technical support to its customers. Distributor must purchase update
and Hotline support from us or our designated support representative
for the annual fee for Hotline support is our then-current published
price for such Hotline support. Distributor will provide all customer
support and pay us an annual fee for each sale of such services you
make to your customers for support of Product licenses. The annual fee
will be Ten Percent (10%) of the International Product List Price.
<PAGE> 87
6. Marketing Materials
You may order marketing materials from us; there may be a standard
charge for certain materials or quantities.
7. Training
Distributor, in order to be certified to perform training and have
access to Sagent's training material, needs to send at least one
representative to attend a one-week certification class at Sagent
Technology, Inc.'s Headquarters in Palo Alto, CA, US. The fee for the
course is $10,000 USD, plus travel and expenses. Classes are held once
a month.
8. Other Terms and Conditions.
All terms of the Agreement are incorporated herein and remain in force
except as specifically changed in this Schedule.
SAGENT TECHNOLOGY INC. Distributor: DYNAMICS SOFTWARE
DISTRIBUTION (8) PTC LTD. ("DSD")
Signed: _________________________ Signed: __________________________
Name: _________________________ Name: __________________________
Title: _________________________ Title: __________________________
Effective Date: _________________ Effective Date: __________________
<PAGE> 88
EXHIBIT A
---------
SAGENT SOFTWARE LICENSE AGREEMENT
THANK YOU FOR PURCHASING THIS PRODUCT. IT IS IMPORTANT THAT YOU CAREFULLY READ
THIS AGREEMENT BEFORE OPENING THIS PACKAGE. BY OPENING THIS SEALED PACKAGE, YOU
AGREE TO THE TERMS AND CONDITIONS OF THIS AGREEMENT AND CREATE A BINDING
CONTRACT BETWEEN YOU AND SAGENT TECHNOLOGY, INC. ("SAGENT"). IF YOU DO NOT AGREE
TO THESE TERMS, YOU MAY RETURN THIS PACKAGE UNOPENED TO SAGENT WITHIN THIRTY
(30) DAYS OF PURCHASE FOR A FULL REFUND.
LICENSE
Sagent grants you a non-exclusive, non-transferable license to use this copy of
the software program (the "Software") and accompanying documentation, if any,
and any updates or upgrades thereto provided by Sagent according to the terms
set forth below. If the Software is being provided to you as an update or
upgrade to software which you have previously licensed, than you agree to
destroy all copies of the prior release of this software within thirty (30) days
after entering into this Agreement; provided, however, that you may retain one
copy of the prior release for backup purposes.
You may:
a. install the Software on only one of the following, as specified on your
Order Form or other signed agreement with Sagent (the "Governing Terms");
(i) (if specified as "stand alone" or "single user" version) a stand alone
or computer network node from which node the Software cannot be accessed by
another computer; or (ii) (if specified as a "LAN" version) a network
server at one site only, which server provides access to multiple
computers, up to the maximum number of computers of concurrent users
specified in such Governing Terms; or (iii) if specified as a "multi-user
pack", the number of computer nodes (network or stand alone) up to the
number of users as specified in such Governing Terms.
b. make one (1) copy of the Software in machine readable form solely for
backup purposes, provided that you reproduce all proprietary notices on the
copy; and
c. physically transfer the Software from (as applicable): (i) one stand alone
computer or network node to another stand alone computer or network node;
or from (ii) one server to another server, provided that the Software is
used on only one computer, network node or server at a time; or from (iii)
the number of stand alone computers, network nodes or servers to other
stand alone computers, network nodes, or servers, provided that the number
of Software users does not exceed the number specified in the Governing
Terms.
You may not:
a. modify, translate, reverse engineer, decompile, disassemble, or create
derivative works based on the Software (except to the extent that such acts
may not be prohibited under applicable law),
b. copy the Software (except as provided above) or copy the accompanying
documentation,
c. rent, transfer, lease, distribute or grant any rights in the Software or
accompanying documentation in any form to any person without the prior
written consent of Sagent, or
d. remove any proprietary notices, labels, or marks on the Software and
accompanying documentation
This license is not a sale. Title and copyrights to the Software, accompanying
documentation and any copy made by you remain with Sagent or its licensors, as
the case may be. Unauthorized copying of the Software or the accompanying
documentation, or failure to comply with the above restrictions, will result in
automatic termination of this license and will make available to Sagent other
legal remedies.
<PAGE> 89
LIMITED WARRANTY AND DISCLAIMER
Sagent warrants that, for a period of thirty (30) days from the date of
delivery to you, (i) the Software will perform substantially in accordance
with the accompanying documentation, and (ii) the software media on which the
Software is furnished under normal use will be free from defects in materials
and workmanship.
Sagent's entire liability and your exclusive remedy under this warranty (which
is subject to your returning the Software to Sagent) will be, at Sagent's
option, to use reasonable commercial efforts to attempt to correct or work
around errors, to replace the Software Media with functionally equivalent
Software Media, as applicable.
Sagent warrants that the software shall not cause erroneous date calculations
due to miscalculations by the Software as a result of the year 2000 date
change. Sagent further warrants that the software includes the ability to
manage and manipulate all data involving dates or date fields which include
indication of century to ensure year 2000 compatibility.
EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTIES, SAGENT MAKES AND YOU RECEIVE
NO WARRANTIES OR CONDITIONS, EXPRESS, IMPLIED, STATUTORY, OR OTHERWISE, OR IN
ANY COMMUNICATION WITH YOU, AND SAGENT SPECIFICALLY DISCLAIMS ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NONINFRINGEMENT AND THEIR EQUIVALENTS. Sagent does not warrant that the
operation of the Software will be uninterrupted or error free or that the
Software will meet your specific requirements.
SOME STATES OR OTHER JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED
WARRANTIES, SO THE ABOVE EXCLUSIONS MAY NOT APPLY TO YOU. YOU MAY ALSO HAVE
OTHER RIGHTS THAT VARY FROM STATE TO STATE AND JURISDICTION TO JURISDICTION.
LIMITATION OF LIABILITY
IN NO EVENT WILL SAGENT BE LIABLE FOR LOSS OF DATA, LOST PROFITS, COST OF
COVER, OR OTHER SPECIAL, INCIDENTAL, PUNITIVE, CONSEQUENTIAL, OR INDIRECT
DAMAGES ARISING FROM THE USE OF THE SOFTWARE OR ACCOMPANYING DOCUMENTATION,
HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY. THIS LIMITATION WILL APPLY EVEN
IF SAGENT OR AN AUTHORIZED DISTRIBUTOR HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGE. IN NO EVENT WILL SAGENT'S LIABILITY EXCEED THE AMOUNTS PAID FOR
THE SOFTWARE. YOU ACKNOWLEDGE THAT THE AMOUNTS PAID BY YOU FOR THE SOFTWARE
REFLECT THIS ALLOCATION OF RISK.
SOME STATES OR OTHER JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
LIABILITY FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, SO THE ABOVE LIMITATIONS AND
EXCLUSIONS MAY NOT APPLY TO YOU.
LANGUAGE
The parties hereto confirm that it is their wish that this Agreement, as well
as other documents relating hereto, have been and shall be written in the
English language only.
Les parties aux presentes confirment leur volonte que cette convention de meme
que tous les documents y compris tout avis qui s'y rattache, soient rediges en
langue anglaise.
GENERAL
This Agreement shall not be governed by the 1980 U.N. Convention on Contracts
for the International Sale of Goods; rather, this Agreement shall be governed
by the laws of the State of California, U.S.A., including its Uniform
Commercial Code, without reference to conflicts of laws principles. This
Agreement is the entire Agreement between us and supersedes any other
communications or advertising with respect to the Software and accompanying
documentation. If any provision of this Agreement is held invalid or
unenforceable, such provision shall be revised to the extent necessary to cure
the invalidity or unenforceability, and the remainder of
<PAGE> 90
this Agreement shall continue in full force and effect. The Software and
accompanying documentation are deemed to be "commercial computer software" and
"commercial computer software documentation", respectively, pursuant to DFAR
Section and FAR Section, as applicable. Any use, modification, reproduction,
release, performing, displaying or disclosing of the Software and accompanying
documentation by the U.S. Government shall be governed solely by the terms of
this Agreement and shall be prohibited except to the extent expressly permitted
by the terms of this Agreement. You agree not to allow the Software to be sent
to or used in any other country except in compliance with applicable U.S. laws
and regulations. In the event of any conflict between any provision of this
Agreement and any applicable law, the provision or provisions of this Agreement
affected shall be modified to remove such conflict and permit compliance with
such law and as so modified this Agreement shall continue in full force and
effect.
If you have any questions, please contact in writing: Sagent Technology, Inc.
Customer Service, 2225 East Bayshore Rd. Suite 100, Palo Alto, California 94303.
<PAGE> 91
EXHIBIT B
INTERNATIONAL PRICE LIST
<TABLE>
<CAPTION>
SAGENT PRODUCT & DESCRIPTION PRODUCT INCLUDES INTL. PRICE
<S> <C> <C>
Data Mart Population Package 1 Data Mart Server $ 35,000
This package provides data mart population 1 Sagent Admin.
capabilities (extraction, transformation and load.) 1 Design Studio
Client/Server OLAP Package 1 Data Mart Server $ 70,000
This package provides end user OLAP capabilities 1 Sagent Admin.
for client/server users. No data mart population 1 Design Studio with Analysis
capabilities are included. 20 Information Studios
20 Analysis
Web OLAP Package 1 Data Mart Server $125,000
This package provides end user OLAP capabilities 1 Sagent Admin.
for client/server and unlimited Web users. 1 Design Studio with Analysis
20 Information Studios
20 Analysis
1 Sagent WebLink
Integrated Client/Server Package 1 Data Mart Server $ 90,000
This package provides a combination of the Data 1 Sagent Admin.
Mart Population and Client/Server OLAP 1 Design Studio with Analysis
Packages. 20 Information Studios
20 Analysis
Integrated Web Package 1 Data Mart Server $150,000
This package provides a combination of the Data 1 Sagent Admin.
Mart Population and Web OLAP Packages. 1 Design Studio with Analysis
20 Information Studios
20 Analysis
1 Sagent WebLink
Sagent Design Studio* 1 Design Studio $ 4,200
Sagent Information Studio* 5 Pack Sagent Info Studio $ 650
Crystal Reports* 5 Pack Crystal Reports $ 2,800
Sagent Administration* 1 Sagent Admin. $ 4,200
Sagent Analysis* 5 Pack Sagent Analysis $ 7,000
Sagent WebLink* 1 WebLink Server $ 56,000
Software Maintenance-One Year Technical Support & Upgrades 15% of SW Price
*These prices are only available to
customers after purchasing one of the above
packages.
</TABLE>
<PAGE> 92
EXHIBIT I
SEVERITY 1, 2 AND 3 DEFINITION AND PROBLEM RESOLUTION
<PAGE> 93
CLASSIFICATION OF PROBLEM:
<TABLE>
<CAPTION>
Classification Criteria
- -------------- ------------------------------------------------------------
<S> <C>
Severity 1 Business Critical Failures: An error or failure which
materially impacts the functions of the business, prevents
all useful work from being done or which disables major
functions from being performed.
Severity 2 System Defect with Workaround: Either a critical error for
which a work around exists or else a non-critical error
that significantly affects the functionality of the Product.
Severity 3 Benign Error: An isolated or benign error, or a Product
enhancement request. This is an error which does not
significantly affect the functionality of the Product,
disables only certain non-essential functions and does not
materially impact system performance.
</TABLE>
RESPONSE LEVELS:
<TABLE>
<CAPTION>
Response Level Description
- -------------- ------------------------------------------------------------
<S> <C>
1st Level Telephone acknowledgment of receipt of report of an error
or problem.
2nd Level Patch or work around (Program or manual), or temporary
release or update release, which allows the user to
continue to use all functions in the Products in all
material respects.
Final Level Official fix, update or release.
</TABLE>
PROBLEM RESOLUTION
Upon receipt from the distributor of a report of an error or problem,
Sagent shall take prompt corrective action to remedy the reported error
or problem as follows within the following time periods.
<TABLE>
<CAPTION>
Classification 1st Level Final Level
- -------------- --------- -----------
<S> <C> <C>
Severity 1 under 1 hour Worked on continuously with best efforts
to provide an official fix or workaround
within 48 hours.
Severity 2 under 2 hours Permanent correction in next scheduled
release, unless otherwise agreed.
Severity 3 within 2 hours Permanent correction when the particular
program in next modified, unless otherwise
agreed.
</TABLE>
Distributor Maintenance Services will also include: Maintenance Releases, in
which Supplier will provide copyrighted in-line releases and workarounds as
available; Upgrades, in which Supplier will provide new product releases
(signified by a change in the version number) as substitutes for covered
Products; and other generally available Technical Materials. Note that
Maintenance Releases and Upgrades, where applicable, may not be used to increase
the total number of copies of the Products. After upgrade or maintenance this
agreement will only apply to the upgraded or maintained versions of a Products;
Distributor agrees to destroy or archive (but not use or transfer) the prior
version. Except as otherwise stated in this Agreement, Product upgrades to new
platforms are generally not available free of charge.
Supplier warrants that it will undertake all reasonable efforts to provide
technical assistance under this Agreement and to rectify or provide solutions
to problems where the Products does not function as described in the Products
documentation, but Supplier does not guarantee that all problems will be solved
or that any item will be error-free. Supplier will provide Distributor with
substantially the same level of service throughout each annual Maintenance Term
of this Agreement. Supplier may from time to time,
<PAGE> 94
however, discontinue Products or versions, and stop supporting Products or
versions within a reasonable time after discontinuance, or otherwise discontinue
any support services. THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES,
CONDITIONS OR PROMISES TO DISTRIBUTOR OR ANY THIRD PARTY, EXPRESS OR IMPLIED,
RELATED TO THE SOFTWARE OR ANY SERVICES SUPPLIER MAY PROVIDE, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OR ARISING BY STATUTE, LAW OR TRADE DEALING OR USAGE. EXCEPT
AS PROVIDED IN THIS AGREEMENT, ALL MATERIALS AND SERVICES ARE PROVIDED "AS IS."
The Products, Upgrades, Maintenance Releases, and Technical Materials are
Supplier's copyrighted property, and may not be copied, distributed, or
transferred, or otherwise used except as Supplier has expressly permitted in
this Agreement or otherwise in writing.
<PAGE> 95
EXHIBIT J
SAGENT'S MAINTENANCE AND TECHNICAL SUPPORT GUIDELINES AND AGREEMENTS
<PAGE> 96
Sagent Technology
Professional Support
One Year Agreement
SAGENT TECHNOLOGY ("WE") WILL PROVIDE YOU THE PROFESSIONAL SUPPORT SERVICES
LISTED BELOW, FOR THE SOFTWARE AND PERSONS INDICATED.
Available Support Services will include telephone support, in which we will
answer technical questions from designated persons about the installation
and use of covered Software products; Maintenance Releases, in which we
will provide our copyrighted in-line releases and workarounds as available
(we will not undertake individual fixes for you); Upgrades, in which we
will provide new product releases (signified by a change in the version
number) as substitutes for covered Software; and other generally available
Technical Materials. Note that Maintenance Releases and Upgrades, where
applicable, may not be used to increase the total number of copies of the
Software. After upgrades or maintenance this agreement will only apply to
the upgraded or maintained versions of a Software product; you agree to
destroy or archive (but not use or transfer) the prior version.
YOU WILL PAY US THE APPLICABLE SUPPORT FEES.
Support Fees must be prepaid, unless you have established credit terms with
us.
WE MAY CHANGE OUR AVAILABLE PRODUCT SUPPORT SERVICES FROM TIME TO TIME.
We will undertake reasonable efforts to provide technical assistance under
this agreement and to rectify or provide solutions to problems where the
Software does not function as described in the Software documentation, But
we do not guarantee that all problems will be solved or that any item will
be error-free. We will provide you with substantially the same level of
service throughout the term of this Agreement. We may from time to time,
however, discontinue Software products or versions, and stop supporting
Software products or versions 1 year after discontinuance, or otherwise
discontinue any support services. THE FOREGOING WARRANTY IS IN LIEU OF ALL
OTHER WARRANTIES, CONDITIONS OR PROMISES TO YOU OR ANY THIRD PARTY, EXPRESS
OR IMPLIED, RELATED TO THE SOFTWARE OR ANY SERVICES WE MAY PROVIDE,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OR CONDITION OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR ARISING BY STATUTE,
LAW OR TRADE DEALING OR USAGE. EXCEPT AS PROVIDED ABOVE, ALL MATERIALS AND
SERVICES ARE PROVIDED "AS IS." We are not liable for incidental, special or
consequential damages for any reason (including loss of data or other
business or property damage), even if foreseeable. Our liability in all
events for any damages, howsoever caused, will not exceed the applicable
fees that you have paid us.
THIS PROFESSIONAL SUPPORT AGREEMENT WILL BE EFFECTIVE FOR ONE YEAR.
You and we may extend or terminate this agreement as provided below. At the
end of any one-year term, you may renew this agreement with our consent
under the terms of the Professional Support Agreement then in effect by
paying the Support Fees in effect at that time. Either you or we may
terminate this agreement for material breach, including nonpayment, at any
time; in the absence of material breach by Sagent, Support Fees are not
refundable. This is the full and final agreement between you and us, and
supersedes any promises, representations or agreements relating to the
subject of this agreement. This agreement may only be changed if you and
our authorized representative do so in writing. No inconsistent,
additional, or preprinted terms on your purchase order or other business
form will apply. You may not assign this agreement without our written
consent. Any unauthorized assignment terminates this agreement
automatically. The Software, Upgrades, Maintenance Releases, and Technical
Materials are our copyrighted property, and may not be copied, distributed,
or transferred, or otherwise used except as we have expressly permitted in
the relevant license agreement (the terms of which are incorporated into
this agreement by reference) or otherwise in writing.
SOFTWARE COVERED:
Software Name & Version Number of Copies
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
-----------------------------------------------------------
PERSONS COVERED:
Person(s):
Name Phone Number
___________________________________________________________
_________________________________( )_____________________
_________________________________( )_____________________
SAGENT TECHNOLOGY, INC.
Signed: _____________________________________________________
Name: _______________________________________________________
Title: ______________________________________________________
Effective Date: _____________________________________________
You: ________________________________________________________
Signed: _____________________________________________________
Name: _______________________________________________________
Title: ______________________________________________________
Address: ____________________________________________________
SAGENT TECHNOLOGY CONFIDENTIAL 02/24/98
<PAGE> 97
[SAGENT LOGO]
SAGENT TECHNOLOGY
PROFESSIONAL SUPPORT PROGRAM REFERENCE GUIDE
Sagent Professional Support provides you with fast, expert technical support for
all Sagent products. It allows you the ease and convenience of communicating via
the phone or electronically, and a well defined escalation path that ensures
your technical issues will receive the proper attention.
This reference guide is an outline to the services currently available under
the Professional Support program. Use this guide to determine the best way to
get the most from this service.
TECHNICAL SUPPORT SERVICES
The Professional Support program is designed to give you access to Sagent
Technology's Technical Support Analysts. These analysts are available to insure
the continued operation of your Sagent product. This includes working with a
Sagent system that has gone down, assisting with the initial setup of new
systems, and other problems that arise from the use of our products. Technical
Support Services does not include the development of custom code, or detailed
product training.
DESIGNATED PROFESSIONAL SUPPORT CONTACTS
Maintaining a clear line of communication between your organization and
Sagent's Technical Support department is key to making sure you get the most
from the Professional Support program. As such, it is important that you
designate specific individuals within your organization that become the primary
contacts for working with Sagent Technical Support. These individuals, who are
familiar with the technical workings of your company's systems, help by
managing the flow of information to the Support Analysts to insure that
responses are focused on the problem at hand. The number of contacts within
your organization that have access to Sagent Technical Support is specified in
your support agreement, and is determined by you based on your need.
WORKING WITH TECHNICAL SUPPORT
Sagent Technical Support tracks your issues based on an incident model. While
we do not limit you to a specific number of incidents, we do use incidents to
make sure that each issue that you have is resolved to the best of our ability.
An incident is defined as a single support issue that can not be broken down
into
Sagent Technology Page 1
<PAGE> 98
smaller support issues. Each of these incidents is tracked individually, and
can be referenced by you when you contact us.
CONTACTING SAGENT TECHNICAL SUPPORT BY PHONE
Use the phone to contact Sagent Technical Support whenever you have a
time-critical or business-critical problem. Sagent Technical Support is
available from 6:00 AM to 5:00 PM PST. Monday through Friday. If we are unable
to answer your call immediately, you will be given the option to leave a voice
mail message. In the message, please be sure to give us your name, company
name, a description of the problem, and a phone number that you can be reached
at. All calls that go to voice mail will be responded to within two business
hours. If we fail to connect with you on the return call, we will leave a
message (if possible) with an appropriate time to follow up.
CONTACTING SAGENT TECHNICAL SUPPORT BY ELECTRONIC MAIL
For problems that are not time-critical, you can contact us via the Internet at
[email protected]. We will respond to all mail messages within one
business day of the time it arrives at Sagent Technical Support. Please be sure
to include a full description of the problem, your name, your company's name,
and a return e-mail address.
ESCALATION PROCESS
Step 1 - All new technical support issues are handled initially by our support
analysts. Our support analysts are trained to deal with the majority
of all support issues, and most support issues are resolved at this
step.
Step 2 - If an issue comes up that cannot be handled by the support analyst,
it is given one of the following priorities.
A) CRITICAL - For business outages, or issues, that have a serious
customer impact which threatens future productivity.
B) IMPORTANT - For issues that do not have a significant current
impact on customer productivity.
Step 3 - CRITICAL issues are immediately escalated to Sagent's upper management
team to determine the proper course of action.
IMPORTANT issues are escalated to an escalation review committee,
which meets regularly to determine the proper course of action for
these escalation's.
Step 4 - The course of action determined in Step 3 is communicated to the
customer, and an estimated time to complete is given.
Sagent Technology Page 2
<PAGE> 99
Sagent Technology
Premium Support
One Year Agreement
SAGENT TECHNOLOGY ("WE") WILL PROVIDE YOU THE PREMIUM SUPPORT SERVICES LISTED
BELOW, FOR THE SOFTWARE AND PERSONS INDICATED.
Available Support Services may include 24 hours, seven days a week
telephone support (telephone support during the holidays should be arranged
one week in advance of the holiday), in which we will answer technical
questions from designated persons about the installation and use of covered
Software products; Maintenance Releases, in which we will provide our
copyrighted in-line releases and workarounds as available (this does not
include full Software products or Upgrades; we will not undertake
individual fixes for you); Upgrades, in which we will provide new product
releases (signified by a change in the version number) as substitutes for
covered Software; and other generally available Technical Materials. Note
that Maintenance Releases and Upgrades, where applicable, may not be used
to increase the total number of copies of the Software. After upgrade or
maintenance this agreement will only apply to the upgraded or maintained
versions of a Software product; you agree to destroy or archive (but not
use or transfer) the prior version. Software upgrades are generally not
available free of charge.
YOU WILL PAY US THE APPLICABLE SUPPORT FEES.
Support Fees must be prepaid, unless you have established credit terms with
us.
WE MAY CHANGE OUR AVAILABLE PRODUCT SUPPORT SERVICES FROM TIME TO TIME.
We will undertake reasonable efforts to provide technical assistance under
this agreement and to rectify or provide solutions to problems where the
Software does not function as described in the Software documentation, but
we do not guarantee that all problems will be solved or that any item will
be error-free. We will provide you with substantially the same level of
service throughout the term of this Agreement. We may from time to time,
however, discontinue Software products or versions, and stop supporting
Software products or versions within a reasonable time after
discontinuance, or otherwise discontinue any support services. THE
FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, CONDITIONS OR
PROMISES TO YOU OR ANY THIRD PARTY, EXPRESS OR IMPLIED, RELATED TO THE
SOFTWARE OR ANY SERVICES WE MAY PROVIDE, INCLUDING WITHOUT LIMITATION ANY
IMPLIED WARRANTY OR CONDITION OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE, OR ARISING BY STATUTE, LAW OR TRADE DEALING OR USAGE.
EXCEPT AS PROVIDED ABOVE, ALL MATERIALS AND SERVICES ARE PROVIDED "AS IS."
We are not liable for incidental, special or consequential damages for any
reason (including loss of data or other business or property damage), even
if foreseeable. Our liability in all events for any damages, howsoever
caused, will not exceed the applicable fees that you have paid us.
THIS PREMIUM SUPPORT AGREEMENT WILL BE EFFECTIVE FOR ONE YEAR.
You and we may extend or terminate this agreement as provided below. At the
end of any one-year term, you may renew this agreement with our consent
under the terms of the Premium Support Agreement then in effect by paying
the Support Fees in effect at that time. Either you or we may terminate
this agreement for material breach, including nonpayment, at any time; in
the absence of material breach by Sagent, Support Fees are not refundable.
This is the full and final agreement between you and us, and supersedes any
promises, representations or agreements relating to the subject of this
agreement. This agreement may only be changed if you and our authorized
representative do so in writing. No inconsistent, additional, or preprinted
terms on your purchase order or other business form will apply. You may not
assign this agreement without our written consent. Any unauthorized
assignment terminates this agreement automatically. The Software, Upgrades,
Maintenance Releases, and Technical Materials are our copyrighted property,
and may not be copied, distributed, or transferred, or otherwise used
except as we have expressly permitted in the relevant license agreement
(the terms of which are incorporated into this agreement by reference) or
otherwise in writing.
SOFTWARE COVERED:
SOFTWARE NAME AND VERSION NUMBER OF COPIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOFTWARE AND PERSONS COVERED:
PERSON(S):
NAME PHONE NUMBER
- --------------------------------------------------------------------------------
( )
- --------------------------------------------------------------------------------
( )
- --------------------------------------------------------------------------------
SAGENT TECHNOLOGY, INC.
Signed: ________________________________________________________________________
Name: __________________________________________________________________________
Title: _________________________________________________________________________
Effective Date: ________________________________________________________________
You: ___________________________________________________________________________
Signed: ________________________________________________________________________
Name: __________________________________________________________________________
Title: _________________________________________________________________________
Address: _______________________________________________________________________
Sagent Technology Confidential 02/24/98
<PAGE> 100
[LOGO]
SAGENT TECHNOLOGY
PREMIUM SUPPORT PROGRAM REFERENCE GUIDE
Sagent Premium Support is provided for our customers that require more security
when implementing Sagent's products in mission critical environments. In order
to provide this security, the Premium Support Program provides round the clock
access to Sagent Technical Support team via the phone, as well as electronic
support via the Internet. Sagent's Premium Support Program also includes an
escalation process that is designed to make sure technical issues receive the
proper attention.
This reference guide is an outline to the services currently available under the
Premium Support program. Use this guide to determine the best way to get the
most from this service.
TECHNICAL SUPPORT SERVICES
The Professional Support Program is designed to give you access to Sagent
Technology's Technical Support Analysts 24 hours a day, seven days a week. These
analysts are available to insure the continued operation of your Sagent product.
This includes working with a Sagent system that has gone down, assisting with
the initial setup of new systems, and other problems that arise from the use of
our products. Technical Support Services does not include the development of
custom code, or detailed product training.
DESIGNATED PROFESSIONAL SUPPORT CONTACTS
Maintaining a clear line of communication between your organization and Sagent's
Technical Support department is key to making sure you get the most from the
Professional Support program. As such, it is important that you designate
specific individuals within your organization that become the primary contacts
for working with Sagent Technical Support. These individuals, who are familiar
with the technical workings of your company's systems, help by managing the flow
of information to the Support Analysts to insure that responses are focused on
the problem at hand. The number of contacts within your organization that have
access to Sagent Technical Support is specified in your support agreement, and
is determined by you based on your need.
WORKING WITH TECHNICAL SUPPORT
Sagent Technical Support tracks your issues based on an incident model. While we
do not limit you to a specific number of incidents, we do use incidents to
Sagent Technology Page 1
<PAGE> 101
make sure that each issue that you have is resolved to the best of our ability.
An incident is defined as a single support issue that can not be broken down
into smaller support issues. Each of these incidents is tracked individually,
and can be referenced by you when you contact us.
CONTACTING SAGENT TECHNICAL SUPPORT BY PHONE
Use the phone to contact Sagent Technical Support whenever you have a
time-critical or business-critical problem. Sagent Technical Support is
available to Premium Support customers 24 hours a day, seven days a week.
During regular business hours your calls are given priority in the phone queue,
if we are unable to answer your call immediately, you will be given the option
to leave a voice mail message. Phone calls placed outside regular business
hours automatically go to voice mail, and a designated Support Analyst is
paged. In either case voice mail messages are responded to within two hours. In
the message, please be sure to give us your name, your companies name, a
description of the problem, and a phone number that you can be reached at. If
we fail to connect with you on the return call, we will leave a message (if
possible) with an appropriate time to follow up. Sagent Technology's normal
business hours are Monday through Friday from 6:00 AM to 5:00 PM PST, excluding
some holidays.
CONTACTING SAGENT TECHNICAL SUPPORT BY ELECTRONIC MAIL
For problems that are not time-critical, you can contact us via the Internet at
[email protected]. We will respond to all mail messages within one
business day of the time it arrives at Sagent Technical Support. Please be sure
to include a full description of the problem, your name, your companies name,
and a return e-mail address.
ESCALATION PROCESS
Step 1 - All new technical support issues are handled initially by our
support analysts. Our support analysts are trained to deal with the
majority of all support issues, and most support issues are resolved
at this step.
Step 2 - If an issue comes up that can not be handled by the support analyst,
it is given one of the following priorities.
A) CRITICAL - For business outages, or issues, that have a serious
customer impact which threatens future productivity.
B) IMPORTANT - For issues that do not have a significant current
impact on customer productivity.
Step 3 - CRITICAL issues are immediately escalated to Sagent's upper
management team to determine the proper course of action.
IMPORTANT issues are escalated to an escalation review committee,
Sagent Technology Page 2
<PAGE> 102
which meets regularly to determine the proper course of action for
these escalations.
Step 4 - The course of action determined in Step 3 is communicated to the
customer, and an estimated time to complete is given.
Sagent Technology Page 3
<PAGE> 103
EXHIBIT K
METHODS AND STANDARDS OF QUALITY FOR PRODUCTION
To be added upon availability
<PAGE> 104
TRADE MARK LICENSE
This Trademark License Agreement (the "AGREEMENT") is entered into on April 8,
1998 (the "EFFECTIVE DATE") between Sagent Technology, Inc. a California
corporation with offices at 2225 East Bayshore Road, Suite 100, Palo Alto, CA
94303 ("OWNER") and Magnolia II Vermogensverwaltung GmbH with offices at c/o
Buro Klaus Luft, Gut Keferloh 1 B, D - 85630 Grasbrunn/Munich, Germany ("USER").
ARTICLE 1 RECITALS
1.1 The Owner owns or is the Licensee of Trade Marks used to identify its
products and Services in the software industry.
1.2 The User has rights to distribute the Owner's Software and Services in
the Territory and desires to obtain limited, non exclusive rights to use
the Trade Marks with the Software and Services for the term of this
Agreement.
IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED HEREIN, THE PARTIES AGREE AS
FOLLOWS:
ARTICLE 2 DEFINITIONS
In this Agreement the following terms shall bear the following meanings:
2.1 "DISTRIBUTION AGREEMENT" shall mean the Exclusive Software Distribution
Agreement executed on April 8, 1998 between Owner and User.
2.2 "METHODS" shall mean the Methods set out in Exhibit D hereto which
relate to the creation and duplication of the Software and Services
for distribution to third party end users.
2.3 "RULES" shall mean the rules which are set out in Exhibit B hereto
which govern the manner in which the Trade Marks may be displayed.
2.4 "SERVICES" shall mean the services and related documentation further
described in Exhibit C hereto and which are provided by User which may
be identified through use of the Trade Marks.
2.5 "SOFTWARE" shall mean the software and related documentation further
described in Exhibit C hereto and which are provided by User which may
be identified through use of the Trade Marks.
2.6 "STANDARD OF QUALITY" shall mean the standards of quality, further
described in Exhibit D hereto, which relate to the manner of display of
the Trade Marks with the Software and Services.
2.7 "TERRITORY" shall be the territory set forth in the Distribution
Agreement.
<PAGE> 105
2.8 "TRADE MARKS" shall mean the trademarks set out in Exhibit A hereto.
3 USE OF TRADE MARKS
3.1 PERMISSION TO USE. The Owner hereby grants the User for the term of
this Agreement a license to use the Trade Marks in the Territory as
trade marks upon or in relation to the Software and Services and the
advertising and licensing thereof provided that the User complies with
the terms of this Agreement. User agrees to follow the Rules which
govern the manner in which the Trade Marks are displayed. Owner hereby
also agrees to permit the User to use the Trade Mark "Sagent" in its
company name for the term of this Agreement. Such permission will not
extend to any subsidiaries or affiliates of User. The parties intend
that the company name will be "Sagent Technology GmbH". The User will
not use a different company name without the Owner's written
permission which shall not be unreasonably withheld.
3.2 Such license is non exclusive and non transferable.
3.3 The User undertakes not to use any of the Trade Marks whether by
themselves or as part of any other name for identification of Software
or Services or other products or services not manufactured or provided
by the Owner.
3.4 STANDARD OF QUALITY. The permission to use the Trade Marks shall
apply only to the Software and Services made according to the Methods
disclosed hereunder provided that any such Software and Services
comply with the Standard of Quality set out in Exhibit D.
4. SPECIMEN SOFTWARE AND INSPECTION
4.1 At Owner's request, User shall, at its expense, submit to Owner
copies of the Software and any related documentation and related
collateral materials to Owner for inspection and testing. Such testing
will be completed 10 business days after it is received by Owner.
4.2 User agrees to immediately destroy all materials which contain any of
the Trade Marks which do not conform to the terms and conditions of
this Agreement.
4.3 User shall permit Owner or its agent or representative, at all
reasonable times to enter any place where the Software and related
materials with the Trade Marks are stored for the purposes of
inspecting and testing the same and of checking the method of
manufacture, processing, packaging, or storing, in order to ascertain
that they attain the Standard of Quality.
2
<PAGE> 106
5. APPLICATION OF TRADE MARKS
5.1 User shall identify all the Software and Services manufactured or
provided and licensed hereunder by using the Trade Marks permanently
affixed to the Software or the materials related to provision of the
Services. User shall supply to the Owner copies, specimens, or
representations of each different depiction of each Trade Mark the
User proposes to use. Users shall comply with the Rules and the User
shall not use any other or additional trade mark upon or in relation
to the Software or Services except with the prior written consent of
the Owner.
6. WARRANTY
6.1 User shall not knowingly use or consent to the use of a Trade Mark
except in relation to the Software and the Services which must in all
instances comply with the Standard of Quality.
7. PRESERVATION OF GOODWILL
7.1 User acknowledges that Owner is, and will remain, the sole and
exclusive owner of all goodwill associated with the Trade Marks. User
recognizes the value of the goodwill associated with the Trade Marks,
and acknowledges that such value is owned by and belongs solely and
exclusively to Owner. User waives any right it may have to receive any
compensation or reparations prior to, upon, or following termination
or expiration of this agreement under the law of the territory or
otherwise. Owner will not be liable to User on account of termination
or expiration of this Agreement, or otherwise, for reimbursement or
damages for the loss of goodwill, prospective profits or anticipated
income, or on account of any expenditures, investments, leases or
commitments made by User or for any other reason whatsoever based upon
or growing out of such termination or expiration or otherwise. User
acknowledges that (i) it has no expectation and has received no
assurances that any investment by it in the promotion of products
utilizing the Trade Marks will be recovered or recouped or that it
will obtain any anticipated amount of profits by virtue of this
Agreement, and (ii) it will not have or acquire by virtue of this
Agreement or otherwise any vested, proprietary or other right in the
Trade Marks or in goodwill created in the Trade Marks. User
acknowledges that the provisions of this section are an essential
element of this agreement.
3
<PAGE> 107
8. THE TERRITORY
8.1 For the protection of the Owner's rights in the corresponding Trade
Marks in other countries, the User shall not export products bearing
any Trade Mark to any country outside of the Territory without first
obtaining from the Owner written permission to do so.
9. RECOGNITION OF OWNERSHIP
9.1 User recognizes that the Owner is the owner in the Territory of the
Trade Mark and of all goodwill attaching to the business in the
Software and Services in respect of which the Trade Mark is used and
agrees that the Trade Mark shall remain vested in the Owner both
during the term of this Agreement and thereafter in the Territory.
The User agrees never to challenge the validity or Ownership of the
Trade Mark.
9.2 The User shall from time to time include in its advertisements in the
press and elsewhere a statement to the effect that the Trade Marks
are the Trade Marks of the Owner, naming it and giving its address.
9.3 The User shall, to the extent requested by the Owner, or on all
labels or containers used in connection with the sale or license of
the Software and Services include a notice to the effect that the
Trade Marks are the trade marks of the Owner.
10. REGISTRATION OF TRADE MARK IN THE TERRITORY
10.1 In the event that the Owner decides to apply for registration of any
of the Trade Marks in the Territory, or a part thereof the User will
render to the Owner all reasonable assistance towards the obtaining
of a registration.
10.2 If at the time when the Owner desires to apply for registration or as
so applied the User is deemed in law to be the proprietor of the
Trade Mark, so as to make it necessary for the application to be made
or proceeded with in the name of the User, the User will at the
request and expense of the Owner, make or proceed with such
application and do all acts and execute all documents necessary for
obtaining registration to the benefit of the Owner. As soon as is
possible, the User will transfer any and all rights it may have in
the Trade Marks to the Owner.
10.3 On the registration of any of the Trade Marks becoming vested in the
Owner, whether under 10.1 or 10.2 above, the User shall be entitled
to the like rights under such registration as are granted by this
Agreement, and the Owner shall at the request and expense of the User
do all acts and execute all documents for establishing the User as a
User thereunder and where applicable for the registration of the
User's permitted user at the appropriate trade marks authority.
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<PAGE> 108
10.4 After each of the Trade Marks have been registered, the User shall
where practicable, (and in respect of goods to be sold in a country
where the Trade Mark is registered) in the representations of the
Trade Mark used by the User in relation to the said Software and
Services to be sold in the Territory append to, or place adjacent to,
or related to, the Trade Mark, such inscription as is usual or proper
form indicating that the Trade Mark is registered.
11. INFRINGEMENT OR PASSING OFF
11.1 In the event that the User learns of any passing off by another of
any goods or services of the same or similar description and function
as the said Software or Services whether by the use of a similar
trade mark, or imitation or otherwise, or if the User shall learn of
any infringement of any trade mark registration which may be obtained
in respect of the Trade Marks, it shall give notice the Owner giving
such details as are available. With the User's advice and assistance,
Owner will determine the best course to pursue but the Owner shall
not be bound to institute legal proceeding at its own expense.
12. CESSATION OF RIGHT TO USE
12.1 On termination or expiration of this Agreement the User shall cease
to have any right to use the Trade Marks or to represent itself as
being connected with the said Software and Services or with the Owner
(unless for some other reason it be the fact) and the User undertakes
promptly to remove all indications of the Trade Mark on the Software
and Services, its premises, its invoices, its quotations and other
documents and labels. The User shall not thereafter, without the
prior written consent of the Owner, use the Trade Marks or any trade
mark which so nearly resembles any of the Trade Marks, as to be
likely to deceive or cause confusion, and it will procure that its
directors, officers, and employee shall not use the Trade Marks or any
other trade mark so nearly resembling the Trade Marks in respect of
any products or services.
12.2 Any registration of the User as a permitted user of a registered
Trade Mark hereunder shall be expunged on termination or expiration
of this Agreement and the Owner shall be entitled to take all
necessary steps to that end and the User shall cooperate to achieve
this result.
12.4 On termination or expiration of this Agreement the User shall cease
to have any right to use the Trade Mark "Sagent" in its company name
and the User undertakes promptly to change its company name to a new
name not including reference to "Sagent". The User shall not
thereafter use the Trade Mark "Sagent" or any Trade Mark in its
company name which so nearly resembles a Trade Mark, as to be likely
to deceive or cause confusion, and it will procure that its
directors, officers, and employee shall not do so.
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<PAGE> 109
13. PAYMENT
13.1 The User shall pay to the Owner an annual fee of US$1.00 during the
life of this Agreement. Payment shall be due on the first day of
December of each year.
13.2 Any amounts payable under this Agreement are net amounts and are
payable in full to Owner. User is responsible for all taxes, duties
and levies.
14. ANCILLARY
14.1 NO ASSIGNMENT: The benefit of this Agreement shall be personal to the
User who shall not without the prior consent in writing of the Owner
mortgage, or charge the same to any third party nor assign the same,
or part with any of its rights or obligations hereunder, nor (except
as hereinafter provided) purport to grant any sublicense in respect
of the Trade Marks. The Owner shall not be required to give any
consent to assign the rights granted hereunder to any person, firm,
or corporation.
14.2 INDEMNITY: Owner will defend at its expense any action brought
against User to the extent it is based on a claim that a Trade Mark,
when used within the scope of this Agreement, infringes a trademark
in any country of the Territory in which such Trade Mark has been
registered by Owner, and Owner will pay any settlements and any
costs, damages and attorney's fees finally awarded against User in
such action which are attributable to such claim; provided that the
foregoing obligation will be subject to User notifying Owner promptly
in writing of the claim, giving Owner the exclusive control of the
defense and settlement thereof, and providing all reasonable
assistance to Owner in connection therewith.
14.3 GOVERNING LAW: The rights and obligations of the parties under this
Agreement shall not be governed by the U.N. Convention on Contracts
for the International Sales of Goods; rather such rights and
obligations shall be governed and construed under the laws of the
State of California, without reference to conflict of laws and
principles. The jurisdiction of the courts of Germany is expressly
excluded except to the extent that Owner may seek any equitable
remedy to which it may be entitled by reason of User's breach of this
Agreement, from the relevant court in Germany or any other court.
Distributor acknowledges that its breach of this agreement may cause
irreparable harm to Sagent, for which Sagent may obtain injunctive
relief.
14.4 ARBITRATION: In the event of any dispute, controversy or claim
arising out of or relating to this Agreement, or to the breach or
termination hereof (a "Dispute"), the parties agree to resolve the
same as follows:
(a) The parties to the Dispute shall initially attempt to resolve it
through consultations and negotiations.
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<PAGE> 110
(b) If the Dispute has not been resolved amicably within thirty (30) days
after any party provides notice thereof, unless the parties agree
otherwise, the Dispute shall be resolved by final and binding
arbitration in the City and county of Zurich, Switzerland, in
accordance with the Arbitration Rules of the United Nations Commission
on International Trade Law ("UNCITRAL"), as in effect on the date of
this Agreement. The language to be used in the arbitration proceeding
shall be English. The International Chamber of Commerce shall serve as
the appointing authority. The arbitrators shall render a written award
stating the reasons for the decision. Judgment on an arbitration award
or decision may be entered by any court of competent jurisdiction, or
application may be made to such a court for judicial acceptance of the
award or decision and any appropriate order, including enforcement.
(c) Each of the parties hereto consents to the submission of any Dispute
for settlement by final and binding arbitration in accordance with
paragraph (b) above. Such consent shall satisfy the requirements for
an "agreement in writing" pursuant to Article II of the United Nations
Convention on the Recognition and Enforcement of Foreign Arbitration
Awards, done at New York on June 10, 1958.
(d) Each of the parties hereby undertakes to carry out without delay the
provisions of any arbitral award or decision.
14.5 NOTICES: All notices sent to the other party concerning this agreement
shall be in English and addressed to the party at the address set out
at the beginning of the Agreement. All notices sent to Owner shall be
marked to the attention of Sagent.
15. TERMINATION
15.1 NON PAYMENT OR INSOLVENCY: This Agreement may be terminated by either
party, on notice to the other party upon (a) the institution by or
against the other party of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of the other
party's debts where such proceedings are not stayed or withdrawn
within thirty (30) days, or upon (b) the other party's making an
assignment for the benefit of creditors, or upon (c) the other party's
dissolution or ceasing to conduct business in the normal course.
15.2 This Agreement shall remain in effect for the same period as the
Distribution Agreement and no longer.
15.3 BREACH BY EITHER PARTY: This agreement may be terminated by either
party hereunder if the other party fails to perform or observe any of
the terms hereof on its part to be performed and observed and fails to
remedy such breach within thirty days of a notice from the other party
to remedy the same giving adequate particulars of the alleged default
and of the intention of the party serving the notice to terminate this
Agreement under this clause unless such default is made good or
remedied within thirty (30) days. If either party waives
7
<PAGE> 111
its rights due to a breach of any provision of this Agreement such
waiver shall not be construed as a continuing waiver of other
breaches of the same or other provisions. User's agreement with any
third party to distribute software and or services which are
competitive with the Software and Services set out in this Agreement
shall be deemed to be a breach of this Agreement and shall entitle
Owner to terminate this Agreement on thirty days notice.
15.3.1 SALE TO THIRD PARTY: This Agreement shall terminate on the sale of
User to any third party.
15.4 SAVING FOR ACCRUED RIGHTS: Any termination of this Agreement shall be
without prejudice to the rights of either party against the other
which may have accrued up to the date of such termination and
notwithstanding termination, the obligations of each party not to
disclose information received in confidence from the other party
shall remain in effect.
15.5 RETURN OF MATERIALS: At the termination or expiration of this
Agreement, User shall immediately return to Owner all materials which
contain any of the Trade Marks or have had a Trade Mark affixed.
16. ENTIRE AGREEMENT.
16.1 This Agreement sets forth the entire agreement and understanding of
the parties relating to the subject matter herein and merges all
prior agreements, discussions, and understandings between them. No
modification of or amendment to the Agreement, nor any waiver of any
rights under this Agreement shall be effective unless in writing
signed by an officer of Owner and User. The terms and conditions of
this Agreement shall supersede the terms and conditions of User's
purchase order, if any.
17. LIMITATION OF LIABILITY:
17.1 Regardless of whether any remedy fails of its essential purpose, in
no event will owner be liable for incidental, indirect, special or
consequential damages, notwithstanding being aware of the possibility
of such damages.
18. SEVERABILITY.
18.1 If one of the provisions of this Agreement should be or become
invalid, or if this Agreement should have an omission, this shall not
affect the validity of the remaining provisions. In such an event,
the parties are obliged to assist in the incorporation of provisions
which form the closest possible economic equivalent to that which the
parties would have agreed if they had been aware of the invalidity or
if they had considered the point.
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<PAGE> 112
IN WITNESS THEREOF THE PARTIES HERETO HAVE CAUSED THIS INSTRUMENT TO BE DULY
EXECUTED BY THEIR REPRESENTATIVES.
"OWNER" "USER"
SAGENT
---------------------------
By: /s/ THOMAS M. LOUNIBOS By: /s/ INES BERGHOF
--------------------------- ------------------------
Authorized Representative
Name: THOMAS M. LOUNIBOS Name: INES BERGHOF
--------------------------- ------------------------
Title: EVP OF Sales Title: General Manager
--------------------------- ------------------------
Date: April 8, 1998 Date: April 8th, 1998
--------------------------- ------------------------
9
The terms and conditions of this Agreement
<PAGE> 113
EXHIBIT A
THE TRADE MARKS
Sagent: German Trade Mark Registration number:
List of Trade Marks:
10
<PAGE> 114
EXHIBIT B
THE RULES RELATING TO THE DISPLAY OF THE TRADE MARKS
The following Trade Marks must always have the first usage in a
document accompanied by the symbol "TM".
List of Trade Marks:
The Sagent corporate logo will be provided to User in electronic and
printed form.
Samples of each Trade Mark are attached
11
<PAGE> 115
EXHIBIT C
SOFTWARE
Server: Data Movement Server
Web Link Server
Data Access Server
Power User Tools: Sagent Administration Tool
Sagent Design Studio Tool
Sagent Automation Tool
End-User Tools: Information Studio Tool
Analysis Tool
Reporting Tool
Crystal Reporting Tool
Statistical Tool
12
<PAGE> 116
EXHIBIT D
METHODS AND STANDARD OF QUALITY
To be added upon availability
13
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-71369) of our reports dated January 27, 1999 on our audits of the
consolidated financial statements and financial statement schedule of Sagent
Technology, Inc. We also consent to the reference to our firm under the caption
"Experts."
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
San Jose, California
April 1, 1999
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EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 (File No.
333-71369) of our report dated February 20, 1998 on our audit of the financial
statements of Talus, Incorporated. We also consent to the reference to our firm
under the caption "Experts."
/s/ PricewaterhouseCoopers LLP
- ------------------------------
PricewaterhouseCoopers LLP
McClean, Virginia
April 1, 1999
