<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 28, 2000
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------
XACCT TECHNOLOGIES (1997) LTD.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
-------------
<TABLE>
<CAPTION>
ISRAEL 7372 NOT APPLICABLE
<S><C>
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
XACCT TECHNOLOGIES (1997) LTD.
31 HALECHI ST., BNEI-BRAK
51200, ISRAEL
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------
ERIC GRIES
CHIEF EXECUTIVE OFFICER
XACCT TECHNOLOGIES, INC.
2900 LAKESIDE DRIVE
SANTA CLARA, CALIFORNIA 95054
(408) 654-9900
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
-------------
Copies to:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
JOHN T. SHERIDAN, ESQ. CHARLES B. GOTTLIEB, ADV. MAYA LIQUORNIK, ADV. WILLIAM D. SHERMAN, ESQ.
JUNLING MA, ESQ. SARIT MOLCHO, ADV. MEITAR, LIQUORNIK, GEVA & CO. JUSTIN L. BASTIAN, ESQ.
ANTHONY KIKUTA, ESQ. S. FRIEDMAN & CO. 16 ABBA HILLEL STREET JACLYN LIU, ESQ.
WILSON SONSINI GOODRICH & ROSATI ADVOCATES AND NOTARIES RAMAT-GAN, ISRAEL MORRISON & FOERSTER LLP
PROFESSIONAL CORPORATION 3 DANIEL FRISCH STREET (972-3) 610-3100 775 PAGE MILL ROAD
650 PAGE MILL ROAD TEL AVIV, ISRAEL PALO ALTO, CALIFORNIA 94304-1018
PALO ALTO, CALIFORNIA 94304-1050 (972-3) 696-0183 (650) 813-5600
(650) 493-9300
</TABLE>
-------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement is declared effective.
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 to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering./ /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering./ /
If 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 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
<TABLE>
<CAPTION>
===========================================================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED PRICE (1) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Voting Ordinary Shares, nominal value NIS 0.01 per share.................. $75,000,000 $19,800
===========================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee in accordance with Rule 457(a) promulgated under the
Securities Act of 1933.
-------------
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.
===============================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
*******************************************************************************
SUBJECT TO COMPLETION, DATED MARCH 28, 2000
Shares
[XACCT LOGO]
Ordinary Shares
-------------------
Prior to this offering, there has been no public market for our ordinary
shares. The initial public offering price of the ordinary shares is expected to
be between $ and $ per share. We have applied to list our
ordinary shares on The Nasdaq Stock Market's National Market under the symbol
"XCCT."
The underwriters have an option to purchase a maximum of additional
ordinary shares to cover over-allotments of shares.
INVESTING IN OUR ORDINARY SHARES INVOLVES RISKS. SEE "RISK FACTORS" ON
PAGE 8.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS XACCT
----------------- ----------------- ----------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>
Delivery of the ordinary shares will be made on or about , 2000.
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.
We have received from the Securities Authority of the State of Israel an
exemption from Israel's prospectus publication requirements. You should not
construe such exemption as authenticating the matters contained in this
prospectus or as an approval of their reliability or adequacy or as an
expression of opinion as to the quality of the securities offered in this
prospectus.
CREDIT SUISSE FIRST BOSTON
CHASE H&Q
U.S. BANCORP PIPER JAFFRAY
The date of this prospectus is , 2000.
<PAGE>
[Diagram of XACCT business infrastructure; listing of systems integrators,
value-added resellers, network infrastructure vendors and software applications
vendors with whom we have formed collaborative relationships or strategic
alliances through our XACCTREADY program, including company logos]
<PAGE>
-------------------
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY.................................................... 4
RISK FACTORS.......................................................... 8
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS.......................................................... 23
USE OF PROCEEDS....................................................... 24
DIVIDEND POLICY....................................................... 24
CAPITALIZATION........................................................ 25
DILUTION.............................................................. 26
SELECTED CONSOLIDATED FINANCIAL DATA.................................. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.......................................................... 28
BUSINESS.............................................................. 34
MANAGEMENT............................................................ 45
RELATED PARTY TRANSACTIONS............................................ 60
PRINCIPAL SHAREHOLDERS................................................ 63
DESCRIPTION OF SHARE CAPITAL.......................................... 65
SHARES ELIGIBLE FOR FUTURE SALE....................................... 69
U.S. TAX CONSIDERATIONS............................................... 71
ISRAELI TAXATION...................................................... 74
CONDITIONS IN ISRAEL.................................................. 77
UNDERWRITING.......................................................... 79
NOTICE TO CANADIAN RESIDENTS.......................................... 81
LEGAL MATTERS......................................................... 82
EXPERTS............................................................... 82
ENFORCEABILITY OF CIVIL LIABILITIES................................... 83
WHERE YOU CAN FIND MORE INFORMATION................................... 84
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................ F-1
-------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.
DEALER PROSPECTUS DELIVERY OBLIGATION
UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF
THIS OFFERING), ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES,
WHETHER OR NOT PARTICIPATING IN THIS OFFERING, 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 UNSOLD ALLOTMENTS
OR SUBSCRIPTIONS.
3
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the ordinary shares being sold in this
offering and our consolidated financial statements and the related notes
appearing elsewhere in this prospectus.
XACCT
We are a leading provider of intelligent business infrastructure software
for telecommunications carriers, Internet service providers, enterprise network
operators and cable network operators, which we refer to collectively as network
service providers. Our infrastructure platform allows network service providers
to leverage the rapid growth of Internet services and data traffic to increase
revenue opportunities. This foundation technology provides a single point of
interface between the operations and business support systems of network service
providers and the physical network. Network service providers use our platform's
comprehensive real-time data collection, data aggregation and automated user
account provisioning capabilities to deploy new business models and
higher-margin, enhanced services. As of December 31, 1999, we had licensed our
business software to over 20 network service providers. Our customers include
Bell Nexxia, Global One, GTE Internetworking, Harvard University, Mannesman
Ipulsys, MCI Worldcom, Siemens, TV Cabo, Verio and UUNET. In addition, we have
developed strategic alliances or collaborative relationships with a group of
over 70 system integrators, value-added resellers, network infrastructure
vendors and software applications vendors.
As the volume of global Internet traffic has grown and demand for high
value-added, Internet-based services has increased, network service providers
have found that their inability to capture, aggregate and transform the raw data
carried over their networks into meaningful business information has constrained
their revenue generation potential. Network service providers are actively
seeking ways to offer higher-margin, enhanced services, which require a flexible
and scalable software platform that dynamically monitors, aggregates, provisions
and configures multiple service-types across their networks. The Yankee Group
estimates that the market for Internet business infrastructure will grow from
$207 million in 1999 to $7.7 billion in 2004. In addition, The Insight Research
Corporation estimates that the market for operations support systems will grow
from $33.9 billion in 2000 to $58.4 billion in 2005.
Our platform enables network service providers to support flexible,
sophisticated business models with differentiated pricing and services. Our
business infrastructure platform collects and synthesizes a high volume of
network usage data from multiple sources and all layers of the network. Network
service providers can use this real-time data to offer and charge appropriately
for service level agreements or for services based on quality of service,
transactions, events, content or volume. This detailed network information can
also be used to support customer relationship management, customer retention and
fraud management applications. In addition, our platform provides for automated
user account provisioning and user self-provisioning. User self-provisioning
allows a network service provider's users to activate, modify or deactivate
services without the intervention of the network service provider. By automating
the provisioning process, network service providers reduce their costs,
accelerate their time to revenue and increase user satisfaction.
Our infrastructure software has been engineered to meet the demanding and
evolving performance requirements of network service providers. Our software
platform's distributed architecture is designed to support carrier-class network
service providers. By deploying software modules throughout the network, our
distributed software architecture captures usage information from all layers of
the network and scales with the growth of our customers' networks and network
traffic while maintaining data integrity and high system availability. We
believe our solution is fully adaptable to all major network infrastructure
technologies, including hardware, software and operations and business support
systems. We have also designed our products to work with industry standard
protocols to allow for the rapid and seamless assimilation of new, emerging
network standards, devices and applications. Our solution also offers a wide
range of web-based monitoring, management and reporting capabilities.
4
<PAGE>
Our objective is to be the leading provider of business infrastructure
solutions to network service providers. Key elements of our strategy for
achieving this objective include:
- Enhancing our product line and extending our technology leadership;
- Expanding our collaborative relationships with technology providers to
enhance our product offerings;
- Expanding and leveraging our relationships with systems integrators
and value-added resellers;
- Leveraging our installed customer base to create new or additional
sales opportunities; and
- Delivering our solution in strategically targeted international
markets.
Our principal executive offices are located at 2900 Lakeside Drive, Santa
Clara, California 95054 and our telephone number is (408) 654-9900. Our World
Wide Web address is www.xacct.com. The information on our web site is not part
of this prospectus.
-------------------
XACCT is a registered trademark in Israel. This prospectus also
contains trademarks and trade names of other companies.
5
<PAGE>
THE OFFERING
Ordinary shares offered..................... ordinary shares
Ordinary shares to be outstanding after this
offering................................. ordinary shares
Use of proceeds............................. For expansion of sales, marketing
and distribution activities,
expansion of research and
development activities, working
capital and other general
corporate purposes. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol...... XCCT
The number of ordinary shares to be outstanding after this offering is
based on the number of shares outstanding as of December 31, 1999 and assumes
the exercise of warrants to purchase 2,058,371 preferred shares outstanding as
of December 31, 1999 that expire upon the completion of this offering if
unexercised and the conversion of preferred shares into ordinary shares on a
one-to-one basis, but does not include:
- 1,227,235 preferred shares sold in March 2000;
- 3,113,439 ordinary shares issuable upon exercise of options
outstanding as of December 31, 1999 with a weighted average exercise
price of $0.68 per share;
- 29,050 ordinary shares issuable upon exercise of warrants to purchase
ordinary shares outstanding as of December 31, 1999 with a weighted
average exercise price of $0.30 per share, which warrants do not
expire upon the completion of this offering;
- 3,104,866 ordinary shares available for future issuance under our
share option plans, plus the ordinary shares available for issuance
upon board of director approval under our Section 3(i) share option
plan; and
- 750,000 ordinary shares that will be available for issuance under
our employee share purchase plan.
-------------------
IN THIS PROSPECTUS, "XACCT," "WE," "US" AND "OUR" REFER TO XACCT
TECHNOLOGIES (1997) LTD., A COMPANY ORGANIZED UNDER THE LAWS OF THE STATE OF
ISRAEL AND ITS WHOLLY-OWNED SUBSIDIARIES.
EXCEPT AS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS IS BASED ON
THE FOLLOWING ASSUMPTIONS:
- THE EXERCISE OF OUTSTANDING WARRANTS AS OF DECEMBER 31, 1999 TO
PURCHASE 2,058,371 PREFERRED SHARES AT A WEIGHTED AVERAGE EXERCISE
PRICE OF $6.19, WHICH WARRANTS IF UNEXERCISED WOULD EXPIRE UPON THE
CLOSING OF THIS OFFERING;
- THE CONVERSION OF ALL OF OUR OUTSTANDING PREFERRED SHARES INTO
ORDINARY SHARES UPON THE CLOSING OF THIS OFFERING;
- THE OCCURRENCE OF A RECAPITALIZATION, A RECLASSIFICATION AND A
RIGHTS OFFERING THAT OCCURRED ON JANUARY 31, 2000 IN WHICH EXISTING
SHAREHOLDERS, OPTIONHOLDERS AND WARRANTHOLDERS RECEIVED SIX PREFERRED
OR ORDINARY SHARES FOR EACH PREFERRED OR ORDINARY SHARE HELD AS OF
THAT DATE; AND
- NO EXERCISE OF THE UNDERWRITERS' OVERALLOTMENT OPTION.
UNLESS OTHERWISE SPECIFIED IN THIS PROSPECTUS, ORDINARY SHARES REFER TO
VOTING ORDINARY SHARES AND NON-VOTING ORDINARY SHARES, AND PREFERRED SHARES
REFER TO VOTING PREFERRED SHARES AND NON-VOTING PREFERRED SHARES. PLEASE SEE
"DESCRIPTION OF SHARE CAPITAL" FOR A MORE DETAILED DESCRIPTION OF OUR ORDINARY
AND PREFERRED SHARES.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
FROM INCEPTION
(JUNE 1997) TO YEAR ENDED DECEMBER 31,
DECEMBER 31, --------------------------
1997 1998 1999
------------------ ------------ ------------
<S> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues...................................................... $ -- $ -- $ 1,194
Gross profit.................................................. -- -- 954
Research and development ..................................... 390 1,511 2,243
Sales and marketing .......................................... 127 1,995 6,472
General and administrative ................................... 152 1,033 1,204
Operating loss................................................ (669) (4,539) (9,346)
Net loss...................................................... $ (662) $ (4,434) $ (9,078)
================== ============ =============
Basic and diluted net loss per share.......................... $ (0.30) $ (1.17) $ (2.34)
================== ============ =============
Weighted average number of shares used in computing basic 2,192,400 3,804,874 3,886,495
and diluted net loss per share.............................================== ============ =============
Pro forma basic and diluted net loss per share................ $ (0.67)
=============
Pro forma weighted average number of shares used in 13,566,732
computing basic and diluted net loss per share............. =============
DECEMBER 31, 1999
-------------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
------------- ------------ ------------
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents..................................... $ 17,309 $ 44,183 $
Working capital............................................... 17,356 44,230
Total assets.................................................. 20,086 46,960
Shareholders' equity.......................................... 17,827 44,701
</TABLE>
See note 2 to our consolidated financial statements for an explanation of
the number of shares used to compute basic and diluted net loss per share.
The pro forma consolidated balance sheet data reflects:
- the receipt of net proceeds of $14.3 million from the sale of
1,227,235 preferred shares in March 2000;
- the exercise of outstanding warrants as of December 31, 1999 to
purchase 2,058,371 preferred shares at a weighted average exercise
price of $6.19 per share, which warrants if unexercised would
expire upon the completion of this offering; and
- the conversion of all issued and outstanding preferred shares into
ordinary shares.
The pro forma as adjusted consolidated balance sheet data reflects the
application of the net proceeds from the sale by us of ordinary shares in this
offering at the assumed initial public offering price of $ per ordinary share,
after deducting estimated underwriting discounts and estimated offering expenses
payable by us.
7
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AND ALL OTHER
INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING OUR ORDINARY SHARES.
ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE
CURRENTLY SEE AS IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS. IF ANY OF
THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS COULD BE HARMED, THE TRADING
PRICE OF OUR ORDINARY SHARES COULD DECLINE AND YOU MAY LOSE ALL OR PART OF YOUR
INVESTMENT.
RISKS RELATED TO THE COMPANY
OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT TO EVALUATE OUR PROSPECTS AND
THE MERITS OF INVESTING IN OUR ORDINARY SHARES, AND OUR FUTURE FINANCIAL
PERFORMANCE MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A
DECLINE IN OUR SHARE PRICE.
We were incorporated in June 1997. Until December 1998, we were engaged
primarily in the research and development of our initial product. We entered
into our first commercial license in January 1999 and have only recently
expanded our sales and service organizations. As a result of our limited
operating history, we have limited financial data that you can use to evaluate
our business. Moreover, the revenue and profitability potential of our market is
unproven. You must consider our prospects in light of the risks, expenses and
challenges we might encounter because we are at an early stage of development in
a new and rapidly evolving market. We may not successfully address these risks,
and our business strategy may not prove successful.
WE HAVE A LARGE ACCUMULATED DEFICIT, WE EXPECT FUTURE LOSSES AND WE MAY NOT
ACHIEVE OR MAINTAIN PROFITABILITY.
We have incurred substantial losses since our inception as we funded the
development of our product and technologies, and expanded our sales and
marketing organizations. Our net losses were $4.4 million for 1998 and $9.1
million for 1999. As of December 31, 1999, we had an accumulated deficit of
$14.2 million.
In order to become profitable, we must increase our revenues. We may not be
able to increase or even maintain our revenues, and we cannot predict when we
will operate profitably, if at all. Even if sales of our XACCTUSAGE product line
continue to grow, we expect to incur net losses for the foreseeable future due
to anticipated spending increases primarily on sales, marketing and research and
development efforts. Moreover, expected increases in competition will make it
difficult to increase our revenues. Even if we are able to increase revenues, we
may experience price competition, which could lower our gross margins and our
profitability. In addition, we anticipate that we may increase the percentage of
our revenues derived from indirect channels and services, which may carry lower
margin percentages than our direct sales and consequently may lower our gross
margin percentages. Even if we do achieve profitability, we may not sustain or
increase profitability on a quarterly or annual basis.
OUR OPERATING RESULTS FLUCTUATE SIGNIFICANTLY, AND AN UNANTICIPATED DECLINE IN
REVENUES MAY DISAPPOINT SECURITIES ANALYSTS OR INVESTORS AND RESULT IN A DECLINE
IN OUR SHARE PRICE.
Our growth rates may not be sustainable and you should not use our past
performance to predict future operating margins or results. We believe that
period-to-period comparisons of our historical results of operations are not
meaningful and are not a good predictor of our future performance. Our quarterly
operating results have fluctuated significantly in the past and we expect them
to fluctuate significantly in the future. Factors that could cause quarterly
fluctuations in our operating results include:
- variations in demand for the XACCTUSAGE platform and related products
and services;
- our ability to develop, introduce and attain market acceptance of
enhancements to XACCTUSAGE and new related products and services on a
timely basis;
- new product and service introductions and pricing changes by our
competitors;
- the mix of products and services sold by us and our competitors;
- the mix of sales channels through which our products and services are
sold;
8
<PAGE>
- the mix of our U.S. and international sales;
- the timing and nature of new product announcements, introductions or
modifications by vendors of software applications, computer hardware
and software platforms and networking products that work with our
product line; and
- our ability to expand our operations, and the amount and timing of
expenditures to expand our operations, including costs related to
acquisitions of technologies and businesses.
We forecast the volume and timing of orders for operational planning, but
these forecasts are based on many factors and subjective judgments. We
cannot assure you of their accuracy. If our forecasts for revenues or expenses
were to prove materially inaccurate, our financial results could be harmed.
Because of our limited operating history, we have limited insight into trends
that may emerge in our market and affect our business. Forecasting for
operational planning is further complicated by our recent rapid growth.
As a result of the foregoing factors, it is likely that in some future
quarters or years our operating results will fall below the expectations of
securities analysts or investors, causing our share price to decline.
OUR REVENUES AND OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AS A RESULT OF
VARIATIONS IN THE TIMING AND VOLUME OF CUSTOMER ORDERS FOR XACCTUSAGE AND
RELATED PRODUCTS AND SERVICES, WHICH MAY RESULT IN A DECLINE IN OUR ORDINARY
SHARE PRICE.
Our revenues and operating results in any given quarter or year depend upon
the volume and timing of customer orders and payments and the date of product
delivery. Historically, a substantial portion of our revenues in any given
quarter has been recorded in the third month of that quarter, and specifically
the last week of that quarter. We expect this trend to continue and intensify.
Since our operating expenses are based on anticipated revenues and because a
high percentage of these expenses are relatively fixed, a delay in a sale or
revenue recognition for a sale could cause significant variations in our
operating results from quarter to quarter and cause unexpected results.
Significant sales may also occur earlier than expected, which could cause
operating results for later quarters to compare unfavorably with operating
results for earlier quarters.
We primarily depend upon new contracts and purchase orders to generate
revenues for each quarter. However, new contracts may not result in revenues in
the quarter in which the contracts were signed, and we may not be able to
predict accurately when revenues from those contracts will be recognized.
As a result of the foregoing factors, it is likely that in some future
quarters our revenues will fall below our expectations and our financial
performance will be harmed.
BECAUSE OUR SALES AND IMPLEMENTATION CYCLES FOR OUR PRODUCTS ARE LONG AND OFTEN
UNPREDICTABLE, OUR REVENUES AND OPERATING RESULTS MAY VARY SIGNIFICANTLY FROM
QUARTER TO QUARTER, WHICH MAY CAUSE OUR ORDINARY SHARE PRICE TO FLUCTUATE.
Customers often use our product line to deploy mission-critical solutions
for their businesses. Our customers generally consider a wide range of issues
before committing to license our products, including assessing the benefits of
our products and our competitors' products, as well as assessing the ability of
our products to operate with existing and future computer systems and
accommodate increased transaction volume and product reliability. Many of our
customers will be addressing these issues for the first time. As a result, we or
other parties, including system integrators, must educate potential customers on
the use and benefits of our products and services. In addition, the purchase of
our products generally involves a significant commitment of capital and other
resources by a customer. This commitment often requires significant technical
review, assessment of competitive products, approval at a number of management
levels within the customer's organization and dedication of personnel support to
facilitate the deployment of our products.
Because of these considerations and challenges, our sales cycle, from
initial evaluation to installation and acceptance, generally has ranged from
three to nine months and is difficult to predict for any particular transaction
or customer. Our customers often begin by licensing our products on a trial
basis before committing to additional licenses for full deployment. Furthermore,
our customers tend to deploy the XACCTUSAGE infrastructure slowly, depending
upon the customer's capabilities, the size of deployment, the complexity of the
customer's network environment and the quantity of the hardware and the degree
of hardware configuration necessary to deploy our
9
<PAGE>
products. The long and often unpredictable sales and implementation cycles
for our products may cause revenues and operating results to vary significantly
from quarter to quarter.
BECAUSE A SMALL NUMBER OF CUSTOMERS ACCOUNT FOR AND ARE LIKELY TO CONTINUE TO
ACCOUNT FOR A SUBSTANTIAL PORTION OF OUR REVENUES, THE LOSS OF ONE OF THESE
CUSTOMERS OR THE CANCELLATION OR DEFERMENT OF A CUSTOMER'S ORDER WOULD CAUSE OUR
REVENUES TO DECLINE SUBSTANTIALLY AND MAY RESULT IN A DECLINE IN OUR SHARE
PRICE.
A relatively small number of customers account for a significant portion of
our total revenues. In 1999, sales to our ten largest customers accounted for
83.6% of our revenues. In 1999, sales to TV Cabo, UUNET, GTE Internetworkings
and Verio accounted for 51.4% of our revenues. Moreover, some of the companies
in our target market of network service providers are consolidating, which could
reduce the number of available potential customers. The loss of a single
customer might cause our revenues to decline substantially or fall short of our
expectations. In addition, we derive and expect to continue to derive a
significant portion of our software license revenues in each quarter from a
small number of relatively large customer orders. For example, in each of the
four quarters in the period ended December 31, 1999, we had at least one
customer that accounted for at least 17.5% of our revenues for the quarter. If a
large order is canceled or deferred or if an anticipated order does not
materialize, our operating results for a particular quarter could be
significantly harmed.
IF WE DO NOT CONTINUE TO ADD NEW CUSTOMERS, WE WILL NOT BE ABLE TO INCREASE OR
SUSTAIN OUR REVENUES.
Our license agreements do not generally provide for substantial ongoing
license payments. Therefore, our future revenue growth depends on our success in
attracting new customers or expanding our relationships with existing customers.
Our ability to attract new customers and expand our relationships with existing
customers will depend on a variety of factors, including the performance,
quality, breadth and depth of our current and future products. Our failure to
add new customers or expand our relationships with existing customers would
reduce our future revenues.
IF WE CANNOT CONVINCE NETWORK SERVICE PROVIDERS THAT OUR SOLUTION PROVIDES A
MEANS TO EXPAND THEIR REVENUE GENERATION POTENTIAL, WE WILL BE UNABLE TO
INCREASE OR SUSTAIN OUR REVENUES.
Our solution offers a business infrastructure platform that is designed to
enable network service providers to implement new business models and offer
higher-margin, enhanced services to expand their revenue generation potential.
The market for business infrastructure software for network service providers
has only recently emerged and is rapidly evolving. A viable market for business
infrastructure software, and for XACCTusage in particular, may not develop and
our product line may not achieve or sustain market acceptance. Our solution has
achieved only limited adoption and there is limited information upon which to
evaluate whether a large number of potential customers will purchase our
solution to replace or expand their existing revenue generation models. In
addition, we cannot assure you that a superior solution enabling network service
providers to better capitalize on the growth of Internet services and data
traffic will not emerge. If we cannot convince network service providers that
our solution is superior to their current revenue generation models that are
based on flat-fee pricing or if we cannot educate potential customers, and
specifically their senior management, on the use and benefits of our products,
we will be unable to increase or sustain revenues. Further, if network service
providers develop their own business infrastructure solutions or decrease their
spending on business infrastructure or if we fail to penetrate these markets,
our operating results will suffer.
IF WE CANNOT MEET THE TECHNICAL AND CAPACITY REQUIREMENTS OF NETWORK SERVICE
PROVIDERS, WE WILL BE UNABLE TO INCREASE OR SUSTAIN OUR REVENUES.
Our product line may not be capable of satisfying the demanding technical
and capacity requirements of network service providers, many of which require
performance levels far in excess of that for which our products have been used
to date. We have only licensed our product line to a small number of customers,
and only a portion of these customers has commenced commercial deployment.
Moreover, network service providers will likely have changing requirements that
will require us to change our product designs or features, sales methods,
support capabilities or pricing policies. We may not successfully upgrade
XACCTusage, and we may not successfully develop new products or services
that meet the expanding needs of network service providers. If we
cannot continue to meet the expanding requirements of network service providers,
we will be unable to increase or sustain our revenues.
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OUR OPERATING RESULTS TO DATE HAVE DEPENDED UPON REVENUES FROM ONE PRODUCT LINE,
XACCTUSAGE, AND OUR BUSINESS COULD BE MATERIALLY HARMED BY FACTORS THAT
ADVERSELY AFFECT THE PRICING AND DEMAND FOR THAT PRODUCT LINE.
Our future growth depends upon the commercial success of XACCTUSAGE. We
currently derive all of our revenues from the licensing, maintenance and support
of our XACCTUSAGE product line. We expect that we will continue to rely on new
and enhanced versions of XACCTUSAGE for a substantial portion of our revenues
for the foreseeable future. However, the limited sales and deployment of our
product line make our future prospects difficult to predict.
Any decline in demand for XACCTUSAGE as a result of competition,
technological change or other factors would significantly reduce our revenues.
IF OUR PRODUCT LINE FAILS TO OPERATE WITH THE MANY HARDWARE, SOFTWARE AND
NETWORKING PLATFORMS USED BY OUR CUSTOMERS, OUR BUSINESS MAY FAIL.
We currently target a customer base that uses a wide variety of constantly
changing software applications and programming tools, network infrastructure
products and hardware and software platforms. The success of our product
line depends upon our ability to address technical challenges, including:
- integrating our XACCTUSAGE product line with multiple software
applications and programming tools, network infrastructure products,
hardware and software platforms and existing systems, and modifying
our product line as new applications, platforms, products and systems
are introduced;
- expanding the functionality of our product line, particularly the
number of operating systems and databases that our product line can
source or target and the ability of our products to process a high
number of transactions per second;
- anticipating and supporting new standards, especially Internet
standards; and
- integrating additional software modules under development with our
existing product line.
If our product line fails to satisfy these demanding and rapidly changing
technological challenges, our customers will be dissatisfied and we may be
unable to generate significant future sales.
IF WE DO NOT DEVELOP AND MAINTAIN SUCCESSFUL RELATIONSHIPS WITH SYSTEMS
INTEGRATORS AND OTHER TECHNOLOGY PROVIDERS, OUR ABILITY TO MARKET AND SELL OUR
PRODUCTS BE HARMED.
We have entered into relationships with third-party systems integrators
that implement and increasingly resell XACCTUSAGE and related products and
services. We also have relationships with software applications, networking
products, hardware and software platform vendors to increase the flexibility of
our software platform and to pursue joint sales and marketing opportunities. We
have derived, and anticipate that we will continue to derive, a significant
portion of our revenues from customers that have relationships with these
technology providers. We could lose sales and marketing opportunities if we fail
to work effectively with these parties or fail to grow our base of applications,
networking products or platform vendors. We are currently investing and plan to
continue to invest significant resources to develop these relationships. Our
operating results could be adversely affected if these efforts do not generate
license and service revenues necessary to offset our significant investment in
building these relationships.
Many of our technology providers also work with competing software
companies. Our success will depend upon the willingness of these providers to
select our solution as superior to competing alternatives and to devote
sufficient resources to market our product. We may not be able to enter into
additional, or maintain our existing, strategic relationships on commercially
reasonable terms, or at all. Our agreements with these parties typically are in
the form of nonexclusive agreements. Competing priorities may limit their
willingness to aggressively market and sell our products. Further,
notwithstanding our agreements with these parties, any party may discontinue
marketing our products or terminate our relationship without cause or on limited
notice. If these relationships fail, we will have to devote substantially more
resources to the distribution, sales, marketing, implementation and support of
our XACCTUSAGE product line than we would otherwise, and our singular efforts
may not be as effective as joint efforts. Technology providers may also pursue
other relationships and may attempt to develop or acquire products and services
that compete with our products and services. Our strategic relationships may
also interfere with our ability to enter into other desirable strategic
relationships.
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OUR BUSINESS WILL SUFFER IF WE FAIL TO INTRODUCE NEW VERSIONS AND RELEASES OF
OUR PRODUCTS IN A TIMELY MANNER.
In the past we have failed to release some new products and upgrades on
time. We cannot assure you that we will meet project milestones for new versions
and releases. If we fail to develop and introduce new versions and releases of
our products in a timely manner and on a cost-effective basis, we could
experience:
- loss of or delay in revenues and loss of market share;
- customer dissatisfaction, loss of customers and cancellation of orders
and license agreements;
- failure to achieve market acceptance;
- diversion of development resources;
- negative publicity and injury to our reputation;
- increased service and warranty costs;
- legal actions by customers against us; and
- increased insurance costs.
IF OUR SOFTWARE CONTAINS ERRORS OR DESIGN FLAWS OR HAS AN ADVERSE IMPACT UPON
OUR CUSTOMERS' NETWORKS, WE MAY LOSE CUSTOMERS, OUR COSTS WILL INCREASE AND
REVENUES MAY BE DELAYED OR LOST.
Computer software such as ours generally contains undetected errors and may
contain design flaws that may adversely impact a user's networks. Because
customers use XACCTUSAGE to perform mission-critical applications, any problem
caused by our products may cause negative publicity and seriously harm our
reputation. Contractual limitations on liability contained in our license
agreements may not be enforceable, and we may be subject to claims based on
errors or design flaws in our software or mistakes in performing our services,
including claims relating to damages to our customers' internal systems. A
product liability claim, whether or not successful, could harm our business by
increasing our costs, damaging our reputation and distracting our management and
technical personnel.
THE UNAVAILABILITY OF AND DEFECTS IN THIRD PARTY SOFTWARE THAT WE INCORPORATE
INTO XACCTUSAGE COULD RESULT IN DELAYED OR LOST SALES AND INCREASED EXPENSES.
Portions of XACCTUSAGE incorporate software developed and maintained by
third-party software vendors, such as operating systems, tools and database
vendors. For example, our programs use Java programming technology provided by
Sun Microsystems and database servers provided by Oracle. We expect that we may
have to incorporate software from third party vendors and developers to a larger
degree in our future products. Any significant interruption in the availability
of these third-party software products or defects in these products or future
products could harm our sales unless and until we can secure another source. We
may not be able to replace the functionality provided by third-party software
currently offered with our products if that software becomes obsolete, defective
or incompatible with future versions of our products or is not adequately
maintained or updated. The absence of, or any significant delay in, the
replacement of that functionality could result in delayed or lost sales and
increased costs and could harm our business.
We also depend upon access to application programming interfaces used for
communication between external software products and packaged application
software. Application providers control our access to their application
programming interfaces. If these application providers deny or delay our access
to application programming interfaces, our business may be harmed. Some
application providers may become competitors or establish alliances with our
competitors, thereby, increasing the likelihood that we would not be granted
access to their application programming interfaces.
IF WE CANNOT SUCCESSFULLY EXPAND OUR SALES AND DISTRIBUTION CAPABILITIES, WE MAY
BE UNABLE TO INCREASE MARKET AWARENESS AND SALES OF OUR XACCTUSAGE PRODUCT LINE.
We must expand our direct and indirect sales operations to increase market
acceptance of XACCTUSAGE and related product and services and to increase our
revenues. We may not be successful in these efforts. There is a shortage of
direct sales personnel with the skills and expertise necessary to sell our
products. Moreover, because our product line and services require sophisticated
sales efforts targeted at the senior management of our prospective
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customers, new hires will require training before they can achieve productivity.
We may not be able to hire enough qualified individuals in the future, and our
recently hired sales personnel may not achieve expected productivity levels. We
also plan to expand our relationships with systems integrators and other third
party resellers to build an indirect sales channel. Accordingly, we will need to
manage potential conflicts between our direct and indirect sales forces. Failure
to expand our sales channels and manage their expansion would harm our revenues
and operating results and place us at a competitive disadvantage.
OUR GROWTH MAY SUFFER IF WE ARE UNABLE TO IMPLEMENT OUR PRODUCTS IN A TIMELY
MANNER.
The use of our products by our customers requires consulting and
implementation services. While we have recently established relationships with
some third party providers, we continue to be the primary provider of consulting
and implementation services for our products. It is difficult and expensive to
recruit, train and retain qualified personnel to perform these services, and we
may from time to time have inadequate levels of staffing to perform these
services. As a result, our growth could be limited due to our lack of capacity
to provide consulting and implementation services or our inability to
subcontract these services to qualified third parties. In addition, we could
experience deterioration in service levels or decreased customer satisfaction,
any of which could harm our reputation and operating results.
UNANTICIPATED DIFFICULTIES IN IMPLEMENTING OUR PRODUCTS COULD SIGNIFICANTLY HARM
OUR REPUTATION WITH CUSTOMERS, INCREASE OUR COSTS AND DIMINISH OUR ABILITY TO
LICENSE ADDITIONAL PRODUCTS TO OUR CUSTOMERS.
Our products are often purchased as part of large projects undertaken by
our customers. The costs of our products and services represent only a portion
of the related hardware, software, development, training and consulting costs of
these projects. The significant involvement of third parties, including system
integrators, reduces the control we have over the implementation of our products
and the level, quality and timeliness of service provided to customers that
license our software. These projects are complex, time consuming and expensive
and typically involve working with sophisticated software, computing and
communications systems. In many cases, our customers must interact with, modify
or replace significant elements of their existing computer systems. Some
customers may require us to develop costly customized features or capabilities,
which increase our costs and consume our limited professional service and
customer support resources. Failure by customers to successfully deploy our
products, or the failure by third-party consultants or us to ensure customer
satisfaction, could damage our reputation with existing and future customers and
reduce future revenues.
If we experience difficulties with an implementation or do not meet project
milestones in a timely manner, we could be obligated to devote more customer
support, engineering and other resources to a particular project and to provide
these services at reduced or no cost.
IF WE ARE UNABLE TO INCREASE SERVICE REVENUES, OUR OPERATING RESULTS WILL BE
ADVERSELY AFFECTED.
Our service revenues are derived from support and maintenance arrangements,
including product upgrades, consulting and training, and are becoming a larger
component of our revenues. Service revenues constituted 25% of our revenues in
1999. The level of service revenues depends significantly on our ability to
continue to obtain renewals of customer support contracts by our installed
customer base, to provide effective customer care services and to release
product updates and modifications on a timely basis. Customer service,
support and maintenance contracts typically have 12-month terms and the growth
of our service revenues depend in part upon the renewal rates of those
contracts. If third party organizations such as systems integrators become
proficient in installing or servicing our product line, we may lose customer
support contracts and our service revenues could decline. In addition, if we are
unable to increase the scale of our service organization, including successfully
recruiting and training a sufficient number of qualified services personnel, we
may not be able to increase service revenues.
IF WE FAIL TO PROTECT OUR XACCT TRADEMARK, THE VALUE OF THE XACCT NAME WOULD
DECREASE AND WE MAY LOSE CUSTOMERS TO COMPETITORS.
We have received an initial refusal of our application to register our
XACCT trademark in the United States. We are currently preparing a response to
the United States trademark office. If we receive a final rejection of our
application to register the XACCT trademark, we will likely experience greater
expense and difficulty in protecting the XACCT mark and its derivations. We may
not be able to enforce rights in our trademarks, and we may not be able to use
our trademarks in all jurisdictions. If the XACCT trademark is invalidated
through legal action, or if we
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were prevented from using our trademarks, we would need to rebuild our brand
identity and reputation with our customers, system integrators, value-added
resellers, network infrastructure vendors and software application vendors. We
would also have to devise new collateral materials. If we needed to rebuild our
brand identity or devise new collateral materials, our operating expenses would
substantially increase and our business would be harmed. Conversely, we may be
unable to stop others from using similar marks in connection with other goods
and services. If that happens, our existing and potential customers and system
integrators, value-added resellers, network infrastructure vendors and software
application vendors could confuse us and our products and services with another
company and its products and services. This could weaken the value of the XACCT
name and result in the loss of business to our competitors, either of which
would harm our operating results.
WE COULD BE CHARGED WITH TRADEMARK INFRINGEMENT AND INCUR SIGNIFICANT COSTS IN
CONTESTING THESE CHARGES AND FOR ANY RELATED LIABILITY.
Other companies that use or have registrations for terms similar to XACCT
for various products and services or for their company or brand name could claim
that we are infringing their federal or state trademark rights by our use of the
mark XACCT or its derivations. An infringement claim of that nature, whether
meritorious or not, could be time consuming and result in the diversion of
management resources and costly litigation. In addition, it could result in our
loss of the right to use the mark XACCT and its derivations, including the right
to use them:
- in our corporate name;
- as part of the services we offer; and
- as part of our web site address, which is currently WWW.XACCT.COM.
Litigation or settlement of an infringement claim could also require us to
pay damages or enter into royalty or licensing agreements on terms that are
unfavorable to us. If we are unable to use the mark XACCT and its derivations,
we will be required to adopt a new company and brand name and to market our
products and services under a new name. To do so, we will be required to incur
significant costs. Any of those events could significantly harm our business.
OUR GROWTH CONTINUES TO PLACE A SIGNIFICANT STRAIN ON OUR MANAGEMENT SYSTEMS AND
RESOURCES, AND IF WE FAIL TO MANAGE OUR GROWTH, OUR ABILITY TO MARKET AND SELL
OUR XACCTUSAGE PRODUCT LINE AND DEVELOP NEW PRODUCTS MAY BE HARMED.
We must plan and manage our growth in order to effectively market and sell
our product line and services and achieve revenue growth and profitability in a
rapidly evolving market. Our growth has and will continue to place a significant
strain on our management systems and resources, and we may not be able to
effectively manage our growth in the future. We continue to increase the scope
of our operations both in the U.S. and internationally, and have added a number
of employees. For example, the number of our employees grew from 40 at December
31, 1997 to 94 at December 31, 1999. In particular, our sales force grew from
one person at December 31, 1997 to 22 people at December 31, 1999. For us to
effectively manage our growth, we must continue to do the following:
- improve our operational, financial and management controls;
- improve our reporting systems and procedures;
- install new management and information control systems; and
- expand, train, motivate and manage our workforce.
Additionally, we expect that we will have to continue to expand our
facilities and may face difficulties and significant expenses identifying and
moving into suitable office space. Expanding our operations will require
significant management attention and financial resources. We cannot be certain
that our investments in our growth will produce desired levels of revenue. Our
business will suffer dramatically if we fail to effectively manage our growth.
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IF WE FAIL TO ATTRACT AND RETAIN QUALIFIED PERSONNEL, OR IF OUR MANAGEMENT FAILS
TO OPERATE EFFECTIVELY, WE WILL NOT BE ABLE TO IMPLEMENT OUR BUSINESS STRATEGY
OR OPERATE OUR BUSINESS EFFECTIVELY.
Our success depends upon the continued services of our senior management
and other key personnel, many of whom would be difficult to replace. The loss of
any of these individuals would harm our ability to implement our business
strategy and to operate our business effectively. In particular, the services of
Eric Gries, our President and Chief Executive Officer, and Eran Wagner, our
Executive Vice President, Technology, would be difficult to replace. None of our
officers or key employees is bound by an employment agreement for any specific
term.
We believe our success depends significantly upon our management's ability
to operate effectively, both individually and as a group. Richard Van Hoesen,
who was hired as Chief Financial Officer in January 2000, and certain other
members of the management team, have only recently joined us. We therefore
cannot assure you that our management will be able to perform effectively in
their respective roles and as a team.
Our success also depends upon our ability to continue to attract, retain
and motivate skilled employees. Competition for employees in our industry is
intense, especially in the San Francisco Bay Area and Israel. We believe that
there are only a limited number of persons with the requisite skills to serve in
many key positions and it is becoming increasingly difficult to hire, retain and
motivate these persons. We have in the past experienced, and we expect to
continue to experience, difficulty in hiring and retaining skilled employees.
Competitors and others in the past have attempted, and may in the future
attempt, to recruit our employees. We believe that we will incur increasing
salaries, benefits and recruiting expenses because of the difficulty in hiring
and retaining employees.
ACQUISITIONS OF NEW COMPANIES OR TECHNOLOGIES MAY RESULT IN DISRUPTIONS TO OUR
BUSINESS AND STRAIN MANAGEMENT RESOURCES DUE TO DIFFICULTIES IN ASSIMILATING
PERSONNEL AND OPERATIONS.
Although we have not done so in the past, we may make future acquisitions
or investments in other companies, products or technologies. If we make any
acquisitions, we will be required to assimilate the operations, products and
personnel of the acquired businesses and train, retain and motivate key
personnel from the acquired businesses. We may be unable to maintain uniform
standards, controls, procedures and policies if we fail in these efforts.
Similarly, acquisitions may cause disruptions in our operations and divert
management's attention from day-to-day operations, which could impair our
relationships with our current employees, customers and strategic partners. The
issuance of equity securities for any acquisition could be substantially
dilutive to our shareholders. In addition, our profitability may suffer because
of acquisition-related costs or amortization costs for acquired goodwill and
other intangible assets.
RISKS RELATED TO OUR INDUSTRY
IF WE DO NOT KEEP PACE WITH RAPID TECHNOLOGICAL CHANGE, CHANGING CUSTOMER
DEMANDS AND EVOLVING INDUSTRY STANDARDS, WE WILL NOT BE ABLE TO COMPETE.
Our industry is characterized by rapid technological change, frequent
product introductions and enhancements, changes in customer demands and evolving
industry standards. The technological life cycle of our products is difficult
to estimate. Future versions of software applications and networking products,
hardware and software platforms embodying new technologies and the emergence of
new industry standards could render our product line obsolete. XACCTUSAGE may
not operate correctly on future networking environments, hardware and software
platforms, programming languages, database environments and software
applications that our customers may use. We may not be able to successfully
continue to enhance our current product line to address these challenges.
Moreover, we may not be able to develop and introduce new products that
anticipate emerging technology standards and keep pace with competitive and
technological developments to address the increasingly sophisticated needs of
our customers on a timely basis. Our failure to do so would render our products
obsolete and would harm our ability to compete.
WE COULD BE PREVENTED FROM SELLING OR DEVELOPING OUR PRODUCTS IF THE GNU GENERAL
PUBLIC LICENSE AND SIMILAR LICENSES UNDER WHICH SOME OF THE SOFTWARE
INCORPORATED INTO OUR PRODUCTS IS DEVELOPED AND LICENSED, ARE NOT ENFORCEABLE,
OR ARE NOT EFFECTIVELY ENFORCED.
Some of the software incorporated into our products has been developed and
licensed under the GNU General Public License, and similar open source licenses.
These licenses require that any software program licensed under
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them may be copied, used, modified and distributed freely, so long as all
modifications are also freely made available and licensed under the same
conditions. We know of no instance in which a party has challenged the validity
of these licenses or in which these licenses have been interpreted in a legal
proceeding. To date, all compliance with these licenses has been voluntary. It
is possible that a court would hold one or more of these licenses to be
unenforceable in the event that someone were to file a claim asserting
proprietary rights in a program developed and distributed under them. Any ruling
by a court that these licenses are not enforceable, or that the software
incorporated into our products or significant portions of the software may not
be copied, modified or distributed freely, would have the effect of preventing
us from selling or developing our products, unless we are able to negotiate a
license for the use of the software or replace the affected portions.
WE MAY SUFFER PRICE REDUCTIONS, LOSS OF CUSTOMERS, REDUCED GROSS MARGINS AND
LOSS OF MARKET SHARE DUE TO INCREASING COMPETITION.
The market for our product line is new, evolving and subject to rapid
technological changes. To date, our primary competition has come from solutions
developed by the in-house technology departments of potential customers or
partners. We have experienced and expect to continue to experience increased
competition from current and potential competitors. Many of these companies have
greater name recognition, longer operating histories, larger customer bases and
significantly greater financial, technical, marketing, public relations, sales,
distribution and other resources. Some of our potential competitors are among
the largest and most well capitalized software, hardware and communications
companies in the world. Our competitors include:
- in-house information technology departments of potential customers or
partners that have developed or may develop systems that substitute
for some or all of the functionality of our XACCTUSAGE product;
- companies with products that address our market, such as Hewlett
Packard, Lucent, EHPT and Narus; and
- companies that have developed software that addresses only certain
components of Internet Protocol mediation.
We are also aware of numerous other companies that are focusing significant
resources on developing and marketing products that will compete with
XACCTUSAGE. Additional competitors could come from a number of companies that
produce application integration or communications software.
We expect that competition will increase in the near term and that our
primary long-term competitors may not have entered the market yet. If any of our
competitors were to become the industry standard or were to enter into or expand
relationships with significantly larger companies through mergers, acquisitions
or otherwise, our business and operating results could be significantly harmed.
Current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to offer a single solution
and increase the ability of their products to address customer needs. Increased
competition could result in price reductions, fewer customer orders, reduced
gross margins and loss of market share, any of which could reduce our future
revenues. We may not compete successfully against current and potential
competitors, especially those with significantly greater resources.
THE GROWTH OF OUR BUSINESS DEPENDS ON THE INCREASING USE OF THE INTERNET AND
OTHER PUBLIC AND PRIVATE NETWORKS.
We sell XACCTUSAGE to organizations providing Internet-based services. If
the use of the Internet and other public and private networks does not grow as
anticipated, our revenues could decline and our business would be significantly
harmed. We depend on the increased acceptance and use of the Internet as a
medium for electronic communications and commerce and its adoption for
transacting business processes. Rapid growth in the use of the Internet is a
recent occurrence. As a result, acceptance and use may not continue to develop
at historical rates and a sufficiently broad base of users may not adopt or
continue to use the Internet as a medium of communications and commerce. Demand
and market acceptance for recently introduced services and products for the
Internet are subject to a high level of uncertainty, and there exist few proven
services and products.
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FUTURE REGULATION OF THE INTERNET MAY SLOW ITS GROWTH, RESULTING IN DECREASED
DEMAND FOR OUR PRODUCTS AND SERVICES AND INCREASED COSTS OF DOING BUSINESS.
Due to the increasing popularity and use of the Internet, it is possible
that state and federal regulators will adopt laws and regulations that may
impose additional burdens on those companies conducting business over the
Internet. The growth and development of the market for Internet-based services
may prompt calls for more stringent consumer protection laws. The adoption of
any additional laws or regulations may decrease the expansion of the Internet. A
decline in the growth of the Internet could decrease demand for our products and
services or otherwise harm our business. Moreover, the applicability to the
Internet of existing laws in various jurisdictions governing issues such as
communications, property ownership, sales tax, libel and personal privacy is
uncertain and may take years to resolve. Any new legislation or regulation, the
application of laws and regulations from jurisdictions whose laws do not
currently apply to our business, or the application of existing laws and
regulations to the Internet and other on-line services could harm our growth.
IF WE FAIL TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WE MAY LOSE THESE
RIGHTS AND OUR BUSINESS WOULD BE SERIOUSLY HARMED.
Our success and ability to compete depend upon our internally developed
technology and other proprietary rights, which we protect through a combination
of copyright, trademark and trade secret laws, as well as confidentiality
agreements and licensing arrangements. In addition, we have made two patent
applications in the United States regarding certain aspects of our technology.
However, existing laws afford only limited protection. Competitors and potential
competitors may develop products with the same functionality as our products.
Moreover, competitors and potential competitors may attempt to copy or reverse
engineer aspects of our product line or to obtain and use information that we
regard as proprietary. Policing the unauthorized use of our products is
difficult, and we cannot be certain that we will be able to prevent
misappropriation of our technology, particularly in foreign countries where the
laws may not protect proprietary rights as fully as do the laws of the United
States. Use by others of our proprietary rights could materially harm our
business, and expensive litigation may be necessary in the future to enforce our
intellectual property rights.
IF OUR SOURCE CODE IS RELEASED TO OUR CUSTOMERS, OUR ABILITY TO PROTECT OUR
PROPRIETARY RIGHTS COULD BE JEOPARDIZED AND OUR REVENUES COULD DECLINE.
Some of our license agreements require us to place the source code for our
products in escrow. These agreements generally provide these customers with a
limited, non-exclusive license to use this code if:
- there is a bankruptcy, insolvency or winding-up proceeding involving
us;
- we cease to do business without a successor; or
- we do not provide contractually agreed maintenance and support.
Our revenues could decline and our business could be seriously harmed if
customers were granted access to our source code.
OUR PRODUCTS COULD INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, WHICH
MIGHT RESULT IN COSTLY LITIGATION AND THE LOSS OF SIGNIFICANT RIGHTS.
It is possible that third parties will claim that we have infringed their
intellectual property rights. Substantial litigation regarding intellectual
property rights exists in the software industry, and we expect that software
developers will be increasingly subject to infringement claims as the number of
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. Some of our competitors may have filed or
may intend to file patent applications covering aspects of their technology upon
which they may claim our technology infringes. Any claims, with or without
merit, could be time-consuming, result in costly litigation, prevent or delay
product shipment, divert the attention and resources of our management or
technical personnel or require us to develop non-infringing technology or to
enter into royalty or licensing agreements, any of which could harm our
business. Patent litigation in particular has complex technical issues and
inherent uncertainties. In the event an infringement claim against us was
successful and we could not obtain a license on acceptable terms, license a
substitute technology or redesign to avoid infringement, our business would be
harmed. Furthermore, former
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employers of our current and future employees may assert that our employees have
improperly disclosed to us or are using confidential or proprietary information.
RISKS RELATED TO OUR OFFERING
THE SUBSTANTIAL NUMBER OF SHARES THAT WILL BE ELIGIBLE FOR SALE IN THE NEAR
FUTURE MAY CAUSE THE MARKET PRICE OF OUR ORDINARY SHARES TO DECLINE.
Our current shareholders hold a substantial number of our ordinary shares
that they will be able to sell in the public market in the near future. Sales of
a substantial number of shares after this offering could significantly reduce
the market price of our ordinary shares. Even the perception that our current
shareholders might sell ordinary shares could depress the trading price of the
ordinary shares. These sales, and the possibility of these sales, could make it
more difficult for us to sell equity or equity-related securities in the future
at a time and price that we deem appropriate.
Holders of 15,394,526 ordinary shares, which will represent approximately
% of our outstanding share capital after completion of this
offering, have the right to require us to register their ordinary shares with
the Securities and Exchange Commission. In addition, after this offering, we
intend to register all ordinary shares that we may issue under our share plans
and employee share purchase plan. Once we register these shares, they can be
freely sold in the public market upon issuance. If these holders cause a large
number of securities to be sold in the public market, the sales could reduce the
trading price of our ordinary shares. These sales also could impede our ability
to raise future capital.
WE EXPECT TO EXPERIENCE VOLATILITY IN OUR SHARE PRICE, WHICH COULD NEGATIVELY
AFFECT YOUR INVESTMENT.
Our ordinary shares have never been sold in a public market and an active
trading market for our shares may not develop or be sustained. If you purchase
our ordinary shares in this offering, you will pay a price that was
not established in a competitive market. Rather, you will pay a price that we
negotiated with the representatives of the underwriters. The price of our
ordinary shares that will prevail in the market may be lower that the price you
pay.
The market price of the ordinary shares may fluctuate significantly in
response to the following factors, most of which are beyond our control:
- variations in our quarterly operating results;
- changes in securities analysts' estimates of our financial
performance;
- changes in market valuations of similar companies;
- announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
- loss of a major customer or failure to complete significant license
transactions; and
- additions or departures of key personnel.
Moreover, the market for technology and Internet-related companies has
experienced extreme volatility that often has been unrelated to the operating
performance of particular companies. These fluctuations may adversely affect the
trading price of our ordinary shares, regardless of our actual operating
performance. As a result, you may be unable to sell your ordinary shares at or
above the offering price.
WE ARE AT RISK OF SECURITIES CLASS ACTION LITIGATION DUE TO OUR EXPECTED SHARE
PRICE VOLATILITY.
In the past, securities class action litigation has often been brought
against a company following a decline in the market price of its securities.
This risk is especially acute for us because technology companies have
experienced greater than average share price volatility in recent years and, as
a result, have been subject to, on average, a greater number of securities class
action claims than companies in other industries. We may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and divert management's attention and resources, and could seriously harm
our business.
18
<PAGE>
CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL SHAREHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.
Upon completion of this offering, our executive officers, directors and
principal shareholders will beneficially own, in the aggregate, approximately
% of our outstanding ordinary shares. As a result, these
shareholders, if acting together, will be able to exercise control over all
matters requiring shareholder approval, including the election of directors and
approval of significant corporate transactions. This concentration of control
could disadvantage other shareholders with interests different from those of our
officers, directors and principal shareholders. For example, our officers,
directors and principal shareholders could delay or prevent an acquisition or
merger even if the transaction would benefit other shareholders. Please see
"Principal Shareholders" for a more detailed description of our share ownership.
FAILURE TO RAISE ADDITIONAL CAPITAL OR TO GENERATE THE SIGNIFICANT CAPITAL
NECESSARY TO EXPAND OUR OPERATIONS AND INVEST IN NEW PRODUCTS COULD REDUCE OUR
ABILITY TO COMPETE AND RESULT IN LOWER REVENUES.
We expect that the net proceeds from this offering, our cash reserves and
any cash flows from operations will be sufficient to meet our working capital
and capital expenditure needs for at least the next 12 months. However, our
limited operating history makes it difficult to predict whether these funds will
be sufficient to finance our anticipated growth. We may need to raise additional
funds if our estimates of revenues or if our working capital or capital
expenditure requirements change or prove inaccurate, if we are required to
respond to unforeseen technological or marketing hurdles or if we choose to take
advantage of unanticipated opportunities. Additional funds might not be
available at acceptable terms, if at all. If additional funds are raised through
the issuance of equity securities, the percentage ownership of our then current
shareholders would be reduced and the value of their investments might decline.
In addition, any new securities issued might have rights, preferences or
privileges senior to those of the securities held by our shareholders. If we
raise additional funds through the issuance of debt, we might become subject to
restrictive covenants.
If we need additional capital and cannot raise it on acceptable terms and
on a timely basis, we may not be able to, among other things:
- develop or enhance our products and services;
- acquire new technologies, products or businesses;
- expand operations, in the United States or internationally;
- hire, train and retain employees; or
- respond to competitive pressures or unanticipated capital
requirements.
Our failure to do any of these things could result in lower revenues and could
seriously harm our business.
WE MAY APPLY THE PROCEEDS OF THIS OFFERING TO USES THAT DO NOT INCREASE OUR
OPERATING RESULTS OR THE VALUE OF YOUR INVESTMENT.
We will have broad discretion in how we use the proceeds from this
offering, and we may spend these proceeds in ways that do not increase our
operating results or the value of your investment. You will not have the
opportunity to evaluate the economic, financial or other information on which we
base our decisions regarding how to use the proceeds from this offering.
WE DO NOT INTEND TO PAY DIVIDENDS ON OUR ORDINARY SHARES.
We have never declared or paid any cash dividend on our share capital. We
currently intend to retain any future earnings for funding growth and,
therefore, do not expect to pay any dividends in the foreseeable future.
NEW INVESTORS IN OUR ORDINARY SHARES WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION IN THE BOOK VALUE OF THEIR INVESTMENT.
The initial public offering price of our ordinary shares will be
substantially higher than the net tangible book value per share of our ordinary
shares immediately after this offering. Therefore, if you purchase our ordinary
shares in this offering, you will incur an immediate dilution of $
in net tangible book value per share of
19
<PAGE>
ordinary shares from the price you paid, based on an assumed initial public
offering price of $ per share. The exercise of outstanding
options and warrants may result in further dilution. For a further description
of the dilution that you may experience immediately after this offering, please
see "Dilution."
RISKS RELATED TO INTERNATIONAL OPERATIONS
WE ARE SUSCEPTIBLE TO ADDITIONAL RISKS FROM INTERNATIONAL OPERATIONS.
We derived 37% of our revenues in 1999 from sales outside North America. As
a result, we face additional risks from doing business internationally
including:
- reduced protection of intellectual property rights in some countries;
- licenses, tariffs and other trade barriers;
- difficulties in staffing and managing foreign operations;
- longer sales and payment cycles;
- greater difficulties in collecting accounts receivable;
- seasonal reductions in business activity;
- potentially adverse tax consequences;
- laws and business practices favoring local competition;
- costs and difficulties of customizing products for foreign countries;
- compliance with a wide variety of complex foreign laws and treaties;
- political and economic instability; and
- variance and unexpected changes in local laws and regulations.
Our research and development facilities are located in Israel, and our
directors, executive officers and other key employees are located primarily in
Israel, the United States and Europe. In addition, we maintain offices in
Germany, Sweden and the United Kingdom to market and sell our products in those
countries and surrounding regions. We have sold XACCTUSAGE internationally for
only a few years, and we have limited experience in developing localized
versions of XACCTUSAGE and marketing and distributing them internationally.
If we fail to overcome the challenges encountered in our international
operations, we could experience slower than expected revenue growth and our
business could be harmed.
EXCHANGE RATE FLUCTUATIONS BETWEEN THE U.S. DOLLAR AND THE NIS MAY NEGATIVELY
AFFECT OUR EARNINGS.
Although most of our revenues and a majority of our expenses are
denominated in U.S. dollars, a significant portion of our research and
development expenses are incurred in New Israeli Shekels, or NIS. As a result,
we may be negatively affected by fluctuations in the exchange rate between the
U.S. dollar and the NIS. Further, because most of our international revenues are
denominated in U.S. dollars, a strengthening of the dollar versus other
currencies could make our products less competitive in foreign markets and
collection of receivables more difficult. We do not currently engage in currency
hedging activities but we may choose to do so in the future.
BECAUSE WE HAVE IMPORTANT FACILITIES AND RESOURCES LOCATED IN ISRAEL, ANY MAJOR
ADVERSE DEVELOPMENT IN ITS POLITICAL OR ECONOMIC CONDITIONS COULD CAUSE OUR
BUSINESS TO SUFFER.
Our principal research and development facilities are located in Israel.
Any major hostilities involving Israel or the interruption or curtailment of
trade between Israel and its present trading partners could significantly harm
our business. Since establishment in 1948, the State of Israel has been and
continues to be in a state of hostility with its neighbors, varying from time to
time in intensity and degree.
Some of our senior officers and key employees who are citizens and
residents of Israel under the age of 48 are currently or may be obligated to
perform annual reserve duty in the Israeli Defense Forces and are subject to
being
20
<PAGE>
called for active military duty at any time. Fulfillment of these obligations
may deprive us of key employees for extended periods of time.
Further, inflation in Israel and devaluation of the NIS could have an
impact on our financial results. Although Israel has experienced substantially
reduced rates of inflation and devaluation in recent years, they are still
relatively high compared to those in the United States. Our business could be
harmed by inflation or devaluation. If inflation rates in Israel increase again
and hurt Israel's economy as a whole, our operations and financial condition
could suffer.
ANY FUTURE PROFITABILITY MAY BE DIMINISHED IF TAX BENEFITS FROM THE STATE OF
ISRAEL ARE REDUCED OR WITHHELD.
Pursuant to the Israeli Law for the Encouragement of Capital Investments,
the Israeli government has granted "Approved Enterprise" status to all of our
existing capital investment programs in Israel. Consequently, we are eligible
for tax benefits for the first several years in which we generate taxable
income. Our future profitability may be diminished if all or a portion of these
tax benefits are reduced. These tax benefits may be cancelled in the event of
changes in Israeli government policies or if we fail to comply with requisite
conditions and criteria. Currently the most significant conditions that we must
continue to meet include making specified investments in fixed assets,
maintaining the development and production nature of our facilities and
financing at least 30% of these investments through the issuance of share
capital. We may not satisfy these requirements in the future. We cannot assure
you that these tax benefits will be continued in the future at their current
levels, if at all. If these tax benefits were reduced or eliminated, the taxes
we would have to pay are likely to increase.
ISRAELI COURTS MIGHT NOT ENFORCE JUDGMENTS RENDERED OUTSIDE OF ISRAEL, WHICH MAY
MAKE IT DIFFICULT TO COLLECT ON JUDGMENTS RENDERED AGAINST US.
Some of our directors and executive officers are not residents of the
United States and some of their assets and our assets are located outside the
United States. Service of process upon our non-U.S. resident directors and
executive officers and the enforcement of judgments obtained in the United
States against us, and our directors and executive officers outside of the
United States, may be difficult to obtain. XACCT Technologies, Inc., our U.S.
subsidiary, is the U.S. agent authorized to receive service of process in any
action against us in any federal or state court arising out of this offering or
any related purchase or sale of securities. We have not given consent for this
agent to accept service of process in connection with any other claim.
We have been informed by our legal counsel in Israel that there is doubt as
to the enforceability of civil liabilities under U.S. securities laws in
original actions instituted in Israel. Moreover, an Israeli court generally will
not enforce a foreign judgment if it was given in a state whose laws do not
provide for the enforcement of judgments of Israeli courts or if its enforcement
is likely to prejudice the sovereignty, the law, public policy or the security
of the State of Israel. An Israeli court also will not declare a foreign
judgment enforceable if:
- the judgment was obtained by fraud;
- adequate service of process was not effected or the defendant did not
have a reasonable opportunity to present his or her arguments and
evidence;
- the judgment was rendered by a court not competent to render it
according to the laws of private international law in Israel;
- the judgment is at variance with another judgment that was given in
the same matter between the same parties and which is still valid; or
- at the time the action was brought in the foreign court a suit in the
same matter and between the same parties was pending before a court or
tribunal in Israel.
WE HAVE ADOPTED ANTI-TAKEOVER PROVISIONS THAT COULD DELAY OR PREVENT AN
ACQUISITION OF XACCT, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL TO OUR
SHAREHOLDERS.
Our articles of association provide for a staggered board of directors and
the ability of our board of directors to issue, without further shareholder
action, preferred shares with rights and privileges which may be senior to our
ordinary shares. These provisions may inhibit or may have the effect of
delaying, preventing or making more difficult a merger or other acquisition of
XACCT, even if doing so would be beneficial to our shareholders. Please
21
<PAGE>
see "Description of Share Capital--Anti-Takeover Provisions Under Israeli Law"
for a further discussion of anti-takeover provisions.
ISRAELI LAW CONTAINS CERTAIN ANTI-TAKEOVER PROVISIONS THAT COULD DELAY OR
PREVENT AN ACQUISITION OF XACCT, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL TO
OUR SHAREHOLDERS.
Israeli law regulates mergers, votes required to approve a merger,
acquisition of shares through tender offers and transactions involving
significant shareholders in a manner that may discourage or delay potential
acquisition proposals, even if they are beneficial to our shareholders. Please
see "Description of Share Capital--Anti-Takeover Provisions Under Israeli Law"
for a further discussion of anti-takeover provisions.
THE NEW ISRAELI COMPANIES LAW IMPOSES SUBSTANTIAL DUTIES ON SHAREHOLDERS AND MAY
CAUSE UNCERTAINTIES REGARDING CORPORATE GOVERNANCE.
The Israeli Companies Law, which became effective on February 1, 2000,
brought about significant changes to Israeli corporate law. The new law includes
provisions imposing substantial duties on certain controlling and
non-controlling shareholders. Please see "Management--Approval of Certain
Transactions--Duties of Shareholders" for a more detailed discussion of
shareholder duties under the Companies Law. In addition, uncertainties regarding
certain aspects of corporate governance may persist until Israeli courts
adequately interpret the Companies Law. These uncertainties could
inhibit takeover attempts, other transactions and other corporate decisions and
actions that may be beneficial to shareholders.
22
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements in "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere. These statements
relate to future events or our future financial performance. In some cases, you
can identify forward-looking statements by terminology such as "may," "will,"
"should," "expect," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue" or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks outlined under "Risk
Factors," that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed of implied by
these forward-looking statements.
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Moreover, neither we nor any
other person assume responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus to conform these statements to actual results.
23
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the
ordinary shares that we are selling in this offering,
after deducting estimated underwriting discounts and estimated offering expenses
payable by us, will be approximately $ at an assumed initial
public offering price of $ per share.
We intend to use the net proceeds to finance the growth of our business
through the expansion of sales, marketing and distribution activities and
increased research and development activities with respect to enhancements to
existing products and new products, and for working capital and general
corporate purposes. We may use a portion of the proceeds of this offering to
acquire new businesses, products or technologies that may be complementary to
our current or future business. We do not currently have any specific plan or
program with respect to any such acquisitions. Pending use of the net proceeds
of this offering, we intend to invest the net proceeds in interest-bearing,
investment-grade securities.
DIVIDEND POLICY
We have not declared or paid any cash dividends on our ordinary shares in
the past. We do not expect to pay cash dividends on our ordinary shares in the
foreseeable future and intend to retain our future earnings, if any, to finance
the development of our business.
In the event that cash dividends are declared in the future, we will pay
those dividends in New Israeli Shekels, or NIS, or in foreign currency, subject
to any statutory limitations. Under current Israeli regulations, any dividends
or other distributions paid with respect to ordinary shares will be freely
repatriable in such non-Israeli currencies at the rate of exchange prevailing at
the time of conversion, provided that Israeli income tax has been paid on, or
withheld from, these payments. Because exchange rates between the NIS and the
U.S. dollar fluctuate, a United States shareholder will bear the risks of
currency fluctuations during the period between the date the dividend is
declared and paid by us in NIS and the date conversion is made by the
shareholder into U.S. dollars.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis;
- on a pro forma basis giving effect to (1) the receipt of net proceeds
of approximately $14.3 million from the sale of 1,227,235 preferred
shares in March 2000, (2) the exercise of warrants outstanding as of
December 31, 1999 to purchase 2,058,371 preferred shares at a weighted
average exercise price of $6.19 per share, which warrants if
unexercised would expire upon the closing of this offering and (3) the
conversion of all issued and outstanding preferred shares into
ordinary shares; and
- on a pro forma as adjusted basis to reflect the sale of the ordinary
shares in this offering at an assumed initial public offering price of
$ per ordinary share after deducting estimated
underwriting discounts and the estimated expenses of this offering
payable by us.
You should read the table below in conjunction with our consolidated
financial statements and the related notes included elsewhere in this
prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
-------- --------- ------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Shareholders' equity:
Preferred shares, NIS 0.01 nominal value, 18,550,000 shares
authorized; 13,336,155 shares issued and outstanding,
actual; no shares issued and outstanding pro forma and pro
forma as adjusted............................................ 33 --
Ordinary shares, NIS 0.01 nominal value, 37,630,000 voting
shares and 1,820,000 non-voting shares authorized;
4,345,775 voting shares and no non-voting shares issued
and outstanding, actual; 19,575,898 voting shares and
1,391,638 non-voting shares issued and outstanding, pro
forma; and voting shares and
non-voting shares issued and outstanding,
pro forma as adjusted........................................ $11 $52
Additional paid-in capital..................................... 34,781 61,647
Deferred stock compensation.................................... (2,824) (2,824)
Accumulated deficit............................................ (14,174) (14,174)
-------- ---------
Total shareholders' equity........................................ 17,827 44,701
======== ========= ============
Total capitalization.............................................. $17,827 $44,701
======== ========= ============
</TABLE>
The table excludes:
- 3,113,439 ordinary shares issuable upon exercise of options
outstanding as of December 31, 1999 with a weighted average exercise
price of $0.68 per share;
- 29,050 ordinary shares issuable upon exercise of warrants to purchase
ordinary shares outstanding as of December 31, 1999 with a weighted
average exercise price of $0.30 per share, which warrants do not
expire upon the completion of this offering;
- 3,104,866 ordinary shares available for future issuance under our
share option plans, plus the ordinary shares available for issuance
upon board of director approval under our Section 3(i) share option
plan; and
- 750,000 ordinary shares that will be available for issuance under our
employee share purchase plan.
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<PAGE>
DILUTION
If you invest in our ordinary shares, your interest will be diluted to the
extent of the difference between the public offering price per share of our
ordinary shares and the pro forma as adjusted net tangible book value per share
of our ordinary shares immediately after this offering.
Investors participating in this offering will incur immediate, substantial
dilution. The pro forma net tangible book value of our ordinary shares as of
December 31, 1999 was $44.7 million, or $2.13 per ordinary share. Pro forma net
tangible book value per share represents the amount of our total tangible assets
less total liabilities, divided by the number of ordinary shares outstanding
after giving effect to the sale of 1,227,235 preferred shares for aggregate net
proceeds of $14.3 million in March 2000, and assuming the exercise of warrants
to purchase 2,058,371 preferred shares outstanding as of December 31, 1999,
which warrants if unexercised would expire upon the completion of this offering.
Assuming our sale of ordinary shares offered by this prospectus at an assumed
initial public offering price of $ per share and after deducting the estimated
underwriting discounts and commissions and estimated offering expenses payable,
our pro forma as adjusted net tangible book value at December 31, 1999 would
have been $ , or $ per ordinary share. This represents an immediate increase in
pro forma net tangible book value of $ per share to existing shareholders and an
immediate dilution of $ per share to new investors purchasing ordinary shares in
this offering. The following table illustrates this dilution on a per ordinary
share basis:
Assumed initial public offering price
per ordinary share.......................................... $
Pro forma net tangible book value
per ordinary share as of December 31, 1999.............$2.13
Increase per share attributable to new investors.........
-------
Pro forma as adjusted net tangible book value per ordinary
share after this offering...................................
-------
Dilution per ordinary share to new investors.................. $
=======
The following table sets forth on a pro forma as adjusted basis, as of
December 31, 1999, the differences between the number of ordinary shares
purchased from us, the total consideration paid and the average price per share
paid by existing holders of ordinary shares and by the new investors, before
deducting the estimated underwriting discount and estimated offering expenses
payable by us.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
----------------------- ------------------------- Price
Number Percent Amount Percent Per Share
------------ ---------- -------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Existing shareholders.............................. 20,967,536 % $60,560,894 % $ 2.89
New investors......................................
------------ ---------- -------------- ----------
Total.................................. 100% $ 100%
============ ========== ============== ==========
</TABLE>
The foregoing discussion and tables assume no exercise of options
outstanding as of December 31, 1999 to purchase 3,113,439 ordinary shares at a
weighted average exercise price of $0.68 per share and assumes no exercise of
warrants outstanding to purchase 29,050 ordinary shares at a weighted average
exercise price of $0.30 per share, which warrants do not expire upon the
completion of this offering. To the extent these options and warrants are
exercised, there will be further dilution to new investors.
If the underwriters' over-allotment option is exercised in full, the number
of shares held by new investors increase to , or % of the
total ordinary shares outstanding after this offering.
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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following selected consolidated financial data as of December 31, 1998
and 1999 and for the period from our inception in June 1997 through December 31,
1997 and for the years ended December 31, 1998 and 1999 have been derived from
our consolidated financial statements and the related notes set forth elsewhere
in this prospectus. These consolidated financial statements have been prepared
in accordance with generally accepted accounting principles in the United
States. The selected consolidated financial data as of December 31, 1997 have
been derived from audited consolidated financial statements not included in this
prospectus, which have also been prepared in accordance with generally accepted
accounting principles in the United States. You should read the selected
consolidated financial data set forth below in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
our consolidated financial statements and the related notes included elsewhere
in this prospectus. Our historical results are not necessarily indicative of
future results.
<TABLE>
<CAPTION>
INCEPTION
(JUNE 1997)
TO DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------
1997 1998 1999
-------------- ----------- -------------
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
<S> <C> <C> <C>
License........................................................... $-- $-- $ 898
Service........................................................... -- -- 296
-------------- ----------- -------------
Total revenues.................................................. -- -- 1,194
-------------- ----------- -------------
Cost of revenues:
License........................................................... -- -- 48
Service........................................................... -- -- 192
-------------- ----------- -------------
Total cost of revenues.......................................... -- -- 240
-------------- ----------- -------------
Gross profit......................................................... -- -- 954
-------------- ----------- -------------
Operating expenses:
Research and development.......................................... 390 1,511 2,243
Sales and marketing............................................... 127 1,995 6,472
General and administrative........................................ 152 1,033 1,204
Amortization of deferred stock compensation....................... -- -- 381
-------------- ----------- -------------
Total operating expenses........................................ 669 4,539 10,300
-------------- ----------- -------------
Operating loss....................................................... (669) (4,539) (9,346)
Interest and other income, net....................................... 7 105 268
-------------- ----------- -------------
Net loss............................................................. $ (662) $(4,434) $(9,078)
============== =========== =============
Basic and diluted net loss per share................................. $ (0.30) $ (1.17) $ (2.34)
============== =========== =============
Weighted average number of shares used in computing basic and
diluted net loss per share........................................ 2,192,400 3,804,874 3,886,495
============== =========== =============
Pro forma basic and diluted net loss per share (unaudited)........... $ (0.67)
=============
Pro forma weighted average number of shares used in computing
basic and diluted net loss per share (unaudited).................. 13,566,732
=============
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1997 1998 1999
------------- ---------- ------------
CONSOLIDATED BALANCE SHEET DATA:
<S> <C> <C> <C>
Cash and cash equivalents............................................ $366 $5,445 $17,309
Working capital...................................................... 243 5,021 17,356
Total assets......................................................... 518 6,064 20,086
Shareholders' equity................................................. 338 4,973 17,827
</TABLE>
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION AND ANALYSIS IN CONJUNCTION WITH
THE "SELECTED CONSOLIDATED FINANCIAL DATA" AND OUR CONSOLIDATED FINANCIAL
STATEMENTS AND THE RELATED NOTES APPEARING ELSEWHERE IN THIS PROSPECTUS. WE
BELIEVE THAT PERIOD-TO-PERIOD COMPARISONS OF OUR RESULTS OF OPERATIONS ARE NOT
NECESSARILY MEANINGFUL AND SHOULD NOT BE RELIED UPON AS INDICATIONS OF FUTURE
PERFORMANCE.
OVERVIEW
We are a leading provider of intelligent business infrastructure software
for network service providers. Our infrastructure platform allows network
service providers to implement new value- and usage-based business models and to
offer higher-margin, enhanced services through comprehensive real-time data
collection, data aggregation and automated user account provisioning. The XACCT
platform is a foundation technology that provides a single point of interface
between the operations and business support systems of network service providers
and the physical network. We have designed our solution to provide the
carrier-class scalability, reliability, manageability and flexibility that our
customers demand to run their mission-critical business applications.
We were incorporated in Israel and commenced operations in June 1997. We
were a development stage company from our inception in June 1997 through
December 1998. We began shipping our initial product in January 1999. We have
spent a substantial amount to date developing our initial products and
establishing our operations. At December 31, 1999, we had an accumulated deficit
of $14.2 million.
We derive our revenues principally from software licenses and related
services. Customer payments received prior to the recognition of revenues are
recorded as deferred revenue. To date, our license revenues have been derived
from licenses of XACCTUSAGE, our server-based software platform that resides at
the network service provider site, as well as information source modules and
gatherers which reside near the switches, routers, hubs and other elements of
the network. In each case, we record license revenue when a software license
agreement has been executed or a definitive purchase order has been received and
the product has been delivered to the end customers, no significant obligations
with regard to implementation remain, the fee is fixed and determinable and
collectibility is probable.
Service revenues include product maintenance and support, consulting and
training. Customers who license our products usually purchase maintenance
contracts. These contracts provide unspecified software upgrades, as well as
technical support, over a specified term, which typically is 12 months.
Maintenance contracts are usually paid in advance, and revenues from these
contracts are recognized ratably over the term of the contract. Customers
typically purchase additional consulting services from us to support their
implementation activities. These consulting services generally are sold on a
time and materials basis. Consulting and training revenues are deferred and
recognized when provided to the customer. Customer advances and billed amounts
due from customers in excess of recognized revenues are recorded as deferred
revenues.
We market our products through our direct sales force and through
relationships with system integrators, value-added resellers and technology
vendors. Revenues attributable to indirect sales are recognized upon acceptance
by the end customer. In 1999, we derived 63% of our revenues from customers
located in North America and approximately 37% of our revenues from customers
outside North America, substantially all of which was in Europe. In the first
quarter of 2000, we opened three offices in Europe. We plan to expand our
operations into Asia and further across Europe.
Our limited operating history makes it difficult to predict our
future operating results. We believe our future success will depend on our
ability to expand our customer base and enhance our products. We intend to
continue to invest significantly in sales, marketing and research and
development and expect to incur operating losses for the foreseeable future. A
delay in the revenue recognition from one or more license transactions could
cause significant variations in operating results from quarter to quarter and
could result in larger-than-anticipated losses.
In 1999, a small number of customers accounted for a significant portion of
our total revenues. During that year, revenues from four customers accounted for
51% of total revenues. We expect that revenues from a limited number of
customers will continue to account for a large percentage of total revenues in
future quarters. TV Cabo, UUNET, GTE Internetworking and Verio each accounted
for at least 10% of total revenues in 1999.
28
<PAGE>
STOCK-BASED COMPENSATION
Deferred stock compensation represents the difference between the estimated fair
value of the ordinary shares for accounting purposes and the option exercise
price at the date of grant. We have recorded deferred stock compensation of $3.2
million in connection with stock options we have granted. This amount is
amortized over the four year vesting period of the options using the multiple
option approach. Based on options granted through December 31, 1999, we expect
to record stock-based compensation expense of $356,000 in the quarter ending
March 31, 2000. We expect that stock-based compensation expense recorded in
quarters after March 31, 2000 will decrease sequentially. We anticipate this
expense to decrease consistently in future periods. Unearned compensation
expense will be reduced for future periods to the extent that options are
terminated prior to full vesting. Please see note 7 to our consolidated
financial statements for a further description of stock-based compensation
expense.
NET OPERATING LOSS CARRYFORWARDS
From our inception in June 1997 through December 31, 1999, we had $4.7
million of Israeli net operating loss carryforwards and $6.9 million of U.S.
federal and state net operating loss carryforwards to offset future taxable
income. These net operating loss carryforwards expire in varying amounts from
2006 to 2019. Given our limited operating history and our losses incurred to
date, coupled with the difficulty of forecasting future results, a full
valuation allowance has been recorded. Furthermore, as a result of changes in
our equity ownership from our preferred share offerings and this offering, use
of net operating losses and tax credits may be subject to substantial annual
limitations. This is due to the ownership change limitations provided in the
United States Internal Revenue Code and similar state provisions. The degree of
any such limitation cannot presently be estimated. To date, we have not
performed an evaluation to determine if such a limitation exists, and we may not
perform that evaluation until and unless we are profitable in the future. The
annual limitation may result in the expiration of net operating losses and tax
credits before utilization. Please see note 8 to our consolidated financial
statements for a further discussion of net operating loss carryforwards.
RESULTS OF OPERATIONS
FOUR QUARTERS ENDED DECEMBER 31, 1999
We first began shipping products in the first quarter of 1999 and, as a
result, we believe that annual comparisons of our operating results and
quarterly results of operations involving periods prior to December 31, 1998 are
less meaningful than an analysis of recent quarterly operating results.
Accordingly, we are providing a discussion and analysis of our quarterly
operating results for the four quarters ended December 31, 1999. The following
table lists the operating results for the four most recent quarters as well as,
for the periods indicated, each line item as a percentage of total revenues:
<TABLE>
<CAPTION>
QUARTERS ENDED
----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
----------- --------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues:
License................................................. $ 81 $ 186 $ 252 $ 379
Service................................................. 4 44 49 199
----------- --------- ------------- -------------
Total revenues........................................ 85 230 301 578
Cost of revenues:
License................................................. 7 9 14 18
Service................................................. 15 33 64 80
----------- --------- ------------- -------------
Total cost of revenues................................ 22 42 78 98
----------- --------- ------------- -------------
Gross profit .............................................. 63 188 223 480
----------- --------- ------------- -------------
Operating expenses:
Research and development................................ 529 497 509 708
Sales and marketing..................................... 1,131 1,278 1,640 2,423
General and administrative.............................. 194 235 257 518
Amortization of deferred stock compensation ............ -- -- 44 337
----------- --------- ------------- -------------
Total operating expenses.............................. 1,854 2,010 2,450 3,986
----------- --------- ------------- -------------
Operating loss............................................. (1,791) (1,822) (2,227) (3,506)
Interest and other income, net............................. 95 19 8 146
----------- --------- ------------- -------------
Net loss................................................... $(1,696) $(1,803) $(2,219) $(3,360)
=========== ========= ============= =============
</TABLE>
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<TABLE>
<CAPTION>
QUARTERS ENDED
-----------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1999 1999 1999 1999
----------- --------- -------------- -------------
(% OF REVENUES)
<S> <C> <C> <C> <C>
Revenues:
License................................................ 95% 81% 84% 66%
Service................................................ 5 19 16 34
----------- --------- -------------- -------------
Total revenues....................................... 100 100 100 100
----------- --------- -------------- -------------
Cost of revenues:
License................................................ 8 4 5 3
Service................................................ 18 14 21 14
----------- --------- -------------- -------------
Total cost of revenues............................... 26 18 26 17
----------- --------- -------------- -------------
Gross profit.............................................. 74 82 74 83
----------- --------- -------------- -------------
Operating expenses:
Research and development............................... 622 216 169 122
Sales and marketing.................................... 1,331 556 545 419
General and administrative............................. 228 102 85 90
Amortization of deferred stock compensation............ -- -- 15 59
----------- --------- -------------- -------------
Total operating expenses............................. 2,181 874 814 690
----------- --------- -------------- -------------
Operating loss............................................ (2,107) (792) (740) (607)
Interest and other income, net............................ 112 8 3 26
----------- --------- -------------- -------------
Net loss.................................................. (1,995)% (784)% (737)% (581)%
=========== ========= ============== =============
</TABLE>
REVENUES
Total revenues increased sequentially on a quarterly basis from $85,000 for
the quarter ended March 31, 1999 to $578,000 for the quarter ended December 31,
1999. We began to generate revenues in 1999 following the commercial release of
our initial product in the fourth quarter of 1998. These revenues grew
sequentially in 1999 as our customer base and our average transaction size
increased. Our customer base increased from three at March 31, 1999 to 25 at
December 31, 1999. Average transaction size increased from approximately
$22,000 in the quarter ended March 31, 1999 to approximately $110,000 in the
quarter ended December 31, 1999 primarily as a result of larger initial
deployments by our customers.
LICENSE. License revenues increased sequentially on a quarterly basis from
$81,000 for the quarter ended March 31, 1999 to $379,000 for the quarter ended
December 31, 1999.
SERVICE. Service revenues increased from $4,000 for the quarter ended March
31, 1999 to $199,000 for the quarter ended December 31, 1999. This increase
resulted primarily from increased software licenses following the introduction
of our products and the expansion of our professional service organization. The
increase in service revenues in the quarter ended December 31, 1999 was
primarily due to approximately $140,000 in fees generated from the custom
development and implementation activities performed for a large customer. We
anticipate that service revenue will decline as a percentage of total revenue in
the short term.
COST OF REVENUES
Total cost of revenues increased sequentially on a quarterly basis from
$22,000 for the quarter ended March 31, 1999 to $98,000 for the quarter ended
December 31, 1999.
LICENSE. Cost of license revenues consists of product and documentation
production costs, packaging and shipping and third-party software license
payments. Cost of license revenues has grown sequentially since the beginning of
1999 to support increased software licenses following the introduction of our
initial product. We expect that cost of license revenues will increase in
dollar amounts but remain relatively flat as a percentage of total revenues in
the long term.
SERVICE. Cost of service revenues consists of salaries and related payroll
and facility expenses for service, support and training personnel. Cost of
service revenues increased sequentially on a quarterly basis during 1999. This
increase was due primarily to our hiring of additional service personnel in 1999
in anticipation of supporting larger service obligations necessary to support a
larger customer base. This investment substantially increased cost of service
revenues as a percentage of service revenue in the third quarter of 1999. We
expect that cost of service
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revenues will continue to increase in dollar amount as we continue to expand our
customer support organization in advance of anticipated customer demand.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT. Research and development expenses include
salaries and related payroll and facilities expenses for engineering and
technical personnel, as well as the cost of third party development consultants.
We expense all of these costs as incurred. A significant majority of our
research and development personnel are located in Israel. Research and
development expenses increased from $509,000 for the quarter ended September 30,
1999 to $708,000 for the quarter ended December 31, 1999 due primarily to the
hiring of seven additional engineering personnel during the quarter ended
December 31, 1999. We intend to spend significant amounts on enhancing existing
products and developing new products. As a result, we anticipate that research
and development expenses will increase significantly in dollar amounts in future
periods.
SALES AND MARKETING. Sales and marketing expenses consist of salaries,
commissions and related overhead expenses for sales and marketing personnel, as
well as advertising, promotional and travel expenses. Sales and marketing
expenses increased from $1.1 million for the quarter ended March 31, 1999 to
$2.4 million for the quarter ended December 31, 1999 due primarily to increased
commissions and our hiring of additional sales and marketing personnel. We
increased our sales and marketing department from 12 employees at December 31,
1998 to 48 employees at December 31, 1999. We anticipate that sales and
marketing expenses will increase significantly in dollar amounts as we continue
to expand our sales and marketing organization.
GENERAL AND ADMINISTRATIVE. General and administrative expenses consist of
salaries for administrative, executive and finance personnel and related
overhead expenses, recruiting costs and professional service fees. General and
administrative expenses increased from $194,000 in the quarter ended March 31,
1999 to $518,000 in the quarter ended December 31, 1999. This sequential
increase was primarily attributable to the hiring of additional administrative
and finance personnel, and higher recruiting and professional service fees. We
believe that our general and administrative expenses will continue to increase
in dollar amounts as our operations grow and as we incur the expenses associated
with operating as a public company.
AMORTIZATION OF DEFERRED STOCK COMPENSATION. We amortized employee
stock-based compensation expense of $381,000 in 1999.
INTEREST AND OTHER INCOME, NET. Interest and other income, net consists
primarily of interest received on invested cash balances. Interest and other
income, net increased from $8,000 in the quarter ended September 30, 1999 to
$146,000 in the quarter ended December 31, 1999 due primarily to higher cash
balances in the fourth quarter following an equity financing completed in
October 1999.
INCEPTION (JUNE 1997) TO DECEMBER 31, 1998 AND YEAR ENDED DECEMBER 31, 1999
REVENUES
LICENSE. We recorded no license revenues for the period from our inception
in June 1997 to December 31, 1998. License revenues in 1999 were $898,000
following the commercial release of our initial product in the fourth quarter of
1998 and the initiation of sales activities.
SERVICE. We recorded no revenues for the period from our inception to
December 31, 1998. Service revenues in 1999 totaled $296,000.
COST OF REVENUES
LICENSE. We recorded no cost of license revenues for the period from our
inception to December 31, 1998. We incurred $48,000 in cost of license revenues
in 1999 primarily for the packaging and documentation of our software.
SERVICE. We recorded no cost of service revenues for the period from our
inception to December 31, 1998. We incurred $192,000 in cost of service revenues
in 1999 to support the installation and implementation of our software and as we
expanded our professional service organization.
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OPERATING EXPENSES
RESEARCH AND DEVELOPMENT. Research and development expenses increased from
$1.9 million for the period from our inception to December 31, 1998 to $2.2
million in 1999. The increase was primarily attributable to the hiring of
additional engineering personnel.
SALES AND MARKETING. Sales and marketing expenses increased from $2.1
million for the period from our inception to December 31, 1998 to $6.5 million
in 1999. The increase was attributable primarily to increased sales and
marketing efforts and higher sales commissions resulting from increased sales.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1.2
million in the period from our inception to December 31, 1998 and were $1.2
million in 1999.
AMORTIZATION OF DEFERRED STOCK COMPENSATION. We recorded no deferred
stock-based compensation in the period from our inception to December 31, 1998.
We recorded $3.2 million in deferred stock-based compensation in 1999 and
amortized $381,000 of deferred stock compensation expense in 1999.
INTEREST AND OTHER INCOME, NET. Interest and other income, net increased
from $112,000 for the period from our inception to December 31, 1998 to $268,000
in 1999 as a result of higher average cash balances.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through the
private sale of $32.3 million of our securities. We anticipate that we will
receive $12.7 million on or prior to the closing of this offering from the
exercise of outstanding warrants for the purchase of 2,058,371 ordinary shares
at a weighted average exercise price of $6.19 per share, which warrants expire
upon the completion of this public offering.
Net cash used in operating activities was $4.2 million in the period from
our inception through December 31, 1998 and $8.2 million in 1999 and was
primarily attributable to net losses during these periods.
Net cash used in investing activities was $437,000 in the period from our
inception through December 31, 1998 and $1.5 million in 1999. Net cash used in
investing activities consists primarily of purchases of computer hardware and
software, office furniture and equipment and, in 1999, investment in short-term
term bank deposits.
Net cash provided by financing activities was $10.1 million in the period
from inception through December 31, 1998 and $21.6 million in 1999. Net cash
provided by financing activities consists primarily of net proceeds from the
issuance of preferred shares.
We expect to experience significant growth in our operating expenses for
the foreseeable future in order to execute our business plan. As a result, we
anticipate that operating expenses and planned capital expenditures will
constitute a material use of our cash resources. In addition, we may use cash
resources to fund acquisitions or investments in other businesses, technologies
or product lines. We believe that available cash and cash equivalents and the
net proceeds from this offering and the exercise of warrants upon closing of
this offering and any cash flows from operations, will be sufficient to meet our
working capital and operating expense requirements for at least the next 12
months. However, we may require additional funds to support our working capital
and operating expense requirements or for other purposes and may seek to raise
these additional funds through public or private debt or equity financings. We
cannot assure you that this additional financing will be available, or if
available, will be available on reasonable terms and not dilutive to our
shareholders.
YEAR 2000 COMPLIANCE
We have not experienced any Year 2000-related disruption in our products
and the operation of our systems. To our knowledge, none of our material
suppliers or vendors experienced any material Year 2000 problems. Although most
Year 2000 problems should have become evident on January 1, 2000 or February 29,
2000, additional Year 2000-related problems may become evident in the future.
TAXATION
Our tax rate will reflect a mix of the United States statutory tax rate on
our United States income and the Israeli tax rate discussed below. We expect
that most of our taxable income will be generated in Israel. Israeli
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companies are generally subject to corporate income tax at the rate of 36%.
However, the effective rate of tax of a company that derives income from an
approved enterprise, as discussed below, may be considerably lower.
Our production facilities have been granted approved enterprise status
pursuant to the Israeli Law for the Encouragement of Capital Investments,
5719-1959, referred to as the Investment Law. The primary tax benefits resulting
from approved enterprise status are described below.
Income derived from our approved enterprise is tax exempt for two years of
the ten-year tax benefit period, and is subject to a reduced tax rate of 10% to
25%, depending on the rate of non-Israeli investments in the company, during the
remainder of the period. The tax benefit period for this approved enterprise has
not yet commenced. The tax benefit period will commence in the year in which we
first recognize Israeli taxable income. The tax benefit period is subject to
limits of the earlier of 12 years from the commencement of production, or 14
years from receipt of the approval. Accordingly, the period relating to this
approved enterprise will expire in 2012.
In the period from our inception in June 1997 through December 31, 1997 and
in the years ended December 31, 1998 and 1999, we incurred losses for tax
purposes. Accordingly, we did not provide for taxes on income in any of the
reported periods.
INFLATION AND MARKET RISK
Most of our sales traditionally have been made in U.S. dollars, and most of
our expenses have been incurred in U.S. dollars or denominated in NIS, which is
linked to the dollar. We have not been materially affected by currency
fluctuations between the NIS and the U.S. dollar or by the Israeli rate of
inflation.
We do not currently use financial instruments for trading purposes and do
not currently hold any derivative financial instruments which could expose us to
significant market risk. We invest our funds primarily in low-risk, short-term
banking instruments yielding fixed interest rates.
FUNCTIONAL CURRENCY
The U.S. dollar is the primary currency in the economic environment in
which we and our subsidiaries operate. Substantially all of our sales are made
outside of Israel and are denominated in U.S. dollars. Most of our expenses,
including marketing and service costs, are made outside of Israel and are
incurred in U.S. dollars. As a result, our functional currency is the U.S.
dollar.
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BUSINESS
OVERVIEW
We are a leading provider of intelligent business infrastructure software
for next-generation networks. The XACCT platform is a foundation technology that
provides a single point of interface between the operations and business support
systems of network service providers and the physical network. Our software
platform allows network service providers to implement new value- and
usage-based business models and to offer higher-margin, enhanced services
through comprehensive real-time data collection, data aggregation and automated
user account provisioning. We have designed our solution to provide the
carrier-class scalability, reliability, manageability and flexibility that our
customers demand to run their mission-critical business applications. As of
December 31, 1999, we had over 20 network service providers customers. Our
customers include Bell Nexxia, Global One, GTE Internetworking, Harvard
University, Mannesman Ipulsys, MCI Worldcom, Siemens, TV Cabo, Verio and UUNET.
In addition, we have developed strategic alliances or collaborative
relationships with a group of over 70 system integrators, value-added resellers,
network infrastructure vendors and software applications vendors.
INDUSTRY BACKGROUND
GROWTH OF INTERNET SERVICES AND DATA TRAFFIC. The Internet is a global
network of interconnected public and private networks that enables millions of
people to communicate, collaborate, access information and conduct business
electronically. International Data Corporation estimates that the number of
worldwide Internet users will grow from 159 million at the end of 1998 to 602
million by 2003. This increased connectivity to the Internet and the
availability of new communications technologies are making Internet-based video,
voice and data communications an integral part of the services offered by
telecommunications carriers, cable TV operators, enterprise network operators
and Internet service providers, which we refer to collectively as network
service providers. The networks of the early 1990s, however, were not designed
to handle these new service offerings or the dramatic increases in data traffic
and users. As the variety of service offerings and the amount of network data
traffic have increased, network service providers have begun to transform their
traditional networks into converged, packet-based networks for integrated voice
and data services, or next-generation networks.
INCREASING COMPETITION AMONG NETWORK SERVICE PROVIDERS. Increased
acceptance and use of the Internet has forced network service providers to
quickly transition to newer communications technologies to support their new
service offerings. Network service providers seek to differentiate themselves
from their competitors through value-added services such as Internet-based video
and voice transmission, which require rapid and large investments in physical
networks and operations and business support systems. The availability of these
new services to Internet users is causing further acceleration in the growth of
Internet usage and data traffic.
NETWORK SERVICE PROVIDERS SEEK TO LEVERAGE THE GROWTH OF INTERNET
SERVICES AND DATA TRAFFIC. Network service providers seek to take advantage of
the significant revenue opportunities that have been created by the growing
volume of global Internet traffic and the increasing demand for high value-added
Internet-based communications services. To date, the growth of these
opportunities has been limited by problems associated with Internet access,
bandwidth, security and the quality and range of applications available. As
these issues are being addressed, however, network service providers are finding
that their inability to aggregate and transform the raw data carried over their
networks into meaningful business information has constrained their revenue
generation potential. Increasingly, network service providers are looking for
methods to move away from flat-fee pricing to flexible, sophisticated business
models based on value to the user and cost to the network service provider.
These new business models will increase revenues by enabling flexible service
offerings, programs to increase customer satisfaction and differentiation based
on quality of service. We believe that the principal limitation on the ability
of network service providers to generate revenues from the Internet is their
lack of a business infrastructure, or Internet back office, necessary to support
these new business models. This Internet back office is analogous to the
infrastructure that allows traditional telecommunications companies to manage,
measure, monitor and analyze traffic across telephone networks.
In order to fully capitalize on the opportunities created by the growth
of the Internet and compete effectively, network service providers need a
business infrastructure that enables the following capabilities:
o value-based pricing of services and price modeling;
o differentiated service levels and quality-of-service metering;
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o intelligent analysis of real-time network usage data;
o customer care/customer relationship management;
o fraud prevention and management;
o carrier-class scalability, reliability, manageability and
flexibility;
o integration with both next-generation and legacy back-office business
systems; and
o rapid assimilation of new network elements and technologies.
EXISTING SOLUTIONS ARE LIMITED. Network service providers have attempted
to address these challenges by implementing custom-made, expensive systems
tools. These single-purpose utilities have proven inadequate for multi-service,
multi-vendor and multi-technology global networks. They are typically difficult
to adapt to purposes beyond those for which they originally were constructed and
do not scale to either the types of data traffic or the new technologies,
devices and services that are characteristic of next-generation networks.
Moreover, these solutions rely on separate collection and analysis of network
data, delayed analysis of the data collected and manual service provisioning.
Consequently, current solutions do not provide network service providers with
the Internet back office functionality needed to create flexible new business
models and manage a dynamic range of customers, service offerings and pricing
structures. This has forced many network service providers to price their
service offerings on a simple, flat-fee basis.
MARKET OPPORTUNITY FOR A BUSINESS INFRASTRUCTURE THAT EXPANDS REVENUE
GENERATION MODELS. Network service providers can benefit from a new class of
intelligent business infrastructure that will allow them to leverage the rapid
growth of Internet services and data traffic into increased opportunities for
revenue generation. We believe that there is significant demand for
infrastructure software that addresses the limitations of existing solutions and
enables network service providers to rapidly capitalize on the growth of the
Internet and to implement higher-margin, enhanced service offerings. This
solution must support high-volume, real-time data collection from multiple
sources and all layers of the network; operate non-intrusively; and have
sufficiently robust quality and reliability for the largest carrier-class
network service providers. Network service providers also require a flexible,
extensible software platform that allows them to dynamically monitor, provision
and configure multiple service-types across their networks. Moreover, any
solution must readily adapt to the full range of network devices and standards
associated with next-generation networks. The immediate opportunity for a
solution that combines these attributes is in the market for Internet business
infrastructure software, which The Yankee Group estimates will grow from $207
million in 1999 to $7.7 billion in 2004. We believe, however, that such a
solution could claim a substantial portion of the larger market for operations
support systems, which The Insight Research Corporation estimates will grow from
$33.9 billion in 2000 to $58.4 billion in 2005.
XACCT SOLUTION
We are a leading provider of business infrastructure software for the
next-generation public network. Our intelligent business infrastructure platform
allows network service providers to implement new value- and usage-based
business models and offer higher-margin, enhanced services. The XACCT platform
is a foundation technology that provides a single point of interface between
Internet back office operations and business support systems and the physical
network. Network service providers utilize our platform to run mission-critical
business applications that require comprehensive real-time data collection, data
aggregation and automated user account provisioning. We have designed our
solution to provide the carrier-class scalability, reliability, manageability
and flexibility that our customers demand.
The following diagram illustrates the interface that the XACCT platform
provides between the operations and business support systems of network service
providers and the physical network:
[DIAGRAM OF OUR BUSINESS INFRASTRUCTURE PLATFORM]
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Our solution offers our customers the following benefits:
ENABLES INTELLIGENT PRICING OF VALUE-ADDED SERVICES. Our business
infrastructure system captures, aggregates and analyzes in real-time the data
necessary to allow network service providers to price their services based on
value to the user and cost to the network service provider. For example, instead
of charging a flat-rate fee for simple connectivity, network service providers
can use our solution to offer and charge appropriately for service level
agreements or for services based on quality of service, transactions, events,
content, or volume. Our solution also provides detailed network information that
can be used to support customer relationship management, customer retention and
fraud management applications.
ENABLES AUTOMATED USER ACCOUNT PROVISIONING. Our platform is designed to
allow network service providers to implement automated user account
provisioning, including self-provisioning, meaning that the network service
provider's users can activate, modify or deactivate services without the
intervention of the network service provider. Automated user account
provisioning reduces a network service provider's costs and time to revenue by
streamlining user interactions and increasing user satisfaction.
CARRIER-CLASS SCALABILITY AND RELIABILITY. Internet-based services
generate significant amounts of data that must be aggregated, correlated,
processed and analyzed in real-time. We have designed our solution with a
distributed software architecture designed to scale with the growth of our
customers' networks and the growth of network traffic. This distributed
architecture helps ensure data integrity and high system availability by placing
intelligent software agents throughout the network, enabling redundant data
collection and transmission to multiple data repositories.
FLEXIBILITY AND EXTENSIBILITY. We believe our solution is fully adaptable
to all major network infrastructure technologies, including hardware, software
and operations and business support systems. In addition, our products are
designed to work with industry standard protocols to allow for the rapid and
seamless assimilation of new, emerging network standards, devices and
applications. For example, we are currently extending our platform to
incorporate the wireless application protocol, or WAP, as it continues to
develop. Our platform's flexible architecture is designed to enable our systems
to evolve and grow with our customers. As a result, when network technology
providers introduce new hardware or software, we typically need only four to
eight weeks to plan, develop and test a software module to interface with the
new network element.
MANAGEABILITY. We offer a secure, easy-to-use browser interface through
which network administrators can centrally manage the XACCT business
infrastructure. Our platform enables system-wide and component-specific
upgrades, configuration changes and activation of components. In addition, our
solution offers a wide range of monitoring and built-in reporting capabilities.
STRATEGY
Our objective is to be the leading provider of business infrastructure
solutions to network service providers. Key elements of our strategy to achieve
this objective include:
EXTEND PRODUCT AND TECHNOLOGY LEADERSHIP. We created the first
commercially available, carrier-class business infrastructure solution to
combine multi-source, multi-layer data collection and aggregation with automated
user account provisioning on a single platform. We will continue to expand our
research and development efforts and enhance our products to expand our market
leadership position as the adoption of next-generation networks continues. In
addition, we intend to continue to introduce new products and services that will
enable network service providers to leverage the rapid growth of Internet
services and data traffic into increased opportunities for revenue generation.
EXPAND COLLABORATIVE RELATIONSHIPS WITH TECHNOLOGY PROVIDERS. We plan to
leverage our collaborative relationships with key technology providers to
enhance our overall product offerings and better serve our customers. Our
XACCTREADY alliance program, launched in June 1999, now has over 70 members
worldwide, including business applications providers, network hardware and
software vendors and value-added systems integrators. By offering compatibility
with an increasing number of business applications and network hardware and
software platforms, we intend to facilitate broad acceptance of and demand for
our solutions.
LEVERAGE AND EXPAND STRATEGIC ALLIANCES. We believe that forging
strategic alliances with key systems integrators is critical to delivering
comprehensive business infrastructure solutions. We work closely with major
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systems integrators to integrate our solutions into our customers' networks, and
we intend to continue to leverage these relationships to reinforce our position
as the preferred infrastructure platform for next-generation applications
deployment. We also intend to develop additional systems integrator
relationships to increase market penetration and extend the scope of our
customer reach.
LEVERAGE INSTALLED CUSTOMER BASE. We intend to further penetrate our
existing customers and obtain new customers by capitalizing on the success of
our initial installations and leveraging our ability to deliver scalable,
reliable, carrier-class solutions. The strategic importance of our products to
our customers allows us to develop relationships with our customers' senior
decisionmakers, which in turn facilitates rapid adoption and deployment of our
platform throughout our customers' organizations.
BROADEN INTERNATIONAL PRESENCE. In addition to our three sales offices in
the United States, we currently maintain direct sales offices in Germany,
Israel, Sweden and the United Kingdom. We plan to expand our direct and indirect
sales channels to include Asia and Latin America, with particular focus on those
areas that are adopting next-generation networks.
PRODUCTS AND TECHNOLOGY
XACCTUSAGE is a carrier-class software platform that provides two basic
functions: network usage data collection and automated user account
provisioning. The XACCTUSAGE product family includes a Service Provider Edition
and an Enterprise Edition, each of which is optimized to meet the special needs
of its respective audience.
The Service Provider Edition is targeted to:
o LECS--traditional telecommunications providers, also known as local
exchange carriers;
o CLECS--competitive local exchange carriers;
o wireless data service providers;
o cable operators that deliver data services;
o ISPS--Internet service providers; and
o ASPS--applications service providers.
The Enterprise Edition of XACCTUSAGE is designed for large businesses
that operate networks within the extended enterprise but that do not need the
full range of functionality contained in the Service Provider Edition. Both
editions are based on XACCTUSAGE's core multi-source, multi-layer network usage
metering and multi-service user account provisioning platform. Both editions are
designed to scale to meet the demands of the largest networks while allowing
changes to the network devices and business applications to be made
independently, without disrupting the operation of business applications or the
network.
XACCTUSAGE captures in real-time the Internet protocol session and
transaction information produced and logged by the individual network elements
and, with its real-time enhancement process, transforms this raw data into
meaningful business information. It utilizes a variety of device-specific, as
well as general purpose, software agents called information source modules, or
ISMs. These software modules capture, filter, aggregate, correlate and merge
data collected from the various network elements such as routers, switches,
firewalls, authentication servers, lightweight directory access protocol, or
LDAP, servers, domain name servers, or DNS, web servers, email servers, video
servers, voice over IP gateways and hundreds of other network elements. Because
they are located near these network elements, our ISMs and other modules
comprise a distributed software architecture that allows XACCTUSAGE to capture
usage information from all layers of the network, from the physical layer to the
application layer.
DATA COLLECTION AND USAGE. Our platform tracks or meters a variety of
parameters such as actual session quality of service, bandwidth used, bit-rate,
duration and applications launched by the end-user, and transforms this data
into a clear and detailed picture of user-level service utilization. We refer to
this output as extensible detail records. Extensible detail records are
comprehensive and extensible usage records that are roughly analogous to the
telephone communications industry's call detail records. Unlike call detail
records, however, extensible detail records can be configured to virtually any
data format and transport and can therefore be readily integrated with the
existing operations support and business support systems of network service
providers. Thus, extensible detail
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records also allow network service providers to use this data for a variety of
business planning and decision support purposes such as:
o usage-based pricing for network services;
o user and application profiling;
o service usage audits;
o capacity planning; and
o other traffic engineering purposes.
USER ACCOUNT PROVISIONING. The automated, end-to-end user account
provisioning capabilities of the XACCTUSAGE platform enable network service
providers to implement real-time subscriber activation, authentication,
authorization and management. Instead of manually configuring services for an
existing or a new subscriber, the network service providers' customer service
application passes the information to XACCTUSAGE via its application programming
interface. The XACCT service provisioning modules, in turn, configure the
relevant application servers automatically in real-time and notify the network
service provider's customer service representative upon completion. In the case
of bundled services, if while configuring multiple services the system
encounters a problem with a specific service, the XACCT system has the
intelligence to roll back the entire operation upon identifying a specific
problem and alert the network service provider so that corrective actions can be
promptly taken.
In addition, network service providers can offer customer self-care
programs that allow the customers to add, delete and modify their services and
service plans, in real-time, without using the network service provider's call
center. This feature allows network service providers to reduce their call
center costs, improve customer satisfaction and shorten their time to revenue.
The XACCT architecture is composed of several well-defined functional
layers, which together provide for the scalability, flexibility, availability
and manageability of our platform:
NON-INTRUSIVE NETWORK INTERFACES FOR COLLECTION AND PROVISIONING.
XACCTUSAGE's non-intrusive operation does not interfere or disrupt the operation
of any network elements or services. XACCT software agents can be activated
without any adverse impact on network elements, enabling them to perform
multi-service data collection spanning a wide range of network devices and
services from the physical layer to the application layer.
MODULAR, DISTRIBUTED DATA PROCESSING CAPABILITIES. The XACCTUSAGE
architecture is designed to work in distributed heterogeneous environments and
is capable of running on multiple platforms. The modular, distributed design
also enables at-source data filtering and aggregation to reduce system capacity
bottlenecks and excessive bandwidth utilization caused by the collection
process. The real-time, policy-based filtering, aggregation, enhancement and
merging capabilities enable XACCTUSAGE to scale and adapt to the large and
complex networks of our customers.
OPEN, EXTENSIBLE DATA OUTPUT AND PROVISIONING INTERFACES. The XACCT
Interface Server can be configured to produce specified data formats and
transport methods to match downstream applications, as well as to allow for
quick and easy integration with back office applications. XACCT Interface
Server's real-time provisioning transaction server enables automated
provisioning of complex services.
UNIFIED, SECURED, WEB-BASED MANAGEMENT. Our web-based user interface
allows secure access to the system with off-the-shelf browsers, locally or
remotely. Our user interface server allows for efficient, centralized system
administration to allow easy system reconfigurations and field upgrades. Our
user interface server also includes a customizable reporting system with
built-in report generation. An open database connectivity compliant interface is
also available to enable the use of off-the-shelf graphical reporting packages.
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CUSTOMERS AND CASE STUDIES
We have initially targeted network service providers and integrated
communications providers such as local exchange carriers, competitive local
exchange carriers, cable operators, wireless operators, Internet service
providers and application service providers. As of December 31, 1999, over 20
customers had licensed XACCTUSAGE, including the following:
Bell Nexxia (Canada) MCI Worldcom (U.S.)
Global One (U.S. and Belgium) Siemens (Canada)
GTE Internetworking (U.S.) TV Cabo (Portugal)
Harvard University (U.S.) Verio (U.S.)
Mannesman Ipulsys (Europe) UUNET (U.S.)
The following case studies illustrate how some of our customers are using
XACCTUSAGE:
BROADWING
Broadwing Communications is a wholly-owned subsidiary of Broadwing Inc.
Broadwing Inc. is an integrated communications company that delivers voice, data
and Internet solutions to a variety of customers nationwide.
CHALLENGE: Broadwing needed to build a flexible business
infrastructure that could support the rapid deployment of new network
services differentiated by value-based pricing.
SOLUTION: We designed and implemented a solution for Broadwing that
normalizes data collected from multiple network elements in order to
measure customer bandwidth utilization. The ability of XACCTUSAGE to
selectively filter and aggregate incoming data allows the system to
handle large volumes of incoming data with minimal network impact.
Real-time correlation of this data with Broadwing's operational databases
allows Broadwing to measure the bandwidth delivered for each type of
service on a per customer basis. A key benefit of the adoption of
XACCTUSAGE is the granular view into network management traffic data now
available to Broadwing. The seamless integration of XACCTUSAGE with
Broadwing's existing Kenan billing system enables Broadwing to offer new
services quickly and with minimal disruption.
GLOBALONE
GlobalOne is a worldwide provider of voice, data and Internet Protocol,
or IP, network services. GlobalOne is a subsidiary of France Telecom.
CHALLENGE: GlobalOne needed to deploy a single, scalable and
flexible platform that would provide it with bandwidth utilization and
service management metrics by customer and that would enable it to offer
differentiated, usage-based, bandwidth-on-demand services.
SOLUTION: XACCTUSAGE captures, aggregates and consolidates all IP
traffic data from GlobalOne's worldwide network of Cisco routers in
real-time and correlates this data with customer information in
GlobalOne's operational database, enabling it to support customer service
level agreements. XACCTUSAGE also extracts information on network
performance and data transmission burst rates. The XACCTUSAGE system
correlates information in multiple formats into a single, normalized
billing record that incorporates bandwidth utilization, network
performance and service level metrics. The resulting record is presented
in formats that can be processed by any of the several billing systems in
use at GlobalOne. Our solution allows GlobalOne to provide data in
support of service level agreements, and to offer differentiated,
usage-based pricing models that allow it to offer bandwidth-on-demand
service.
SALES AND MARKETING
We license our products and sell services primarily through our direct
sales organization, complemented by the selling and support efforts of our
authorized value-added resellers, including system integrators, and other
strategic partners. As of December 31, 1999, our sales force consisted of 22
sales professionals and 21 technical field professionals. We have sales offices
in the greater metropolitan areas of Atlanta, Denver, San Francisco, Tel
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Aviv, Israel, London, England, Stockholm, Sweden and Berlin, Germany. System
engineers who provide pre-sales support to potential customers on product
information and deployment capabilities complement our direct sales
professionals. We plan to significantly expand the size of our direct sales
organization and to establish additional sales offices domestically and
internationally.
Our sales process requires that we work closely with targeted customers
to identify short-term technical needs and long-term goals. Our sales team,
which includes both sales and technical professionals, then works with the
customer to develop a proposal to address these needs. In many cases, we
collaborate with our customers' senior management to develop mission-critical
applications. The level of customer analysis and financial commitment required
for many of our product implementations has caused our sales cycle generally to
range from three to nine months.
We focus our marketing efforts on educating potential customers,
generating new sales opportunities, and creating awareness of our product and
their applications. We conduct a variety of marketing programs to educate our
target market, including seminars, trade shows, direct mail campaigns, press
relations and industry analyst programs.
COLLABORATIVE RELATIONSHIPS AND STRATEGIC ALLIANCES
To enhance the productivity of our sales and service organizations, we
have established relationships with system integrators, value-added resellers,
network infrastructure vendors and software applications vendors through our
XACCTREADY program.
SYSTEM INTEGRATORS AND VALUE-ADDED RESELLERS. We have established
strategic relationships with a number of leading system integrators. Many of our
system integrators have established relationships across a broad range of
network service providers and enterprise customers and our relationships with
these system integrators often enable us to reach key decision-makers within
these enterprises more quickly, thus reducing sales cycles. Working with system
integrators enables us to leverage their professional services and integration
resources and shorten solution implementation time. In addition, by leveraging
our partners' domain expertise, we can more effectively and rapidly penetrate
vertical markets. We also market XACCTUSAGE through value-added resellers.
Value-added resellers enable us to seed the market with specific pre-packaged
solutions built on the XACCTUSAGE platform. Many of these value-added resellers
specialize in providing solutions to particular market segments, including the
network service provider, government and large enterprise segments. We intend to
leverage the domain expertise of our value-added resellers to deliver solutions
that accelerate our penetration in key markets.
We had relationships with the following system integrators and
value-added resellers as of December 31, 1999:
<TABLE>
<S> <C> <C>
Atos Integration Group Federal Network Services, Inc. The Management Network Group, Inc.
Cap Gemini Telecom and Media Group Steria SCA Transtema AB
Consultancy and Project Group (CPG) Logica plc UNISYS Corporation
Danet, Inc. Maxnet Systems, Inc. WeMM
Etnoteam S.p.A Nissho Iwai Infocom Corporation
Federal Data Corporation Telesoft Corporation
</TABLE>
NETWORK INFRASTRUCTURE VENDORS. We work with leading vendors of network
hardware and software infrastructure products to help ensure compatibility of
XACCTUSAGE with their products. We worked with the following network hardware
and software infrastructure vendors as of December 31, 1999:
<TABLE>
<S> <C> <C>
Abatis Systems Corporation Data General Corporation Sun Microsystems, Inc.
Bridgewater Systems Corporation Ennovate Networks, Inc. Unisphere Solutions, Inc.
Cisco Systems, Inc. IP Highway, Inc.
</TABLE>
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SOFTWARE APPLICATIONS VENDORS. We work with leading application software
and database vendors and operations support and billing systems integrators to
help ensure compatibility or integration of XACCTUSAGE with their products. We
worked with the following application software and database vendors and
operations support and billing systems integrators as of December 31, 1999:
<TABLE>
<S> <C> <C>
ADC Telecommunications (Saville) Info Directions, Inc. Proxima Systems Ltd.
Alpha Software Consulting Billing Infocomm International Corporation Savera Systems, Inc.
Satyam Computer Services, Ltd. Intasys Corporation Sepro Telecom International Ltd.
Solutions Independent Technology Systems Sigma Systems Group, Inc.
American Management Systems Integretel, Inc. SLP InfoWare
Aptis Software, Inc. Kingston-SCL Ltd. Smarten Software
Ascom AG LHS Communications Systems, Inc. Solect Technology Group
Certis Ltd. MaxBill Limited Teleknowledge Group Ltd.
Comptel AB Mer Telemanagement Solutions Ltd. USHA Communications Technology
Convergys Corporation Mindport Integrated Business Systems BV Veramark Technologies, Inc.
CSG Systems, Inc. Net Toll Version Software (PTY) Ltd.
Daleen Technologies, Inc. OAN Services, Inc. Vitria Technology, Inc.
DST Innovis (CableData, Inc.) Portal Software, Inc.
FileTek, Inc.
Geneva Technology Ltd.
</TABLE>
SERVICE AND SUPPORT
The primary function of our professional services organization is to
facilitate the implementation of our product by customers and system
integrators. We provide services directly to our customers and to system
integrators for XACCTUSAGE project planning, implementation and performance. Our
professional services organization works closely with system integrators to
train their personnel in the design and implementation of our product line.
We offer different customer support options to our customers, ranging
from local business hour support to seven days a week, 24 hours-a-day support
with a dedicated customer support representative.
Our professional services and customer support groups deliver education
and product training to our customers and strategic partners relating to the
design of business solutions using XACCTUSAGE, as well as the technical aspects
of deployment, use and maintenance. Our professional service and customer
support organizations consisted of 21 employees as of December 31, 1999.
RESEARCH AND DEVELOPMENT
As of December 31, 1999, our engineering group consisted of 31 employees,
divided into the following groups:
CORE RESEARCH AND DEVELOPMENT. This group researches and develops
advanced architectures and technologies and works to improve the performance,
quality, features, coverage and manageability of the XACCTUSAGE product and
related information source modules. This group also closely monitors
developments in industry standards related to eBusiness, Internet technologies,
operating systems, networks and software applications.
APPLICATIONS. This group develops back office applications that, when
combined with XACCTUSAGE, will provide a vertically integrated solution for
select back office functions.
TECHNICAL PUBLICATIONS. This group is responsible for the technical
writing for our products.
QUALITY ASSURANCE. This group designs and manages a process designed to
identify and prevent software defects throughout the development cycle.
Since our inception, we have focused our research and development efforts
on developing and enhancing XACCTUSAGE. We are currently working to increase the
performance, quality, features, coverage and manageability of our XACCTUSAGE
product and to develop back office applications. Research and development
expenses were
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$390,000 in the period from our inception in June 1997 through December 31,
1997, $1.5 million in 1998 and $2.2 million in 1999.
COMPETITION
The market for our product is new, evolving and subject to rapid
technological change. To date, our primary competition has come from solutions
developed by the in-house technology departments of potential customers or
partners. We have experienced and expect to continue to experience increased
competition from current and potential competitors. Many of these companies have
greater name recognition, longer operating histories, larger customer bases and
significantly greater financial, technical, marketing, public relations, sales,
distribution and other resources. Some of our potential competitors are among
the largest and most well capitalized software, hardware and communications
companies in the world. Our competitors include:
o in-house information technology departments of potential customers or
partners that have developed or may develop systems that substitute
for some or all of the functionality of our XACCTUSAGE product;
o companies with products that address our market, such as Hewlett
Packard, Lucent, EHPT and Narus; and
o companies that have developed software that addresses only certain
components of Internet Protocol mediation.
We are also aware of numerous other companies that are focusing
significant resources on developing and marketing products that will compete
with XACCTUSAGE. Additional competitors could come from a number of companies
that produce application integration or communication software.
We expect that competition will increase in the near-term and that our
primary long-term competitors may not have entered the market yet. If any of our
competitors were to become the industry standard or were to enter into or expand
relationships with significantly larger companies through mergers, acquisitions
or otherwise, our business and operating results could be significantly harmed.
In addition, potential competitors may bundle their products or incorporate
functionality into existing products in a manner that discourages users from
purchasing our products. Increased competition could result in price reductions,
fewer customer orders, reduced gross margin and loss of market share, any of
which could cause our business to suffer.
We believe that the principal competitive factors in our market include:
o product quality, scalability, performance and reliability;
o the ability of products to operate with multiple software
applications;
o the ability of products to operate with multi-vendor network
infrastructure products, hardware and software platforms;
o establishment of a significant base of reference customers;
o ability to implement solutions quickly;
o customer service;
o relationship with system integrators and value-added resellers;
o strength of core technology; and
o product price.
Although we believe that we compete favorably with respect to these
factors, our market is relatively new and is evolving rapidly. We may not
compete successfully against current and potential competitors.
INTELLECTUAL PROPERTY AND OTHER PROPERTY RIGHTS
Our success is dependent upon our ability to develop and protect our
proprietary technology and intellectual proprietary rights. To protect our
proprietary technology and intellectual property, we rely primarily on a
combination of contractual provisions, confidentiality procedures, trade
secrets, and copyright and trademark laws.
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However, we believe that factors such as the technological and creative skills
of personnel, new product developments, frequent product enhancements and
reliable product maintenance are more essential to establishing and maintaining
a technology leadership position. We cannot assure you that others will not
develop technologies that are similar or superior to our technology.
We license XACCTUSAGE pursuant to non-exclusive license agreements that
impose restrictions on customers' ability to utilize the software. In addition,
we seek to avoid disclosure of our trade secrets, including but not limited to,
requiring employees, customers and others with access to our proprietary
information to execute confidentiality agreements with us and restricting access
to our source code. We also seek to protect our software, documentation and
other written materials under trade secret and copyright laws.
Some of our license agreements require us to place the source code for
XACCTUSAGE into escrow. These agreements generally provide that these parties
will have a limited, non-exclusive right to use this code if:
o there is a bankruptcy, insolvency or winding-up proceeding involving
us;
o we cease to do business without a successor; or
o we do not provide contractually agreed maintenance and support.
We have two U.S. patent applications pending. It is possible that the
patents that we have applied for, if issued, or our potential future patents may
be successfully challenged or that no patent will be issued from our patent
application. It is also possible that we may not develop proprietary products or
technologies that are patentable, that any patent issued to us may not provide
us with any competitive advantages, or that the patents of others will seriously
harm our ability to do business.
We have received an initial refusal of our application to register our
XACCT trademark in the United States. We are currently preparing a response to
the United States trademark office.
EMPLOYEES
As of December 31, 1999, we had a total of 92 full time employees. Of the
total number of employees, 31 were engaged in research and development, 22 in
sales, seven in marketing, 21 in customer support, professional services and
training, and 11 in administration and finance. None of our employees are bound
by an employment agreement requiring service for any defined period of time.
None of our employees are represented by a labor union. We have not experienced
any work stoppage and consider our relations with our employees to be good.
As of December 31, 1999, 47 of our employees were located in Israel. We are
not a party to any collective bargaining agreement with our employees. However,
Israeli law and certain provisions of the nationwide collective bargaining
agreements between the government of Israel, the Histadrut which is the General
Federation of Labor in Israel, and the Coordinating Bureau of Economic
Organizations which is the Israeli federation of employers' organizations, apply
to our Israeli employees by way of expansion orders of the Israeli Ministry of
Labor and Welfare. These provisions and other mandatory provisions of Israel law
principally concern the maximum length of the work day and the work week,
minimum wages, contributions to a pension fund, insurance for work-related
accidents, procedures for dismissing employees, determination of severance
payment and other conditions of employment. Furthermore, pursuant to such
provisions, the wages of most of our employees are subject to increase as a
result of cost of living adjustments, based on changes in the Israeli Consumer
Price Index. The formulas for those adjustments and their amounts and frequency
are modified from time to time according to the agreements reached between the
government of Israel, the Manufacturers Association and the General Federation
of Labor in Israel. Israeli law generally requires the payment of severance pay
upon the retirement or death of an employee or upon termination of employment by
the employer or, in certain circumstances, by the employee. We currently fund
most of our ongoing severance obligations for our Israeli employees by making
monthly payments for insurance policies to cover these obligations.
FACILITIES
We lease approximately 8,100 square feet in a single office building
located in Bnei-Brak, Israel and approximately 16,200 square feet in a single
office building located in Santa Clara, California. The leases for the office
space in Bnei-Brak, Israel expire in April 2000. We have entered into a lease
for office space in Ramat Gan,
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Israel for approximately 18,300 square feet commencing April 2000 that will
expire in April 2003 with an option for an additional three years. The lease for
the office space in Santa Clara, California expires in December 2004.
LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
individuals who will be our directors and executive officers as of February 29,
2000. All of these individuals are presently serving in the respective
capacities described below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------ --------- ----------------------------------------------------------------
<S> <C> <C>
Eric Gries........................... 40 President, Chief Executive Officer and Director
Eran Wagner.......................... 32 Executive Vice President, Technology and Chairman of the
Board
Richard Van Hoesen................... 44 Vice President and Chief Financial Officer
Limor Schweitzer..................... 31 Chief Technology Officer and Director
Anil Uberoi.......................... 50 Vice President, Product Marketing
Robert C. Hawk....................... 47 Director
Nitsan Yanovski...................... 38 Director
Jon Q. Reynolds, Jr.................. 32 Director
Todd Springer........................ 33 Director
</TABLE>
- -------------------
ERIC GRIES has served as our President, Chief Executive Officer and a
director since March 1998. From January 1996 to January 1998, Mr. Gries was the
General Manager of the Network and Systems Management Division at Compuware
Corporation, a global software company. From March 1992 to December 1995, Mr.
Gries was the Vice President of Product Marketing for ACI, Ltd., a publisher of
database development tools. Mr. Gries received his Bachelor of Science and
Master of Business Administration from Northeastern University.
ERAN WAGNER is a co-founder of our company and has served as our Executive
Vice President, Technology since January 2000, a director since June 1997 and
Chairman of the Board since June 1997. From June 1997 to January 1998, Mr.
Wagner served as our Chief Executive Officer. Prior to founding our company, Mr.
Wagner was President and Chief Executive Officer of Xpert UNIX Systems Ltd., a
company he co-founded in 1993 that provides global networking solutions and
specializes in the areas of network billing and accounting, network security,
software development and systems integration. Mr. Wagner served in an elite
technology unit of the Israel Defense Forces. Mr. Wagner holds a Bachelor of
Science in Mathematics and Computer Science, from Tel Aviv University.
RICHARD VAN HOESEN has served as our Vice President and Chief Financial
Officer since February 2000. From November 1998 to January 2000, Mr. Van Hoesen
was Senior Vice President and General Manager of the Micro Focus Division of
Merant plc, a global software company. From March 1998 to November 1998, Mr. Van
Hoesen was Senior Vice President and Chief Financial Officer of Merant. From May
1996 to March 1998, Mr. Van Hoesen was the Vice President, Finance, Chief
Financial Officer and Treasurer of Wall Data Incorporated, a software company.
From October 1994 to May 1996, Mr. Van Hoesen was Vice President and Chief
Financial Officer of Consilium, an enterprise manufacturing software company.
Mr. Van Hoesen holds a Bachelor of Science in Engineering from Lehigh University
and a Master of Business Administration from the Wharton School at the
University of Pennsylvania.
LIMOR SCHWEITZER is a co-founder of our company and has served as a
director since June 1997 and our Chief Technology Officer since January 1998.
From June 1997 to January 1998, Mr. Schweitzer served as our Product Architect
and Research and Development Manager. In 1993, Mr. Schweitzer co-founded Xpert
UNIX Systems Ltd., a provider of global networking solutions specializing in the
areas of network billing and accounting, network security, software development
and systems integration. Mr. Schweitzer has served as the Chief Operations
Officer and the Vice President, Technology of Xpert UNIX Systems Ltd. since its
inception through June 1997. Mr. Schweitzer served in an elite technology unit
of the Israel Defense Forces. Mr. Schweitzer holds a Bachelor of Science in
Mathematics and Physics from Tel-Aviv University.
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ANIL UBEROI has served as our Vice President, Product Marketing of XACCT
Technologies, Inc., one of our wholly-owned subsidiaries, since April 1998. From
January 1996 to March 1998 Mr. Uberoi was the director of high-speed Internet
connectivity solutions at Netopia, Inc., which was formerly Farallon
Communications. From February 1990 to January 1996, Uberoi was Group Marketing
Manager for all networking products at Sun Microsystems Computer Company. Mr.
Uberoi has done graduate work at Stanford University and University of
California at Berkeley in addition to having a Master of Business Administration
from Santa Clara University, a Master of Business Administration from Bombay
University, and a Bachelor of Engineering from Vikram University, India.
ROBERT C. HAWK has been a director of XACCT since July 1998. Mr. Hawk has
been the President of Hawk Communications, Inc., a telecommunications consulting
company, since May 1997. From May 1986 to April 1997, Mr. Hawk was the President
and Chief Executive Officer of US WEST Multimedia Communications. Mr. Hawk was
President of the Carrier Division of US WEST Communications, a regional
telecommunications service provider, from September 1990 to May 1996. Prior to
that time, Mr. Hawk was Vice President, Marketing and Strategic Planning for CXC
Corporation. Prior to joining CXC Corporation, Mr. Hawk was Director of Advanced
Systems Development for AT&T/American Bell, a telecommunications company. Mr.
Hawk is on the board of directors of Covad, Efficient Networks, Pairgain
Technologies, Concord Communications, Centillium and Com 21. Mr. Hawk received a
Bachelor of Business Administration from University of Iowa and a Master of
Business Administration from University of San Francisco.
NITSAN YANOVSKI has been a director of XACCT since June 1997. Mr. Yanovski
has been Vice President, Business Development of Ampal Industries (Israel) Ltd.
since 1996, and was the Deputy Director General of Ampal Industries (Israel)
Ltd. from 1993 to 1996.Mr. Yanovski serves as a director on the boards of Ampal
Industries (Israel) Ltd., Ampal (Israel) Ltd., Ampal Development (Israel) Ltd.,
Shellcase Ltd. and Xpert Integrated Systems Ltd. Mr. Yanovski received a
Bachelor of Arts in Economics from Tel-Aviv University.
JON Q. REYNOLDS, JR. has served as a director of XACCT since October 1999.
Mr. Reynolds has been employed at Technology Crossover Ventures since July 1997,
most recently as a general partner. From July 1993 to December 1995, Mr.
Reynolds was an associate at General Atlantic Partners, a private equity firm
focusing on information technology. From December 1991 to July 1993, Mr.
Reynolds was a member of the mergers and acquisitions group at Lazard Freres &
Co. Mr. Reynolds is on the board of directors of Inventa Technologies. Mr.
Reynolds received an Associate Bachelor in Geography from Dartmouth College and
a Master of Business Administration from Columbia Business School.
TODD A. SPRINGER has served as a director of XACCT since November 1998. Mr.
Springer has been a Managing Director of Trident Capital, a venture capital
firm, since June 1998. From March 1996 to June 1998, Mr. Springer served as Vice
President of Trident Capital. From September 1994 to February 1996, Mr. Springer
was an associate in corporate finance with Jefferies & Company, Inc., an
investment bank. Mr. Springer is on the board of directors of Newgen Results
Corporation. Mr. Springer received his Bachelor of Science in Economics from
Wharton School at the University of Pennsylvania and his Master of Business
Administration from Stanford Graduate School of Business.
BOARD OF DIRECTORS
Immediately following this offering, our board of directors will consist of
7 directors. As set forth in our articles of association, the person serving as
our Chief Executive Officer will be appointed automatically to the board,
subject to annual shareholder approval. The remaining six directors will be
divided into three classes with each class serving an initial term ranging from
less than one year to three years and thereafter for additional three year
terms. As of August 2000, we will be required under Israeli law to have two
outside or independent directors who will serve a three year term that can be
extended for one additional three year term.
At each annual general meetings of shareholders, the directors who are up
for election to succeed those directors who resign or whose terms are expiring
will be elected by the holders representing the requisite majority of our
ordinary shares as may be required by law. In addition, our articles of
association provide that our authorized number of directors may be changed by
modifying the articles of association by an affirmative vote of 75% of those
present and voting at a general meeting of shareholders. This classification of
the board of directors may have the effect of delaying or preventing changes in
the effective control of our company.
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ALTERNATIVE DIRECTOR
Our articles of association allow a director to appoint an alternative
director possessing all the rights and obligations of the director who appointed
him or her, except that the alternate has no standing at any meeting while the
appointing director is present and is not entitled to remuneration. A person who
is not qualified to be appointed as a director, or a person who already serves
as a director or an alternative director, may not be appointed as an alternative
director. Unless the appointing director limits the time or scope of the
appointment, the appointment is effective for all purposes until the appointing
director ceases to be a director or terminates the appointment. The appointment
of an alternative director does not in itself diminish the directorship
responsibilities of the appointing director.
OUTSIDE OR INDEPENDENT DIRECTORS
Under the new Israeli Companies Law, 1999-5759, or the Companies Law,
effective as of February 1, 2000, companies incorporated under the laws of the
State of Israel whose shares have been offered to the public in or outside of
Israel are required to appoint at least two outside or independent directors.
The Companies Law provides that a person may not be appointed as an outside
director if such person or such person's relative, partner, employer or any
entity under such person's control, has, as of the date of such person's
appointment as an outside director, or had, during the two years preceding that
date, any affiliation with the company or any entity controlling, controlled by
or under common control with the company. The term "affiliation" includes:
o an employment relationship;
o a business or professional relationship maintained on a regular basis;
o control; and
o service as an office holder.
The Companies Law requires that the outside directors be residents of
Israel. However, the Minister of Justice of the State of Israel has promulgated
regulations exempting certain qualifying foreign companies such as our company
from the applicability of certain provisions of the Companies Law. A "foreign
company" is defined in The Companies Regulations (Concessions for Public
Companies Whose Shares are Registered in a Stock Exchange Outside Israel),
5760-2000, or the regulations, as a public company whose shares were offered to
the public solely outside of Israel or are registered only on a stock exchange
outside of Israel. Pursuant to the regulations, the effective date for
appointment of outside directors for a foreign company has been postponed until
August 1, 2000, and the outside directors of the foreign company need not be an
Israeli resident. No person may serve as an outside director if such person's
position or other business activities create, or may create, a conflict of
interest with the person's responsibilities as an outside director, or may
otherwise interfere with the person's ability to serve as an outside director.
If at the time of the appointment of the outside directors our board shall be
comprised of members of only one gender, then at least one of the outside
directors must be of the other gender.
Outside directors are to be elected by a majority vote at a shareholders'
meeting, provided that either:
o the majority of shares voted at the meeting, including at least
one-third of the shares of non-controlling shareholders voted at the
meeting, vote in favor of election of the outside director; or
o the total number of shares of non-controlling shareholders voted
against the election of the outside director does not exceed 1% of
the aggregate voting rights in the company.
The initial term of an Israeli outside director is three years and it may
be extended for one additional three year term. Each committee of a company's
board of directors is required to include at least one outside director, except
for the audit committee which must include both outside directors, as also
required by the Nasdaq National Market. Within the statutory period as provided
for in the Companies Law and the regulations, we intend to take all actions
necessary to comply with the Companies Law and its requirements relating to the
appointment of outside directors.
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An outside director is entitled to compensation as provided in the
regulations that have been adopted pursuant to the Companies Law, and the
outside director is otherwise prohibited from receiving any other compensation,
directly or indirectly, in connection with his or her services as an outside
director.
BOARD COMMITTEES
COMPENSATION COMMITTEE. The board of directors has a compensation committee
that was established in November 1998. The compensation committee, currently
comprised of Messrs. Hawk, Springer and Yanovski, makes recommendations with
respect to share option plans and share purchase plans, and all matters
concerning executive compensation and employee agreements.
AUDIT COMMITTEE. The Companies Law requires public companies such as our
company to appoint an audit committee. Our audit committee was formed in
November 1998 and is currently comprised of Messrs. Reynolds, Springer and
Yanovski. The responsibilities of the audit committee under the Companies Law
include identifying irregularities in the management of the company's business
and approving related party transactions as required by Israeli law. Under the
Companies Law, an audit committee must consist of at least three directors,
including two outside directors. The chairman of the board of directors, any
director employed by or otherwise providing services to the company, and any
controlling shareholder or any relative of a controlling shareholder, may not be
a member of the audit committee. In addition, pursuant to the listing
requirements of the Nasdaq National Market, we will be required to have at least
two independent directors on our audit committee. The audit committee of our
board of directors performs the following functions:
o monitors our system of internal controls;
o monitors corporate financial reporting and internal and external
audits;
o provides the board of directors with the results of its examinations
and recommendations;
o outlines to the board of directors the improvements made or to be made
in internal accounting controls;
o nominates independent auditors; and
o provides the board of directors with other financial information and
materials necessary to make the board of directors aware of
significant financial matters.
INTERNAL AUDITOR
Under the Companies Law, the board of directors must appoint an internal
auditor, nominated by the audit committee. The role of the internal auditor is
to examine, among other matters, whether the company's actions comply with the
law and orderly business procedure. Under the Companies Law, the internal
auditor may be an employee of the company but not an office holder, or an
affiliate, or a relative of an office holder or affiliate, and he or she may not
be the company's independent accountant or its representative. We intend to
appoint an internal auditor in accordance with the requirements of the Companies
Law upon the completion of this offering.
DIRECTOR COMPENSATION
We do not currently pay cash compensation to our directors in their
capacity as directors, except for reimbursement of business, travel and other
related expenses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The compensation committee is currently comprised of Messrs. Hawk, Springer
and Yanovski. None of these committee members has at any time been an officer or
employee of our company. You should note the following relationships and
transactions with members of the compensation committee and their affiliates:
ROBERT C. HAWK. In July 1998, Mr. Hawk purchased 63,455 ordinary shares at
$0.19 per share, pursuant to a restricted stock purchase agreement. Under the
restricted stock purchase agreement, Eran Wagner and Limor Schweitzer have the
right to repurchase those ordinary shares. The right of Eran Wagner and Limor
Schweitzer to repurchase those ordinary shares lapsed as to one-fourth of the
total number of shares on the first anniversary of the grant date and lapses as
to 1/12th of the total shares each quarter thereafter. The lapsing of the
repurchase right is
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dependent upon the continued service by Mr. Hawk on our board of directors. In
May 1999, Mr. Hawk received an option to purchase 24,500 shares at an exercise
price of $0.35 per share. Mr. Hawk purchased 24,500 ordinary shares upon
exercise of this option in August 1999 at an aggregate exercise price of $8,575.
These ordinary shares vest over a four year period and are subject to repurchase
until vested.
TODD A. SPRINGER. Mr. Springer is a managing director of Trident Capital
Management, an entity affiliated with Information Associates-II, L.P. and IA-II
Affiliates Fund, L.L.C., each a preferred shareholder of our company. The
following summarizes private placement transactions with Information
Associates-II, L.P. and IA-II Affiliates Fund, L.L.C.:
o OCTOBER 1998: 1,185,184 Series B-1 preferred shares and warrants to
purchase 375,046 Series B-1 preferred shares at $1.40 per share.
o OCTOBER 1998: 1,315,146 Series B-2 preferred shares at $1.40 per
share.
o DECEMBER 1999: 399,938 Series C-1 preferred shares and warrants to
purchase 140,980 Series C-1 preferred shares at $5.32 per share.
o DECEMBER 1999: 70,000 Series C-2 preferred shares at $5.32 per share.
o MARCH 2000: 375,046 Series B-1 preferred shares at $2.80 per share
upon exercise of outstanding warrants.
NITSAN YANOVSKI. Mr. Yanovski is the Vice President of Business Development
of Ampal Industries (Israel) Ltd. and several affiliated entities, which are
preferred shareholders of our company. The following summarizes private
placement transactions with Ampal Industries (Israel) Ltd. and its affiliated
entities:
o JUNE 1997: 1,491,000 Series A preferred shares at $0.71 per share.
o OCTOBER 1998: 1,071,567 Series B-1 preferred shares and warrants to
purchase 160,734 Series B-1 preferred shares at $1.40 per share.
o DECEMBER 1999: 939,883 Series C-1 preferred shares and warrants to
purchase 281,976 Series C-1 preferred shares at $5.32 per share.
Mr. Yanovski is also a non-employee director of Xpert Integrated Systems
Ltd., our Israeli reseller. Eran Wagner and Limor Schweitzer, each a director
and executive officer of our company, are also non-employee directors of Xpert
Integrated Systems Ltd.
Moreover, entities affiliated with Ampal Israel American Corporation,
including Ampal Industries (Israel) Ltd., own approximately 20% of the
outstanding shares of Xpert Integrated Systems Ltd.
No interlocking relationship exists between our 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.
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EXECUTIVE COMPENSATION
The following table sets forth information concerning the compensation that
we paid during the fiscal year ended December 31, 1999 to our Chief Executive
Officer and our other most highly compensated officers who earned more than
$100,000 during that fiscal year. All option grants were made under our 1998
Stock Option Plan, the 1998 Section 102 Share Option Plan or Section 3(i) of the
Israeli Income Tax Ordinance.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL COMPENSATION ---------------------
--------------------- SECURITIES
NAME AND PRINCIPAL POSITION SALARY BONUS UNDERLYING OPTIONS
- ------------------------------------------------------ -------- -------- ---------------------
<S> <C> <C> <C>
Eric Gries......................................... $201,400 $60,420 182,000
President and Chief Executive Officer
Eran Wagner........................................ 152,640 20,352 91,000
Executive Vice President, Technology
Limor Schweitzer................................... 100,000 10,000 91,000
Chief Technology Officer
Anil Uberoi........................................ 159,000 26,500 56,000
Vice President, Product Marketing
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information with respect to share options
granted to our Chief Executive Officer and our most highly compensated executive
officers during the fiscal year ended December 31, 1999. We have never granted
any share appreciation rights. All option grants listed in the table below were
made under our 1998 Stock Option Plan, the 1998 Section 102 Share Option Plan or
Section 3(i) of the Israeli Income Tax Ordinance. The exercise price per share
was equal to the fair market value of the ordinary shares on the date of grant
as determined by our board of directors. Percentage of total options is based on
an aggregate of 1,461,670 ordinary shares granted under the 1998 Stock Option
Plan, the 1998 Section 102 Share Option Plan or Section 3(i) of the Israeli
Income Tax Ordinance in the year ended December 31, 1999. The potential
realizable value is calculated based on the term of the eight-year option and
assumed rates of share appreciation of 5% and 10%, compounded annually. These
assumed rates comply with the rules of the Securities and Exchange Commission
and do not represent our estimate of future share price. Actual gains, if any,
on share option exercises will be dependent on the future performance of our
ordinary shares.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED
NUMBER PERCENTAGE ANNUAL RATES OF SHARE PRICE
OF SECURITIES OF TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION -----------------------------
NAME GRANTED FISCAL YEAR SHARE DATE 5% 10%
- --------------------- ------------- ---------------- --------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Eric Gries........... 182,000 12.45% $1.57 10/20/07 $136,138 $326,509
Eran Wagner.......... 91,000 6.23 1.57 10/20/07 68,214 163,385
Limor Schweitzer..... 91,000 6.23 1.57 10/20/07 68,214 163,385
Anil Uberoi.......... 28,000 1.92 0.35 8/12/07 4,679 11,207
28,000 1.92 1.57 10/20/07 20,989 50,272
</TABLE>
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth our Chief Executive Officer and our other
most highly compensated executive officers information concerning ordinary
shares acquired upon exercise of share options in fiscal year ended December 31,
1999 and exercisable and unexercisable options held as of December 31, 1999. All
options listed in the table below were granted under our 1998 Stock Option Plan,
1998 Section 102 Share Option Plan or Section 3(i) of the Israeli Income Tax
Ordinance. The value realized is based on the assumed initial public offering
price of $ , minus the per share exercise price, multiplied by the number of
shares issued upon exercise of the option.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT FISCAL YEAR-END OPTIONS AT FISCAL YEAR-END
ACQUIRED ON VALUE ----------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------ ------------- ------------ ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Eric Gries............ -- -- 215,412 518,958 $ $
Eran Wagner........... -- -- 13,125 130,375
Limor Schweitzer...... -- -- 13,125 130,375
Anil Uberoi........... -- -- 103,484 207,050
</TABLE>
EMPLOYMENT AGREEMENTS
ERIC GRIES' employment agreement, dated January 27, 1998, establishes Mr.
Gries' initial annual salary of $190,000 commencing on March 1998 and provides
for a $30,000 lump sum signing bonus and eligibility for benefits and
performance based bonuses. This agreement also provides for his nomination to
our board of directors. Mr. Gries' employment is at will and may be terminated
at any time, with or without cause. If his employment is terminated by us
without cause or if he is constructively terminated, we must pay his salary for
up to 12 additional months. Under this agreement, Mr. Gries was granted the
right to receive an option to purchase 412,370 ordinary shares at an exercise
price of $0.07 per share under the 1998 Stock Option Plan. As an incentive bonus
for 1998, Mr. Gries received an option to purchase 140,000 ordinary shares at an
exercise price of $0.35 per share under the 1998 Stock Option Plan. As an
incentive bonus for 1999, Mr. Gries received an option to purchase 182,000
ordinary shares at an exercise price of $1.57 per share under the 1998 Stock
Option Plan. As an incentive bonus for 2000, Mr. Gries received an option to
purchase 70,490 ordinary shares at an exercise price of $0.71 per share under
the 1998 Stock Option Plan. The shares subject to these options vest ratably in
quarterly installments over the four year period from the date of grant. All of
the shares subject to options held by Mr. Gries that have not vested shall vest
either upon a change of control of our company, or if Mr. Gries is terminated
without cause or is constructively terminated. As of February 29, 2000, an
aggregate of 534,677 ordinary shares have not vested.
ERAN WAGNER'S offer letter, dated August 15, 1998, provides for an initial
annual salary of $144,000 commencing on September 25, 1998, and eligibility for
benefits and performance based bonuses. As an incentive bonus for 1998, Mr.
Wagner received an option to purchase 52,500 ordinary shares at an exercise
price of $0.35 per share under the 1998 Stock Option Plan. As an incentive bonus
for 1999, Mr. Wagner received an option to purchase 91,000 ordinary shares at an
exercise price of $1.57 per share under the 1998 Stock Option Plan. As an
incentive bonus for 2000, Mr. Wagner received an option to purchase 28,490
ordinary shares at an exercise price of $0.71 per share under the 1998 Stock
Option Plan. The shares subject to these options vest ratably in quarterly
installments over the four year period from the date of grant. If Mr. Wagner is
terminated without cause, his salary and benefits will continue for six months
following effective date of termination. Mr. Wagner's employment is at will and
may be terminated at any time, with or without cause. As of February 29, 2000,
an aggregate of 146,054 shares have not vested.
RICHARD VAN HOESEN'S offer letter, dated January 14, 2000, provides for an
initial annual salary of approximately $200,000 commencing on January 14, 2000,
eligibility for benefits and performance based bonuses. Pursuant to the offer
letter, Mr. Van Hoesen received an option to purchase 447,300 ordinary shares at
an exercise price of $3.00 per share under the 1998 Stock Option Plan. The
shares subject to these options vest ratably in quarterly installments over the
four year period from the date of grant. If Mr. Van Hoesen is terminated without
cause, his salary and benefits will continue for 12 months following effective
date of termination. Mr. Van Hoesen's employment is at will and may be
terminated at any time, with or without cause. All of the shares subject to
options held by Mr. Van Hoesen that have not vested shall vest upon a change of
control of our company to the extent permitted by the relevant stock option
agreements, the stock option plan and applicable law. As of February 29, 2000,
an aggregate of 447,300 shares have not vested.
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LIMOR SCHWEITZER'S offer letter, dated as of January 1, 2000, provides for
an initial annual salary of $165,000 commencing as of the date of the offer
letter and eligibility for benefits and performance based bonuses. Mr.
Schweitzer received an option to purchase 52,500 ordinary shares at an exercise
price of $0.35 per share under Section 3(i) of the Israeli Income Tax Ordinance.
As an incentive bonus for 1999, Mr. Schweitzer received an option to purchase
91,000 ordinary shares at an exercise price of $1.57 per share under Section
3(i) of the Israeli Income Tax Ordinance. As an incentive bonus for 2000, Mr.
Schweitzer received an option to purchase 14,000 ordinary shares at an exercise
price of $0.71 per share under the 1998 Section 102 Share Option Plan. The
shares subject to these options vest ratably in quarterly installments over the
four year period from the date of grant. If Mr. Schweitzer is terminated without
cause, his salary and benefits will continue for six months following the
effective date of termination. Mr. Schweitzer's employment is at will and may be
terminated at any time, with or without cause. As of February 29, 2000 an
aggregate of 135,187 shares have not vested.
ANIL UBEROI'S offer letter, dated March 26, 1998, provides for an initial
annual salary of $150,000 commencing on April 1, 1998, and eligibility for
benefits and performance based bonuses. Pursuant to the offer letter, Mr. Uberoi
received an option to purchase 212,534 ordinary shares at an exercise price of
$0.14 per share under the 1998 Stock Option Plan. As an incentive bonus for
1998, Mr. Uberoi received an option to purchase 42,000 ordinary shares at an
exercise price of $0.35 per share under the 1998 Stock Option Plan. As an
incentive bonus for 1999, Mr. Uberoi received an option to purchase 28,000
ordinary shares at an exercise price of $0.35 per share and 28,000 ordinary
shares at an exercise price of $1.57 per share under the 1998 Stock Option Plan.
As an incentive bonus for 2000, Mr. Uberoi received an option to purchase 37,100
ordinary shares at an exercise price of $0.71 per share under the 1998 Stock
Option Plan. The shares subject to these options vest ratably in quarterly
installments over the four year period from the date of grant. If Mr. Uberoi is
terminated without cause, his salary and benefits will continue for three months
following effective date of termination. Mr. Uberoi's employment is at will and
may be terminated at any time, with or without cause. All of the shares subject
to options held by Mr. Uberoi that have not vested shall vest upon a change of
control of our company to the extent permitted by the relevant stock option
agreements, the stock option plan and applicable law. As of February 29, 2000,
an aggregate of 229,625 shares have not vested.
OTHER AGREEMENTS
We require each of our employees to enter into proprietary rights and
invention assignment agreements prohibiting the employee from disclosing any of
our confidential or proprietary information. In addition, the agreements
generally provide that upon termination the employee will not solicit our
employees for a period of 12 months. Substantially all of our key employees in
Israel have agreed not to compete with us for one year following the termination
of their employment with us. At the time of commencement of employment, our U.S.
employees also generally sign offer letters specifying certain basic terms and
conditions of employment and our Israel employees generally sign employment
agreements specifying certain basic terms and conditions of employment,
including customary notice provisions for termination consistent with Israeli
law.
EMPLOYEE BENEFIT PLANS
SECTION 102 SHARE OPTION PLAN
In July 1998, our board of directors adopted a share option plan in
accordance with Section 102 of the Israeli Income Tax Ordinance, or the 102
Plan. The 102 Plan expires in 2006. As of February 29, 2000, we had outstanding
options to purchase 803,600 ordinary shares under the 102 Plan at a weighted
average exercise price of $0.77 per ordinary share. As of that date, our
officers held options to purchase 192,724 ordinary shares under the 102 Plan,
and no director held any options issued under the 102 Plan. We believe that our
issuance of options to Israeli employees has been done in compliance with
Israeli securities laws. However, due to uncertainty relating to the proper
interpretation of these laws, we cannot be certain the Israel Securities
Authority will not challenge our position.
NUMBER OF ORDINARY SHARES AVAILABLE UNDER THE SECTION 102 SHARE OPTION
PLAN. Under the 102 Plan, we have reserved an aggregate of 2,060,000 voting
ordinary shares for grant to our Israeli employees.
EXERCISE PRICE AND FORM OF OPTIONS. Our board of directors determines the
exercise prices of options granted under the 102 Plan at the time of the grant.
The options granted under the 102 Plan typically expire no later than
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eight years from the date of grant. Any shares subject to options that are
cancelled or not exercised before expiration become available for future grant.
ADMINISTRATION OF SECTION 102 SHARE OPTION PLAN. In general, our board of
directors administers the 102 Plan. The administrator has the power to determine
the terms of the options granted, including the exercise price, the number of
ordinary shares subject to each option, the exercisability of the options and
the form of consideration payable upon exercise.
RIGHTS UPON TERMINATION. Pursuant to the 102 Plan, if the employment of any
optionee is terminated as a result of death or disability of such optionee, the
optionee or his or her heirs may, within a period of three months following the
termination, exercise the options that were already vested upon such
termination.
TRANSFERABILITY OF OPTIONS. Except for transfer as a result of death, the
102 Plan does not allow for the transfer of options and only the optionee may
exercise an option.
ADJUSTMENTS UPON MERGER. The 102 Plan provides that in the event of a
merger with or into another corporation, the successor corporation shall assume
or substitute equivalent options for each option. However, in the event that the
successor corporation will not agree to assume the options, then all outstanding
options will accelerate and become fully vested ten days prior to the close of
the merger.
PROXY. Until we become a public company, any shares purchased through the
exercise of an option granted under the 102 Plan are voted by proxy pursuant to
the directions of our board of directors, with the proxy to be given to the
person or persons designated by our board of directors. Currently, Eran Wagner
and Limor Schweitzer are the persons designated by our board of directors to
vote the proxies.
TAXATION. Pursuant to Section 102 of the Israeli Income Tax Ordinance and
the rules promulgated thereunder (including the requirement that the options and
the underlying shares be deposited with a trustee for a period of at-least two
years), the tax on the benefit arising to the employee from the grant and
exercise of options as well as from the allotment of ordinary shares under these
options is deferred until the transfer of the options and ordinary shares to the
employee's name or upon the sale of those options and/or ordinary shares. We
will be allowed to claim as an expense for tax purposes the amounts credited to
the employees as a benefit upon sale of the shares allotted under the plan. The
benefit is equal to the difference between the market price and the exercise
price. The related capital gains tax is payable by the employee.
SECTION 3(i) SHARE OPTION PLAN
Section 3(i) of the Israeli Income Tax Ordinance governs the tax treatment
of share options not issued pursuant to Section 102 of the Israeli Income Tax
Ordinance. As of February 29, 2000, we had issued an aggregate of 459,214
options that will be taxed in accordance with Section 3(i) of the Israeli Income
Tax Ordinance. Prior to the completion of this offering, we intend to adopt a
formal, written share option plan in accordance with Section 3(i) of the Israeli
Income Tax Ordinance, or the 3(i) Plan. The 3(i) Plan will be effective for a
period of ten years commencing upon the date of its adoption.
NUMBER OF ORDINARY SHARES AVAILABLE UNDER THE SECTION 3(i) SHARE OPTION
PLAN. Under the 3(i) Plan, our board of directors has authority to grant options
to purchase ordinary shares to our Israeli employees, subject to shareholder
approval upon reaching specified thresholds. Any shares subject to options that
are cancelled or not exercised before expiration become available for future
grant.
ADMINISTRATION OF SECTION 3(i) SHARE OPTION PLAN. In general, our board of
directors will administer the 3(i) Plan. Our board of directors will determine
the terms and conditions of the options, as well as the identity of the
participants in the 3(i) Plan and the number of ordinary shares covered by each
option granted under the 3(i) Plan, based upon a recommendation of the
compensation committee.
RIGHTS UPON TERMINATION. The 3(i) Plan will provide that in case the
employment of any optionee is terminated as a result of death or disability of
such optionee, the optionee or his or her heirs may, within a period of 12
months following the termination, exercise the options that were already vested
upon the time of the termination. This period may be extended by our board of
directors for a period not to exceed the period during which the options by
their terms would otherwise have been exercisable.
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TRANSFERABILITY. Except for transfer as a result of death, the 3(i) Plan
will not allow for the transfer of options and only the optionee will be allowed
to exercise an option.
ADJUSTMENTS UPON MERGER OR ASSET SALE. The 3(i) Plan will provide that in
the event of a merger with or into another corporation or a sale of all or
substantially all of our assets, the successor corporation shall assume or
substitute equivalent options for each outstanding option. However, in the event
that the successor corporation will not agree to assume or substitute the
options, then all outstanding options will accelerate and become fully vested
ten days prior to the close of the merger or sale.
TAXATION. The options and the underlying shares will be exercisable or
available for sale immediately upon vesting and are not required to be deposited
in trust. The participants in the 3(i) Plan are not eligible for any tax
benefits or deferrals. We will be allowed to claim as an expense for tax
purposes the amounts credited to the employees as a benefit upon sale of the
shares allotted under the plan. The related income tax or capital gain tax shall
be paid by the participants.
1998 SHARE OPTION PLAN
Our board of directors adopted the 1998 Share Option Plan in July 1998. Our
1998 Share Option Plan provides for the grant of incentive share options, within
the meaning of Section 422 of the Internal Revenue Code, to our employees, and
for the grant of nonstatutory share options to our employees, directors and
consultants.
NUMBER OF ORDINARY SHARES AVAILABLE UNDER THE 1998 SHARE OPTION PLAN. As of
February 29, 2000, a total of 5 million of our ordinary shares were reserved for
issuance pursuant to the 1998 Share Option Plan, of which options to acquire
2,723,702 ordinary shares at a weighted average exercise price of $1.41 per
share were issued and outstanding, 317,232 ordinary shares had been issued upon
exercise of outstanding options and 1,959,066 ordinary shares remain available
for issuance.
ADMINISTRATION OF THE 1998 SHARE OPTION PLAN. In general, our board of
directors or a committee maintained by our board for such purpose administers
the 1998 Share Option Plan. The administrator has the power to determine the
terms of the options granted, including the exercise price, the number of
ordinary shares subject to each option, the exercisability of the options and
the form of consideration payable upon exercise.
EXERCISE PRICE AND FORM OF OPTIONS. The administrator determines the
exercise price of options granted under the 1998 Share Option Plan. In the case
of an incentive share option, the exercise price must at least be equal to the
fair market value of our ordinary shares on the date of grant. In addition, the
term of an option may not exceed ten years.
LIMITATION ON OPTION GRANTS. After termination of an employee, director or
consultant, he or she may exercise his or her vested options for the period of
time stated in the option agreement. Generally, if termination is due to death
or disability, the option will remain exercisable for 12 months. In all other
cases, the option will generally remain exercisable for 3 months. An option may
generally not be exercised later than the expiration of its original term.
TRANSFERABILITY OF OPTIONS. Unless otherwise determined by the
administrator, our 1998 Share Option Plan generally does not allow for the
transfer of options and only the optionee may exercise an option during his or
her lifetime.
ADJUSTMENTS UPON MERGER OR ASSET SALE. Our 1998 Share Option Plan provides
that in the event of our merger with or into another corporation or a sale of
substantially all of our assets, the successor corporation will assume or
substitute equivalent options for each option. If the outstanding options are
not assumed or substituted, all outstanding options will accelerate and become
fully vested prior to the close of such merger or sale of assets.
AMENDMENT AND TERMINATION OF OUR 1998 SHARE OPTION PLAN. Our 1998 Share
Option Plan will automatically terminate on July 23, 2003, 60 months from the
day of adoption. In addition, our board of directors has the authority to amend,
suspend or terminate the 1998 Share Option Plan, provided it does not adversely
affect any previously granted option.
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2000 SHARE OPTION PLAN
Our board of directors intends to adopt the 2000 Share Option Plan prior to
the completion of this offering. The 2000 Share Option Plan will provide for the
grant of incentive share options, within the meaning of Section 422 of the
Internal Revenue Code, to our employees, and for the grant of nonstatutory share
options to our employees, directors and consultants.
NUMBER OF ORDINARY SHARES AVAILABLE UNDER THE 2000 SHARE OPTION PLAN. We
intend to reserve a total of 5,300,000 of our ordinary shares for issuance
pursuant to the 2000 Share Option Plan. Our 2000 Share Option Plan will provide
for annual increases in the number of shares available for issuance on the first
day of each fiscal year, beginning 2001, equal to the LESSER of 5% of the
outstanding ordinary shares on the first day of each fiscal year, 1,500,000
ordinary shares or another amount determined by our board.
ADMINISTRATION OF THE 2000 SHARE OPTION PLAN. In general, our board of
directors will administer the 2000 Share Option Plan. The administrator will
have the power to determine the terms of the options granted, including the
exercise price, the number of ordinary shares subject to each option, the
exercisability of the options and the form of consideration payable upon
exercise.
EXERCISE PRICE AND FORM OF OPTIONS. The administrator will determine the
exercise price of options granted under the 2000 Share Option Plan, but with
respect to all incentive share options, the exercise price must at least be
equal to the fair market value of our ordinary shares on the date of grant. In
addition, the term of an option may not exceed ten years.
LIMITATION ON OPTION GRANTS. No optionee may be granted an option to
purchase more than 1,500,000 ordinary shares in any fiscal year. In connection
with his or her initial service, an optionee may be granted an additional option
to purchase up to 3,000,000 ordinary shares.
RIGHTS UPON TERMINATION. After termination of one of our employees,
directors or consultants, he or she may exercise his or her option for the
period of time stated in the option agreement. Generally, if termination is due
to death or disability, the option will remain exercisable for 12 months. In all
other cases, the option will generally remain exercisable for three months.
However, an option generally may not be exercised later than the expiration of
its original term.
TRANSFERABILITY OF OPTIONS. Unless otherwise determined by the
administrator, our 2000 Share Option Plan generally will not allow for the
transfer of options and only the optionee may exercise an option during his or
her lifetime.
ADJUSTMENTS UPON MERGER OR ASSET SALE. Our 2000 Share Option Plan will
provide that in the event of our merger with or into another corporation or a
sale of substantially all of our assets, the successor corporation will assume
or substitute equivalent options for each option. If the outstanding options are
not assumed or substituted, all outstanding options will accelerate and become
fully vested prior to the close of such merger or sale of assets.
AMENDMENT AND TERMINATION OF OUR 2000 SHARE OPTION PLAN. Our 2000 Share
Option Plan will automatically terminate in 2010, unless we terminate it sooner.
In addition, our board of directors will have the authority to amend, suspend or
terminate the 2000 Share Option Plan provided it does not adversely affect any
previously granted option.
2000 EMPLOYEE SHARE PURCHASE PLAN
Our board of directors intend to adopt the 2000 Employee Share Purchase
Plan prior to the completion of this offering.
NUMBER OF ORDINARY SHARES AVAILABLE UNDER THE 2000 EMPLOYEE SHARE PURCHASE
PLAN. A total of 750,000 of our ordinary shares will be made available for sale
under our 2000 Employee Share Purchase Plan. In addition, our 2000 Employee
Share Purchase Plan will provide for annual increases in the number of ordinary
shares available for issuance on the first day of each fiscal year, beginning
2001, equal to the lesser of 2.0% of the outstanding ordinary shares on the
first day of each fiscal year, 750,000 ordinary shares or another amount
determined by our board of directors.
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ADMINISTRATION OF THE PURCHASE PLAN. Generally, our board of directors will
administer the 2000 Employee Share Purchase Plan. Our board of directors or a
committee appointed by the board will have full and exclusive authority to
interpret the terms of the purchase plan and determine eligibility.
ELIGIBILITY TO PARTICIPATE. All of our employees will be eligible to
participate if they are customarily employed by us or any participating
subsidiary for at least 20 hours per week and more than five months in any
calendar year. However, an employee will not be granted an option to purchase
shares under the 2000 Employee Share Purchase Plan if such employee:
o immediately after grant owns shares possessing 5% or more of the total
combined voting power or value of all classes of our capital shares,
OR
o whose rights to purchase shares under all of our employee share
purchase plans accrues at a rate that exceeds $25,000 worth of shares
for each calendar year.
OFFERING PERIODS; PARTICIPATION. Our 2000 Employee Share Purchase Plan is
intended to qualify under Section 423 of the Internal Revenue Code and contains
consecutive, overlapping 24-month offering periods. Each offering period
includes four six-month purchase periods. The offering periods generally start
on the first trading day on or after May 1st and November 1st of each year,
except for the first offering period, which will commence on the first trading
day on or after the effective date of this offering and will end on the first
trading day on or after November 1st.
Our 2000 Employee Share Purchase Plan will permit participants to purchase
ordinary shares through payroll deductions of up to 15% of their compensation.
For purposes of our 2000 Employee Share Purchase Plan, compensation will include
base salary, wages, overtime pay, commissions, bonuses and other compensation
paid directly to the employee. A participant will be able to purchase a maximum
of 5,000 ordinary shares during a six-month purchase period.
PURCHASE OF SHARES. Amounts deducted and accumulated by the participant
will be used to purchase full ordinary shares at the end of each six-month
purchase period. The price will be 85% of the lower of the fair market value of
our ordinary shares at the beginning of an offering period or at the end of a
purchase period. If the fair market value at the end of a purchase period is
less than the fair market value at the beginning of the offering period,
participants will be withdrawn from the current offering period following their
purchase of shares and will be automatically re-enrolled in a new offering
period. Participants will be able to end their participation at any time during
an offering period and will be paid their payroll deductions to date.
Participation in our 2000 Employee Share Purchase Plan will end automatically
upon termination of employment with us.
TRANSFERABILITY OF RIGHTS. A participant will not be able to transfer
rights granted under our 2000 Employee Share Purchase Plan other than by will,
the laws of descent and distribution or as otherwise provided under the 2000
Employee Share Purchase Plan.
ADJUSTMENTS UPON MERGER OR ASSET SALE. In the event of our merger with or
into another corporation or a sale of all or substantially all of our assets, a
successor corporation may assume or substitute for each outstanding option. 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 prior to the closing of the merger or sale of assets.
AMENDMENT AND TERMINATION OF THE 2000 EMPLOYEE SHARE PURCHASE PLAN. Our
2000 Employee Share Purchase Plan will terminate in 2010. However, our board of
directors will have the authority to amend or terminate our 2000 Employee Share
Purchase Plan, except that, subject to certain exceptions, no such action may
adversely affect any outstanding rights to purchase shares.
APPROVAL OF CERTAIN TRANSACTIONS
DUTIES OF OFFICE HOLDERS
The Companies Law codifies the fiduciary duties that "office holders,"
including directors and executive officers, owe to a company. An office holder's
fiduciary duties consist of a duty of loyalty and a duty of care. The duty of
loyalty includes:
o avoiding any conflict of interest between the office holder's position
in the company and his or her personal affairs;
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<PAGE>
o avoiding any activity that is competitive with the company;
o avoiding exploiting any business opportunity of the company in order
to receive personal advantage for himself or herself or others; and
o revealing to the company any information or documents relating to the
company's affairs which the office holder has received due to his or
her position as an office holder.
The duty of care requires an office holder to act at a level of care that a
reasonable office holder in the same position would employ under the same
circumstances. This includes the duty to utilize reasonable means to obtain:
o information regarding the appropriateness of a given action brought
for his or her approval or performed by him or her by virtue of his or
her position; and
o all other information of importance pertaining to the foregoing
actions.
An office holder is defined in the Companies Law to include a director, the
general manager or chief executive officer, chief business manager or chief
operating officer, deputy general manager or executive vice-president,
vice-president, any other officer or manager directly subordinated to the
general manager and any other person assuming the responsibilities of any of the
above mentioned positions without regard to that person's title. Each person
listed in the table under "Executive Officers and Directors" is an office
holder. Under the Companies Law, all arrangements as to compensation and terms
of service of office holders require approval of the board of directors.
Arrangements regarding compensation and terms of service of directors, and
directors who are also managers of the company, require the approval by the
audit committee, the board of directors and the shareholders.
The Companies Law requires that an office holder of the company promptly
disclose any personal interest that he or she may have and all related material
information known to him or her, in connection with any existing or proposed
transaction by the company. In addition, if the transaction is an extraordinary
transaction as such term is defined under the Companies Law, the office holder
must also disclose any personal interest held by the office holder's spouse,
siblings, parents, grandparents, descendants, spouse's descendants and the
spouses of any of the foregoing. In addition, the office holder must also
disclose any interest held by any corporate entity in which the office holder is
a 5% or greater shareholder, director or general manager or in which he or she
has the right to appoint at least one director or the general manager. An
extraordinary transaction is defined in the Companies Law as a transaction other
than in the ordinary course of business, otherwise than on market terms, or that
is likely to have a material impact on the company's profitability, assets or
liabilities.
After the office holder complies with the above disclosure requirements, a
transaction that is not an extraordinary transaction requires only board
approval unless the articles of association of the company provide otherwise. If
the transaction in which the office holder has a personal interest is an
extraordinary transaction, then, in addition to any approval stipulated by the
articles of association, it must also be approved by the company's audit
committee and then by the board of directors, and, under certain circumstances,
by a meeting of the shareholders of the company. Generally, a director who has a
personal interest in a matter which is to be considered at a meeting of the
board of directors or of the audit committee may not be present during the board
of director's or audit committee's discussions and may not vote on this matter.
DUTIES OF SHAREHOLDERS
The Companies Law applies the same disclosure requirements to a controlling
shareholder of a public company. A shareholder that holds 25% or more of the
voting rights in the company is deemed to be a controlling shareholder if no
other shareholder owns more than 50% of the voting rights in the company.
Extraordinary transactions with a controlling shareholder or in which a
controlling shareholder has a personal interest, and the terms of compensation
of a controlling shareholder who is an office holder, require the approval of
the audit committee, the board of directors and the shareholders of the company.
The shareholder approval must include at least one-third of the shareholders who
have no personal interest in the transaction and are present, in person or by
proxy, at the meeting or, alternatively, the total shareholdings of those who
have no personal interest in the transaction who vote against the transaction
must not represent more than 1% of the voting rights in the company. The
Companies Law requires that every shareholder that votes by proxy indicate
whether or not that shareholder has a personal interest in the vote in question,
a failure of which results in the invalidation of that shareholder's vote.
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Under the Companies Law, a shareholder has a duty to act in good faith
towards the company and the other shareholders of the company and to refrain
from abusing that shareholder's power in the company including, among other
things, voting in a general meeting of shareholders on the following matters:
o any amendment to the articles of association;
o an increase of the company's authorized share capital;
o a merger; or
o approval of interested party transactions, which require shareholder
approval.
The Companies Law further provides that a shareholder shall refrain from
oppressing other shareholders.
In addition, any controlling shareholder, any shareholder who knows that it
possesses power to determine the outcome of a shareholder vote and any
shareholder who, pursuant to the provisions of a company's articles of
association, has the power to appoint or prevent the appointment of an office
holder in the company, or has any other power over the company, is under a duty
to act with fairness towards the company. A breach of the above duty of fairness
shall be considered as a breach of the fiduciary duty of an office holder as
described above.
For information concerning the direct and indirect personal interests of
some of our office holders and principal shareholders in transactions with us,
please see "Related Party Transactions" and "Description of Share
Capital--Anti-Takeover Provisions Under Israeli Law."
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Companies Law provides that an Israeli company cannot exonerate an
office holder from liability with respect to a breach of his or her duty of
loyalty, but may exonerate in advance an office holder from his or her liability
to the company, in whole or in part, with respect to a breach of his or her duty
of care. Our articles of association provide that, subject to any restrictions
imposed by the Companies Law, we may enter into an insurance contract providing
coverage for the liability of any of our office holders with respect to:
o a breach of his or her duty of care to us or to another person;
o a breach of his or her duty of loyalty to us, provided that the office
holder acted in good faith and had reasonable grounds to assume that
his or her act would not prejudice our interests; or
o a financial liability imposed upon him or her in favor of another
person with respect to an act performed by him or her in his or her
capacity as an office holder.
In addition, we may indemnify an office holder against the following
expenses or liabilities imposed upon him or her in his or her capacity as an
office holder:
o a financial liability imposed on him or her in favor of another person
by any judgment, including a settlement or an arbitrator's award
approved by a court; and
o reasonable litigation expenses, including attorneys' fees, incurred by
such office holder or imposed upon him or her by a court, in relation
to proceedings instigated by us against him or her or that are
instigated on our behalf or by another person, or as a result of a
criminal charge from which he or she was acquitted or a criminal
charge in which he or she was convicted for a criminal offense that
does not require proof of intent.
The Companies Law provides that a company may not indemnify an office
holder nor enter into an insurance contract which would provide coverage for any
monetary liability incurred as a result of any of the following:
o a breach by the officer holder of his or her duty of loyalty unless
the office holder acted in good faith and had a reasonable basis to
believe that the act would not prejudice the company;
o a breach by the office holder of his or her duty of care if such
breach was committed intentionally or recklessly;
o an act or omission with the intent to unlawfully derive a personal
benefit; or
o a fine levied against the office holder as a result of a criminal
offense.
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Under the Companies Law, the shareholders of a company may include or amend
its articles of association to include either of the following provisions:
o a provision authorizing the company to grant in advance an undertaking
to indemnify an office holder, provided that the undertaking is
limited to specified classes of events which the board of directors
deem foreseeable at the time of grant and limited to an amount
determined by the board of directors to be reasonable under the
circumstances, or
o a provision authorizing the company to retroactively indemnify an
office holder.
In addition, pursuant to the Companies Law, indemnification of, and
procurement of insurance coverage for, a company's office holders must be
approved by the audit committee and the board of directors. In the case of
directors, approval by the shareholders is also required.
Our articles of association allow us to insure and indemnify our office
holders to the fullest extent permitted by Israeli law, provided that the
insurance or indemnification is approved by the audit committee of our board of
directors and, if required by the Companies Law, also by our shareholders.
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RELATED PARTY TRANSACTIONS
We describe below transactions and series of similar transactions, as of
February 29, 2000, to which we were or will be a party:
o in which the amounts involved exceeded or will exceed $60,000; and
o in which any director, executive officer, holder of more than 5% of
our ordinary shares or any member of their immediate family had or
will have a direct or indirect material interest.
EQUITY INVESTMENT TRANSACTIONS
Between June 1997 through March 1998, we sold 3,617,250 Series A preferred
shares at $0.71 and $0.93 per share. Between November 1998 and February 1999, we
sold 4,399,864 shares of Series B-1 preferred shares and 1,315,146 shares of
Series B-2 non-voting preferred shares at $1.40 per share. In November 1999, we
sold 3,933,895 shares of Series C-1 preferred shares and 70,000 shares of Series
C-2 non-voting preferred shares at $5.32 per share. Listed below are the
directors, executive officers and shareholders who beneficially own 5% or more
of our securities who participated in these financings.
<TABLE>
<CAPTION>
WARRANTS
FOR WARRANTS
SERIES SERIES SERIES FOR SERIES SERIES
SERIES A B-1 B-1 B-2 SERIES C-1 C-1 C-2 AGGREGATE
DIRECTORS, EXECUTIVE OFFICERS PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED PREFERRED CASH
AND 5% SHAREHOLDERS SHARES SHARES SHARES SHARES SHARES SHARES SHARES CONSIDERATION
- ---------------------------------- ---------- ---------- ---------- ---------- ----------- ----------- ---------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Entities affiliated with Ampal
American Israel Corporation.... 1,491,000 1,071,567 160,734 -- 939,883 281,967 -- $ 7,773,294
Entities affiliated with Israel
Seed L.P....................... 1,491,000 357,182 53,564 -- 56,392 16,912 -- 2,186,900
Entities affiliated with Trident
Capital........................ -- 1,185,184 375,046 1,315,146 399,938 140,980 70,000 6,000,532
Entities affiliated with Eucalyptus
Ventures L.P................... -- 1,071,560 160,720 -- 281,967 84,588 -- 3,000,248
Entities affiliated with Technology
Crossover Ventures III L.P..... -- -- -- -- 1,315,832 394,751 -- 7,000,226
Technorov Holdings (1993) Ltd..... 635,250 285,747 42,861 -- 93,989 28,196 -- 1,379,993
Entities affiliated with WSG
Capital, L.P................... -- 428,624 64,288 -- 93,989 28,196 -- 1,100,096
</TABLE>
Entities affiliated with Ampal Israel American Corporation that
participated in the financings include Ampal Israel American Corporation, Ampal
Industries (Israel) Ltd., Marinera Ltd. and Inveco International Inc. Nitsan
Yanovski, a director of our company, is the Vice President, Business Development
of Ampal Industries (Israel) Ltd. He disclaims beneficial ownership of the
securities held by these entities except for his proportional interest in these
entities and except to the extent of his right to acquire 71,435 of our ordinary
shares held by Ampal Industries (Israel) Ltd.
Entities affiliated with Israel Seed L.P. that participated in the
financings include Israel Seed L.P. and Israel Seed II L.P.
Entities affiliated with Trident Capital that participated in the
financings include Information Associates-II, L.P. and IA-II Affiliates Fund,
L.L.C. Trident Capital Management is the general partner of Information
Associates-II, L.P. Todd Springer, a director of our company, is a managing
director of Trident Capital Management, and the general partner of IA-II
Affiliates Fund, L.L.C. Mr. Springer disclaims beneficial ownership of the
securities held by these entities except for his proportional interest in these
entities.
Entities affiliated with Eucalyptus Ventures L.P. that participated in the
financings include Eucalyptus Ventures (Israel) L.P., Eucalyptus Ventures
(Cayman) L.P. and Eucalyptus Ventures Affiliated Fund L.P.
Entities affiliated with Technology Crossover Ventures III L.P. that
participated in the financings include TCV III (GP), TCV III, LP, TCV III (Q),
L.P. and TCV III Strategic Partners, L.P. Jon Q. Reynolds, Jr., a director of
our company, is a general partner of Technology Crossover Ventures. Mr. Reynolds
disclaims beneficial ownership of the securities held by these entities except
for his proportional interest in these entities.
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Entities affiliated with WSG Capital, L.P. that participated in the
financings include WSG Capital, L.P. and WSG Capital II, L.P. Eric Gries, Eran
Wagner and Limor Schweitzer, who are each executive officers and directors of
our company, are each partners in WSG Management LLC. WSG Management LLC is the
general partner of WSG Capital, L.P. and WSG Capital II, L.P. Mr. Gries, Mr.
Wagner and Mr. Schweitzer disclaim beneficial ownership of the securities held
by these entities except for their proportional interest in these entities.
On various occasions during 1999 and the two preceding fiscal years, we
granted the following options to purchase our ordinary shares to the following
executive officers, directors and shareholders who beneficially own 5% or more
of our securities:
<TABLE>
<CAPTION>
SHARES UNDERLYING
NAME OPTIONS GRANTED PRICE PER SHARE DATE OF GRANT
- -------------------------------------- ----------------- --------------- -------------
<S> <C> <C> <C>
Eric Gries................................. 412,370 $0.07 02/01/98
140,000 0.35 12/21/98
182,000 1.57 10/20/99
70,490 0.71 01/01/00
Eran Wagner................................ 52,500 $0.35 12/21/98
91,000 1.57 10/20/99
28,490 0.71 01/01/00
Limor Schweitzer........................... 52,500 $0.35 12/21/98
91,000 1.57 10/20/99
14,000 0.71 01/01/00
Rick Van Hoesen............................ 447,300 $3.00 01/14/00
Anil Uberoi................................ 212,534 $0.14 04/01/98
42,000 0.35 12/21/98
28,000 0.35 08/12/99
28,000 1.57 10/20/99
37,100 0.71 01/01/00
Robert Hawk................................ 24,500 0.35 05/18/99
</TABLE>
The options listed above generally vest over a four year period. On August
1, 1999, Mr. Hawk exercised his option to purchase 24,500 ordinary shares for an
aggregate exercise price of $8,575. These shares are subject to repurchase by
the Company until vested.
In July 1998, Robert Hawk purchased 63,455 ordinary shares at $0.19 per
share, pursuant to a restricted stock purchase agreement. Under the restricted
stock purchase agreement, Eran Wagner and Limor Schweitzer have the right to
repurchase those ordinary shares. The right of Eran Wagner and Limor Schweitzer
to repurchase those ordinary shares lapsed as to one-fourth of the total number
of shares on the first anniversary of the grant date and lapses as to 1/12th of
the total shares each quarter thereafter. The lapsing of the repurchase right is
dependent upon the continued service by Mr. Hawk on our board of directors.
LOANS TO OFFICERS
XACCT Technologies Inc. plans to extend a home improvement loan to Eric
Gries in the amount of $175,000 with an interest rate of 6.45% per annum. The
principal plus interest on the loan are due upon the earlier of his date of
termination or two years from the date of loan. We have a security interest in
the proceeds of any severance payments due to Mr. Gries under his employment
agreement.
OTHER RELATED PARTY TRANSACTIONS
Eran Wagner and Limor Schweitzer, who are our directors and officers, are
each a board member of Xpert Integrated Systems Ltd. Xpert Integrated Systems
Ltd. is our Israeli reseller, and we also retain that entity to perform our
system administration tasks. In addition, Mr. Wagner and Mr. Schweitzer are each
a director and shareholder of
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Xpert UNIX Systems Ltd., which owns approximately 53.3% of Xpert Integrated
Systems Ltd. Mr. Wagner and Mr. Schweitzer each own 100 ordinary shares of Xpert
UNIX Systems Ltd., which together constitute 100% of the outstanding shares of
Xpert UNIX Systems Ltd. Both Mr. Wagner and Mr. Schweitzer disclaim beneficial
ownership of the securities held by Xpert Integrated Systems Ltd. except for
their proportional interest in that entity through Xpert Unix Systems Ltd.
In addition, Nitsan Yanovski, one of our directors, is also a director of
Xpert Integrated Systems Ltd. While none of our other directors or officers are
affiliated with Xpert UNIX Systems Ltd. or with Xpert Integrated Systems Ltd.,
entities affiliated with Ampal Israel American Corporation own approximately 20%
of the outstanding shares of Xpert Integrated Systems Ltd.
We have procured indemnification insurance for our directors and office
holders.
Holders of preferred shares are entitled to certain registration rights
with respect to the ordinary shares issued or issuable upon conversion of the
preferred shares. Please see "Description of Share Capital--Registration
Rights."
We believe that all related-party transactions described above were on
terms no less favorable than could have been otherwise obtained from unrelated
third parties.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our ordinary shares, as of February 29, 2000, and as
adjusted to reflect the sale of ordinary shares offered by us in this offering,
for:
- each person who we know beneficially owns more than 5% of our ordinary
shares;
- each of our directors;
- each executive officer named in the Summary Compensation Table; and
- all of our directors and officers as a group.
Unless otherwise indicated, the principal address of each of the
shareholders below is c/o XACCT Technologies, Inc., 2900 Lakeside Drive, Suite
100, Santa Clara, California 95054. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission and includes
voting or investment power with respect to the securities. Except as indicated
by footnote, and subject to applicable community property laws, each person
identified in the table possesses sole voting and investment power with respect
to all ordinary shares shown to be held by them. The number of ordinary shares
outstanding used in calculating the percentage for each listed person or entity
includes ordinary shares underlying options or warrants held by such person that
are exercisable within 60 days of February 29, 2000, but excludes ordinary
shares underlying options or warrants held by any other person or entity.
Percentage of beneficial ownership is based on 19,652,583 ordinary shares
outstanding as of February 29, 2000, after giving effect to the conversion of
all outstanding preferred shares upon the closing of this offering. The numbers
shown in the table assume no exercise by the underwriters of their
over-allotment option.
<TABLE>
PERCENTAGE
NUMBER OF BENEFICIALLY OWNED
SHARES ----------------------------------
BENEFICIALLY AFTER
5% SHAREHOLDERS OWNED BEFORE OFFERING OFFERING
- --------------- ------------- ------------------ --------------
<S> <C> <C> <C>
Entities affiliated with Ampal Israel American Corporation(1) 3,945,151 19.1%
Entities affiliated with Israel Seed L.P.(2)................ 1,975,050 10.0%
Entities affiliated with Trident Capital(3)................. 3,486,294 17.3%
Entities affiliated with Eucalyptus Ventures L.P.(4)........ 1,598,835 8.0%
Entities affiliated with Technology Crossover Ventures III 1,710,583 8.5%
L.P.(5)..................................................
Technorov Holdings (1997) Ltd.(6)........................... 1,086,043 5.5%
DIRECTORS AND EXECUTIVE OFFICERS
- --------------------------------
Eric Gries (7).............................................. 1,202,542 6.0%
Eran Wagner (8)............................................. 2,541,781 12.8%
Limor Schweitzer (9)........................................ 2,537,253 12.8%
Richard Van Hoesen (10)..................................... 27,956 0.1%
Anil Uberoi (11)............................................ 137,986 0.7%
Robert C. Hawk (12)......................................... 87,995 0.4%
Nitsan Yanovski (1)......................................... 3,502,450 17.8%
Todd A. Springer (3)........................................ 3,486,294 17.3%
Jon Q. Reynolds Jr. (5)..................................... 1,710,583 8.5%
All executive officers and directors as a group (nine 15,234,800 71.3%
Persons) (13)............................................
</TABLE>
- ---------------------
(1) Principal address is 1177 Avenue of the Americas, New York, New York
10036. Number of shares includes 1,491,000 shares held by Ampal American Israel
Corporation, 2,242,821 shares held by Ampal Industries (Israel) Ltd., 128,578
shares held by Marinera Ltd., and 82,152 shares held by Inveco International
Inc. In addition, Ampal Industries (Israel) Ltd. has a proxy to vote 82,152
shares issuable upon exercise of warrants held by Inveco International Inc. Mr.
Yanovski, Vice President of Business Development of Ampal (Israel) Ltd. and a
director of our company, disclaims beneficial ownership of the securities held
by these entities except for his proportional
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interest in these entities and except to the extent of his right to acquire
71,435 of our ordinary shares held by Ampal Industries (Israel) Ltd. Ampal
Industries (Israel) Ltd. has the right to vote the shares of Marinera Ltd. and
Inveco International, Inc.
(2) Principal address is Countanche House, 66-68 Espande Street, Helier,
Jersey, Channel Islands. Number of shares includes 987,625 shares held by Israel
Seed L.P. and 987,625 shares held by Israel Seed II L.P.
(3) Principal address is 11150 Santa Monica Boulevard, Suite 320, Los
Angeles, CA 90025. Number of shares includes 3,294,137 shares held by
Information Associates-II, L.P., and 192,157 preferred shares held by IA-II
Affiliates Fund L.L.C. Mr. Springer, one of our directors, is a managing
director of Trident Capital Management-II, L.L.C., and the general partner of
IA-II Affiliates Fund, L.L.C. Mr. Springer disclaims beneficial ownership of the
shares held by these entities, except to the extent of his pecuniary interest in
those shares arising from his interest in Trident Capital.
(4) Principal address is One Bush Street, San Francisco, CA 94104. Number
of shares includes 1,460,718 shares held by Eucalyptus Ventures L.P., 73,381
shares held by Eucalyptus Ventures (Israel) L.P., 44,114 shares held by
Eucalyptus Ventures (Cayman) L.P., and 20,622 shares held by Eucalyptus Ventures
Affiliated Fund L.P.
(5) Principal address is 575 High Street, Suite 400, Palo Alto, CA 94301.
Number of shares includes 1,568,147 shares held by TCV(Q), L.P., 12,425 shares
held by TCV III (GP), 58,996 shares held by TCV III, L.P., and 71,015 shares
held by TCV III Strategic Partners, L.P. Mr. Reynolds, one of our directors, is
a member of Technology Crossover Management III. Mr. Reynolds disclaims
beneficial ownership of such shares except to the extent of his pecuniary
interest in those shares arising from his interest in Technology Crossover
Management III.
(6) Principal address is 46 Rothschild Boulevard, Tel Aviv 94104, Israel.
(7) Number of shares includes 492,912 shares held by WSG Capital, L.P.,
122,195 shares held by WSG Capital II, L.P. and 294,713 ordinary shares issuable
upon the exercise of share options exercisable within 60 days of February 29,
2000. Mr. Gries, our Chief Executive Officer and President and one of our
directors, is a partner in WSG Management LLC, which is the general partner of
WSG Capital, L.P. and WSG Capital II, L.P.
(8) Number of shares includes 492,912 shares held by WSG Capital L.P.,
122,195 shares held by WSG Capital II, L.P. and 36,684 ordinary shares issuable
upon the exercise of share options exercisable within 60 days of February 29,
2000. Mr. Wagner, one of our executive officers and directors, is the managing
partner in WSG Management LLC, which is the general partner of WSG Capital, L.P.
and WSG Capital II, L.P.
(9) Number of shares includes 492,912 shares held by WSG Capital L.P.,
122,195 shares held by WSG Capital II, L.P. and 22,313 ordinary shares issuable
upon the exercise of share options exercisable within 60 days of February 29,
2000. Mr. Schweitzer, one of our executive officers and directors, is a general
partner in WSG Management LLC, which is the general partner of WSG Capital, L.P.
and WSG Capital II, L.P.
(10) Number of shares includes 27,956 ordinary shares issuable upon the
exercise of share options exercisable within 60 days of February 29, 2000.
(11) Number of shares includes 137,986 ordinary shares issuable upon the
exercise of share options exercisable within 60 days of February 29, 2000.
(12) Number of shares includes no ordinary shares issuable upon the
exercise of share options exercisable within 60 days of February 29, 2000.
(13) Number of shares includes 519,652 ordinary shares issuable upon the
exercise of share options exercisable within 60 days of February 29, 2000.
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DESCRIPTION OF SHARE CAPITAL
DESCRIPTION OF SHARES
Below is a summary of the material provisions governing our share capital.
This summary does not purport to be complete and is subject to the terms and
conditions of our memorandum of association and articles of association, a copy
of each of which has been filed as an exhibit to the registration statement of
which this prospectus is a part.
As of December 31, 1999, our authorized share capital consisted of
37,630,000 voting ordinary shares, NIS 0.01 nominal value per share, 1,820,000
non-voting ordinary shares, NIS 0.01 nominal value per share, and 18,550,000
preferred shares, NIS 0.01 nominal value per share. Upon the closing of this
offering, assuming no exercise of the underwriters' over-allotment option, our
authorized share capital will consist of:
o 200,000,000 voting ordinary shares, of which approximately
ordinary shares will be issued and outstanding;
o 1,820,000 non-voting ordinary shares, of which approximately
non-voting ordinary shares will be issued and outstanding; and
o 5,000,000 special preferred shares, of which no preferred shares will
be issued or outstanding.
DESCRIPTION OF THE SPECIAL PREFERRED SHARES
The special preferred shares, NIS 0.01 nominal value per share, may be
issued from time to time as shares of one or more series with distinct serial
designations approved by our board of directors. The designations include, among
others, the dividend rate and the number of ordinary shares into which the
special preferred shares are convertible. We intend to authorize 5,000,000
special preferred shares upon consummation of this offering.
DESCRIPTION OF ORDINARY SHARES
All of our issued and outstanding voting and non-voting ordinary shares,
and the voting ordinary shares offered hereby when issued and paid for, will be,
duly authorized and validly issued, fully paid and non assessable. Neither our
memorandum of association nor our articles of association nor the laws of the
State of Israel restrict in any way the ownership or voting of ordinary shares
by non-residents of Israel except with respect to subjects of countries that are
in a state of war with Israel.
Each non-voting ordinary share has the same rights as the voting ordinary
shares except for voting rights, including the right to receive notice of
meetings of shareholders and to participate in and vote at such meetings. Each
non-voting ordinary share is convertible at any time after the issuance of such
share at the option of the holder thereof and without payment of any additional
consideration into one fully-paid and non-assessable voting ordinary share. The
voting and non-voting ordinary shares do not have pre-emptive rights.
LIQUIDATION AND DIVIDEND RIGHTS. If we liquidate, after satisfaction in
full of all the liabilities to our creditors, our assets will be distributed to
the holders of ordinary shares in proportion to the nominal consideration paid
by them. This liquidation right may be affected by the grant of preferential
dividend or distribution rights to the holders of our authorized special
preferred shares, if and when such shares shall be issued, or to the holders of
any other class of preferred shares that we might authorize and issue in the
future. We may declare a dividend to be paid to the holders of ordinary shares
according to their rights and interests in our profits. Under the Companies Law,
cash dividends may be paid out of retained earnings of a company and also out of
the net earnings of a company, as calculated under that law, for the two years
preceding the distribution of dividend, provided however, that there is no
reasonable concern that such distribution will prevent the company from
satisfying its existing and foreseeable obligations as they become due. The
Companies Law also permits a company to effectuate a distribution by
repurchasing its own shares provided such distribution fulfills the criteria set
forth above relating to distributions. Under our articles of association, our
board of directors may declare interim and final dividends and distributions
with respect to any fiscal period.
VOTING, SHAREHOLDERS' MEETINGS AND RESOLUTIONS. Holders of voting ordinary
shares have one vote for each voting ordinary share held on all matters
submitted to a vote of shareholders. These voting rights may be affected by the
grant of any special voting right to the holders of our authorized special
preferred shares, if and when such
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shares shall be issued, or to the holders of any other class of preferred shares
that we might authorize and issue in the future. An annual general meeting shall
be held once every year and such annual meeting must be held within a period of
not more than 15 months after the last preceding annual general meeting.
According to our articles of association, the quorum required for a general
meeting of shareholders is the presence of at least two shareholders, in person
or by proxy, who together hold or represent more than 50% of the outstanding
share capital. A meeting adjourned for lack of quorum shall be adjourned to the
same day, in the following week at the same time and the same place unless
stated otherwise in the invitation to such meeting. Under the Companies Law,
unless otherwise stated in our articles of association or applicable law, all
resolutions of shareholders require a simple majority.
Most shareholder resolutions, including resolutions for the election of
directors, the appointment of auditors or the approval of transactions with
office holders as required by the Companies Law, will be deemed adopted if
approved by the holders of a majority of the voting power represented at the
meeting, in person or by proxy, and voting thereon. Certain corporate actions
such as: (1) amending the articles of association; (2) amending the memorandum
of association; (3) a merger or consolidation; (4) a voluntary winding up; (5)
approving changes in capitalization; and (6) authorizing a new class of shares
or changing special rights of a class of shares, will be deemed adopted only if
approved by the holders of not less than 75% of the voting power represented in
person or by proxy at the meeting and voting thereon, and in some cases 75% of
the voting power of the affected class of shares. For a discussion of
shareholder duties, please see "Management--Approval of Certain Transactions."
TRANSFER OF SHARES AND NOTICES. Fully paid ordinary shares are issued in
registered form and may be transferred freely. Under the Companies Law, all
shareholders' meetings require prior notice of at least 21 days. Pursuant to
regulations promulgated pursuant to the Companies Law, such notice shall include
the type of the general meeting, the time and place of the meeting, the agenda,
a summary of the proposed resolutions and the record date. The notice shall also
include the formal address and telephone number of the company as well as the
places, including Internet sites, where the full text of the proposed
resolutions and proxies, if applicable, may be reviewed by the shareholders. For
the purposes of determining the shareholders entitled to notice and to vote at
the meeting, the board of directors may fix the record date not more than 21
days and not less then four days prior to the date of the general meeting.
MODIFICATION OF CLASS RIGHTS. As long as our share capital is divided into
different classes of shares, the rights attached to any class, unless otherwise
provided by our articles of association, may be modified or abrogated only by a
resolution of our shareholders subject to the consent in writing of
three-fourths of the holders of the issued shares of that class, or with the
adoption of a resolution by 75% of those present and voting at a separate
general meeting of the holders of the shares of that class.
OPTIONS AND WARRANTS
As of February 29, 2000, options to purchase 3,986,516 of our ordinary
shares were outstanding under our 1998 Plan, our 102 Plan and Section 3(i) of
the Israeli Income Tax Ordinance, with a weighted average exercise price of
$1.24 per share. We also have outstanding warrants as of that date to purchase
an aggregate of 2,097,921 ordinary shares at a weighted average exercise price
of $6.09 per share.
REGISTRATION RIGHTS
After this offering, the holders of approximately 15.5 million of our
ordinary shares have certain rights to register those shares under the
Securities Act of 1933 under a rights agreement. The amended and restated rights
agreement provides that if requested by holders of at least 50% of any class of
preferred shares or at least 50% of all registrable securities with respect to
the registration of not less than that number of registrable shares which would
result in an anticipated aggregate offering price, net of underwriting discount
and commissions, greater than $5,000,000, we will file a registration statement
under the Securities Act covering all registrable securities requested to be
included. We will not be obligated to effect a demand registration until six
months after this initial public offering. The managing underwriter may reduce
the number of registrable securities to be registered for marketing reasons. All
expenses incurred in connection with such registrations, other than
underwriters' and brokers' discounts and commissions, will be borne by us.
In addition, if we propose to register any of our ordinary shares under the
Securities Act other than registrations relating solely to employee share option
or purchase plans or relating solely to a transaction under Rule 145 enacted
under the Securities Act, the holders of registrable securities may require us
to include all or a
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portion of their shares in such registration, although the managing underwriter
of any such offering has certain rights to reduce the number of shares to be
included in such registration. All expenses incurred in connection with such
registrations, other than underwriters' and brokers' discounts and commissions,
will be borne by us. The underwriters of this initial public offering have
decided to exclude all registrable securities from this offering.
RIGHTS TO PURCHASE SHARES IN OUR INITIAL PUBLIC OFFERING
The holders of our Series C preferred shares have rights to purchase an
aggregate of 83,000,000 of the ordinary shares offered in our initial public
offering, based on the mid-point of the initial price range set forth in our
preliminary prospectus. The number of shares subject to this allocation may be
reduced if our board of directors determines in good faith that the issuance of
those shares would be materially detrimental to the success of the initial
public offering. The allocation is also subject to applicable legal and
regulatory limitations. Our board has not yet considered the foregoing share
allocations, and we are continuing to review the advisability and legality of
those allocations.
ANTI-TAKEOVER PROVISIONS UNDER ISRAELI LAW
MERGERS AND ACQUISITIONS
Israeli law regulates mergers, votes required to approve mergers and
acquisitions of shares through tender offers. The law requires special approvals
for transactions involving significant shareholders and regulates other matters
that are relevant to these types of transactions.
Generally, under the Companies Law, a merger is required to be approved by
the board of directors and the shareholders of each of the merging companies. If
the share capital of the company that will not be the surviving company is
divided into different classes of shares, the approval of each class is also
required. Our articles of association requires that a merger be approved by the
holders of not less than 75% of the voting power represented in person or by
proxy at a shareholders' meeting and voting thereon. In addition, a merger can
be completed only after all approvals have been submitted to the Israeli
Registrar of Companies and 70 days have passed from the time that a proposal for
approval of the merger was filed with the Registrar.
The Companies Law also provides that an acquisition of shares in a public
company must be made by means of a tender offer if as a result of the
acquisition the purchaser would become a 25% shareholder of the company. This
rule does not apply if there is already another 25% shareholder of the company.
Similarly, the Companies Law provides that an acquisition of shares in a public
company must be made by means of a tender offer if as a result of the
acquisition the purchaser would become a 45% shareholder of the company, unless
someone else already holds a majority of the voting power of the company. These
rules do not apply if the acquisition is made by way of a merger. Regulations
promulgated under the Companies Law provide that these tender offer requirements
do not apply to companies whose shares are listed for trading outside of Israel
if, according to the law in the country in which the shares are traded,
including the rules and regulations of the stock exchange on which the shares
are traded, either:
o there is a limitation on acquisition of any level of control of the
company; or
o the acquisition of any level of control requires the purchaser to do
so by means of a tender offer to the public.
Further, Israeli tax law may treat some acquisitions, including a
stock-for-stock swap between an Israeli company and a foreign company, less
favorably than does U.S. tax law. For example, Israeli tax law may subject a
shareholder who exchanges his ordinary shares for shares in a foreign
corporation to immediate taxation.
CLASSIFIED BOARD OF DIRECTORS
Our Chief Executive Officer is appointed to our board of directors by
virtue of his office, subject to annual shareholder approval. The other
directors are divided into three classes. The directors in each class will serve
for staggered three-year terms. This system of electing and removing directors
may discourage a third party from making a tender offer or otherwise attempting
to obtain control of us, because a staggered board generally makes it more
difficult for shareholders to replace a majority of the directors.
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SPECIAL PREFERRED SHARES
The authorization of undesignated preferred shares makes it possible for
the board of directors to issue preferred shares with voting or other rights or
preferences that could impede the success of any attempt to change our control.
These and other provisions may have the effect of deferring hostile takeovers or
delaying changes in our control or management.
ISRAELI SECURITIES LAW REQUIREMENTS
We have received from the Israeli securities authority an exemption from
Israel's prospectus delivery requirements applicable to the offering. We have
also received from the Israeli securities authority an exemption from the
reporting obligations to which Israeli companies whose shares are publicly
traded are subject, provided that a copy of each of the reports filed by us
under applicable United States securities laws shall be available for public
review at our offices in Israel.
TRANSFER AGENT AND REGISTRAR
We have selected American Stock Transfer & Trust Company as the transfer
agent and registrar for our ordinary shares.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our ordinary shares.
Future sales of substantial amounts of our ordinary shares in the public market
following this offering could cause the prevailing market price of our ordinary
shares to fall and impede our ability to raise equity capital at a time and on
terms favorable to us.
Upon completion of this offering, we will have outstanding an aggregate
of ordinary shares, assuming the exercise of outstanding warrants as of
February 29, 2000 to purchase 2,058,371 preferred shares, which warrants if
unexercised would expire upon the closing of this offering, but no exercise of
the underwriters' over-allotment option and no exercise of outstanding options
or any other outstanding warrants after February 29, 2000. Of these outstanding
shares, the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act of 1933, unless
purchased by our affiliates, as that term is defined in Rule 144 under the
Securities Act of 1933. The remaining ordinary shares outstanding
upon completion of this offering and held by existing shareholders will be
"restricted securities" 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. Sales of restricted shares in the public
market, or the availability of such shares for sale, could adversely affect the
market price of our ordinary shares.
NUMBER OF SHARES DATE
---------------- ----
After 180 days from the date of this
prospectus, the 180 day lock-up terminates and these
shares are saleable under Rule 144 (subject in some
cases to volume limitations) or Rule 144(k)
After 180 days from the date of this prospectus, the
180 day lock-up is released and these shares are
saleable under Rule 701
After 180 days from the date of this prospectus,
restricted securities that are held for less than one
year and are not yet saleable under Rule 144
LOCK-UP AGREEMENT
All officers, directors and holders of our ordinary shares and preferred
shares 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 ordinary shares owned by them or that could be purchased by
them through the exercise of options or warrants for a period of 180 days after
the date of this prospectus without the prior written consent of Credit Suisse
First Boston 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 beginning 181
days after the effective date of this offering, subject in some cases to certain
volume limitations.
RULE 144
In general, under Rule 144 as currently in effect, beginning 91 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 our affiliates, would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of:
o 1% of the number of ordinary shares then outstanding, which will
equal approximately shares immediately after this offering;
or
o the average weekly trading volume of the ordinary shares 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 certain public
information about us.
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RULE 144(k)
Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during 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.
RULE 701
Subject to certain limitations on the aggregate offering price of a
transaction and other conditions, Rule 701 permits resales of shares issued
prior to the date the issuer becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, pursuant to certain compensatory benefit
plans and contracts 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 91 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 requirements.
We have entered into an agreement with the underwriters that we will not
sell or otherwise dispose of any ordinary shares or any securities convertible
into or exercisable or exchangeable for ordinary shares, or enter into any swap
or similar agreement that transfers, in whole or in part, the economic risk of
ownership of the ordinary shares, for a period of 180 days after the date of
this prospectus, without the prior written consent of Credit Suisse First Boston
Corporation, subject to limited exceptions.
REGISTRATION OF SHARES ISSUED IN CONNECTION WITH COMPENSATORY OPTION PLANS
We intend to file a registration statement under the Securities Act of
1933 covering the ordinary shares subject to outstanding options or reserved for
issuance under the share option plans and share purchase plans. Upon the
effectiveness of such registration statement, all such shares 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 our vesting restrictions or the
contractual restrictions described above.
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U.S. TAX CONSIDERATIONS
The following describes the material United States federal income tax
consequences of the purchase, ownership and disposition of the ordinary shares
to a U.S. holder.
For purposes of this discussion, a U.S. holder is:
o an individual citizen or resident of the United States;
o a corporation or other entity taxable as a corporation created or
organized under the laws of the United States or any political
subdivision thereof;
o an estate, the income of which is includable in gross income for
United States federal income tax purposes regardless of its source;
or
o a trust, if (1) a United States court is able to exercise primary
supervision over its administration and one or more United States
persons have the authority to control all of its substantial
decisions, or (2) the trust was in existence on August 20, 1996 and
has properly elected to continue to be treated as a United States
person.
This summary is for general information only and does not purport to be a
comprehensive description of all of the federal income tax considerations that
may be relevant to a decision to purchase the ordinary shares. This summary
generally considers only U.S. holders that will own the ordinary shares as
capital assets. This summary does not consider the United States tax
consequences to a person that is not a U.S. holder.
This discussion is based on current provisions of the Internal Revenue
Code of 1986, as amended, or the Code, current and proposed Treasury regulations
issued under the Code, and administrative and judicial interpretations of the
Code, all as in effect today and all of which are subject to change, possibly
with a retroactive effect. This discussion does not address all aspects of U.S.
federal income taxation that may be relevant to any particular U.S. holder based
on the U.S. holder's particular circumstances. In particular, this discussion
does not address the tax treatment of U.S. holders:
o who are broker-dealers;
o who own, directly, indirectly or constructively, 10% or more of our
outstanding voting shares;
o holding the ordinary shares as part of a hedging, straddle or
conversion transaction;
o whose functional currency is not the dollar; and
o who may be subject to special tax rules not discussed below,
including insurance companies, tax-exempt organizations, financial
institutions and persons subject to the alternative minimum tax.
Additionally, the tax treatment of persons who hold the ordinary shares
through a partnership or other pass-through entity is not considered, nor are
the possible application of U.S. federal estate or gift taxes or any aspect of
state, local or non-U.S. tax laws.
You are advised to consult your own tax advisor with respect to the
specific U.S. federal income tax consequences to you of purchasing, holding or
disposing of the ordinary shares.
DISTRIBUTIONS ON THE ORDINARY SHARES
The amount of a distribution with respect to the ordinary shares will
equal the amount of cash and the fair market value of any property distributed
and will also include the amount of any Israeli taxes withheld as described
below under "Israeli Taxation--Withholding and Capital Gains Taxes Applicable to
Non-Israeli Shareholders." In general, a distribution paid by us with respect to
the ordinary shares to a U.S. holder will be treated as ordinary dividend income
to the extent that the distribution does not exceed our current and accumulated
earnings and profits, as determined for U.S. federal income tax purposes. The
amount of any distribution which exceeds these earnings and profits will be
treated first as a non-taxable return of capital, reducing the U.S. holder's tax
basis in its ordinary shares to the extent thereof, and then as capital gain.
Corporate holders generally will not be allowed a deduction for dividends
received on ordinary shares.
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A dividend paid by us in NIS will be included in the income of U.S.
holders at the dollar amount of the dividend, based upon the spot rate of
exchange in effect on the date of the distribution. U.S. holders will have a tax
basis in the NIS for U.S. federal income tax purposes equal to that dollar
value. Any subsequent gain or loss on the NIS arising from exchange rate
fluctuations will be taxable as ordinary income or loss and will be U.S. source
income or loss.
Dividends paid by us generally will be foreign source passive income for
U.S. foreign tax credit purposes or, in the case of a U.S. holder that is a
financial services entity, financial services income. Subject to the limitations
in the Code, U.S. holders may elect to claim as a foreign tax credit against
their U.S. federal income tax liability the Israeli income tax withheld from
dividends received on the ordinary shares. U.S. holders that do not elect to
claim a foreign tax credit may instead claim a deduction for Israeli income tax
withheld. The rules relating to foreign tax credits are complex, and you should
consult your own tax advisor to determine whether and to what extent you would
be entitled to this credit.
DISPOSITION OF THE ORDINARY SHARES
Upon the sale, exchange or other disposition of the ordinary shares, a
U.S. holder generally will realize capital gain or loss in an amount equal to
the difference between the amount realized on the disposition and the U.S.
holder's tax basis in the ordinary shares. The gain or loss recognized on the
sale, exchange or other disposition of the ordinary shares generally will be
long-term capital gain or loss if the U.S. holder held the ordinary shares for
more than one year at the time of the disposition.
Gain or loss recognized by a U.S. holder on a sale, exchange or other
disposition of ordinary shares generally will be treated as U.S. source income
or loss for U.S. foreign tax credit purposes.
PASSIVE FOREIGN INVESTMENT COMPANIES
We believe that we were not a passive foreign investment company in 1999
and do not expect to become a passive foreign investment company. However, the
factual determination of our passive foreign investment company status is made
annually and thus may be subject to change. Therefore, we cannot assure you that
we will not become a passive foreign investment company in 2000 or in a future
year.
PASSIVE FOREIGN INVESTMENT COMPANY STATUS
In general, we will be a passive foreign investment company if for any of
our taxable years in which you held ordinary shares:
o at least 75% of our gross income for the taxable year is passive
income; or
o at least 50% of the value, determined on the basis of a quarterly
average, of our assets is attributable to assets that produce or are
held for the production of passive income.
Passive income generally includes dividends, interest, some types of
royalties and rents and gains from the sale or exchange of assets that produce
passive income. Cash and other current assets readily convertible into cash will
be treated as passive assets for purpose of the asset test. If we own directly
or indirectly at least 25% by value of the stock of another corporation, we will
be treated for purposes of the passive foreign investment company tests as
owning our proportionate share of the other corporation's assets and as directly
earning our proportionate share of the other corporation's income.
EFFECTS OF PASSIVE FOREIGN INVESTMENT COMPANY STATUS
If we were classified as a passive foreign investment company, and you
did not make either a mark-to-market election or a qualified electing fund
election, each as described below, you would be subject to special rules for:
o any gain you realize on the sale or other disposition of your
ordinary shares; and
o any excess distribution that we make to you, which means any
distribution you receive on the shares in a taxable year that is
greater than 125% of the average annual distribution received by you
on our ordinary shares in the three preceding taxable years or your
holding period for the ordinary shares, if shorter.
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Under these special tax rules:
o the gain or excess distribution would be allocated ratably over your
holding period for the ordinary shares;
o the amount allocated to the taxable year in which you realized the
gain or excess distribution and any taxable year before the first
taxable year in which we were classified as a passive foreign
investment company would be treated as ordinary income and subject to
tax at the rates currently applicable to ordinary income;
o the amount allocated to each of the other years would be subject to
tax at the highest tax rate applicable to ordinary income in effect
for that year; and
o the interest charge applicable to underpayments of tax would be
imposed on the resulting tax attributable to each year before the
current year in which we were classified as a passive foreign
investment company.
To avoid this tax consequence, a U.S. holder may elect to mark-to-market
the ordinary shares. If you make this election:
o you will include as ordinary income each year the excess, if any, of
the fair market value of your ordinary shares at the end of the
taxable year over your adjusted taxable basis in your ordinary
shares, and you will recognize additional gain, if any, on the sale
or other disposition of your ordinary shares as ordinary income for
that taxable year;
o you will be allowed to claim a deduction as an ordinary loss for the
excess, if any, of the adjusted taxable basis of your ordinary shares
over their fair market value at the end of the taxable year or over
their final sale or disposition price, but only to the extent of the
net amount of previously included income that results from the
mark-to-market election; and
o your basis in the ordinary shares will be adjusted to reflect any
income or loss amounts.
However, if we were classified as a passive foreign investment company,
persons who inherit the ordinary shares from you would not receive the normally
available increase in the tax basis in the ordinary shares to fair market value
as of the date of death, even if you have made the mark-to-market election.
Under some circumstances, U.S. holders in a passive foreign investment
company may make a qualified electing fund election as an alternative to the
mark-to-market election described above. If you make a qualified electing fund
election, you would not be subject to the passive foreign investment company
rules described above. Instead, you generally would be required to include in
your taxable income some undistributed amounts of our income. However, we do not
currently intend to take actions necessary for a U.S. holder to make a qualified
electing fund election if we are determined to be a passive foreign investment
company.
If you own ordinary shares during any year that we are a passive foreign
investment company, you must file with your U.S. income tax return IRS Form 8621
for distributions received on the ordinary shares and any gain realized on the
disposition of the ordinary shares.
Neither we nor our advisors has any duty to, or will undertake to inform,
U.S. holders of change in circumstances that would cause us to become a passive
foreign investment company. U.S. holders should consult their own tax advisors
concerning our status as a passive foreign investment company at any time after
the date of this prospectus.
BACKUP WITHHOLDING
A U.S. holder may be subject to backup withholding at a rate of 31% with
respect to dividend payments and proceeds from the disposition of the ordinary
shares. In general, backup withholding will apply only if a U.S. holder fails to
comply with certain identification procedures. Backup withholding will not apply
with respect to payments made to certain exempt recipients, such as corporations
and tax-exempt organizations. Backup withholding is not an additional tax and
may be claimed as a credit against the U.S. federal income tax liability of a
U.S. holder. Alternatively, the U.S. holder may be eligible for a refund of any
excess amounts withheld under the backup withholding rules. In either case, the
required information must be furnished to the Internal Revenue Service.
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ISRAELI TAXATION
The following is a summary of the current tax issues relating to companies
in Israel, with special reference to its effect on us. The following also
contains a discussion of certain Israeli tax consequences to persons purchasing
the ordinary shares offered hereby and certain Israeli Government programs
benefiting us. To the extent that the discussion is based on new tax legislation
that has not been subject to judicial or administrative interpretation, we
cannot assure you that the views expressed in the discussion will be accepted by
the tax authorities in question. The discussion is not intended, and should not
be construed, as legal or professional tax advice and is not exhaustive of all
possible tax considerations. You should consult your own tax advisors as to the
Israeli or other tax consequences of the purchase, ownership and disposition of
ordinary shares, including, in particular, the effect of any foreign, state or
local taxes.
You are urged to consult your own tax advisors about the Israeli or other
tax consequences of the purchase, ownership and disposition of our ordinary
shares, including, in particular, the effect of any foreign, state or local
taxes.
GENERAL CORPORATE TAX STRUCTURE
Israeli companies are subject to corporate tax at a rate of 36%. However,
the effective rate of tax of a company that derives income from an approved
enterprise, as defined below, may be considerably lower.
LAW FOR THE ENCOURAGEMENT OF INDUSTRY (TAXES), 1969
We currently qualify as an "industrial company" under the Law for the
Encouragement of Industry (Taxes), 1969, or the Industry Encouragement Law. A
company qualifies as an "industrial company" if it is resident in Israel and at
least 90% of its income in a given tax year, exclusive of income from certain
loans, marketable securities, capital gains, interest and dividends, is derived
from industrial enterprises owned by it. An "industrial enterprise" is defined
as an enterprise whose major activity in a particular tax year is industrial
manufacturing.
Under the Industry Encouragement Law, an industrial company is entitled to
deduct the purchase price of patents and certain other intangible property
rights, other than goodwill, over a period of eight years, beginning with the
year in which such rights were first used, and to deduct public offering
expenses ratably over a period of three years.
An industrial company may be eligible for special depreciation rates for
machinery, equipment and buildings. These rates vary, based on various factors,
including the date of commencement of operation and the number of works shifts.
An industrial company owning an approved enterprise may choose between such
special depreciation rates and the depreciation rates available to approved
enterprises.
Qualification as an industrial company under the Industry Encouragement Law
is not conditioned upon the receipt of prior approval from any Israel government
authority. We cannot assure you that we will continue to qualify as an
industrial company or that we will, in the future, be able to take advantage of
any tax benefits available to industrial companies.
LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS, 1959
The Law for the Encouragement of Capital Investments, 1959, or the
Investment Law, provides that a capital investment in eligible facilities may,
upon application to the Investment Center of the Ministry of Industry and
Commerce of the State of Israel, be designated as an approved enterprise. Each
certificate of approval for an approved enterprise relates to a specific
investment program delineated both by its financial scope, including its capital
resources, and by its physical characteristics, such as the equipment to be
purchased and utilized pursuant to the program. The tax benefits derived from
any such certificate of approval relate only to taxable income attributable to
the specific approved enterprise. If a company has more than one approval or
only a portion of its capital investments is approved, its effective tax rate is
the result of a weighted average of the applicable rates.
We have been granted the status of an "approved enterprise" under the
Investment Law, and we qualify as a "foreign investors' company" as defined in
the Investment Law. We have elected to receive the alternative package of
benefits under the Investment Law. Under the terms of our approved enterprise
program, our income from the approved enterprise will be tax exempt for a period
of two years, commencing with the year in which we first earn
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taxable income, and subject to a reduced corporate tax rate of between 10%
and 20% (depending on the level of foreign investment in the company) for an
additional period of up to a total of eight years, provided that the total
period of tax benefits will not extend past the earlier of (1) 12 years from the
year of commencement of production or (2) 14 years from the year of approval of
the approved enterprise status. The initial two-year period of benefit has not
yet commenced.
If dividends are paid out of tax-exempt profit derived from our approved
enterprise, we will be liable for corporate tax at the rate that would have been
applied if we had not elected the alternative tax benefit. This rate is
generally 10% to 20%, depending on the percentage of the company's shares held
by foreign shareholders. We will also be required to withhold on behalf of the
dividend recipients an additional 15% of the amount distributed as dividends.
Cash dividends paid by an Israeli company are normally subject to a withholding
tax, except for dividends that are paid to an Israeli company, in which case no
tax is withheld unless the dividend is paid in respect of earnings from an
approved enterprise. In addition, because we have received certain benefits
under Israeli laws relating to approved enterprises, payment of dividends may
subject us to certain Israeli taxes to which we would not otherwise be subject.
The tax-exempt income attributable to the approved enterprise can be distributed
to shareholders without subjecting us to taxes only upon our complete
liquidation.
The Investment Law also provides that an approved enterprise is entitled to
accelerated tax depreciation on property and equipment included in an approved
investment program.
Any future applications we make to the Investment Center will be reviewed
separately, and decisions as to whether or not to approve such applications will
be based, among other things, on the then prevailing criteria set forth in the
Investment Law, on the specific objective we set forth in such applications and
on certain financial criteria. Accordingly, we cannot assure you that any such
applications will be approved. In addition, the benefits available to an
approved enterprise are conditional upon our fulfilling certain conditions
stipulated in the Investment Law and its regulations and the criteria set forth
in the specific certificate of approval. If we do not meet these conditions, in
whole or in part, we would be required to refund the amount of tax benefits,
with the addition of the Israeli CPI linkage adjustment and interest thereupon.
We believe that our approved enterprise operates in substantial compliance with
each of these conditions and criteria.
TAXATION UNDER INFLATIONARY CONDITIONS
The Income Tax Law (Inflationary Adjustments), 1985, or the Inflationary
Adjustments Law, attempts to overcome some of the problems experienced in a
traditional tax system by an economy experiencing rapid inflation, which was the
case in Israel at the time the Inflationary Adjustments Law was enacted. The
Inflationary Adjustments Law was designed to neutralize the erosion of capital
investments in business and to prevent tax benefits resulting from deduction of
inflationary expenses. The Inflationary Adjustments Law applies a supplementary
set of inflationary adjustments to the normal taxable profits computed under
regular historical cost principles.
The Inflationary Adjustments Law introduced a special tax adjustment for
the preservation of equity based on changes in the Israeli CPI, whereby certain
corporate assets are classified broadly into fixed (inflation-resistant) assets
and non-fixed assets. Where shareholders' equity, as such term is defined in the
Inflationary Adjustments Law, exceeds the depreciated cost of fixed assets, a
tax deduction that takes into account the effect of the annual rate of inflation
on such excess is allowed up to a ceiling of 70% of taxable income in any single
tax year, with the unused portion permitted to be carried forward on a linked
basis, without limit. If the depreciated cost of fixed assets exceeds
shareholders' equity, then such excess, multiplied by the annual inflation rate,
is added to taxable income.
In addition, subject to certain limitations, depreciation deductions on
fixed assets and losses carried forward are adjusted for inflation on the basis
of changes in the Israeli CPI. Under the Inflationary Adjustments Law, results
for tax purposes are measured in real terms, in accordance with changes in the
Israeli CPI.
We are taxed under this law. The discrepancy between the change in (1) the
Israeli CPI and (2) the exchange rate of Israeli currency in relation to the
dollar, may in future periods cause significant differences between taxable
income, as determined for Israeli tax purposes, and the income measured in U.S.
dollars as reflected by our consolidated financial statements, which are
measured in U.S. dollars.
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WITHHOLDING AND CAPITAL GAINS TAXES APPLICABLE TO NON-ISRAELI SHAREHOLDERS
The State of Israel imposes income tax on non-residents of Israel on income
accrued or derived from sources in Israel or received in Israel. The sources of
income include passive income such as dividends, royalties and interest, as well
as non-passive income from business conducted or services rendered in Israel.
Upon distribution of dividends other than bonus shares, I.E., stock dividends,
income tax is generally withheld at the rate of 25%, or at the rate of 15% for
dividends distributed out of income generated by an approved enterprise, unless
a different rate is provided in a treaty between Israel and the shareholder's
country of residence. Under the income tax treaty between the United States and
Israel, the maximum tax on dividends paid to a holder of ordinary shares who is
a qualifying U.S. resident is 25%.
Israeli law imposes a capital gains tax on the sale of securities and other
capital assets. Under current law, however, sales by an individual of the
ordinary shares offered by this prospectus are exempt from Israeli capital gains
tax for so long as the shares are quoted on Nasdaq or listed on a stock exchange
recognized by the Israeli Ministry of Finance, provided that we continue to
qualify as an industrial company, and provided further that the individual does
not hold such shares for business purposes. Please see "Law for Encouragement of
Industry (Taxes), 1969." If we do not maintain our status as an industrial
company then, subject to any applicable tax treaty, the Israeli capital gain tax
rates would be up to 50% for non-Israeli resident individuals and 36% for
corporations.
Under the Israel-U.S. treaty, a holder of ordinary shares who is a U.S.
resident generally will be exempted from Israeli capital gain tax on the sale of
ordinary shares if such holder owned, directly or indirectly, shares
representing less than 10% of our voting power throughout the 12-month period
before the sale. Under certain circumstances specified in the treaty, if Israeli
capital gains tax is payable, it can be credited against U.S. federal tax,
subject to limitations in U.S. tax law applicable to foreign tax credits.
A non-resident of Israel who receives interest, dividend or royalty income
derived from or accrued in Israel, from which Israeli tax was withheld at
source, is generally exempted from the duty to file tax returns in Israel with
respect to such income, provided such income was not derived from a business
conducted in Israel by such person and such person has no other non-passive
income from sources within Israel.
Israel presently has no estate or gift tax.
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CONDITIONS IN ISRAEL
We are incorporated under the laws of the State of Israel, and
substantially all of our research and development facilities, and certain
Israeli and non-U.S. operations are managed from the State of Israel.
Accordingly, we are directly affected by economic, political and military
conditions in Israel. Our operations may be materially adversely affected if
major hostilities involving Israel arise or if trade between Israel and its
present trading partners is curtailed.
POLITICAL CONDITIONS
Since the establishment of the State of Israel in 1948, a number of armed
conflicts have taken place between Israel and its Arab neighbors, and a state of
hostility, varying from time to time in intensity and degree, has led to
security and economic problems for Israel. Additionally, from time to time since
December 1987, Israel has experienced civil unrest, primarily in the West Bank
and Gaza Strip territories administered by Israel since 1967. A peace agreement
between Israel and Egypt was signed in 1979, a peace agreement between Israel
and Jordan was signed in 1994 and, since 1993, several agreements between Israel
and Palestinian representatives have been signed. As of the date hereof, Israel
has not entered into any peace agreement with Syria or Lebanon, and there have
been delays in the negotiations and implementation of the agreements with the
Palestinians. However, Israel has recently been engaged in peace talks with
Syria under the good auspices of the United States government. We cannot predict
how the peace process will develop or what effect that it may have upon the
company.
Certain countries, companies and organizations continue to participate in a
boycott of Israeli firms and others doing business in Israel or with Israeli
companies. Although we are precluded from marketing our products to these
countries, we believe that in the past the boycott has not had a material
adverse effect on us. We cannot assure you that restrictive laws, policies or
practices directed towards Israel or Israeli businesses will not have an adverse
impact on the expansion of our business.
Generally, all male adult citizens and permanent residents of Israel under
the age of 48 are, unless exempt, obligated to perform up to 39 days of military
reserve duty annually. Additionally, all such residents are subject to being
called to active duty at any time under emergency circumstances. Some of our
male officers and employees are currently obligated to perform annual reserve
duty. Although we have operated effectively under these requirements, we cannot
assess the full impact of these requirements on our workforce or business if
conditions should change, and we cannot predict the impact on us of any
expansion of such obligations.
TRADE RELATIONS
Israel is a member of the United Nations, the International Monetary Fund,
the International Bank for Reconstruction and Development, and the International
Finance Corporation. Israel is a member of the World Trade Organization and is a
signatory to the General Agreement on Trade in Services. In addition, Israel has
been granted preferences under the Generalized System of Preferences from the
United States, Australia, Canada and Japan. These preferences allow Israel to
export products covered by such program either duty-free or at reduced tariffs.
Israel has entered into preferential trade agreements with the European
Union, the United States and the European Free Trade Association. In recent
years, Israel has established commercial and trade relations with a number of
other nations, including China, India, Russia and other nations in Asia and
Eastern Europe, with which Israel had not previously had such relations.
ECONOMIC CONDITIONS
Israel's economy has been subject to numerous destabilizing factors, including a
period of rampant inflation in the early to mid-1980s, low foreign exchange
reserves, fluctuations in world commodity prices, military conflicts and civil
unrest. The Israeli government, for these and other reasons, has intervened in
the economy by utilizing, among other means, fiscal and monetary policies,
import duties, foreign currency restrictions and control of wages, prices and
foreign currency exchange rates. The Israeli government has in the past
periodically changed its policies in all these areas. During 1997, the monetary
policy of the Bank of Israel changed in several respects. These changes included
a decision of the Bank of Israel to reduce its intervention in the currency
markets to allow the NIS to trade more freely. In addition, the Bank of Israel
has adopted and implemented certain measures to liberalize foreign currency
regulations. There are currently no Israeli currency control restrictions on
remittance of dividends or the
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proceeds from the sale of the ordinary shares, although legislation remains in
effect pursuant to which currency controls may be imposed by administrative
action at any time.
The Israeli government's monetary policy contributed to relative price and
exchange rate stability in recent years, despite fluctuating rates of economic
growth and unemployment. The Israeli inflation rates for the years 1997, 1998
and 1999 were 7.0%, 8.6% and 1.3%, respectively. We cannot assure you that the
Israeli government will be successful in its attempts to keep prices and
exchange rates stable.
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UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement, dated , 2000, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Chase Securities Inc.
and U.S. Bancorp Piper Jaffray Inc. are acting as representatives, the following
respective numbers of ordinary shares:
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
Credit Suisse First Boston Corporation.......................
Chase Securities Inc.........................................
U.S. Bancorp Piper Jaffray Inc...............................
----------------
Total......................................
================
The underwriting agreement provides that the underwriters are obligated to
purchase all the ordinary shares in this offering if any are purchased, other
than those shares covered by the over-allotment option described below. The
underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of ordinary shares may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares from us at the initial public
offering price less the underwriting discounts and commissions. The option may
be exercised only to cover any over-allotments of ordinary shares.
The underwriters propose to offer the ordinary shares initially at the
public offering price on the cover page of this prospectus and to selling group
members at that price less a concession of $ per share. The underwriters
and selling group members may allow a discount of $ per share on sales
to other broker/dealers. After the initial public offering, the public offering
price and concession and discount to broker/dealers may be changed by the
representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
PER SHARE TOTAL
------------------------------- -------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C>
Underwriting Discounts and Commissions $ $ $ $
paid by us...............................
Expenses paid by us......................... $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed % of the ordinary shares being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any of our ordinary shares or securities convertible into or exchangeable or
exercisable for any of our ordinary shares, or publicly disclose the intention
to make any such offer, sale, pledge, disposition or filing, without the prior
written consent of Credit Suisse First Boston Corporation for a period of 180
days after the date of this prospectus.
Our officers and directors and certain other shareholders, including
holders of our ordinary shares and preferred shares, have agreed that they will
not offer, sell, contract to sell, pledge or otherwise dispose of, directly of
indirectly, any of our ordinary shares or securities convertible into or
exchangeable or exercisable for any of our ordinary shares, or publicly disclose
the intention to make any such offer, sale, pledge or disposition, without, in
each case, the prior written consent of Credit Suisse First Boston Corporation
for a period of 180 days after the date of this prospectus.
The underwriters have reserved for sale, at the initial public offering
price up to shares of the ordinary shares for employees, directors
and certain other persons associated with us who have expressed an interest
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in purchasing ordinary shares in this offering. The number of shares available
for sale to the general public in this offering will be reduced to the extent
such persons purchase such reserved shares. Any reserved shares not so purchased
will be offered by the underwriters to the general public on the same terms as
the other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.
We have applied to list the ordinary shares on The Nasdaq Stock Market's
National Market under the symbol "XCCT".
In March 2000, we sold Series D preferred shares in a private placement at
a purchase price of $12.63 per share. In this private placement, Credit Suisse
First Boston Venture Fund I L.P. purchased 23,752 ordinary shares, individuals
and entities affiliated with Chase Securities Inc. purchased an aggregate of
7,917 ordinary shares and individuals affiliated with U.S. Bancorp Piper Jaffray
purchased an aggregate of 7,917 ordinary shares. These organizations purchased
these Series D preferred shares on the same terms as the other investors in the
private placement.
Prior to this offering, there has been no public market for our ordinary
shares. The initial public offering price for the ordinary shares will be
determined by negotiation between us and the underwriters, and does not reflect
the market price for the ordinary shares following this offering. Among the
principal factors to be considered in determining the initial public offering
price will be:
o the information in this prospectus and otherwise available to the
underwriters;
o market conditions for initial public offerings;
o the history of and prospects for the industry in which we will
compete;
o the ability of our management;
o our prospects for future earnings;
o the present state of our development and our current financial
condition;
o the recent market prices of, and the demand for, publicly traded
ordinary shares of generally comparable companies; and
o the general condition of the securities markets at the time of this
offering.
The underwriters may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934, as amended.
o Over-allotment involves syndicate sales in excess of the offering
size, which creates a syndicate short position.
o Stabilizing transactions permit bids to purchase the underlying
security so long as the stabilizing bids do not exceed a specified
maximum.
o Syndicate covering transactions involve purchases of the ordinary
shares in the open market after the distribution has been completed
in order to cover syndicate short positions.
o Penalty bids permit the underwriters to reclaim a selling concession
from a syndicate member when the ordinary shares originally sold by
the syndicate member is purchased in a stabilizing or syndicate
covering transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the ordinary shares to be higher than it would otherwise
be in the absence of these transactions. These transactions may be effected on
The Nasdaq National Market or otherwise and, if commenced, may be discontinued
at any time.
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NOTICE TO CANADIAN RESIDENTS
RESALE RESTRICTIONS
The distribution of the ordinary shares in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of ordinary shares are effected. Accordingly, any resale of the ordinary
shares in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or pursuant
to a discretionary exemption granted by the applicable Canadian securities
regulatory authority. Purchasers are advised to seek legal advice prior to any
resale of the ordinary shares.
REPRESENTATIONS OF PURCHASERS
Each purchaser of ordinary shares in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom the
purchase confirmation is received that: (i) such purchaser is entitled under
applicable provincial securities laws to purchase the ordinary shares without
the benefit of a prospectus qualified under the securities laws; (ii) where
required by law, such purchaser is purchasing as principal and not as agent; and
(iii) such purchaser has reviewed the text above under "Resale Restrictions."
RIGHTS OF ACTION (ONTARIO PURCHASERS)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
ENFORCEMENT OF LEGAL RIGHTS
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or these persons. All or a substantial portion of the assets of the
issuer and these persons may be located outside of Canada and, as a result, it
may not be possible to satisfy a judgment against the issuer or such persons in
Canada or to enforce a judgment obtained in Canadian courts against the issuer
or persons outside of Canada.
NOTICE TO BRITISH COLUMBIA RESIDENTS
A purchaser of ordinary shares to whom the SECURITIES ACT (British
Columbia) applies is advised that the purchaser is required to file with the
British Columbia Securities Commission a report within ten days of the sale of
any ordinary shares acquired by such purchaser in this offering. This report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed in respect of ordinary shares acquired on the same date and under the
same prospectus exemption.
TAXATION AND ELIGIBILITY FOR INVESTMENT
Canadian purchasers of ordinary shares should consult with their own legal
and tax advisors with respect to the tax consequences of an investment in the
ordinary shares in their particular circumstances and with respect to the
eligibility of the ordinary shares for investment by the purchaser under
relevant Canadian legislation.
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LEGAL MATTERS
Certain legal matters in connection with this offering with respect to
United States law will be passed upon for us by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California. The validity of the
ordinary shares offered hereby and certain other legal matters in connection
with this offering with respect to Israeli law will be passed upon for us by S.
Friedman & Co., Advocates & Notaries, Tel Aviv, Israel. Certain legal matters in
connection with this offering will be passed upon for the underwriters by
Morrison & Foerster LLP, Palo Alto, California, with respect to United States
law and by Meitar, Liquornik, Geva & Co., Israel, with respect to Israeli law.
WS Investment Company, an investment partnership composed of certain current and
former members of and persons associated with Wilson Sonsini Goodrich & Rosati,
Professional Corporation, beneficially owns an aggregate of 37,500 of our
ordinary shares. Attorneys at S. Friedman & Co., Advocates & Notaries,
beneficially own options to purchase 25,750 of our ordinary shares.
EXPERTS
Kost Forer & Gabbay, a member of Ernst & Young International, independent
auditors, have audited our consolidated financial statements as of December 31,
1998 and 1999, and for the period from our inception in June 1997 to December
31, 1997 and for each of the years in the two-year period ended December 31,
1999 as set forth in their report. We have included our consolidated financial
statements and the related notes in the prospectus and elsewhere in the
registration statement in reliance on Kost Forer & Gabbay's report, given upon
the authority of such firm as experts in accounting and auditing.
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ENFORCEABILITY OF CIVIL LIABILITIES
We are incorporated in the State of Israel, and some of our officers,
directors and the Israeli experts named herein are not residents of the United
States and substantially all of their assets may be located outside of United
States. The service of process upon, and the enforcement of judgements against,
us, our non-U.S. resident officers, directors and the Israeli experts may be
difficult.
We have been informed by our legal counsel in Israel, S. Friedman & Co.,
that there is doubt as to the enforceability of civil liabilities under the
Securities Act or the Securities Exchange Act of 1934 in original actions
instituted in Israel. However, subject to certain time limitations, Israeli
courts may enforce foreign, final, non-appealable executory judgments in civil
matters, including a monetary or compensatory judgment in a non-civil matter,
obtained after completion of due process before a court of competent
jurisdiction, according to the laws of the state in which the judgment is given
and the rules of private international law prevailing in Israel. The rules of
private international law currently prevailing in Israel do not prohibit the
enforcement of judgments of Israeli courts, provided that:
o adequate service of process has been effected and the defendant has
had a reasonable opportunity to be heard;
o the judgment and the enforcement thereof are not contrary to the law,
public policy, security or sovereignty of the State of Israel;
o the judgment was not fraudulently obtained and does not conflict with
any other valid judgment in the same matter between the same parties;
and
o an action between the same parties in the same matter is not pending
in any Israeli court or tribunal at the time the lawsuit is instituted
in the foreign court.
We have appointed our U.S. subsidiary, XACCT Technologies, Inc., as our
agent to receive service of process in any action against us in any federal
court or court of the State of California arising out of this offering or any
purchase or sale of securities in connection with this offering. We have not
given such agent consent to accept service of process in connection with any
other claim.
If a foreign judgment is enforced by an Israeli court, it generally will
be payable in Israeli currency, which can then be converted into non-Israeli
currency and transferred out of Israel. The usual practice in an action before
an Israeli court to recover an amount in a non-Israeli currency is for the
Israeli court to render judgment for the equivalent amount in Israeli currency
at the rate of exchange in force on the date thereof, but the judgment debtor
may make payment in foreign currency. Pending collection, the amount of the
judgment of an Israeli court stated in Israeli currency ordinarily will be
linked to the Israeli CPI plus interest at the annual statutory rate set by
Israeli regulations prevailing at such time.
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WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission in connection with this offering. This prospectus, which is
part of the registration statement, does not contain all of the information
included in the registration statement and the exhibits and schedules to the
registration statement. For further information with respect to us and our
ordinary shares, we refer you to the registration statement and the exhibits and
schedules files as part of the registration statement. Statements contained in
this prospectus concerning the contents of any contract or any other document
are not necessarily complete. If a contract or document has been files as an
exhibit to the registration statement, we refer you to the copy of the contract
or document that has been filed. Each statement in this prospectus relating to a
contract or document filed as an exhibit is qualified by the filed exhibit. You
may read and copy the registration statement and any other documents we file at
the Securities and Exchange Commission's Public Reference Room at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 or at the regional offices of
the Securities and Exchange Commission located at CitiCorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade
Center, 13th Floor, New York, New York 10048. The Securities and Exchange
Commission maintains a web site that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the Securities and Exchange Commission at http://www.sec.gov.
We intend to make available to our shareholders annual reports containing
consolidated financial statements audited by an independent public accounting
firm and quarterly reports containing unaudited financial data for the first
three quarters of each year.
We have received from the Israel Securities Authority an exemption from the
reporting obligations to which public Israeli companies are normally subject. As
a condition to that exemption, a copy of each of the reports we file with the
Securities and Exchange Commission pursuant to applicable U.S. law will be
available for review at our headquarters in Israel.
We file reports with the Israeli Registrar of Companies regarding our
registered address, our registered capital, our shareholders of record and the
number of shares held by each shareholder, the identity of the directors and
details regarding security interests on our assets. In addition, we must file
with the Israeli Registrar of Companies our articles of association and a copy
of any special resolution adopted by a general meeting of shareholders. The
information filed with the Israeli Registrar of Companies is available to the
public. In addition to the information available to the public, our shareholders
are entitled, upon request, to review and receive copies of all minutes of
meetings of our shareholders.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
----
Report of Independent Auditors................................... F-2
Consolidated Balance Sheets....................................... F-3
Consolidated Statements of Operations............................. F-4
Statements of Changes in Shareholders' Equity..................... F-5
Consolidated Statements of Cash Flows............................. F-6
Notes to Consolidated Financial Statements........................ F-7
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of
XACCT TECHNOLOGIES (1997) LTD.
We have audited the accompanying consolidated balance sheets of XACCT
Technologies (1997) Ltd. and its subsidiary as of December 31, 1998 and 1999 and
the related consolidated statements of operations, changes in shareholders'
equity, and cash flows for the period from June 8, 1997 (inception) through
December 31, 1997, and for each of the two years in the period ended December
31, 1999. 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 in the United States. 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 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
XACCT Technologies (1997) Ltd. and its subsidiary as of December 31, 1998 and
1999, and the consolidated results of their operations and cash flows for the
period from June 8, 1997 (inception) through December 31, 1997, and for each of
the two years in the period ended December 31, 1999, in conformity with
generally accepted accounting principles in the United States.
/s/ KOST, FORER & GABBAY
Tel-Aviv, Israel KOST, FORER & GABBAY
March 2, 2000, except for Note 10 A Member of Ernst and Young
which is dated March 28, 2000 International
F-2
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
CONSOLIDATED BALANCE SHEETS
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
SHAREHOLDERS'
DECEMBER 31, EQUITY AS OF
-------------------- DECEMBER 31,
1998 1999 1999
--------- --------- ---------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents........................................... $5,445 $ 17,309
Short-term bank deposits............................................ -- 221
Marketable securities............................................... -- 465
Trade receivables................................................... 30 559
Other accounts receivable........................................... 151 396
--------- ---------
5,626 18,950
--------- ---------
Severance pay fund..................................................... 78 180
--------- ---------
Property and equipment, net............................................ 360 956
--------- ---------
$6,064 $ 20,086
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables...................................................... $ 335 $ 465
Deferred revenues................................................... -- 127
Accrued expenses and other liabilities.............................. 270 1,002
--------- ---------
605 1,594
--------- ---------
Accrued severance pay.................................................. 486 665
--------- ---------
Commitments and contingent liabilities
SHAREHOLDERS' EQUITY:
Preferred shares of NIS 0.01 par value:
Authorized: 12,950,000 as of December 31, 1998 and 18,550,000 as
of December 31, 1999;
Issued and outstanding: 8,903,636 as of December 31, 1998 and
13,336,155 as of December 31, 1999
Issued and outstanding, pro forma: no shares as of December 31,
1999; aggregate liquidation preference of $32,264 as of December 31,
1999.......................................................... 3 33 --
Ordinary shares of NIS 0.01 par value:
Authorized: 43,050,000 as of December 31, 1998 and 39,450,000 as
of December 31, 1999;
Issued and outstanding: 4,263,455 as of December 31, 1998 and
4,345,775 as of December 31, 1999
Issued and outstanding pro forma: 17,681,930 as of December 31,
1999............................................................ 2 11 $ 44
Additional paid-in capital............................................. 10,064 34,781 34,781
Deferred stock compensation............................................ -- (2,824) (2,824)
Accumulated deficit.................................................... (5,096) (14,174) (14,174)
--------- --------- ---------------
Total shareholders' equity............................................. 4,973 17,827 $ 17,827
--------- --------- ===============
$6,064 $ 20,086
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED
FINANCIAL STATEMENTS.
F-3
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 8, 1997
(INCEPTION) YEAR ENDED
UNTIL DECEMBER 31,
DECEMBER 31, ---------------------------
1997 1998 1999
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
License............................................... $ -- $ -- $ 898
Service............................................... -- -- 296
------------- ------------- -------------
Total revenues...................................... -- -- 1,194
------------- ------------- -------------
Cost of revenues:
License............................................... -- -- 48
Service............................................... -- -- 192
------------- ------------- -------------
Total cost of revenues.............................. -- -- 240
------------- ------------- -------------
Gross profit............................................. -- -- 954
------------- ------------- -------------
Operating expenses:
Research and development.............................. 390 1,511 2,243
Sales and marketing................................... 127 1,995 6,472
General and administrative............................ 152 1,033 1,204
Amortization of deferred stock compensation........... -- -- 381
------------- ------------- -------------
Total operating expenses............................ 669 4,539 10,300
------------- ------------- -------------
Operating loss........................................... (669) (4,539) (9,346)
Interest and other income................................ 8 111 303
Interest and other expenses.............................. (1) (6) (35)
------------- ------------- -------------
Net loss................................................. $ (662) $ (4,434) $ (9,078)
============= ============= =============
Basic and diluted net loss per share..................... $ (0.30) $ (1.17) $ (2.34)
============= ============= =============
Weighted average number of shares used
in computing basic and diluted net loss per share..... 2,192,400 3,804,874 3,886,495
============= ============= =============
Pro forma basic and diluted net loss
per share (unaudited)................................. $ (0.67)
=============
Pro forma weighted average number of
shares used in computing basic and diluted
net loss per share (unaudited)........................ 13,566,732
=============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-4
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
ORDINARY SHARES PREFERRED SHARES
---------------------------- ----------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Balance as of June 8, 1997 (inception)........ -- $ -- $--
Issuance of ordinary shares, net .......... 4,200,000* 1 -- --
Issuance of Preferred A shares, net ....... -- 1,540,000 --**
Net loss .................................. -- -- -- --
----------- ----------- ----------- -----------
Balance as of December 31, 1997 ............. 4,200,000 1 1,540,000 --**
Stock split by rights offering ............ -- 1 -- --**
Issuance of ordinary shares, net .......... 63,455 --** -- --
Issuance of Preferred A shares, net ....... -- -- 2,077,250 1
Issuance of Preferred B shares, net ....... -- -- 5,286,386 2
Net loss .................................. -- -- -- --
----------- ----------- ----------- -----------
Balance as of December 31, 1998 ............. 4,263,455 2 8,903,636 3
Issuance of Preferred B shares, net ....... -- -- 428,624 --**
Issuance of Preferred C shares, net ....... -- -- 4,003,895 2
Stock split by rights offering ............ -- 9 -- 28
Exercise of warrants ...................... 82,320 --** -- --
Deferred stock compensation ............... -- -- -- --
Amortization of deferred stock compensation -- -- -- --
Net loss .................................. -- -- -- --
----------- ----------- ----------- -----------
Balance as of December 31, 1999 ............. 4,345,775 $ 11 13,336,155 $ 33
=========== =========== =========== ===========
<CAPTION>
ADDITIONAL
PAID-IN DEFERRED TOTAL
STOCK STOCK ACCUMULATED SHAREHOLDERS'
CAPITAL COMPENSATION DEFICIT EQUITY
----------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Balance as of June 8, 1997 (inception)........ $ -- $ -- $ -- $ --
Issuance of ordinary shares, net .......... -- -- -- 1
Issuance of Preferred A shares, net ....... 999 -- -- 999
Net loss .................................. -- (662) (662)
----------- ----------- ----------- ----------
Balance as of December 31, 1997 ............. 999 -- (662) 338
Stock split by rights offering ............ (1) -- -- --
Issuance of ordinary shares, net .......... 12 -- -- 12
Issuance of Preferred A shares, net ....... 1,824 -- -- 1,825
Issuance of Preferred B shares, net ....... 7,230 -- -- 7,232
Net loss .................................. -- -- (4,434) (4,434)
----------- ----------- ----------- ----------
Balance as of December 31, 1998 ............. 10,064 -- (5,096) 4,973
Issuance of Preferred B shares, net ....... 574 -- -- 574
Issuance of Preferred C shares, net ....... 20,925 -- -- 20,927
Stock split by rights offering ............ (37)*** -- -- --
Exercise of warrants ...................... 50 -- -- 50
Deferred stock compensation ............... 3,205 (3,205) -- --
Amortization of deferred stock compensation -- 381 -- 381
Net loss .................................. -- -- (9,078) (9,078)
----------- ----------- ----------- ----------
Balance as of December 31, 1999 ............. $ 34,781 $ (2,824) $ (14,174) $ 17,827
=========== =========== =========== ==========
</TABLE>
- -------------------
* Includes 420,000 shares issued to a trustee in favor of options to
employees which have not yet been exercised.
** Represents an amount lower than $1.
*** Receivables on account of shares in respect of rights offering.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-5
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM
JUNE 8, 1997
(INCEPTION) YEAR ENDED
UNTIL DECEMBER 31,
DECEMBER 31, ----------------------------
1997 1998 1999
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss...................................................... $ (662) $ (4,434) $ (9,078)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation............................................... 11 66 178
Increase in accrued interest on short-term bank deposits... -- -- (4)
Amortization of deferred stock compensation................ -- -- 381
Increase in accrued severance pay, net..................... 6 402 77
Increase in trade receivables.............................. (4) (25) (529)
Increase in other accounts receivable...................... (47) (104) (245)
Increase in trade payables................................. 70 265 130
Increase in accrued expenses and other liabilities......... 104 165 732
Increase in deferred revenues.............................. -- -- 127
------------- ------------- -------------
Net cash used in operating activities......................... (522) (3,665) (8,231)
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment......................... (112) (325) (774)
Investment in short-term bank deposits..................... -- -- (217)
Purchase of marketable securities.......................... -- -- (465)
------------- ------------- -------------
Net cash used in investing activities......................... (112) (325) (1,456)
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of shares, net...................... 1,000 9,069 21,501
Proceeds from exercise of warrants......................... -- -- 50
------------- ------------- -------------
Net cash provided by financing activities..................... 1,000 9,069 21,551
------------- ------------- -------------
Increase in cash and cash equivalents......................... 366 5,079 11,864
Cash and cash equivalents at the beginning of the period...... -- 366 5,445
------------- ------------- -------------
Cash and cash equivalents at the end of the period............ $ 366 $ 5,445 $ 17,309
============= ============= =============
Supplemental disclosure of cash flows information:
Cash paid during the period for:
Interest ................................................ $ -- $ 6 $ --
============= ============= =============
Non-cash transaction:
Receivables on accounts of shares in respect
of rights offering ...................................... $ -- $ -- $ 37
============= ============= =============
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONSOLIDATED FINANCIAL
STATEMENTS.
F-6
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. GENERAL
XACCT Technologies (1997) Ltd. ("the Company" or "XACCT") was incorporated
in Israel and commenced operations in June 1997.
The Company and its U.S. wholly-owned subsidiary, XACCT Technologies Inc.,
a Delaware corporation, develop, manufacture and market intelligent
business infrastructure software for telecommunications carriers, Internet
service providers, enterprise network operators and cable network
operators. The Company generates revenues principally from licensing its
software products and, to a lesser extent, from services such as training,
consulting, support and maintenance.
The Company's sales are made principally in North America and Europe. As
for major customers, see Note 9.
2. SIGNIFICANT ACCOUNTING POLICIES
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 amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
FINANCIAL STATEMENTS IN U.S. DOLLARS
A majority of the revenues of the Company and its subsidiary is generated
in United States dollars ("dollars"). In addition, a substantial portion of
the Company and its subsidiary's costs are incurred in dollars. Since the
dollar is the primary currency in the economic environment in which the
Company operates, the dollar is its functional and reporting currency.
Accordingly, monetary accounts maintained in currencies other than the
dollar are remeasured into dollars in accordance with Statement No. 52 of
the Financial Accounting Standard Board ("FASB"). All transaction gains and
losses from the remeasurement of monetary balance sheet items are reflected
in the statement of operations as financial income or expenses, as
appropriate.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiary. Significant inter-company transactions and balances
were eliminated in the consolidation.
CASH EQUIVALENTS
Cash equivalents are short-term, highly liquid investments that are readily
convertible to cash with original maturities of three months or less.
SHORT-TERM DEPOSITS
Bank deposits with maturities of more than three months, but less than one
year, are included in short-term deposits.
F-7
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
MARKETABLE SECURITIES
In accordance with Statement of Financial Accounting Standards 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
115"), the Company has classified its marketable debt into the
available-for-sale category. (In applying SFAS 115 the Company is
required to classify individual debt and equity securities into one of
three categories: trading, held-to-maturity or available-for-sale).
Securities classified as available for sale are reported at fair value.
Unrecognized gains or losses on available-for-sale securities are included
in equity until their disposition. Realized gains and losses and declines
in value judged to be other than temporary on available-for-sale securities
are included in interest income. The cost of securities sold is based on
the specific identification method.
Unrealized holding losses on available-for-sale securities at December 31,
1999 were immaterial. There were no sales of securities during 1999.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is calculated by
the straight-line method over the estimated useful lives of the assets at
the following annual rates:
%
---------------------------
Computers and peripheral equipment....... 33
Office furniture and equipment........... 7-15
Leasehold improvements................... Over the term of the lease
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to statements of operations as
incurred.
Statement of Financial Accounting Standards 86, "Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed" ("SFAS 86"),
requires capitalization of certain software development costs subsequent to
the establishment of technological feasibility. Based on the Company's
product development process, technological feasibility is established upon
completion of a working model. The Company does not incur any costs between
the completion of the working model and the point at which the product is
ready for general release. Therefore, through December 31, 1999, the
Company has charged all software development costs to research and
development expenses in the period incurred.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". This statement prescribes the use of the
liability method, whereby deferred tax asset and liability account balances
are determined based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax
rates and laws that will be in effect when the differences are expected to
reverse. The Company provides a valuation allowance, if necessary, to
reduce deferred tax assets to their estimated realizable value.
REVENUE RECOGNITION
The Company generates revenues from licensing the rights to use its
software products directly to end-users and indirectly through sub-license
fees from resellers. The Company also generates
F-8
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
revenues from sales of professional services, including consulting,
support, training and maintenance.
Revenues from software license agreements are recognized, in accordance
with Statement Of Position (SOP) 97-2 "Software Revenue Recognition" (as
amended) when a software license agreement has been executed or a
definitive purchase order has been received and the product has
been delivered to the end customers, no significant obligations with regard
to implementation remain, the fee is fixed and determinable and
collectibility is probable.
Service revenues are comprised of revenues from support arrangements,
consulting fees and training. XACCT's policy is to recognize license
revenues when these associated services are not essential to the
functionality of the product. To date, these services have not been
essential to the functionality of the product. Support arrangements provide
technical support and the right to unspecified upgrades on an
if-and-when-available basis. Revenues from support arrangements are
deferred and recognized, on a straight-line basis, as services revenues,
over the life of the related agreement, which is usually one year.
Consulting and training revenues are deferred and recognized when provided
to the customer. Customer advances and billed amounts due from customers,
in excess of recognized revenues, are recorded as deferred revenues.
In December 1998, the AICPA issued Statement of Position 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, With Respect to
Certain Transactions". SOP 98-9 amends SOP 98-4 to extend the deferral of
the application of certain passages of SOP 97-2 provided by SOP 98-4
through fiscal years beginning on or before March 15, 1999. All other
provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999.
ACCOUNTING FOR STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25 ("APB-25"), "Accounting for Stock Issued to Employees" in accounting for
its employee stock option plan. Under APB-25, when the exercise price of
the Company's share options equals or is above the market price of the
underlying shares on the date of grant, no compensation expense is
recognized.
The Company applies Financial Accounting Standards Board Statement No. 123
"Accounting for Stock-Based Compensation" ("SFAS 123") with respect to
options issued to non-employees. SFAS 123 requires use of an option
valuation model to measure the fair value of the options at the grant date.
The pro forma disclosures required by SFAS 123, are provided in Note 7.
SEVERANCE PAY
The Company's liability for severance pay is calculated pursuant to Israeli
severance pay law based on the most recent salary of the employees
multiplied by the number of years of employment, as of the balance sheet
date. Employees are entitled to one month's salary for each year of
employment or a portion thereof. The Company's liability for all of its
employees, is fully provided by monthly deposits with insurance policies
and by an accrual.
The deposited funds include profits accumulated up to the balance sheet
date. The deposited funds may be withdrawn only upon the fulfillment of the
obligation pursuant to Israeli severance pay law or labor agreements. The
value of the deposited funds is based on the cash surrendered value of
these policies, and includes immaterial profits.
F-9
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments:
The carrying amounts of cash and cash equivalents, accounts receivable,
trade receivables, short-term bank deposits and trade payables approximate
their fair value due to the short-term maturity of such instruments.
Marketable securities are based on the quoted market price.
BASIC AND DILUTED NET LOSS PER SHARE
Basic net loss per share is computed based on the weighted average number
of ordinary shares outstanding during each year. Diluted net loss per share
is computed based on the weighted average number of ordinary shares
outstanding during each year, plus dilutive potential ordinary shares
considered outstanding during the year, in accordance with FASB Statement
No. 128, "Earnings Per Share".
All convertible preferred shares, outstanding stock options, and warrants
have been excluded from the calculation of the diluted net loss per
Ordinary share because all such securities are anti-dilutive for all
periods presented. The total numbers of shares related to the outstanding
convertible preferred shares, options and warrants excluded from the
calculations of diluted net loss per share were, 1,603,700, 11,678,660 and
18,537,015 for the period from June 8, 1997 (inception) through December
31, 1997 and for the years ended December 31, 1998 and 1999, respectively.
Basic and diluted pro forma net loss per share, as presented in the
statements of operations, has been calculated as described above and also
gives effect to the automatic conversion of the convertible preferred
shares into ordinary shares that will occur upon the closing of the
offering contemplated by this prospectus (using the as-if converted
method).
The following table presents the calculation of pro forma basic and diluted
net loss per share (U.S. dollars in thousands, except share and per share
data):
YEAR ENDED
DECEMBER 31,
1999
-------------
Net loss.............................................. $ (9,078)
=============
Pro forma:
Shares used in computing basic and diluted net loss
per share........................................ 3,886,495
Effect of assumed conversion of convertible
preferred shares................................. 9,680,237
-------------
Shares used in computing pro forma basic and
diluted net loss per share (unaudited)........... 13,566,732
=============
Pro forma basic and diluted net loss per share
(unaudited)...................................... $ (0.67)
=============
PRO FORMA SHAREHOLDERS' EQUITY
If the offering contemplated by this prospectus is consummated, all of the
convertible preferred shares outstanding will automatically be converted
into ordinary shares. Pro forma shareholders' equity at December 31, 1999,
as adjusted for the assumed conversion of those shares outstanding at
December 31, 1999, is disclosed on the balance sheet.
F-10
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash, cash
equivalents, short-term bank deposits and trade receivables. Cash and cash
equivalents, and short-term bank deposits, are deposited with major banks
in Israel and in the United States. Such deposits in the United States may
be in excess of insured limits and are not insured in other jurisdictions.
Management believes that the financial institutions holding the Company's
investments are financially sound, and, accordingly, minimal credit risk
exists with respect to these investments. The Company's trade receivables
are mainly derived from sales to customers in the United States and Europe.
The Company has adopted credit policies and standards intended to
accommodate industry growth and inherent risk. The Company performs ongoing
credit evaluations of its customers' financial condition and generally does
not require collateral.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
133, "Accounting for Derivative Instruments and Hedging Activities"
("Statement 133"). This Statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value.
The Statement also requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria
are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement and requires that a company formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting.
Statement 133 is effective for fiscal years beginning after June 15, 2000
and cannot be applied retroactively. The Company does not expect the impact
of this new statement on the Company's consolidated balance sheets or
results of operations to be material.
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
1998 1999
----------------- ---------------
<S> <C> <C>
Cost:
Computers and peripheral equipment................. $339 $ 747
Office furniture and equipment..................... 93 453
Leasehold improvements............................. 5 11
----------------- ---------------
437 1,211
Accumulated depreciation.............................. 77 255
----------------- ---------------
Depreciated cost...................................... $360 $ 956
================= ===============
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Employees and payroll accruals........................ $202 $ 718
Accrued expenses...................................... 66 275
Other liabilities..................................... 2 9
----------------- ---------------
$270 $1,002
================= ===============
</TABLE>
5. ACCRUED SEVERANCE PAY, NET
The Company's liability for severance pay pursuant to Israeli law is
calculated upon the employees' most recent monthly salary multiplied by the
period of employment. Part of the liability is funded
F-11
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
through insurance policies which are designated only for severance
payments. The value of these policies is recorded as an asset in the
Company's balance sheets.
Severance expenses for the period from June 8, 1997 (inception) until
December 31, 1997 and for the years ended December 31, 1998 and 1999, were
$26, $460 and $317, respectively.
6. COMMITMENTS AND CONTINGENT LIABILITIES
LEASE COMMITMENTS
The facilities of the Company and its U.S. subsidiary are rented under
operating leases for periods ending in 2004.
Future minimum lease commitments under non-cancelable operating leases for
the years ending December 31, are as follows:
2000......... $ 687
2001......... $ 759
2002......... $ 772
2003......... $ 498
2004......... $ 415
GUARANTEES
The Company has provided guarantees, in connection with rental agreements,
totaling approximately $30.
7. SHARE CAPITAL
GENERAL
On January 29, 2000, the Company effected a pro-rata rights offering,
pursuant to which each existing shareholder was granted six additional
shares of the same class, with a nominal value of NIS 0.01 par value each,
subject to the payment or liability for the payment of the nominal value.
Each option and warrant holder is entitled to adjustments to his respective
options or warrants.
All share and per share data included in these consolidated financial
statements have been retroactively adjusted to reflect recapitalizations of
the company, the abovementioned rights offering, as well as to reflect the
1:1 rights offering and 100:1 stock split effected on January 27, 1998 and
on February 9, 1998, respectively.
F-12
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
In October 1999, the Company reclassified 5,600,000 ordinary shares into
Preferred C shares.
COMPOSITION OF SHARE CAPITAL
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1998 1999
ORIGINAL ------------------------------ --------------------------------
ISSUANCE ISSUED AND ISSUED AND
PRICE AUTHORIZED OUTSTANDING AUTHORIZED OUTSTANDING
------------------- -------------- -------------- ---------------- ---------------
NUMBER OF SHARES
---------------------------------------------------------------
Shares of NIS 0.01 par value each:
<S> <C> <C> <C> <C>
Ordinary shares ......... 41,300,000 4,263,455* 37,630,000 4,345,775*
Non-voting Ordinary
shares................. 1,750,000 -- 1,820,000 --
Preferred "A" shares..... $0.71 - $0.93 4,200,000 3,617,250 4,200,000 3,617,250
Preferred "B-1" shares... $1.40 7,000,000 3,971,240 7,000,000 4,399,864
Preferred "B-2" shares... $1.40 1,750,000 1,315,146 1,750,000 1,315,146
Preferred "C-1" shares... $5.32 -- -- 5,530,000 3,933,895
Preferred "C-2" shares... $5.32 -- -- 70,000 70,000
-------------- -------------- ---------------- ---------------
56,000,000 13,167,091 58,000,000 17,681,930
============== ============== ================ ===============
</TABLE>
-------------------
* Includes 420,000 shares issued to a trustee in favor of options to
employees which have not yet been exercised.
ORDINARY SHARES
The voting ordinary shares confer upon the holders the right to receive
notice to participate and vote in the general meetings of the Company, the
right to receive dividends, if and when declared, and the right to appoint
directors.
The non-voting ordinary shares confer all of the rights of the voting
ordinary shares, except for the rights to appoint directors and to receive
notice to participate and vote in the general meetings of the Company. The
non-voting ordinary shares shall be convertible at the option of the holder
into an equal number of voting ordinary shares.
PREFERRED SHARES
The Series A, B-1 and C-1 preferred shares confer all of the rights of the
voting ordinary shares. The Series B-2 and C-2 non-voting preferred shares
confer all of the rights of the non-voting ordinary shares. All the
preferred shares confer additional rights as detailed below.
CONVERSION
Each share of Series A, B-1 and C-1 preferred shares is convertible
into an Ordinary share on a one-to-one basis.
Each share of Series B-2 and C-2 preferred shares is convertible into
Series B-1 and C-1 preferred shares, respectively, on a one-to-one
basis, or into non-voting ordinary shares, pursuant to the conversion
rate.
All preferred shares shall be automatically converted into ordinary
shares immediately prior to the consummation of an initial public
offering ("IPO").
The pro forma shareholders' equity gives effect to the conversion of
all outstanding preferred shares as if such conversion occurred on
December 31, 1999.
F-13
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
LIQUIDATION PREFERENCE
The preferred shares confer a preference over ordinary shares, in the
event of any liquidation, dissolution or winding up of the Company,
either voluntarily or involuntarily. The liquidation preference is
equal to the original purchase price in U.S. dollars.
OTHER PREFERENCE
In addition, all preferred shares confer preemptive rights and certain
rights of first refusal, co-sale rights and anti-dilution rights.
STOCK WARRANTS
As part of the issuance of shares in October 1999, the investors received
warrants to purchase 1,201,158 Series C-1 preferred shares, with an
exercise price of $7.82, related to 50% of the warrants, and $9.39, related
to the other 50%. The first 50% of the warrants are exercisable through the
earlier of the termination of a 24-month period, an IPO or liquidation of
the Company.
The remaining 50% of the warrants are exercisable through the earlier of
the termination of a 30-months period, consummation of an IPO, or
liquidation of the Company.
As part of the issuance of shares on October 29, 1998, the investors
received warrants to purchase 857,213 Series B preferred shares, with an
exercise price of $2.80 per share. The first 50% of the warrants are
exercisable through the earlier of the termination of an 18-month period,
an IPO or liquidation of the Company. The remaining 50% of the warrants are
exercisable through the earlier of the termination of a 24-month period, an
IPO, or liquidation of the Company.
In June 1997, in connection with an issuance of shares, the Company granted
its consultants warrants to purchase 63,700 ordinary shares at $0.71 per
share. As of December 31, 1999, 57,820 warrants, have already been
exercised. The remaining 5,880 warrants will be forfeited in June 2000.
STOCK OPTIONS
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Shares Issued to Employees" ("APB-25"), and related
interpretations, in accounting for its employee share options because, as
discussed below, the alternative fair value accounting provided for under
FASB Statement No. 123, "Accounting for Stock-Based Compensation", requires
the use of option valuation models that were not developed for use in
valuing employee share options.
As at December 31, 1999, the Company has authorized through several
Incentive Stock Option Plans, the grant of options to officers, management,
other key employees and others of up to 3,302,236 of the Company's ordinary
shares. The options granted generally become fully exercisable after four
consecutive years of employment and expire eight years from the approval
date of the option plan under the terms they were granted.
F-14
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
A summary of the Company's employees share option activity, and
related information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1997 1998 1999
----------------------- ------------------------ -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER OF EXERCISE NUMBER OF EXERCISE NUMBER OF EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
------------ ---------- ------------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding--at the beginning
of the period......... -- $ -- -- $ -- 1,830,941 $ 0.16
Granted.................. -- -- 1,840,566 0.16 1,461,670 1.28
Forfeited................ -- -- 9,625 0.07 154,672 0.18
Exercised................ -- -- -- -- 24,500 0.35
------------ ---------- ------------ ----------- ------------ ----------
Outstanding--at the
end of the period..... -- -- 1,830,941 $ 0.16 3,113,439 $ 0.68
------------ ---------- ------------ ----------- ------------ ----------
Exercisable options...... -- $ -- -- $ -- 668,120 $ 0.14
============ ========== ============ =========== ============ ==========
</TABLE>
The options outstanding as of December 31, 1999 have been classified
by exercise price, as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- -----------------------------
OUTSTANDING WEIGHTED
AS OF WEIGHTED AVERAGE WEIGHTED EXERCISABLE AVERAGE
DECEMBER 31, REMAINING AVERAGE AS OF DECEMBER 31, EXERCISE
EXERCISE PRICE 1999 CONTRACTUAL LIFE EXERCISE PRICE 1999 PRICE
---------------- ------------ ----------------- -------------- ------------------ -----------
(IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.07 - $0.19 1,354,969 6.44 $0.11 582,544 $0.11
0.35 701,750 7.18 0.35 85,576 0.35
1.57 932,120 7.81 1.57 -- --
2.13 124,600 7.95 2.13 -- --
---------------- ------------ ---------------- ------------ ---------------- -----------
$0.68 3,113,439 7.07 $0.68 668,120 $0.14
================ ============ ================ ============ ================ ===========
</TABLE>
Deferred compensation expenses which represent the excess of the market
value over the exercise price totaled $3,205 and are amortized to the
statements of operations over the vesting period which usually is four
years.
In 1998, the Company granted service providers options to purchase 23,170
ordinary shares at an exercise price of $ 0.19. As of December 31, 1999,
these options are fully vested. The Company accounts for these options in
accordance with the provisions of SFAS 123. No compensation expense has
been recorded in the consolidated financial statements regarding these
options due to the insignificant amount of deferred compensation.
In 1998, the Company granted a director 63,455 ordinary shares at an
exercise price of $0.19. The shares are vested over a period of four years.
Under SFAS 123, pro forma information regarding net loss and loss per share
is required and has been determined as if the Company had accounted for its
employee stock option under the fair value method of that Statement. The
fair value for these options was estimated at the date of grant using a
minimum value option pricing model with the following assumptions for 1998
and 1999: risk-free interest rates of 6.00% and 5.75%, respectively,
dividend yields of 0% and an expected life of the option range between 1.5
to 4.5 years.
The minimum value options pricing model was developed for use in estimating
the fair value of traded options that have no vesting restrictions and are
fully transferable. In addition, option
F-15
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
valuation models require the input of highly subjective assumptions.
Because the Company's employee stock options have characteristics
significantly different from those traded options, and because changes in
the subjective input assumptions can materially affect the fair value
estimate, in management's opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock
options.
Weighted-average fair values of options whose exercise price (1) equals, or
(2) is less than the market price of the stock on date of grant are as
follows:
<TABLE>
<CAPTION>
WEIGHTED-AVERAGE FAIR VALUE OPTIONS
GRANTED AT AN EXERCISE PRICE:
----------------------------------------------
DECEMBER 31,
----------------------------------------------
1997 1998 1999
-------------- -------------- ---------------
<S> <C> <C> <C>
Less than fair value at date of grant............ $ -- $ -- $ 18.71
============== ============== ===============
Equals to fair value at date of grant............ $ $ 0.18 $ 0.40
============== ============== ===============
</TABLE>
Pro forma information under SFAS 123:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
1997 1998 1999
-------------- -------------- ---------------
<S> <C> <C> <C>
Net loss as reported............................. $ 662 $ 4,434 $ 9,078
Pro forma net loss............................... $ 662 $ 4,444 $ 9,131
Pro forma basic and diluted net loss per share... $ 0.3 $ 1.17 $ 2.35
</TABLE>
DIVIDENDS:
In the event that cash dividends are declared in the future, such dividends
will be paid in NIS. The Company does not intend to pay cash dividends in
the foreseeable future.
8. TAXES ON INCOME
TAX BENEFITS UNDER THE LAW FOR THE ENCOURAGEMENT OF CAPITAL INVESTMENTS,
1959 ("THE LAW")
The Company has been granted the status of "Approved Enterprise" under the
law in 1998.
According to the provisions of the law, the Company has elected the
"alternative benefits" - waiver of grants in return for a tax exemption
and, accordingly, the Company's income is tax-exempt for a period of two
years commencing with the year it first earns taxable income relating to
each expansion program, and subject to corporate taxes at the reduced rate
of 10% to 20% (depending on the rate of foreign investments in the
Company), for an additional period of eight years.
As the Company currently has no taxable income, these benefits have not yet
commenced.
The tax-exempt profits that will be earned by the Company's "Approved
Enterprise" can be distributed to shareholders, without imposing a tax
liability to the Company only upon the complete liquidation of the Company.
If these retained tax-exempt profits are distributed in a manner other than
in the complete liquidation of the Company, they would be taxed at the
corporate tax rate applicable to such profits as if the Company had not
elected the alternative system of benefits. The Company's board of
directors has determined that such tax exempt income will not be
distributed as dividends.
F-16
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The period of tax benefits, detailed above, is limited to the earlier of 12
years from the commencement of production, or 14 years from the approval
date. Accordingly, the period relating to the Company's approved enterprise
will expire in 2012.
Should the Company derive income in Israel from sources other than the
approved enterprises during the relevant period of benefits, such income
will be taxable at regular corporate tax rate of 36%.
MEASUREMENT OF RESULTS FOR TAX PURPOSES
Results for tax purposes are measured and reflected in real terms in
accordance with the changes in the Israeli CPI. As explained in Note 2, the
consolidated financial statements are presented in U.S. dollars. The
difference between the change in the Israeli CPI and in the NIS/U.S. dollar
exchange rate causes a difference between taxable income or loss and the
income or loss before taxes reflected in the consolidated financial
statements. In accordance with paragraph 9(f) of SFAS No. 109, the Company
has not provided deferred income taxes on this difference between the
reporting currency and the tax bases of assets and liabilities.
TAX BENEFITS UNDER THE LAW FOR THE ENCOURAGEMENT OF INDUSTRY (TAXATION),
1969
The Company is an "industrial company" under the above law and as such is
entitled to certain tax benefits, including accelerated rates of
depreciation on certain assets and deduction of expenses incurred in
respect of public issuance of securities and deduction of 12.5% per annum
of the cost of certain intangible property rights. The Company has not
utilized these tax benefits.
NET OPERATING LOSSES CARRYFORWARDS
As of December 31, 1999, the Company had approximately $4,700 of Israeli
net operating loss carryforwards. The Israeli loss carryforwards have no
expiration date. The Company expects that during the period these tax
losses are utilized, its income would be substantially tax exempt.
Accordingly, there will be no tax benefit available from such losses and no
deferred income taxes have been included in these consolidated financial
statements.
As of December 31, 1999, the U.S. subsidiary had U.S. federal and state net
operating loss carryforwards for income tax purposes in the amount of
approximately $6,900, which can be carried forward and offset against
taxable income in various amounts between the years 2006 and 2019.
Utilization of U.S. net operating losses may be subject to substantial
annual limitation due to the "change in ownership" provisions of the
Internal Revenue Code of 1986 and similar state provisions. The annual
limitation may result in the expiration of net operating losses before
utilization.
F-17
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
DEFERRED TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax liabilities and assets
are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Deferred tax assets:
U.S. operating loss carryforward............. $ 553 $ 2,428
Not currently deductible reserve............. 64 91
----------- -----------
Total deferred tax asset..................... 617 2,519
Valuation allowance............................. (617) (2,519)
----------- -----------
Net deferred tax asset.......................... $ -- $ --
=========== ===========
</TABLE>
The Company's U.S subsidiary has provided valuation allowances in respect
of deferred tax assets resulting from tax loss carryforwards. Management
currently believes that since the Company has a history of losses it is
more likely than not that the deferred tax regarding the loss carryforwards
and other temporary differences will not be realized in the foreseeable
future.
PRE-TAX LOSS
YEAR ENDED DECEMBER 31,
-------------------------------------------
1997 1998 1999
------------- ------------- -------------
Domestic............ $ 662 $ 2,666 $ 3,890
Foreign............. -- 1,768 5,188
------------- ------------- -------------
$ 662 $ 4,434 $ 9,078
============= ============= =============
9. GEOGRAPHIC OPERATING INFORMATION
SUMMARY INFORMATION ABOUT GEOGRAPHICAL AREAS
The Company manages its business on a basis of one reportable segment (see
Note 1 for a brief description of the Company's business) and follows the
requirements of SFAS 131, "Disclosures About Segments of an Enterprise and
Related Information".
The total revenues are attributed to geographic information, based on the
customers' location.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenues from sales to unaffiliated
customers:
Israel............................. $ -- $ -- $ 17
United States...................... -- -- 595
Canada............................. -- -- 156
Portugal........................... -- -- 230
Europe (except Portugal)........... -- -- 196
------------ ------------ ------------
$ -- $ -- $ 1,194
============ ============ ============
</TABLE>
F-18
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(U.S. DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Long-lived assets:
Israel............................. $ 101 $ 278 $ 413
United States...................... -- 82 543
------------ ------------ ------------
$ 101 $ 360 $ 956
============ ============ ============
</TABLE>
Major customer data as a percentage of total revenues:
YEAR ENDED
DECEMBER 31,
1999
--------------
Customer A.............................. 19%
Customer B.............................. 12%
Customer C.............................. 10%
Customer D.............................. 10%
10. SUBSEQUENT EVENTS
PROPOSED PUBLIC OFFERING
The Board of Directors has authorized the Company to file a registration
statement with the United States Securities and Exchange Commission for an
initial public offering of its ordinary shares. In connection with the
initial public offering, all of the Company's convertible preferred shares
outstanding will be converted into ordinary shares.
SERIES D PREFERRED SHARES FINANCING
In March 2000, the Company completed a private placement of 1,227,235
shares of Series D preferred shares at $12.63 per share resulting in net
cash proceeds of approximately $14,300. In the event of voluntary or
involuntary liquidation of the Company the holders of Series D preferred
shares are entitled to a liquidation preference of $12.63 per share.
Holders of Series D preferred shares are entitled to one vote for each
ordinary share into which the preferred shares and convertible. Each
preferred share will be automatically converted into one voting ordinary
share upon the closing of a firm commitment public offering of ordinary
shares at a price per ordinary share representing a company valuation
immediately prior to such offering of at least $360,000 or with total
gross offering proceeds to the Company of at least $45,000.
On March 22, 2000, a shareholder exercised warrants to purchase 375,046
Series B-1 preferred shares at an aggregate purchase price of $1,050.
F-19
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all expenses, other than the underwriting
discounts and commissions, payable by the Registrant in connection with the sale
of the securities being registered. All amounts shown are estimates except for
the SEC registration fee, the NASD filing fee and the Nasdaq National Market
fees.
SEC registration fee..................................... $ *
NASD filing fee.......................................... *
NASDAQ National Market Fees.............................. *
Blue Sky qualification fees and expenses................. *
Israeli Fee for new shares............................... *
Travel/Road Show expenses................................ *
Printing and engraving expenses.......................... *
Transfer Agent Fee....................................... *
Accountant's fees and expenses........................... *
Legal fees and expenses.................................. *
Miscellaneous............................................ *
-------------
Total................................................. $ *
=============
------------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Companies Law provides that an Israeli company cannot exonerate an
office holder from liability with respect to a breach of his or her duty of
loyalty, but may exonerate in advance an office holder from his or her liability
to the company, in whole or in part, with respect to a breach of his or her duty
of care. Our articles of association provide that, subject to any restrictions
imposed by the Companies Law, we may enter into an insurance contract providing
coverage for the liability of any of our office holders with respect to:
o a breach of his or her duty of care to us or to another person;
o a breach of his or her duty of loyalty to us, provided that the
office holder acted in good faith and had reasonable grounds to
assume that his or her act would not prejudice our interests; or
o a financial liability imposed upon him or her in favor of another
person with respect to an act performed by him or her in his or her
capacity as an office holder.
In addition, we may indemnify an office holder against the following
expenses or liabilities imposed upon him or her in his or her capacity as an
office holder:
o a financial liability imposed on him or her in favor of another
person by any judgment, including a settlement or an arbitrator's
award approved by a court; and
o reasonable litigation expenses, including attorneys' fees, incurred
by such office holder or imposed upon him or her by a court, in
relation to proceedings instigated by us against him or her or that
are instigated on our behalf or by another person, or as a result of
a criminal charge from which he or she was acquitted.
The Companies Law provides that a company may not indemnify an office
holder nor enter into an insurance contract which would provide coverage for any
monetary liability incurred as a result of any of the following:
o a breach by the officer holder of his or her duty of loyalty unless
the office holder acted in good faith and had a reasonable basis to
believe that the act would not prejudice the company;
o a breach by the office holder of his or her duty of care if such
breach was committed intentionally or recklessly;
o an act or omission with the intent to unlawfully derive a personal
benefit; or
II-1
<PAGE>
o a fine levied against the office holder as a result of a criminal
offense.
Under the Companies Law, the shareholders of a company may amend its
articles of association to include either of the following provisions:
o a provision authorizing the company to grant in advance an
undertaking to indemnify an office holder, provided that the
undertaking is limited to specified classes of events which the board
of directors deem foreseeable at the time of grant and limited to an
amount determined by the board of directors to be reasonable under
the circumstances, or
o a provision authorizing the company to retroactively indemnify an
office holder.
In addition, pursuant to the Companies Law, indemnification of, and
procurement of insurance coverage for, a company's office holders must be
approved by the audit committee and the board of directors. In the case of
directors, additional approval by the shareholders is required.
Our articles of association allow for us to insure and indemnify office
holders to the fullest extent permitted by Israeli law, provided that the
insurance or indemnification is approved by the audit committee of our board of
directors and, if required by the Companies Law, also by our shareholders.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
The share numbers below reflect (i) the 100 for 1 share split that
occurred on January 27, 1998, (ii) a rights offering in which the holders of
shares outstanding as of February 9, 1998 received one share for each share
outstanding held by them and (iii) a rights offering in which the holders of
shares outstanding as of January 29, 2000 received six shares for each share
outstanding held by them.
(1) From June 8, 1997 through February 29, 2000, we issued options to
purchase an aggregate of 4,401,118 ordinary shares to employees, officers,
directors, consultants and other service providers and we issued and sold an
aggregate of 375,052 unregistered ordinary shares to an officer and director of
the Registrant for aggregate consideration of U.S.$111,254.47, upon exercise of
compensatory options. The sales and grants of the above securities are deemed to
be exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on either Rule 701 promulgated under Section 3(b)
of the Securities Act, or on Section 4(2) of the Securities Act, and were made
without general solicitation or advertising.
(2) On June 8, 1997, we issued and sold an aggregate of 1,890,000
ordinary shares to each of Eran Wagner and Limor Schweitzer for NIS 1,350. The
sales of these securities are deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, and were made
without general solicitation or advertising.
(3) On June 8, 1997, we issued and sold an aggregate of 420,000 ordinary
shares to Amnon Evron & Co. Trust Co. Ltd., as trustee for certain future
optionholders, for NIS 300. The sale of these securities is deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, and was made without general solicitation or advertising.
(4) On June 9, 1997, we issued and sold an aggregate of 560,000 shares of
our Series A preferred shares to Ampal-American Israel Corporation for an
aggregate purchase price of U.S.$400,000 and we issued warrants to purchase
287,000 preferred shares for U.S.$240,000 to the same investor. These preferred
shares are convertible into an equal number of ordinary shares. The sales of
these securities are deemed to be exempt from registration under the Securities
Act in reliance on Section 4(2) of the Securities Act, and were made without
general solicitation or advertising.
(5) On June 9, 1997, we granted fully vested options to purchase an
aggregate of 49,000 ordinary shares to Foresight Business and Consulting Ltd.
for an aggregate purchase price of U.S.$35,000. Also on June 9, 1997, we granted
fully vested options to purchase an aggregate of 14,700 ordinary shares to
Jerusalem Global Ltd. for an aggregate purchase price of U.S.$10,500. These
grants of options to purchase securities are deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, and were made without general solicitation or advertising.
(6) On June 22, 1997, we issued and sold 420,000 Series A preferred
shares to Technorov Holdings (1993) Ltd. for an aggregate purchase price of
U.S.$300,000 and we issued warrants to purchase 215,250 preferred shares
II-2
<PAGE>
for U.S.$180,000 to the same investor. These preferred shares are convertible
into an equal number of ordinary shares. The sales of these securities are
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act, and were made without general solicitation
or advertising.
(7) On June 23, 1997, we issued and sold an aggregate of 420,000 Series A
preferred shares to Israel Seed Limited Partnership and Israel Seed II L.P. for
an aggregate purchase price of U.S.$300,000 and we issued warrants to purchase
215,250 preferred shares for U.S.$240,000 to the same investors. These preferred
shares are convertible into an equal number of ordinary shares. The sales of
these securities are deemed to be exempt from registration under the Securities
Act in reliance on Section 4(2) of the Securities Act, and were made without
general solicitation or advertising.
(8) On December 16, 1997, we issued and sold an aggregate of 140,000
Series A preferred shares to Israel Seed Limited Partnership and Israel Seed II
L.P. for an aggregate purchase price of U.S.$100,000. These preferred shares are
convertible into an equal number of ordinary shares. The sales of these
securities are deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act, and were made without general
solicitation or advertising.
(9) On March 2, 1998, we issued and sold an aggregate of 717,500 Series A
preferred shares to Ampal American Israel Corporation, Technorov Holdings (1993)
Ltd., Israel Seed Limited Partnership and Israel Seed II L.P. upon exercise of
outstanding warrants for an aggregate purchase price of U.S.$600,000. These
preferred shares are convertible into an equal number of ordinary shares. The
sales of these securities are deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, and were made
without general solicitation or advertising.
(10) On March 2, 1998, we issued and sold an aggregate of 1,288,000
Series A preferred shares to Ampal American Israel Corporation, Technorov
Holdings (1993) Ltd., Israel Seed Limited Partnership and Israel Seed II L.P.
for an aggregate exercise price of U.S.$1,196,000. These preferred shares are
convertible into an equal number of ordinary shares. The sales of these
securities are deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act, and were made without general
solicitation or advertising.
(11) On March 2, 1998, we issued warrants to purchase an aggregate of
71,750 Series A preferred shares to Israel Seed Limited Partnership and Israel
Seed II L.P. for an aggregate exercise price of U.S.$66,625. These preferred
shares issuable upon exercise of the warrant are convertible into an equal
number of ordinary shares. The issuances of these warrants to purchase
securities are deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act, and were made without general
solicitation or advertising.
(12) On March 18, 1998, we issued and sold an aggregate of 71,750 Series
A preferred shares to Israel Seed Limited Partnership and Israel Seed II L.P.
upon exercise of outstanding warrants for an aggregate purchase price of
U.S.$66,625. These preferred shares are convertible into an equal number of
ordinary shares. The sales of these securities are deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, and were made without general solicitation or advertising.
(13) On July 23, 1998, we issued and sold an aggregate of 63,455 ordinary
shares to Robert C. Hawk for an aggregate purchase price of U.S.$12,056.45,
pursuant to a restricted stock purchase agreement. The sale of these securities
is deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act, and was made without general solicitation or
advertising.
(14) On September 1, 1998, we granted a fully vested option to purchase
an aggregate of 17,920 shares of our ordinary shares to Gallagher Public
Relations Firm for an aggregate exercise price of U.S.$3,328. This grant of an
option to purchase securities is deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, and was made
without general solicitation or advertising.
(15) On October 29, 1998, we issued and sold an aggregate of (i)
3,971,240 Series B-1 preferred shares, (ii) 1,315,146 Series B-2 non-voting
preferred shares and (iii) warrants to purchase 792,925 Series B-1 preferred
shares to entities affiliated with Ampal American Israel Corporation, entities
affiliated with Israel Seed L.P., entities affiliated with Trident Capital,
entities affiliated with Eucalyptus Ventures L.P., and entities affiliated with
Technorov Holdings (1993) Ltd. for an aggregate purchase price of
U.S.$7,339,958.64. The Series B-1 preferred shares are convertible into an equal
number of voting ordinary shares and the Series B-2 non-voting preferred shares
are convertible into an equal number of non-voting ordinary shares. The sales of
these securities are deemed to be exempt from registration under the Securities
Act in reliance on Section 4(2) of the Securities Act and/or Rule 506
promulgated under the Securities Act, and were made without general solicitation
or advertising. Each purchaser
II-3
<PAGE>
was a sophisticated investor and had access to all relevant information
necessary to evaluate the investment and represented to us that the shares were
being acquired for investment purposes.
(16) On November 1, 1998, we granted a fully vested option to purchase an
aggregate of 5,250 shares of our ordinary shares to Charles B. Gottlieb for an
aggregate exercise price of U.S.$975. This grant of an option to purchase
securities is deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act, and was made without general
solicitation or advertising.
(17) On January 21, 1999, we issued and sold an aggregate of (i) 428,624
Series B-1 preferred shares and (ii) warrants to purchase 64,288 Series B-1
preferred shares to WSG Capital L.P. for an aggregate purchase price of
U.S.$599,994. These preferred shares are convertible into an equal number of
ordinary shares. The sales of these securities are deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act and/or Rule 506 promulgated under the Securities Act, and were
made without general solicitation or advertising. Each purchaser was a
sophisticated investor and had access to all relevant information necessary to
evaluate the investment and represented to us that the shares were being
acquired for investment purposes.
(18) On May 18, 1999, we granted Robert C. Hawk an option to purchase
24,500 ordinary shares at a U.S.$0.35 per share exercise price, with 6.25% of
the options vesting quarterly beginning on May 18, 1999. This grant of an option
to purchase securities is deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, and was made
without general solicitation or advertising.
(19) On June 1, 1999, we issued and sold an aggregate of 1,470 voting
ordinary shares to Michael Eisenberg upon exercise of outstanding options for an
aggregate purchase price of U.S.$1,050. The sale of these securities is deemed
to be exempt from registration under the Securities Act in reliance on Section
4(2) of the Securities Act, and was made without general solicitation or
advertising.
(20) On June 1, 1999, we issued and sold an aggregate of 43,120 voting
ordinary shares to Forstec Holdings (1999) Ltd. upon exercise of outstanding
options for an aggregate purchase price of U.S.$30,800. The sale of these
securities is deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act, and was made without general
solicitation or advertising.
(21) On June 1, 1999, we issued and sold an aggregate of 13,230 voting
ordinary shares to Jerusalem Global Ltd. upon exercise of outstanding options
for an aggregate purchase price of U.S$9,450. The sale of these securities is
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act, and was made without general solicitation or
advertising.
(22) On August 1, 1999, we issued and sold an aggregate of 24,500
ordinary shares to Robert C. Hawk for an aggregate exercise price of U.S.$8,575
upon exercise of his option. These shares are subject to repurchase until
vested. The sale of these securities is deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, and
was made without general solicitation or advertising.
(23) On October 7, 1999, we issued and sold an aggregate of (i) 3,839,906
Series C-1 preferred shares, (ii) 70,000 Series C-2 non-voting preferred shares
and (iii) warrants to purchase 1,172,962 Series C-1 preferred shares to entities
affiliated with Ampal American Israel Corporation, entities affiliated with
Israel Seed L.P., entities affiliated with Information Associates II, L.P.,
entities affiliated with Eucalyptus Ventures L.P., Technology Crossover Ventures
III L.P., Nissho Iwai American Corporation and Deutsche Bank AG for an aggregate
purchase price of U.S.$20,799,973.13. The Series C-1 preferred shares are
convertible into an equal number of voting ordinary shares and the Series C-2
non-voting preferred shares are convertible into an equal number of non-voting
ordinary shares. The sales of these securities are deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, and were made without general solicitation or advertising.
(24) On December 21, 1999, we issued and sold an aggregate of (i) 93,989
Series C-1 preferred shares, and (ii) warrants to purchase 28,196 Series C-1
preferred shares to WSG Capital II L.P. for an aggregate purchase price of
U.S.$500,004.02. The Series C-1 preferred shares are convertible into an equal
number of voting ordinary shares. The sales of these securities are deemed to be
exempt from registration under the Securities Act in reliance on Section 4(2) of
the Securities Act, and were made without general solicitation or advertising.
(25) On December 27, 1999, the unexercised portion of the warrant issued
on June 9, 1997 to Foresight Business and Consulting Ltd. was transferred to
Benny De-Kalo. Benny De-Kalo received a warrant to purchase 5,880 voting
ordinary shares at an aggregate exercise price of $4,200. The issuance of this
warrant to purchase
II-4
<PAGE>
securities is deemed to be exempt from registration under the Securities Act in
reliance on Section 4(2) of the Securities Act, and was made without general
solicitation or advertising.
(26) On January 31, 2000, we granted Charles B. Gottlieb an option to
purchase 10,500 ordinary shares at an exercise price of U.S.$3.00 per share,
with monthly vesting over a two year period beginning on January 1, 2000, with
no service related vesting. This grant of an option to purchase securities is
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act, and was made without general solicitation or
advertising.
(27) On March 8, 2000, we granted Charles B. Gottlieb an option to
purchase 10,000 ordinary shares at an exercise price of U.S.$3.00 per share,
with 6.25% of the options vesting quarterly beginning on January 1, 2000. This
option grant is subject to service and current service is terminable upon 90
days prior written notice. This grant of an option to purchase securities is
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act, and was made without general solicitation or
advertising.
(28) On March 22, 2000, we issued and sold an aggregate of 375,046
preferred shares to entities affiliated with Information Associates II, L.P. for
an aggregate exercise price of $1,050,128.80 upon exercise of outstanding
warrants. This sale was made in reliance on Section 4(2) of the Securities Act
and was made without general solicitation or advertising.
(29) On March 27, 2000, we issued and sold an aggregate of 1,227,235
Series D preferred shares to Sun Microsystems, Inc., Credit Suisse First Boston
Venture Fund I L.P., individuals and entities affiliated with Chase Securities
Inc. and individuals affiliated with U.S. Bancorp Piper Jaffray, Inc. for an
aggregate purchase price of approximately U.S.$15.5 million. The Series D
preferred shares are convertible into an equal number of voting ordinary shares.
Credit Suisse First Boston Corporation served as placement agent in connection
with this offering. The sales of these securities are deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act and/or Rule 506 promulgated under the Securities Act, and were
made without general solicitation or advertising. Each purchaser was a
sophisticated investor and had access to all relevant information necessary to
evaluate the investment and represented to us that the shares were being
acquired for investment purposes.
Except as disclosed above, there were no underwriters employed in
connection with any transactions set forth in this Item 15.
II-5
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------------------------- -------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Memorandum of Association of XACCT Technologies (1997) Ltd.
3.2 Articles of Association of XACCT Technologies (1997) Ltd., as amended on March 27, 2000
4.1 Specimen of Ordinary Share Certificate*
4.2 Second Amended and Restated Rights Agreement, dated March 27, 2000, by and among the Company, the key
management and holders of preferred shares*
5.1 Opinion of S. Friedman & Co., Advocates and Notaries, as to the validity of the Shares*
9.1 Proxy by Marinera Ltd. in favor of Ampal-American Israel Corporation, dated December 28, 1998
9.2 Proxy by Inveco International Inc. - Profit Sharing Plan in favor of Ampal-American Israel Corporation,
dated December 28, 1998
9.3 Form of Proxy Agreement entered into by certain purchasers of Series D preferred shares in connection
with the Series D financing
10.1 1998 U.S. ISO Stock Option Plan and related agreements
10.2 1998 Section 102 Share Option Plan and related agreements
10.3 2000 Share Option Plan*
10.4 2000 Employee Share Purchase Plan*
10.5 Section 3(i) Share Option Plan*
10.6 Employment Agreement, dated January 1997, by and between the Registrant and Eric Gries
10.7 Offer Letter, dated March 26, 1998, by and between the Registrant and Anil Uberoi
10.8 Offer Letter, dated August 15, 1998, by and between the Registrant and Eran Wagner
10.9 Offer Letter, dated December 28, 1999, by and between the Registrant and Limor Schweitzer
10.10 Offer Letter, dated January 14, 2000, by and between the Registrant and Richard Van Hoesen
10.11 Lease Agreement, dated December 31, 1999, by and between the Registrant and Nichsei Crystal Lemischar
(Ramat-Gan)(1)
10.12 Lease Agreement, dated November 12, 1999, by and between XACCT Technologies, Inc. and Princeton
Investment Group LLC
10.13 Lease Agreement, dated January 28, 2000, by and between XACCT Technologies, Inc. and Princeton
Investment Group LLC
10.14 Form of XIS End-User License Agreement
10.15 Form of XACCTusage 3.4 End-User License Agreement
10.16 Form of Support and Maintenance Agreement
10.17 Form of Support Agreement
10.18 Form of Global Teaming Agreement
10.19 Form of Value Added Partner Agreement
21.1 Subsidiaries of the Registrant
23.1 Consent of Kost Forer & Gabbay, a Member of Ernst and Young International
23.2 Consent of S. Friedman & Co. (included in Exhibit 5.1)*
24.1 Powers of Attorney (See page II-8)
27.1 Financial Data Schedule
99.1 Officer's Certificate regarding fairness and accuracy of translations*
</TABLE>
- --------------------------
(1) Translated in full; the original language version is on file with the
registrant and is available upon request.
* To be filed by amendment.
II-6
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the
consolidated financial statements or notes thereto.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
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 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>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Santa
Clara, the State of California, on March 28, 2000.
XACCT TECHNOLOGIES (1997) LTD.
By: /s/ Eric Gries
-------------------------------------
Eric Gries
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature
appears below constitutes and appoints, jointly and severally, Eric Gries and
Richard Van Hoesen and each of them his or her true and lawful attorney-in-fact
and agent, each with the power of substitution, for him or her and in his or her
name, place and stead, in any and all capacities, to sign any amendment,
including any post-effective amendments, to this registration statement, and any
registration statement related to the offering contemplated by this registration
statement that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act of 1933 and to file the same, with all exhibits thereto and all
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that each of said attorneys-in-fact and agents or any of
them, or his or her or their substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Eric Gries President, Chief Executive Officer and Director March 28, 2000
- ------------------------------------ (Principal Executive Officer)
Eric Gries
/s/ Richard Van Hoesen Vice President and Chief Financial Officer March 28, 2000
------------------------------------ (Principal Financialand Accounting Officer)
Richard Van Hoesen
/s/ Limor Schweitzer Director and Chief Technology Officer March 28, 2000
- ------------------------------------
Limor Schweitzer
/s/ Eran Wagner Director and Executive Vice President, March 28, 2000
- ------------------------------------ Technology
Eran Wagner
/s/ Robert C. Hawk Director March 28, 2000
- ------------------------------------
Robert C. Hawk
/s/ Nitsan Yanovski Director March 28, 2000
- ------------------------------------
Nitsan Yanovski
/s/ Jon Q. Reynolds, Jr. Director March 28, 2000
- ------------------------------------
Jon Q. Reynolds, Jr.
/s/ Todd Springer Director March 28, 2000
- ------------------------------------
Todd Springer
</TABLE>
II-8
<PAGE>
AUTHORIZED REPRESENTATIVE IN
THE UNITED STATES
XACCT Technologies, Inc.
By: /s/ Eric Gries
-------------------------
Name: Eric Gries
Title: President & Chief Executive Officer
Date: March 28, 2000
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------------------------- -------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement*
3.1 Memorandum of Association of XACCT Technologies (1997) Ltd.
3.2 Articles of Association of XACCT Technologies (1997) Ltd., as amended on March 27, 2000
4.1 Specimen of Ordinary Share Certificate*
4.2 Second Amended and Restated Rights Agreement, dated March 27, 2000, by and among the Company, the key
management and holders of preferred shares*
5.1 Opinion of S. Friedman & Co., Advocates and Notaries, as to the validity of the Shares*
9.1 Proxy by Marinera Ltd. in favor of Ampal-American Israel Corporation, dated December 28, 1998
9.2 Proxy by Inveco International Inc. - Profit Sharing Plan in favor of Ampal-American Israel Corporation,
dated December 28, 1998
9.3 Form of Proxy Agreement entered into by certain purchasers of Series D preferred shares in connection
with the Series D financing
10.1 1998 U.S. ISO Stock Option Plan and related agreements
10.2 1998 Section 102 Share Option Plan and related agreements
10.3 2000 Share Option Plan*
10.4 2000 Employee Share Purchase Plan*
10.5 Section 3(i) Share Option Plan*
10.6 Employment Agreement, dated January 1997, by and between the Registrant and Eric Gries
10.7 Offer Letter, dated March 26, 1998, by and between the Registrant and Anil Uberoi
10.8 Offer Letter, dated August 15, 1998, by and between the Registrant and Eran Wagner
10.9 Offer Letter, dated December 28, 1999, by and between the Registrant and Limor Schweitzer
10.10 Offer Letter, dated January 14, 2000, by and between the Registrant and Richard Van Hoesen
10.11 Lease Agreement, dated December 31, 1999, by and between the Registrant and Nichsei Crystal Lemischar
(Ramat-Gan)(1)
10.12 Lease Agreement, dated November 12, 1999, by and between XACCT Technologies, Inc. and Princeton
Investment Group LLC
10.13 Lease Agreement, dated January 28, 2000, by and between XACCT Technologies, Inc. and Princeton
Investment Group LLC
10.14 Form of XIS End-User License Agreement
10.15 Form of XACCTusage 3.4 End-User License Agreement
10.16 Form of Support and Maintenance Agreement
10.17 Form of Support Agreement
10.18 Form of Global Teaming Agreement
10.19 Form of Value Added Partner Agreement
21.1 Subsidiaries of the Registrant
23.1 Consent of Kost Forer & Gabbay, a Member of Ernst and Young International
23.2 Consent of S. Friedman & Co. (included in Exhibit 5.1)*
24.1 Powers of Attorney (See page II-8)
27.1 Financial Data Schedule
99.1 Officer's Certificate regarding fairness and accuracy of translations*
</TABLE>
- --------------------------
(1) Translated in full; the original language version is on file with the
registrant and is available upon request.
* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
MEMORANDUM OF ASSOCIATION
-------------------------
Name of company: XACCT TECHNOLOGIES LTD.
1. The objects of the company:
1.1. To develop, research, support, improve, maintain, market and
distribute software and software products.
1.2. To act and deal in any way whatsoever as permitted by Law, provided,
that such acts are intended to support the objectives of the Company.
1.3. Any other object as the board of directors will determine from time to
time.
2. The company is of limited liability.
3. The authorized share capital of the company is NIS 40,000, divided into
10,000 (ten thousand) preferred shares, par value NIS 1.- per share, and
30,000 (thirty thousand) ordinary shares, par value NIS 1.- per share.
We the undersigned wish to associate as a company according to this memorandum,
and hereby agree to take each the number of shares in the company capital as set
forth each by his name:
<TABLE>
<CAPTION>
NAME OF SIGNER (IDENTIFICATION, ADDRESS) NUMBER SIGNATURE
- -------------------------------------- OF SHARES ---------
---------
<S> <C> <C>
1. ERAN WAGNER I.D. 06-980978-8 1,350 Ordinary shares /s/ ERAN WAGNER
12 Ahimeir St. Tel-Aviv 69126. ---------------
2. LIMOR SCHWEIZER I.D. 01-346697-4 1,350 Ordinary shares /s/ LIMOR SCHWEIZER
52 Hovevei Zion St., Tel-Aviv 63346. -------------------
Total no. of shares taken: 2,700 Ordinary shares
</TABLE>
Today, this 8th of June, 1997.
Witness to the signatures: /s/ [ILLEGIBLE]
---------------
<PAGE>
EXHIBIT 3.2
The Companies Law, 5759 -1999
A company limited by shares
Articles of Association
of
XACCT Technologies (1997) Ltd.
<PAGE>
THE COMPANIES LAW
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
XACCT TECHNOLOGIES (1997) LTD.
(Amended Articles of Association effective as of March 27, 2000)
1. The following regulations shall, subject to repeal, addition and alteration
as provided by the Companies Law (as defined in Article 2 below) or these
Articles (as defined in Article 2 below), be the regulations of the Company
(as defined in Article 2 below).
2. In these Articles, if not inconsistent with the context, the words standing
in the first column of the following table shall bear the meanings set
opposite them respectively in the second column.
WORDS MEANINGS
Articles these Articles of Association as from time to time
amended by Special Resolution;
Auditors the Company auditors;
Board the Board of Directors of the Company;
the Chairman the Chairman of the Board;
the Company XACCT Technologies (1997) Ltd.;
the Companies Law the Israeli Companies Law, 5759 - 1999;
Conversion Price As defined in Article 6.2;
Conversion Shares The Ordinary Shares issued or issuable pursuant to the
conversion or reclassification of (i) the Preferred
Shares (as defined in this Article 2), or (ii) any
preferred shares of the Company that any of
2
<PAGE>
the shareholders may hereinafter acquire or receive
upon exercise of warrants, a Recapitalization Event
or otherwise;
Deemed Liquidation A merger, reorganization, acquisition or sale of all
or substantially all of the assets of the Company,
following which the holders of the Company's share
capital hold less than 50% of the voting power of the
surviving or acquiring entity and less than 50% of the
issued and outstanding share capital of the surviving
or acquiring entity, unless the majority of the Series
C Preferred Shareholders agree otherwise;
Director member of the Board appointed in accordance to these
Articles holding office at any one time;
Founder(s) Eran Wagner and Limor Schweitzer;
Key Management Eran Wagner, Limor Schweitzer and Eric Gries;
The Management
Rights Agreement the Management Rights Agreement dated October 7, 1999;
Month a Gregorian calendar month;
Non-voting Ordinary Share(s) the Non-voting Ordinary Shares of a nominal
value of NIS 0.01 per share;
Non-voting
Ordinary
Shareholders The holders of Non-voting Ordinary Shares;
the Office the Registered Office of the Company at any one time;
Office Holder as such term is defined in the Companies Law;
Ordinary Share(s) collectively the Voting Ordinary Shares and the
Non-voting Ordinary Shares;
Ordinary
Shareholder(s) collectively the holder(s) of Voting Ordinary Shares
and Non-voting Ordinary Shares;
Preferred Shares
Director a Series A Preferred Shares Director (as defined in
Article 77), a Series B-1 Preferred Shares Director
(as defined in Article 77) or a Series C-1 Preferred
Shares Director (as defined in Article 77);
Preferred
3
<PAGE>
Shareholder(s) collectively the holder(s) of Series A Preferred
Shares, Series B Preferred Shares the Series C
Preferred Shares and the Series D Preferred Shares;
Preferred
Share(s) collectively the Series A Preferred Shares, the Series
B Preferred Shares, the Series C Preferred Shares and
Series D Preferred Shares;
Qualified IPO for each Series of Preferred Shares and Ordinary
Shares other than the Series D Preferred Shares a
firmly underwritten initial public offering of the
Company's Ordinary Shares (the "IPO") at a price per
Ordinary Share (prior to underwriters' commissions and
expenses) representing a Company valuation immediately
prior to the IPO of at least US$200 million (as
determined by the underwriters) and with total gross
offering proceeds to the Company in excess of $20
million; and for the Series D Preferred Shares any
IPO;
Recapitalization
Event any share split, subdivision, combination, share
dividend, bonus share, recapitalization or similar
event;
the Register the Register of Members of the Company administered in
accordance with Section 130 of the Companies Law;
the Rights
Agreement the Second Amended and Restated Rights Agreement by
and among the Company, the Key Management and the
Preferred Shareholders made as of March __, 2000;
Restricted Securities (i) the Preferred Shares, (ii) the Conversion Shares,
(iii) any other securities issued in respect of the
Preferred Shares or the Conversion Shares upon any
Recapitalization Event;
Series A Preferred
Share(s) the Series A Preferred Shares of a nominal value of
NIS 0.01 per share;
Series A Preferred
Shareholder(s) the holder(s) of Series A Preferred Shares;
Series B Conversion
Price the applicable Conversion Price of a Series B
Preferred Share;
Series B
4
<PAGE>
Preferred Share(s) collectively, the Series B-1 Preferred Shares and the
Series B-2 Non-voting Preferred Shares;
Series B
Preferred
Shareholder(s) collectively, the holder(s) of Series B-1 Preferred
Shares and the holder(s) of Series B-2 Non-voting
Preferred Shares;
Series B-1
Preferred
Shareholder(s) the holder(s) of Series B-1 Preferred Shares;
Series B-1
Preferred Share(s) Share(s) the Series B-1 Preferred Shares of a nominal
value of NIS 0.01 per share;
Series B-2
Non-voting
Preferred Shares the Series B-2 Non-voting Preferred Shares of a
nominal value of NIS 0.01 per share;
Series B-2
Non-voting Preferred
Shareholder(s) the holder(s) of Series B-2 Non-voting Preferred
Shares;
Series C Conversion
Price the applicable Conversion Price of a Series C
Preferred Share;
Series C
Preferred Share(s) collectively, the Series C-1 Preferred Shares and the
Series C-2 Non-voting Preferred Shares;
Series C
Preferred
Shareholder(s) collectively, the holder(s) of Series C-1 Preferred
Shares and the holder(s) of Series C-2 Non-voting
Preferred Shares;
Series C-1
Preferred
Shareholder(s) the holder(s) of Series C-1 Preferred Shares;
Series C-1 Preferred
Share(s) the Series C-1 Preferred Shares of a nominal value of
NIS 0.01 per share;
5
<PAGE>
Series C-2 Non-voting
Preferred Share(s) the Series C-2 Non-voting Preferred Shares of a
nominal value of NIS 0.01 per share;
Series C-2
Non-voting Preferred
Shareholder(s) the holder(s) of Series C-2 Non-voting Preferred
Shares;
Series D Conversion
Price the applicable Conversion Price of a Series D
Preferred Share;
Series D
Preferred Share(s) the Series D Preferred Shares;
Series D
Preferred
Shareholder(s) the holder(s) of Series D Preferred Shares;
Series D Preferred
Share(s) the Series D Preferred Shares of a nominal value of
NIS 0.01 per share;
Voting Ordinary
Share(s) the Voting Ordinary Shares of a nominal value of NIS
0.01 per share;
Voting Preferred
Share(s) collectively the Series A Preferred Shares, the Series
B-1 Preferred Shares, the Series C-1 Preferred Shares
and the Series D Preferred Shares;
Voting Preferred
Shareholders collectively the holder(s) of Series A Preferred
Shares, Series B-1 Preferred Shares, Series C-1
Preferred Shares and Series D Preferred Shares;
Warrants The warrants issued to the Series B Shareholders
pursuant to a Series B Share Purchase Agreement dated
October 29, 1998 between the Company and each of the
Series B Shareholders and the warrants issued to the
Series C Shareholders pursuant to a Series C Share
Purchase Agreement dated October 7, 1999 between the
Company and each of the Series C Shareholders and the
warrant to purchase Voting Ordinary Shares granted to
Foresight Business and Consulting Ltd.;
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in writing written, printed, photocopied, typed, sent via
facsimile or produced by any visible substitute for
writing, or partly one and partly another and "signed"
shall be construed accordingly;
year a Gregorian calendar year from January 1st to December
31st;
Words denoting the singular number shall include the plural number and vice
versa, words denoting the masculine gender shall include the feminine
gender; Words denoting persons shall include corporations, partnerships and
other corporate entities;
Save as aforesaid any words or expressions defined in the Companies Law
shall, if not inconsistent with the subject or context, bear the same
meaning in these Articles.
The captions of these Articles are for convenience only and shall not be
deemed a part hereof or affect the construction or interpretation of any
Article hereof.
For the purposes of these Articles the phrase "ON AS-CONVERTED BASIS" means
that with respect to any given right in question, and for any calculation
of shareholding in the Company, Preferred Shares shall be calculated as,
and has the effect of, such number of Ordinary Shares into which such
Preferred Shares are convertible at that time.
3. The Company is a private company and accordingly:
3.1 The right to transfer shares is restricted in the manner hereinafter
prescribed;
3.2 The number of members of the Company at any time (other than employees
or former employees) shall not exceed 50; provided, however, that if
two or more individuals hold a share or shares of the Company jointly,
they shall be deemed to be one member for purposes of this Article;
3.3 Any invitation to the public to subscribe for any shares or debentures
of the Company is prohibited.
SHARE CAPITAL
4.1 The share capital of the Company is NIS 580,000 (five hundred and eighty
thousand New Israeli Shekels), divided into eight classes of shares:
4,200,000 (four million two hundred thousand) Series A Preferred Shares;
7,000,000 (seven million) Series B-1 Preferred Shares; 1,750,000 (one
million seven hundred and
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fifty thousand) Series B-2 Non-voting Preferred Shares; 5,530,000 (five
million five hundred and thirty thousand) Series C-1 Preferred Shares;
70,000 (seventy thousand) Series C-2 Non-voting Preferred Shares;
35,630,000 (thirty five million six hundred and thirty thousand) Voting
Ordinary Shares; 1,820,000 (one million eight hundred and twenty thousand)
Non-voting Ordinary Shares; and 2,000,000 (two million) Series D Preferred
Shares.
4.2 Anything herein to the contrary notwithstanding, and until determined
otherwise by Trident Capital (the "ENTITY") in its sole and absolute
discretion, by written notice to the Company, the Entity shall not hold, in
the aggregate more than 10% (the "THRESHOLD PERCENTAGE") of any Voting
Ordinary Shares or Series B-1 Preferred Shares or Series C-1 Preferred
Shares. In the event that the Entity shall hold any class of voting shares
above the Threshold Percentage then: (i) any Voting Ordinary Shares held by
the Entity shall automatically be converted or reclassified into Non-voting
Ordinary Shares, (ii) any Series B-1 Preferred Shares shall automatically
be converted or reclassified into Series B-2 Non-voting Preferred Shares,
and (iii) any Series C-1 Preferred Shares shall automatically be converted
or reclassified into Series C-2 Non-voting Preferred Shares, immediately
prior to or simultaneously with any transaction, act or event (including,
purchase of additional securities, repurchases or redemptions (if and when
permitted by applicable law) of securities or any other act permitted by
law whether performed by the Entity, the Company or any third party)
resulting in such excess; provided however, that Voting Ordinary Shares
held by the Entity shall first be converted or reclassified into Non-voting
Ordinary Shares to bring such holdings down to the Threshold Percentage
prior to the conversion or reclassification of Series B-1 Preferred Shares
into Series B-2 Non-voting Preferred Shares or Series C-1 Preferred Shares
into Series C-2 Non-voting Preferred Shares. The Threshold Percentage shall
be determined by and shall reflect the aggregate of the Voting Ordinary
Shares and the Voting Preferred Shares held by the Entity in aggregate and
not a percentage of a specific class of shares.
SHARES
5. RIGHTS ATTACHED TO ORDINARY SHARES
5.1 RIGHTS ATTACHED TO VOTING ORDINARY SHARES
Each Voting Ordinary Share shall convey to its holder PARI PASSU the
right to receive notice of, and to participate in, all General
Meetings (as defined in the Companies Law), to vote in such meetings
and, subject of the terms of Articles 6 and 65 hereunder to receive
dividends and, subject to the terms of Article 6 hereunder to
participate in the distribution of the surplus assets and funds of the
Company in the event of a Liquidation (as defined in Article 6.1
hereof) of the Company. The holders of Voting Ordinary Shares shall
have the right to appoint Directors as described in Article 77
hereunder, and no
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other rights except as may be expressly provided for herein or any
other mandatory right of a shareholder in a private company pursuant
to the Companies Law.
5.2 RIGHTS ATTACHED TO NON-VOTING ORDINARY SHARES
Each Non-voting Ordinary Share shall convey to its holder pari passu
each and every right and privilege of the Voting Ordinary Shares with
the exception of (i) the right to appoint directors, (ii) the right to
receive notices of General Meetings (iii) the right to participate and
vote in such meetings. The Non-voting Ordinary Shares shall be
convertible at the option of the holder(s) thereof into an equal
number of Voting Ordinary Shares upon written notice to the Company by
the holder(s) thereof.
6. RIGHTS ATTACHED TO PREFERRED SHARES
The Series A Preferred Shares, the Series B-1 Preferred Shares, the Series
C-1 Preferred Shares and the Series D Preferred Shares will have all the
rights and privileges of the Voting Ordinary Shares. The Series B-2
Non-voting Preferred Shares and the Series C-2 Non-voting Preferred Shares
will have all the rights and privileges of the Non-voting Ordinary Shares.
In addition, each Preferred Share shall entitle its holder to the powers,
preferences and rights as follows:
6.1 In the event of any liquidation, winding up or Deemed Liquidation of
the Company ("LIQUIDATION"):
(a) The Series D Preferred Shareholders shall be entitled to receive,
prior and in preference to any payment to any other class or
series of share capital, an amount per Series D Preferred Share
(the "SERIES D LIQUIDATION PREFERENCE") equal to the original
purchase price in US dollars per Series D Preferred Share (as
adjusted for any Recapitalization Event with respect to such
shares).
If the assets and funds thus distributed among the Series D
Preferred Shareholders shall be insufficient to permit the
payment in full of the Series D Liquidation Preference to the
Series D Preferred Shareholders, then the entire assets and funds
of the Company legally available for distribution shall be
distributed PRO RATA among the Series D Preferred Shareholders in
proportion to the Series D Liquidation Preference each such
holder is otherwise entitled to receive.
(b) After payment in full of the Series D Liquidation Preference to
the Series D Preferred Shareholders, but prior and in preference
to any distribution of any of the assets or surplus funds of the
Company to the
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Series B Preferred Shareholders, the Series A Preferred
Shareholders and to the Ordinary Shareholders, the Series C
Shareholders shall be entitled to receive an amount per Series C
Preferred Share (the "SERIES C LIQUIDATION PREFERENCE") equal to
the original purchase price in US dollars per Series C Preferred
Share (as adjusted for any Recapitalization Event with respect to
such shares).
If the assets and funds thus distributed among the Series C
Preferred Shareholders shall be insufficient to permit the
payment in full of the Series C Liquidation Preference to the
Series C Preferred Shareholders, then the entire assets and funds
of the Company legally available for distribution, after giving
effect to the Series D Liquidation Preference, shall be
distributed pro rata among the Series C Preferred Shareholders in
proportion to the Series C Liquidation Preference each such
holder is otherwise entitled to receive.
(c) After payment in full of the Series D Liquidation Preference to
the Series D Shareholders and the Series C Liquidation Preference
to the Series C Preferred Shareholders, but prior and in
preference to any distribution of any of the assets or surplus
funds of the Company to the Series A Preferred Shareholders and
to the Ordinary Shareholders, the Series B Preferred Shareholders
shall be entitled to receive an amount per Series B Preferred
Share (the "SERIES B LIQUIDATION PREFERENCE") equal to the
original purchase price in US dollars per Series B Preferred
Share (as adjusted for any Recapitalization Event with respect to
such shares). If the assets and funds thus distributed among the
Series B Preferred Shareholders shall be insufficient to permit
the payment in full of the Series B Liquidation Preference to the
Series B Preferred Shareholders, then the entire assets and funds
of the Company legally available for distribution after giving
effect to the Series D Liquidation Preference and the Series C
Liquidation Preference, shall be distributed PRO RATA among the
Series B Preferred Shareholders in proportion to the Series B
Liquidation Preference each such holder is otherwise entitled to
receive.
(d) After payment in full of the Series D Liquidation Preference, the
Series C Liquidation Preference and the Series B Liquidation
Preference but prior and in preference to any distribution of any
of the assets or surplus funds of the Company to the Ordinary
Shareholders, the Series A Preferred Shareholders shall be
entitled to receive an amount per Series A Preferred Share (the
"SERIES A LIQUIDATION PREFERENCE") equal to the original purchase
price in US dollars per Series A Preferred Share (as adjusted for
any Recapitalization Event with respect to such shares). If the
assets and funds thus distributed among the Series A Preferred
Shareholders shall be insufficient to permit the payment in full
of the Series A Liquidation Preference to the Series A Preferred
Shareholders,
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then the entire assets and funds of the Company legally available
for distribution after giving effect to the Series D Liquidation
Preference, the Series C Liquidation Preference and the Series B
Liquidation Preference, shall be distributed PRO RATA among the
Series A Preferred Shareholders in proportion to the Series A
Liquidation Preference each such holder is otherwise entitled to
receive.
(e) Thereafter the remaining assets and surplus assets of the Company
legally available for distribution, if any, shall be distributed
PRO RATA to all of the shareholders of the Company, in proportion
to their respective shareholdings in the Company, as if all of
the Preferred Shares had been converted into Ordinary Shares of
the Company.
(f) Whenever the distribution provided for in this sub-article shall
be payable in securities or property other than cash, the value
of such distribution shall be the fair market value of such
securities or property as determined in good faith by the Board,
or by the liquidator in the case of winding up. The NIS
equivalent of the U.S. dollar value of any distribution under
this sub-article shall be determined in accordance with the
Representative Rate of Exchange last published by the Bank of
Israel prior to the date of the making of the distribution.
(g) Notwithstanding the distribution detailed in sub-articles (a)-(e)
above, if as a result of a Deemed Liquidation the Series C
Preferred Shareholders would receive 2 (two) times the Series C
Conversion Price (as determined by Article 6.2 below) or more,
then the entire assets and surplus funds of the Company legally
available for distribution, if any, shall be distributed PRO-RATA
to all shareholders of the Company, in proportion to their
respective shareholdings in the Company, as if all of the
Preferred Shares had been converted into Ordinary Shares, subject
to the prior payment of the Series D Liquidation Preference in
the event that, as a result of a Deemed Liquidation the PRO RATA
amount that the Series D Preferred Shareholders would receive
from such distribution on a PRO RATA as converted basis is less
than the Series D Liquidation Preference.
(h) Notwithstanding the distribution detailed above, if as a result
of a Deemed Liquidation the Series B Preferred Shareholders would
receive 2.5 (two and one-half) times the Series B Conversion
Price (as determined by Article 6.2 below) or more, then the
entire assets and surplus funds of the Company legally available
for distribution, if any, after giving effect to the preferential
rights of the Series D Preferred Shareholders and the Series C
Preferred Shareholders as set forth above, shall be distributed
pro rata to all shareholders of the Company, in proportion to
their respective shareholdings in the Company, as if all of the
Preferred Shares had been converted into Ordinary Shares.
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<PAGE>
6.2 CONVERSION
OPTIONAL CONVERSION. Subject to adjustment as specified below, (i) the
Series D Preferred Shareholders have the right at any time to have
their Series D Preferred Shares converted or reclassified into Voting
Ordinary Shares (ii) the Series C-1 Preferred Shareholders have the
right at any time to have their Series C-1 Preferred Shares converted
or reclassified into Voting Ordinary Shares or Non-voting Ordinary
Shares, (iii) the Series C-2 Non-voting Preferred Shareholders have
the right at any time to have their Series C-2 Non-voting Preferred
Shares converted or reclassified into Series C-1 Preferred Shares or
into Non-voting Ordinary Shares, (iv) the Series A Preferred
Shareholders and the Series B-1 Preferred Shareholders have the right
at any time to have their Series A Preferred Shares and Series B-1
Preferred Shares converted or reclassified into Voting Ordinary
Shares, (v) the Series B-2 Non-voting Preferred Shareholders have the
right at any time to have their Series B-2 Non-voting Preferred Shares
converted or reclassified into Series B-1 Preferred Shares or into
Non-voting Ordinary Shares, and (vi) the Non-voting Ordinary
Shareholders have the right at any time to have their Non-voting
Ordinary Shares converted or reclassified into Voting Ordinary Shares.
Any conversion or reclassification of (i) Non-voting Ordinary Shares
into Voting Ordinary Shares; and (ii) Non-voting Preferred Shares into
Voting Preferred Shares of the same class; will be made on a one to
one basis. Any conversion or reclassification of Preferred Shares into
Ordinary Shares will be made pursuant to the Conversion Rate (subject
to adjustment as provided under these Articles) at the time in effect
for such share. The "CONVERSION RATE" shall be the Original Issue
Price divided by the Conversion Price (subject to any adjustment as
may be set forth in these Articles) at the time in effect for such
share. The "ORIGINAL ISSUE PRICE" of each Preferred Share is the
amount in U.S Dollars originally paid to the Company for that share.
The "CONVERSION PRICE" for each Preferred Share shall initially be the
Original Issue Price of that Preferred Share subject to adjustment as
provided in sub-article 6.3 herein.
MANDATORY CONVERSION. The Voting Preferred Shares shall be
automatically converted or reclassified into Voting Ordinary Shares as
aforesaid and the Series B-2 Non-voting Preferred Shares and the
Series C-2 Non-voting Preferred Shares shall be automatically
converted or reclassified into Non-voting Ordinary Shares, each upon
the closing of a Qualified IPO. Conversion of the Preferred Shares may
be effected by way of reclassification of the Preferred Shares into
Ordinary Shares at the then existing Conversion Rate.
6.3 ADJUSTMENT TO CONVERSION RATE.
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The Conversion Rate shall be subject to adjustment in the following
cases:
(a) In the event the Company shall at any time change as a whole, by
subdivision or combination in any manner or by the making of a
share dividend (i.e. bonus shares), the number of Ordinary Shares
then outstanding into a different number of shares, then
thereafter the number of Ordinary Shares issuable upon the
conversion or reclassification of Preferred Shares shall be
increased or decreased, as the case may be, in direct proportion
to the increase or decrease in the number of Ordinary Shares by
reason of such change; provided, however, that no adjustment in
the Conversion Rate shall be made hereunder in either of the
following cases: (i) a share dividend on the Ordinary Shares
where an identical share dividend in Ordinary Shares was paid
also on the Preferred Shares, or (ii) a subdivision or
combination of the Ordinary Shares where an identical subdivision
or combination was made PRO-RATA also in respect of the Preferred
Shares.
(b) In the event of any capital reorganization, or of any
reclassification of the share capital of the Company or in case
of the consolidation or merger of the Company with or into any
other corporation, each Preferred Share shall after such capital
reorganization, reclassification of share capital, consolidation,
merger or sale entitle the holder to obtain the kind and number
of Ordinary Shares or other securities or property of the
Company, or of the corporation resulting from such consolidation
or surviving such merger or to which such sale shall be made, as
the case may be, to which such holder would have been entitled if
he had held the Ordinary Shares issuable upon conversion or
reclassification of such Preferred Shares immediately prior to
such capital reorganization, reclassification of capital stock,
consolidation, merger or sale.
6.4 ANTI DILUTION
(1) Upon each bona fide issuance or deemed issuance by the Company of
any New Shares (as defined in Article 6.4 (4) below) at a price
per share less than the existing Conversion Price of a share of a
certain class of Preferred Shares, the Conversion Price of each
share of that class of Preferred Shares will be reduced to an
amount equal to the existing Conversion Price multiplied by a
fraction (i) the numerator of which is the sum of (A) the total
number of shares of Preferred Shares outstanding plus (B) the
number of New Shares that can be purchased at the existing
Conversion Price for the total consideration received from the
issuance of New Shares and (ii) the denominator of which is the
number of outstanding Preferred Shares, plus the number of New
Shares issued in the new issuance.
The formula can be expressed algebraically as follows:
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N + np/P
--------
P' = P * N + n
where:
N = Number of Preferred Shares outstanding prior to the dilutive
issuance of shares
P = Conversion Price of the Preferred Share prior to the dilutive
issuance
P' = New Conversion Price of the Preferred Share after the
dilutive issuance
n= Number of New Shares issued in the dilutive issuance
p= Price per share in the dilutive issuance
No adjustments of the Conversion Price for a Preferred Share
shall be made in an amount less than one U.S. cent per share. No
adjustment of such Conversion Price pursuant to this sub-article
shall be made if it has the effect of increasing the Conversion
Price above the Conversion Price in effect immediately prior to
such adjustment.
(2) In the case of the issuance of options to purchase or rights to
subscribe for Ordinary Shares, or securities by their terms
convertible into or exchangeable for Ordinary Shares or options
to purchase or rights to subscribe for such convertible or
exchangeable securities (other than shares to be issued to bona
fide employees, consultants and service providers of the Company
or of the Company's subsidiaries pursuant to any share option
plan or share incentive plan approved by the Board), the
aggregate maximum number of Ordinary Shares deliverable upon
exercise (assuming the satisfaction of any conditions to
exerciseability, including without limitation, the passage of
time, but without taking into account potential antidilution
adjustments) of such options to purchase or rights to subscribe
for Ordinary Shares, or upon the exchange or conversion of such
security, shall be deemed to have been issued at the time of the
issuance of such options, rights, or securities, at a
consideration equal to the consideration received by the Company
upon the issuance of such options, rights, or securities plus any
additional consideration payable to the Company pursuant to the
term of such options, rights or securities (without taking into
account potential anti-dilution adjustments) for the Ordinary
Shares covered thereby.
(3) In the case of the issuance of shares or other securities for a
consideration in whole or in part other than cash, the price per
share shall be deemed to be the fair market value thereof as
determined in good faith by the Board.
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(4) For the purpose of this Article, the consideration of any New
Shares shall be calculated at the U.S. dollar equivalent thereof,
on the day such New Shares are issued or deemed to be issued
pursuant to this Article. "NEW SHARES" shall mean shares of
whatever class issued or deemed to be issued pursuant to this
Article by the Company other than Excepted Securities as defined
in Article 12(a) hereunder.
6.5 The Company shall at all times reserve and keep available
out of its authorized Ordinary Shares, solely for the
purpose of issuance upon conversion or reclassification of
Preferred Shares as herein provided, such number of Ordinary
Shares as shall then be issuable upon the conversion or
reclassification of all outstanding Preferred Shares and the
Non-voting Ordinary Shares. All Ordinary Shares, which shall
be so issued, shall be duly and validly issued and fully
paid and non-assessable.
6.6 The Series A Preferred Shareholders, the Series B-1
Preferred Shareholders and the Series C-1 Preferred
Shareholders shall have the right to appoint Directors as
described in Article 77.
6.7 Prior to a Qualified IPO, in the event that the Company
declares a distribution of dividends, the Preferred
Shareholders shall be entitled to receive, prior and in
preference to any distribution to be made to the Ordinary
Shareholders, forty percent (40%) of the amount of dividends
declared to be allocated in proportion to their respective
shareholding in the Company (on an as converted basis).
Thereafter, the remaining amounts of dividend legally
available for distribution, shall be distributed pro rata to
all the shareholders of the Company in proportion to their
respective shareholding in the Company (on an as converted
basis). Notwithstanding the foregoing, any dividends paid as
a result of or in connection with a Liquidation will be
distributed in the manner provided in Article 6.1 hereof.
6.8 Each Preferred Shareholder shall have one vote for each
Ordinary Share into which the Preferred Shares held by him
of record could be converted (as provided in this Article
6), on every resolution (other than class meeting or
resolution), without regard to whether the vote thereon is
conducted by a show of hands, by written ballot or by any
other means. Notwithstanding the foregoing, in any class
meeting or resolution, each Preferred Shareholder shall have
one vote for each Preferred Shares held by him of record.
7. CO-SALE RIGHTS
Certain capitalized terms used in this Article have the meanings ascribed
to them in Article 28.
7.1 RIGHT TO PARTICIPATE. In the event that a member of Key Management
proposes
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to sell his shares and there remain Refused Securities, each Primary
and Secondary Offeree desiring to participate in the sale
(collectively, "CO-SELLERS") shall have the right to participate in
the sale to the Proposed Transferee upon the same terms and conditions
as set forth in the Primary Right, subject to the terms and conditions
set forth in this Article 7.1. A Co-Seller shall exercise its right by
delivering to the Seller, within fifteen (15) days after the
expiration of the Secondary Right Period, (i) a written notice of its
intention to participate, specifying the amount of shares Co-Seller
desires to sell to the Proposed Transferee, and (ii) one or more
certificates representing the number of Ordinary Shares or Preferred
Shares which Co-Seller elects to sell hereunder, duly endorsed for
transfer to the Proposed Transferee.
7.2 QUALIFIED PARTICIPATION. Each Co-Seller shall have the right to sell
up to that number of Ordinary Shares or Preferred Shares equal to the
product of (i) the amount of Refused Securities multiplied by (ii) a
fraction, the numerator of which is the number of shares of Ordinary
Shares and Conversion Shares held by such Co-Seller, and the
denominator of which is the total number of shares of Ordinary Shares
and Conversion Shares owned by the Seller and the Co-Sellers as a
group. In the event of Co-Seller participation, the amount of Offered
Securities which Seller is entitled to sell on Seller's own behalf
pursuant to this Article 7.2 shall be reduced accordingly, and Seller
shall include such Co-Seller shares in the sale of the Offered
Securities.
7.3 CONTINUING RIGHTS. The exercise or non-exercise of the right to
participate hereunder with respect to a particular sale by a Seller
shall not adversely affect a Co-Seller's right to participate in
subsequent sales by the same or other Sellers.
8. Subject to Article 65 and the provisions of the Companies Law, any share
may be issued with such preferred, deferred, right of redemption or other
special rights or such restrictions, whether in regard to dividend, voting,
return of capital or otherwise as the Company may from time to time by
resolution determine.
VARIATION OF RIGHTS
9. Subject to Article 65:
9.1. Whenever the capital of the Company is divided into different classes
of shares, the rights attached to any class may, unless otherwise
provided by the terms of issue of the shares of that class, be varied
or abrogated, whether or not the Company is being wound up, only (i)
with the consent in writing of the holders of the majority of the
issued shares of the class, or (ii) with the
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sanction of the majority of those shareholders present and voting at a
duly convened meeting of those shareholders, but not otherwise.
9.2 All the provisions of these Articles relating to general meetings of
the shareholders of the Company or the proceedings thereat, shall,
MUTATIS MUTANDIS, apply to every separate general meeting of the
holders of a class of shares, except that the necessary quorum shall
be two persons holding or representing by proxy at least 51%
(fifty-one percent) in nominal amount of the issued shares of the
class or, at any adjourned meeting of such holders, those members who
are present in person or by proxy, whatever their holdings and the
holders of shares of the class shall be.
10. The special rights conferred upon the holders of any shares or class of
shares issued with preferred or other special rights shall not, unless
otherwise expressly provided by these Articles or the conditions of issue
of such shares, be deemed to be varied by the creation or issue of further
shares ranking PARI PASSU therewith or subsequent thereto.
ISSUANCE OF SHARES
11. Subject to these Articles, all unissued shares of the Company shall be at
the disposal of the Board and the Board may allot, at a premium or at par
or subject to the Companies Law, at a discount, with or without conferring
a right of renunciation, grant options over, or otherwise dispose of them
to such persons, at such times and on such terms as it thinks proper.
12. PRE-EMPTIVE RIGHT
Until a Qualified IPO, each Preferred Shareholder and member of Key
Management (collectively the "PREEMPTIVE PURCHASER(S)") shall have a right
of first refusal (a "PREEMPTIVE RIGHT") to purchase its PRO RATA share (or
any portion thereof) of New Securities (as defined below) that the Company
may, from time to time, propose to sell and issue. Each Preemptive
Purchaser's PRO RATA share shall be the ratio of the number of shares of
the Company's Ordinary Shares (assuming for purposes of this Article that
all Preferred Shares have been converted into Ordinary Shares) then held by
such Preemptive Purchaser as of the date of the Rights Notice (as defined
in the Subarticle 12(b)), to the sum of the total number of Ordinary Shares
outstanding as of such date (calculated on an as-converted basis).
This Preemptive Right shall be subject to the following provisions:
(a) "NEW SECURITIES" shall mean any Ordinary Shares or Preferred Shares of
any kind of the Company, whether now or hereafter authorized, and
rights, options, or warrants to purchase said Ordinary Shares or
Preferred Shares,
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and securities of any type whatsoever that are, or may become,
convertible into said Ordinary Shares or Preferred Shares excluding
the "EXCEPTED SECURITIES". The Excepted Securities shall include (i)
securities issuable upon conversion or reclassification of Preferred
Shares; (ii) securities offered to the public in a Qualified IPO;
(iii) the Company's Ordinary Shares or Preferred Shares issued in
connection with any Recapitalization Event; (iv) Voting Ordinary
Shares to be distributed to employees, Directors, service providers,
advisors or consultants of the Company pursuant to any share option
plan or any share incentive plan approved by the Board; (v) Voting
Ordinary Shares issued upon conversion or reclassification of the
Non-voting Ordinary Shares; (vi) securities issued in connection with
equipment financing, sponsored research, collaboration, technology
licensing, development agreements or any other strategic partnerships
approved by the Board; (vii) shares issued in connection with the
acquisition by the Company of another business entity or the merger of
any business entity with or into the Company or subsidiary of the
Company or a merger of a subsidiary of the Company with or into
another entity; (viii) securities issuable upon exercise of the
Warrants; (ix) securities issued in connection with a rights offering.
(b) If the Company proposes to issue New Securities, it shall give each
Preemptive Purchaser written notice (the "RIGHTS NOTICE") of its
intention, describing the New Securities, the price, the general terms
upon which the Company proposes to issue them, and the number of
shares that each Preemptive Purchaser has the right to purchase under
this Article 12. Each Preemptive Purchaser shall have thirty (30) days
from delivery of the Rights Notice to agree to purchase (i) all or any
part of its PRO RATA share of such New Securities and (ii) all or any
part of the PRO RATA share of any other Preemptive Purchaser
(including for this purpose any Permitted Transferee (as defined in
Article 32 hereunder) of such Preemptive Purchaser) entitled to such
rights to the extent that such other Preemptive Purchaser does not
elect to purchase its full PRO RATA share, in each case for the price
and upon the general terms specified in the Rights Notice, by giving
written notice to the Company setting forth the quantity of New
Securities to be purchased. If a Preemptive Purchaser that has elected
to purchase its full PRO RATA share also elects to purchase in the
aggregate the New Securities that other Preemptive Purchasers have not
elected to purchase, such New Securities shall be sold to such
Preemptive Purchaser in accordance with its respective PRO RATA share
which PRO RATA share shall be the ratio of the number of shares of the
Company then held by such Preemptive Purchaser (on an as converted
basis), divided by the total number of the Company's shares then
outstanding (on an as converted basis), then held by all Preemptive
Purchasers who have elected to purchase New Securities in excess of
their full PRO RATA share multiplied by the sum of the total number of
New Securities not purchased at such time;
(c) If the Preemptive Purchasers fail to exercise in full the right of
first refusal within the period or periods specified in Subarticle
12(b), the Company shall
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have ninety (90) days after delivery of the Rights Notice to sell the
unsold New Securities at a price and upon general terms no more
favorable than specified in the Rights Notice. If the Company has not
sold the New Securities within said ninety (90) day period the Company
shall not thereafter issue or sell any New Securities without first
offering such securities to the Preemptive Purchasers in the manner
provided above.
13. INTENTIONALLY DELETED.
14. Except as required by law, no person shall be recognized by the Company as
holding any share upon any equitable, contingent, future or partial
interest in any share, or any interest in any fractional part of a share,
or, except only as by these Articles or by law otherwise provided, any
other right in respect of any share, except an absolute right to the
entirety thereof in the registered holder
CERTIFICATES
15.
15.1 Every person whose name is entered as a member in the Register shall
be entitled without payment to receive one certificate in respect of
each class of shares held by him, or, with the consent of the Board
and upon payment of sum, if any, for every certificate after the first
as the Board shall determine, to several certificates, each for one or
more of his shares. Shares of different classes may not be included in
the same certificate. Where a member has transferred a part of the
shares comprises in his holding he shall be entitled to a certificate
for the balance without charge.
15.2 Subject to the Companies Law and any regulation promulgated pursuant
thereto, every share certificate shall specify the shares to which it
relates. In the case of a share held jointly by several persons, the
Company shall not be bound to issue more than one share certificate
for a share to one of several joint holders shall be deemed sufficient
delivery to all.
15.3 If a share certificate is worn out, defaced, lost or destroyed, it may
be renewed on such terms, if any, as to evidence and indemnity with or
without security as the Board requires. In the case of loss or
destruction the person to whom the new certificate is issued shall pay
to the Company all expenses incidental to the investigation or
evidence of loss or destruction and the preparation of the requisite
form of indemnity.
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CALLS ON SHARES
16.
16.1 Subject to any terms upon which any shares may have been issued the
Board may from time to time make calls upon the members in respect of
any moneys unpaid on their shares, whether on account of the nominal
value of the shares or by way of premium, provided that, subject as
aforesaid, no call on any share shall be made without at least 14
(fourteen) days prior notice specifying the time or times and place of
payment. A call may be revoked or the time fixed for its payment be
postponed by the Board.
16.2 A call shall be deemed to have been made at the time when the
resolution of the Board authorizing the call was passed, and may be
made payable by installments.
16.3 INTENTIONALLY DELETED
17.
17.1 Each member shall pay to the Company, at the time and place of payment
specified in the notice of the call, the amount called on its shares.
The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
17.2 If a sum called in respect of a share is not paid before or on the day
appointed for payment, the person from whom the sum is due shall pay
interest thereon from the day fixed for payment to the time of actual
payment at such rate, note exceeding the debitory rate prevailing at
the largest Israeli commercial bank on the day appointed for the
payment referred to, as the Board may determine; but the Board shall
be at liberty to waive payment of such interest wholly or in part.
17.3 Any sum which by the terms of issue of a share becomes payable on
allotment or at any fixed date, whether on account of the nominal
value of the share or by way of premium, shall for the purposes of
these Articles be deemed to be a call duly made and payable on the
date on which, by the terms of issue, the same becomes payable. In
case of non-payment all the provisions of these Articles relating to
payment of interest and expenses, forfeiture and otherwise shall apply
as if such sum had become payable by virtue of a call duly made and
notified.
18. The Board may, if it thinks fit, receive from any member willing to advance
the same, all or any part of the moneys uncalled and unpaid upon any shares
held by
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him, and may pay upon all or any of the moneys so advanced, until the same
would but for such advance become presently payable, interest at such rate
as may be agreed upon between the Board and such member.
LIEN ON SHARES
19. The Company shall have a first and paramount lien on every share, not being
a fully paid share, for all moneys, whether presently payable or not,
called or payable at a fixed time in respect of that share. The Board may
at any time declare any share to be wholly or in part exempt from the
provision of this Article. The Company's lien on a share shall extend to
all dividends and other moneys payable thereon.
20.
20.1 The Company may sell, in such manner as the Board thinks fit, any
shares on which the Company has a lien, but no sale shall be made
unless some sum in respect of which the lien exists is presently
payable, nor until the expiration of 14 (fourteen) days after a notice
in writing, stating and demanding payment of the sum presently payable
or any part thereof and stating the intention to sell in default,
shall have been given to the registered holder for the time being of
the share, or the person entitled to the share by reason of death or
bankruptcy. Such sale shall be subject to the Pre-emptive right
described in Article 12.
20.2 To give effect to any such sale the Board may authorize some person to
execute a transfer of the shares sold to, or in accordance with the
directions of the purchaser. The transferee shall be entered in the
Register as the holder of the shares comprised in any such transfer,
and he shall not be bound to see to the application of the purchase
money, nor shall his title to the shares be affected by any
irregularity or invalidity in the proceedings in reference to the
sale.
20.3 The net proceeds of sale, after payment of the costs thereof, shall be
applied in or towards payment or satisfaction of the debt or liability
in respect of which the lien exists, so far as the same is presently
payable, and any residue, subject to a like lien for sums not
presently payable as existed upon the shares prior to the sale, shall
be paid to the person entitled to the shares at the date of the sale.
FORFEITURE AND SURRENDER OF SHARES
21.
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21.1 If a member fails to pay the whole or any part of any call or
installment of a call on the day fixed for payment, the Board may, at
any time thereafter during such time as any part of such call or
installment remains unpaid, serve a notice on him requiring payment of
so much of the call or installment as is unpaid, together with any
accrued interest and any costs, charges and expenses incurred by the
Company by reason of such non-payment.
21.2 The notice shall fix a further day, not being less than 7 (seven) days
from the date of the notice, on or before which and the place where
the payment required by the notice is to be made, and shall state
that, in the event of non-payment at or before the time and at the
place specified, the shares on which the call was made will be liable
to be forfeited.
22. If the requirements of any such notice are not complied with, any share in
respect of which such notice has been given may, at any time thereafter,
before the payments required by the notice have been made, be forfeited by
a resolution of the Board to that effect. Every forfeiture shall include
all dividends declared in respect of the forfeited shares and not actually
paid before the forfeiture.
23. Subject to the Companies Law and to these Articles, a forfeited share may
be sold, re-allotted or otherwise disposed of upon such terms and in such
manner as the Board thinks fit; and at any time before sale, re-allotment
or disposal, the forfeiture may be annulled on such terms as the Board
thinks fit. The Board may authorize some person to execute the transfer of
a forfeited share.
24. A person whose shares have been forfeited shall cease to be a member in
respect of the forfeited shares, but shall, notwithstanding the forfeiture,
remain liable to pay to the Company all moneys which at the date of
forfeiture were then payable by him to the Company in respect of the
shares, with interest thereon at such rate not exceeding 10% (ten percent)
per year as the Board shall deem fit from the date of forfeiture until
payment; but such person's liability shall cease if and when the Company
shall have received payment in full of all moneys in respect of the shares.
25. The forfeiture of a share shall involve the extinction at the time of
forfeiture of all interest in and all claims and demands against the
Company in respect of the share, and all other rights and liabilities
incidental to the share as between the member whose share is forfeited and
the Company, except only such of those rights and liabilities as are
expressly saved by these Articles, or in the case of past members, as are
given or imposed by the Israeli law.
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26. The Board may accept the surrender of any share which it is in a position
to forfeit upon such terms and conditions as may be agreed and, subject to
any such terms and conditions, a surrendered share shall be treated as if
it had been forfeited.
27. An affidavit in writing that the declarant is one of the Directors and that
a share has been duly forfeited or surrendered on a date stated in the
affidavit, shall be conclusive evidence of such facts as against all
persons claiming to be entitled to the share, and that affidavit and the
receipt of the Company of the consideration, if any, given for the share,
on the sale or disposition or re-allotment thereof, shall constitute good
title to the share. After the person to whom the share is sold, re-allotted
or disposed of shall have been registered as the holder thereof, he shall
not be bound to see to the application of the purchase money and his title
to the share shall not be affected by any irregularity or invalidity in the
proceedings in reference to the forfeiture, surrender, sale, re-allotment
or disposal of the share.
The provision of these Articles as to forfeiture shall apply in the case of
non-payment of any sum which, by the terms of issue of a share, become
payable at a fixed time, whether on account of the amount of the share, or
by way of premium as if the same had been payable by virtue of a call duly
made and notified.
TRANSFER OF SHARES
28. RIGHT OF FIRST REFUSAL
28.1 PRIMARY RIGHT. At any time a shareholder (the "SELLER") proposes to
sell or otherwise dispose of any share capital of the Company held by
such Seller (the "OFFERED SECURITIES") to a third party (the "PROPOSED
TRANSFEREE"), the Seller shall first notify the Company in writing of
the price, terms and identity of the Proposed Transferee (the "OFFER
TERMS"). The Company shall give notice of the Offer Terms in writing
(i) if the Seller is a member of Key Management who is selling
Ordinary Shares, to the other members of Key Management, (ii) if the
Seller is an Ordinary Shareholder who is selling Ordinary Shares, to
the members of Key Management, (iii) if the Offered Securities are
Series A Preferred Shares, to the other Series A Preferred
Shareholders, (iv) if the Offered Securities are Series B Preferred
Shares, to the other Series B Preferred Shareholders, (v) if the
Offered Securities are Series C Preferred Shares to the other Series C
Preferred Shareholders, or (vi) if the Offered Securities are Series D
Preferred Shares to the other Series D Preferred Shareholders (such
respective offerees shall be referred to as the "PRIMARY OFFEREES").
Each Primary Offeree shall have the right (the "PRIMARY RIGHT") to
purchase from the Seller at the same price and on the same terms (x)
that portion of the Offered Securities as the aggregate number of
shares of Ordinary Shares and Conversion Shares held by such Primary
Offeree bears to the total number of shares of Ordinary Shares and
Conversion Shares held by all the
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Primary Offerees for such class of securities (the "PRIMARY BASIC
AMOUNT") and (y) such additional portion of the remaining Offered
Securities as any Primary Offeree indicates it will purchase should
any of the other Primary Offerees subscribe for less than their
Primary Basic Amounts (the "PRIMARY UNDERSUBSCRIPTION AMOUNT") and to
which such Primary Offeree is entitled under Article 28.2 for a period
of five (5) business days after delivery (the "PRIMARY RIGHT PERIOD").
28.2 NOTICE OF PRIMARY EXERCISE. Notice of a Primary Offeree's election to
exercise, in whole or in part, a Primary Right shall be made by a
written notice signed by such Primary Offeree specifying the portion
of the Offered Securities that such Primary Offeree elects to purchase
(and, if such Primary Offeree elects to purchase more than its Primary
Basic Amount, the Primary Undersubscription Amount that such Primary
Offeree elects to purchase, if any), delivered to the Company prior to
the expiration of the Primary Right Period (the "PRIMARY EXERCISE
NOTICE"). If the Primary Basic Amounts subscribed for by the Primary
Offerees are less than the total amount of Offered Securities, then
each Primary Offeree specifying a Primary Undersubscription Amount in
its Primary Exercise Notice shall be entitled to purchase the Primary
Undersubscription Amount specified; PROVIDED, HOWEVER, that should the
Primary Undersubscription Amounts subscribed for exceed the difference
between the total amount of Offered Securities the Primary Offerees
are entitled to purchase and the Primary Basic Amounts subscribed for
(the "AVAILABLE PRIMARY UNDERSUBSCRIPTION AMOUNT"), each Primary
Offeree who has subscribed for any Primary Undersubscription Amount
shall be entitled to purchase only that portion of the Available
Primary Undersubscription Amount as is determined by multiplying such
Available Primary Undersubscription Amount by a fraction, the
numerator of which is the aggregate number of shares of Ordinary
Shares and Conversion Shares held by such Primary Offeree and the
denominator of which is the aggregate number of shares of Ordinary
Shares and Conversion Shares held by the Primary Offerees who have
subscribed for a Primary Undersubscription Amount; PROVIDED FURTHER,
HOWEVER, that if, as a result of the allocation of the Available
Primary Undersubscription Amount, any Primary Offeree shall be
allocated a number of shares greater than the number of shares it has
indicated it is willing to purchase, it shall not be required to
purchase such shares; rather such additional shares shall be
reallocated in accordance with the above formula among the other
Primary Offerees who have subscribed for a Primary Undersubscription
Amount. All amounts determined by the formula set forth in this
Article 28.2 shall be subject to rounding by the Board of the Company
to the extent it reasonably deems necessary.
28.3 SECONDARY RIGHT. If the Primary Offerees do not elect to purchase all
of the Offered Securities, the Company shall give notice in writing of
the Offer Terms to the Preferred Shareholders and Key Management (as
applicable) other than the Primary Offerees (the "SECONDARY
OFFEREES"). Each Secondary
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<PAGE>
Offeree shall have the right (the "SECONDARY RIGHT") to purchase from
the Seller (i) that portion of the remaining Offered Securities, if
any, after the Primary Offerees' election to purchase, as the
aggregate number of shares of Ordinary Shares and Conversion Shares
held by such Secondary Offeree bears to the total number of shares of
Ordinary Shares and Conversion Shares held by all the Secondary
Offerees (the "SECONDARY BASIC AMOUNT") and (ii) such additional
portion of the remaining Offered Securities as any Secondary Offeree
indicates it will purchase should any of the Secondary Offerees
subscribe for less than their Secondary Basic Amounts (the "SECONDARY
UNDERSUBSCRIPTION AMOUNT") and to which such Secondary Offeree is
entitled under Article 28.4, at the same price and on the same terms
as those set forth in the Primary Right, which Secondary Right shall
remain open for a period of five (5) business days (the "SECONDARY
RIGHT PERIOD").
28.4 NOTICE OF SECONDARY EXERCISE. Notice of a Secondary Offeree's election
to exercise the Secondary Right, in whole or in part, shall be
evidenced by a written notice signed by such Secondary Offeree,
setting forth the amount that the Secondary Offeree elects to purchase
(and, if such Secondary Offeree elects to purchase more than its
Secondary Basic Amount, the Secondary Undersubscription Amount that
such Secondary Offeree elects to purchase, if any), and delivered to
the Company prior to the end of the Secondary Right Period (the
"SECONDARY EXERCISE NOTICE"). If the Secondary Basic Amounts
subscribed for by the Secondary Offerees are less than the total
amount of Offered Securities the Secondary Offerees are entitled to
purchase pursuant to Article 28.3, then each Secondary Offeree
specifying a Secondary Undersubscription Amount in its Secondary
Exercise Notice shall be entitled to purchase the Secondary
Undersubscription Amount specified; provided, however, that should the
Secondary Undersubscription Amounts subscribed for exceed the
difference between the total amount of Offered Securities the
Secondary Offerees are entitled to purchase and the Secondary Basic
Amounts subscribed for (the "SECONDARY AVAILABLE UNDERSUBSCRIPTION
AMOUNT"), each Secondary Offeree who has subscribed for any Secondary
Undersubscription Amount shall be entitled to purchase only that
portion of the Secondary Available Undersubscription Amount as is
determined by multiplying such Secondary Available Undersubscription
Amount by a fraction, the numerator of which is the aggregate number
of shares of Ordinary Shares and Conversion Shares held by such
Secondary Offeree and the denominator of which is the aggregate number
of shares of Ordinary Shares and Conversion Shares held by the
Secondary Offerees who have subscribed for a Secondary Available
Undersubscription Amount; provided further, however, that if, as a
result of the allocation of the Secondary Available Undersubscription
Amount, any Secondary Offeree shall be allocated a number of shares
greater than the number of shares it has indicated it is willing to
purchase, it shall not be required to purchase such shares; rather
such additional shares shall be reallocated in accordance with the
above formula among the other Secondary Offerees who have subscribed
for a Secondary
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Available Undersubscription Amount. All amounts determined by the
formula set forth in this Article 28.4 shall be subject to rounding by
the Board of the Company to the extent it reasonably deems necessary.
28.5 PERMITTED SALES OF REFUSED SECURITIES. In the event that the amount of
the Offered Securities the Primary Offerees and the Secondary Offerees
elect to purchase does not equal or exceed the total amount of the
Offered Securities, Seller shall have one hundred twenty (120) days
from the expiration of the Secondary Right Period to sell, subject to
Article 7, all or any part of the Offered Securities for which a
Primary Exercise Notice or a Secondary Exercise Notice has not been
given (the "REFUSED SECURITIES") to the Proposed Transferee at the
same price and on the same terms as those set forth in the Primary
Right.
28.6 CLOSING. The Primary and Secondary Offerees shall purchase the amount
of Offered Securities specified in each respective Exercise Notice,
upon the terms and conditions specified in the Primary Right, promptly
following delivery of the Secondary Exercise Notice, provided,
however, that the consummation of such purchase shall be subject to
the preparation, execution and delivery of a purchase agreement
reasonably satisfactory to the Primary and Secondary Offerees, as the
case may be, and their respective counsel. The term "ACCEPTING
SHAREHOLDERS" shall refer to the Primary and Secondary Offerees who
deliver an Exercise Notice. In addition, Seller shall promptly remit
to each Accepting Shareholder that portion of the sale proceeds to
which Accepting Shareholder is entitled by reason of its participation
in the sale to the Proposed Transferee pursuant to Article 7.
28.7 FURTHER SALE. Any Offered Securities not purchased by the Primary or
Secondary Offerees or the Proposed Transferee in accordance with this
Article 28 may not be sold or otherwise disposed of until they are
again offered in accordance with this Article 28.
28.8 Subject to these Articles, nothing in this Article 28 shall be
construed as limiting the right of a shareholder to transfer any of
its shares separately from its Warrants.
29. The Seller shall be bound, upon payment of the offer price to transfer the
shares which have been allocated to the Accepting Shareholders pursuant to
the above paragraphs, to such Accepting Shareholders. If, after becoming so
bound, the Seller makes default in transferring the shares, the Company may
receive the purchase money and the Seller shall be deemed to have appointed
any one Director of the Company as his agent to execute a transfer of the
shares to the Accepting Shareholders and, upon execution of such transfer,
the Company shall hold the purchase money in trust for the Seller. The
receipt by the Company of the purchase money shall be a good discharge to
each transferee and, after his name has been
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entered in the Register, the validity of the proceedings shall not be
questioned by any person.
30. RESTRICTIONS ON TRANSFER. The holder of each certificate representing
Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Article 30. Subject to Article 32
hereof, any sale, assignment or any other transfer of securities by the
Seller (as defined in Article 28) shall be null and void and the transferee
of such a sale shall not be recognized by the Company as the holder or
owner of the securities sold, assigned or transferred for any purpose
(including, without limitation, voting or dividend rights)
(a) unless and until the Seller has provided the Company with written
evidence that the requirements of Articles 7 and 28, if applicable,
have been met or waived; and
(b) if there is no registration statement under the United States
securities act(s) covering the proposed transfer, and, if reasonably
requested by the Company, unless and until the Seller provides, at
Seller's expense, a written opinion of legal counsel who shall be, and
whose legal opinion shall be, reasonably satisfactory to the Company
addressed to the Company, to the effect that the proposed transfer of
the Restricted Securities (carrying the meaning commonly ascribed to
such term pursuant United States securities laws) may be effected
without registration under the applicable securities laws; and
(c) unless such assignment or transfer does not subject the Company to the
prospectus requirements of the Israeli securities laws, and
(d) unless and until the Seller provides to the Company documents, in form
and substance satisfactory to the Company evidencing the agreement by
the Permitted Transferee (as defined in Article 32.1 below) to be
bound by the provisions of the Rights Agreement.
31. No member shall transfer the beneficial ownership of any share registered
in its name in any way other than pursuant to the provisions of these
Articles.
32. PERMITTED TRANSFERS
32.1 The Seller may transfer its Ordinary or Preferred Shares to the
following transferees (each a "PERMITTED TRANSFEREE") without having
to comply with Articles 7 and 28 hereof: (i) the Seller's spouse,
lineal descendant or antecedent, brother or sister, (ii) an entity
controlled by or controlling the Seller, or controlled by the
shareholders of the Seller (provided that if such entity does not
remain so controlled or controlling, such shares shall be transferred
back to the original shareholder or to another such entity), (iii) as
to
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any Seller which is a partnership, in addition to (ii) above, the
Seller may transfer to the Seller's partners and to affiliated
partnerships managed by the same management company or the same
managing general partner as the Seller. No subsequent transfer of any
of such shares may be made except in conformity with the provisions of
Articles 7 and 28, as applicable, provided, however, that no such
transfer shall be made to any transferee, unless such transferee
agrees in writing to be bound by all agreements binding upon the
shareholders immediately prior to such transfer.
32.2 SALES BY KEY MANAGEMENT
No member of Key Management shall sell, assign, transfer, pledge,
hypothecate, mortgage or dispose of, by gift or otherwise, or in any
way encumber the Restricted Shares (as defined below) prior to the
earlier of (i) the closing of a Qualified IPO, (ii) the termination by
the Company of the employment of such member of Key Management (the
"EMPLOYEE") other than for (x) Employee's gross negligence in the
performance of his duties under his employment relationship,
intentional non-performance or misperformance of such duties, (y) the
Employee's conviction of a felony or other crime involving moral
turpitude; or (z) the Employee's abuse of alcohol or drugs (legal or
illegal) that materially impairs the Employee's ability to perform his
duties, (iii) any material reduction of the Employee's duties or
responsibilities or any reduction whether material or not, in the
Employee's title relative to the Employee's duties, responsibilities
of title as in effect immediately prior to such reduction except if
such Employee agrees in writing or (iv) June 9, 2000. The "RESTRICTED
SHARES" shall mean (i) with respect to the Founders, shares in the
share capital of the Company of any class or series now owned or
hereafter acquired by the Founders (excluding Series C Preferred
Shares and Series B Preferred Shares and Conversion Shares), that
constitute more than 20% of each of the Founder's respective
shareholding in the Company as of September 30, 1998; (ii) with
respect to Eric Gries, shares that constitute more than 20% of the
shares issuable upon exercise of the vested portion (excluding the
Series C-1 Preferred Shares, Series B-1 Preferred Shares and
Conversion Shares) of the options granted to Eric Gries as of
September 30, 1998. The provisions of Article 7 and 28, if applicable,
shall apply only to the sale of Restricted Shares under Article 32.2.
32.3 Termination. The rights set forth in Articles 7, 28 and 32 shall
terminate upon the earlier of: (i) with respect to the Preferred
Shareholders or Key Management, such time as the Preferred
Shareholders or member of Key Management no longer owns any
securities; (ii) the closing of a Qualified IPO; (iii) such time as
the Company becomes subject to the reporting obligations of section 13
or 15(d) of the United States Securities and Exchange Act of 1934, as
amended; or (iv) the occurrence of the merger or consolidation of the
Company into or the sale of all or substantially all of the Company's
assets to another corporation, unless the shareholders of the Company
shall retain
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effective control over such other corporation immediately after such
merger, consolidation or sale.
33. INTENTIONALLY DELETED.
34. CERTAIN TRANSFERS
Subject to Article 65.1, and the provisions of the Companies Law, in the
event that any person or entity makes an offer to purchase all of the
issued and outstanding share capital of the Company or to merge the Company
into another entity, and all the shareholders holding more than 75% of the
Ordinary Shares and the Preferred Shares, voting together on an as
converted basis (excluding the Series C-2 Non-voting Preferred Shares, the
Series B-2 Non-voting Preferred Shares and the Non-voting Ordinary Shares)
indicate their acceptance of such offer, and such offer is approved by a
majority of the Board, then, at the closing of such offered purchase of all
the issued and outstanding share capital of the Company or merger, all of
the holders of Ordinary Shares and Preferred Shares in the Company will
transfer such Ordinary Shares or Preferred Shares to such person or entity;
provided, however, that the consideration for all of the Company's shares
shall in any event be allocated among the members in accordance with these
Articles.
35. Save as provided in these Articles, it shall be obligatory for the Board to
register any written transfer of shares made pursuant to and permitted by
the provisions of Articles 7, 28, 32 and 34, and subject to provisions of
the Companies Law it shall also be obligatory for the Board to refuse to
register any transfer not so made and permitted. The Board shall also
refuse to register any instrument or transfer of shares if it does not
comply with any of the following:
35.1 it is duly stamped, is lodged at the Office or at such other place as
the Board may appoint and is accompanied by the certificate of the
shares to which it relates, and such other evidence as the Board may
reasonably require to show the rights of the transferor to make the
transfer; and
35.2 the transferee submitted to the Board and to each of the Preferred
Shareholders and to the Key Management, written notice in which such
transferee takes upon itself, all of the rights, obligations and
duties set forth in the Rights Agreement, herein and in any other
obligation of the Seller intended to be applicable as of the transfer
date.
36. If the Board refuses to register a transfer, it shall, within 2 (two) weeks
after the date on which the transfer was lodged with the Company, send to
the transferee notice of its refusal.
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37. The registration of transfers of shares or of any class of shares may be
suspended and the Register closed at such times and for such periods as the
Board may from time to time determine, provided that it shall not be closed
for more than 30 (thirty) days in any year.
TRANSMISSION OF SHARES
38. Subject to the provisions set forth herein, in the case of the death of a
member, the survivor, where the deceased was a joint holder, and the legal
personal representatives of the deceased, where he was a sole holder, shall
be the only persons recognized by the Company as having any title to his
shares; but nothing herein contained shall release the estate of a deceased
joint holder from any liability in respect of any share which has been
jointly held by him with other persons.
39. Any person becoming entitled to shares in consequence of the death or
bankruptcy or liquidation of a member and who is not a Permitted Transferee
thereof, must within 3 (three) months of being so entitled produce such
evidence of his title as the Board may require. The person must within the
said three month period serve upon the Board a transfer notice under
Article 28 in relation to the shares and such Article shall bind him as if
he were a member holding such shares. In the event of such person not
serving such a transfer notice with the said period he shall, upon expiry
of such period be automatically deemed to have served a transfer notice and
to have fixed the offer price of the shares at such price as the Auditors
for this purpose, at the expense of the said person, report to be the fair
value thereof as at the end of the month in which such death, liquidation
bankruptcy occurred. A transfer notice served or deemed served pursuant to
this Article shall not be revocable in any circumstances whatsoever.
Subject to the above, all provisions of the Article titled "TRANSFER OF
SHARES" shall, MUTATIS MUTANDIS, apply to this Article. In the event that
no shareholder offers to purchase such shares the shares shall be
registered in the name of the entitled party.
40. A person becoming entitled to shares as a consequence of the death,
bankruptcy or liquidation of a member shall, subject to the requirement of
Article 39, be entitled to receive, and may give a discharge for all
dividends and other monies payable in respect to such shares, but he shall
not be entitled to receive notice of or attend or vote at meetings of the
Company or to any of the rights or privileges of a member, until his name
is entered into the Company's register of members in accordance with the
provisions of Article 39 above.
41. INTENTIONALLY DELETED.
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42. INTENTIONALLY DELETED.
43. INTENTIONALLY DELETED.
44. INTENTIONALLY DELETED.
ALTERATION OF CAPITAL
45.
45.1 Subject to Article 65, the Company may from time to time by a
special resolution of the shareholders or at such time as the
Companies Law may be in effect such form of resolution as may be
permitted under the Companies Law, whether all the shares being
authorized shall have been issued or not or all the shares for the
time being shall have been fully called up or not, increase its
share capital by the creation of new shares, such new capital to
be of such amount and to be divided into shares of such respective
amounts and, subject to any special rights for the time being
attached to any existing class of shares, to carry such
preferential, deferred or other special rights, if any, or to be
subject to such conditions and restrictions, if any, in regard to
dividends, return of capital, voting or otherwise as the General
Meeting of the shareholders resolving such increase so directs.
45.2 INTENTIONALLY DELETED.
45.3 The new shares shall be subject to the same provisions with
reference to the payment of calls, lien, transfer, transmission,
forfeiture and otherwise as the shares in the original capital.
46. Subject to the provisions of Article 65, the Company may from time to
time:
46.1 Consolidate and divide all or any of its share capital into shares
of larger amount than its existing shares and authorize the Board
to make such provisions as the Board thinks fit for the case of
any fractions arising in the course of such consolidation and
division, but so that the Board shall not be permitted to provide
for the sale of shares representing fractions except on terms that
the net proceeds are distributed among the members in respect of
whose shares the fractions arise;
46.2 Sub-divide its shares, or any of them, into shares of smaller
amount than is fixed by the Memorandum of Association subject to
the provisions of the the Companies Law;
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46.3 Cancel any shares which, at the date of the passing of the
resolution, have not been taken, or agreed to be taken, by any
person, and diminish the amount of its share capital in any manner
and subject to any incident authorized and consent required by
law.
47. INTENTIONALLY DELETED.
48. INTENTIONALLY DELETED.
REDEEMABLE SHARES
49.
49.1 Subject to the provisions of Article 65 and the Companies Law, the
Company may issue redeemable securities and convert shares of the
Company as it sees fit, into redeemable shares, and may redeem
such redeemable securities or redeemable shares.
49.2 Subject to the provisions of Article 65, the Board shall determine
from time to time which redeemable shares or redeemable securities
shall be redeemed and it shall thereupon give 15 (fifteen) days'
prior written notice to the holders of such redeemable preferred
shares, such notice to include place, time and conditions of
redemption.
MEETINGS OF MEMBERS: CONVENING OF GENERAL MEETINGS
50. The Company shall not be obligated to hold an annual general meeting
of its shareholders except to the extent it is necessary in order to
appoint an Auditor.
51. All general meetings of the shareholders other than annual general
meetings of the shareholders shall be called extraordinary or special
meetings of the shareholders.
52. The Board may call an extraordinary general meeting of the shareholders
whenever it thinks fit, and, on the requisition of members of the Board
or other persons and entities entitled to do so in accordance with the
provisions of the Companies Law it shall forthwith convene an
extraordinary meeting of the shareholders. Whenever the Board shall
convene an extraordinary meeting of the shareholders on the requisition
of members, it shall convene such meeting for a date not later than
ninety days after
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the receipt of such requisition unless the requisitionists shall consent
in writing to a later date being fixed.
NOTICE OF GENERAL MEETINGS
53. Subject to the provisions of the Companies Law, at least 7 (seven)
days prior notice shall be given in a manner provided by these Articles
to such members as are, under the provisions of these Articles, entitled
to receive notices from the Company.
54.
54.1 Every notice of meeting shall specify the place, the day and
the hour of meeting, and, in the case of special business, the
general nature of such business. Every notice convening an annual
general meeting of the shareholders shall specify the meetings as
such. Every notice of meeting shall state with reasonable
prominence that a member entitled to attend and vote is entitled
to appoint a proxy to attend and on a poll to vote thereat instead
of him and that a proxy need not be a member.
54.2 It shall not be necessary to give the full text of a proposed
resolution in such notice, as mentioned in Sub-article 54.1 above,
and it shall be sufficient to state generally the content of such
proposed resolution. It is hereby expressly provided that if all
members entitled to attend and vote at the general meeting of the
Company agree to waive the above requirements regarding notice,
general meetings may be held and all kind of resolutions proposed
and passed by them without any notice having been given or with a
shorter notice being given than required by the law or this
Article in respect of such general meeting.
54.3 The accidental omission to give notice of any meeting, or to send
a form of proxy with a notice where required by these Articles, to
any person entitled to receive the same, or the non-receipt of a
notice of meeting or form of proxy by such a person, shall not
invalidate the proceedings at the meeting, if the notice has been
duly sent to such member of the Company.
PROCEEDINGS AT GENERAL MEETINGS
55. INTENTIONALLY DELETED.
56. No business shall be transacted at any general meeting of the
shareholders unless a quorum is present when the meeting proceeds to
business. Subject to Article 65, two members present in person or in
proxy, together holding more than 51% (fifty
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one percent) in nominal amount of the issued share capital of the Company
conferring a right to vote, and entitled to vote shall be a quorum for
all purposes. A corporation being a member shall be deemed to be
personally present for the purpose of this Article if represented by its
representative duly authorized in accordance with Article 73.
57. Members entitled to be present and vote at a General Meeting of the
Shareholders may participate in a General Meeting of the shareholders by
means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each
other, and such participation in a meeting shall constitute attendance in
person at the meeting, provided confirmation in writing by each such
participant be forwarded to the Company at any reasonable time after such
meeting.
58. The Chairman or in his absence any other person nominated for the
purpose by the Board, shall preside at every general meeting of the
Company. If there is no such chairman or other person, or if at any
meeting neither the Chairman nor the other person is present within 15
(fifteen) minutes after the time fixed for holding the meeting or is
willing to act as chairman of the meeting, the Directors present shall
choose one of themselves or if no Director is present, or if all the
Directors present decline to take the chair, the members present shall
choose one of themselves to be chairman of the meeting. The chairman of
the meeting shall have no second or casting vote.
59. If within one hour, or such longer time as the Chairman or the
chairman of the meeting may determine, from the time fixed for the
meeting, a quorum is not present, the meeting, shall if convened on the
requisition of members, shall be dissolved. In any other case it shall
stand adjourned to such day and to such time, and place, as may be fixed
by the chairman of the meeting.
60. The chairman of a meeting at which a quorum is present may with the
consent of the meeting, and shall if so directed by the meeting, adjourn
the meeting from time to time and from place to place. No business shall
be transacted at any adjourned meeting except business left unfinished at
the meeting from which the adjournment took place. When a meeting is
adjourned for 10 (ten) days or more for an indefinite period, notice of
the adjourned meeting shall be given in like manner as in the case of the
original meeting; but it shall not otherwise be necessary to give any
notice of an adjournment or of the business to be transacted at an
adjourned meeting.
61.
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61.1 At any General Meeting of the Shareholders a resolution put to the
vote of the meeting shall be decided on a show of hands unless,
before or on the declaration of the result of the show of hands, a
poll is demanded:
61.1.1. by the chairman of the meeting; or
61.1.2. by at least one member present in person or by proxy and
entitled to vote.
61.2 Unless a poll is so demanded, the minutes of the proceedings of
the general meeting of the shareholders signed by the chairman of
such meeting, stating that a resolution has been carried, or
carried unanimously, or by a particular majority, or lost, and an
entry to that effect in the minute book of the Company, shall be
conclusive evidence of the fact, without proof of the number or
proportion of the votes recorded in favor of or against such
resolution.
61.3 If a poll is duly demanded, it shall be taken in such manner as
the chairman of the meeting may direct. The result of a poll shall
be deemed to be the resolution of the meeting at which the poll
was demanded.
62. A poll demanded on the election of the chairman of a meeting or on a
question of adjournment shall be taken forthwith. A poll demanded on any
other question shall be taken at such time and place as the chairman of
the meeting directs, but in any case not more than 28 (twenty-eight) days
after the meeting at which the poll was demanded. Any business other than
that upon which a poll was demanded may be proceeded with pending the
completion of the poll. The demand for a poll may be withdrawn at any
time before the conclusion of the meeting; but, if a demand is withdrawn,
the chairman of the meeting or other members entitled may himself or
themselves demand a poll.
63. In the case of an equality of votes whether on a show of hands or on
a poll, the chairman of the meeting at which the show of hands took place
or at which the poll is demanded shall not be entitled to a further or
casting vote in addition to the votes to which he may be entitled as a
member or as a representative or proxy of a member. In such a case the
vote will be treated as if it was rejected.
64.
64.1 Notwithstanding anything to the contrary in these Articles, a
resolution in writing signed by or on behalf of all persons for
the time being entitled to receive notice of, to attend and to
vote at general meetings of the Company or their proxies shall,
for the purposes of these Articles and the Companies Law,
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be treated as a resolution duly passed at a duly convened and
constituted general meeting of the Company. A facsimile message or
electronic mail message or telecopy addressed to any member,
setting forth the text of a resolution and approved by the
addressee in reply facsimile or electronic mail message or
telecopy, which expressly identifies the telex or electronic mail
message or telecopy to which it is a reply, shall be deemed a
writing signed by such member for the purposes of this Article.
64.2 Any such resolution shall be deemed to have been passed at a
meeting held on the date on which it was signed by the last member
to sign, and where the resolution states a date being the date of
his signature thereof by any member the statement shall be prima
facie evidence that it was signed by him on that date.
64.3 This Article shall not be construed as requiring that persons
signing a resolution under this Article shall sign the same
document containing the resolution; but where 2 (two) or more
documents are used for the purpose of obtaining signatures under
this Article in respect of any resolution, each such document
shall be certified in advance by the Chairman to contain the
correct version of the proposed resolution.
65. MAJOR DECISIONS
65.1 Notwithstanding anything herein to the contrary, prior to a
Qualified IPO, for so long as at least 50% of the Series D
Preferred Shares or 50% of the Series C-1 Preferred Shares or 50%
of the Series B-1 Preferred Shares or 50% of the Series A
Preferred Shares remain issued and outstanding, all of the
following decisions of the Company, except for the conversion or
reclassification detailed in Sub-article 6.2 above, will be
brought to the shareholders of the Company for approval by: (x)
for sub-article 65.1(i) the holders of at-least 51% of each series
of Preferred Shares affected by the amendment voting as a separate
class; or (y) for sub-articles 65.1(ii) through 65.1(xi), the
holders of at-least 51% of each of the Series A Preferred Shares,
the Series B-1 Preferred Shares, and the Series C-1 Preferred
Shares with each series voting as a separate class:
(i) adopt any amendment to the Memorandum or Articles of
Association of the Company or any other action which would
have the effect of amending the specific rights,
preferences or privileges of the Preferred Shares; (other
than an action taken pursuant to the provisions of
Sub-article 6.2 above);
(ii) increase the authorized number of Preferred Shares or of
any class or series thereof;
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(iii) create any new class or series of shares (including rights,
options or warrants) having rights, preferences or
privileges on a parity with the Series A Preferred Shares
or the Series B-1 Preferred Shares or the Series C-1
Preferred Shares, or enter into any contract or grant any
option for the issue of any such securities, except for
issuance of securities (i) issued in consideration for at
least ten million U.S. Dollars ($10,000,000) at a pre-money
valuation of the Company of at least one hundred and sixty
million U.S. Dollars ($160,000,000) on terms not more
favorable than those of the Preferred Shares; (ii) to
employees, consultants and service providers of the Company
pursuant to share option plans approved by the Board from
time to time (provided that any such grants in excess of
639,100 shares shall require Board approval which includes
the approval of at least one (1) of the Preferred Shares
Directors, as such term is defined in Article 77 below);
(iv) create any new class or series of shares (including rights,
options or warrants) having rights, preferences or
privileges senior to the Series A Preferred Shares or the
Series B-1 Preferred Shares or the Series C-1 Preferred
Shares, or enter into any contract or grant any option for
the issuance of any such securities;
(v) Subject to the law, liquidate the Company or sell a
majority of the outstanding share capital, or merge with or
consolidate into any corporation, firm or entity,
reorganize, or sell, assign, lease or otherwise dispose of
(whether in one transaction or a series of transactions)
all or substantially all of the Company's assets;
(vi) Subject to the provisions of the Companies Law, approval of
the Board resolution to declare or pay any dividend (other
than a dividend payable only in Ordinary Shares) to any
holder of any class or series of share capital declare or
pay any dividend or other distribution of cash, shares or
other assets, provided however that in any case the
recommendation of the Board may only be approved, denied or
reduced;
(vii) issue or sell shares of the Company in a public offering
other than in a Qualified IPO;
(viii) Subject to the provisions of the Companies Law, purchase,
redeem or otherwise acquire any Company share capital
including without limitation, any redemptions under Article
49 above;
(ix) approve the constitution of the board of directors of any
subsidiary of the Company the composition of which does not
reflect the representation of each class of the Preferred
Shareholders on the Board;
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(x) accept any capital or tax benefits from the State of Israel
which includes restrictions on transferring the assets of
the Company or is otherwise detrimental to the Preferred
Shareholders; or
(xi) issue, sell, transfer or otherwise dispose of any capital
stock of any subsidiary.
65.2 Subject to the provisions of the Companies Law and prior to a
Qualified IPO, for so long as at least 50% of the Series C-1
Preferred Shares or 50% of the Series B-1 Preferred Shares or 50%
of the Series A Preferred Shares remain issued and outstanding,
any of the following decisions may be adopted by the Board only
(i) at a meeting at which a quorum shall be constituted by the
presence of at least one Ordinary Shares Director, the Series A
Preferred Shares Director, the Series B-1 Preferred Shares
Director and the Series C-1 Preferred Director. If such a quorum
is not present, the meeting shall stand adjourned to the same day
on the next week at the same time and place or such other time and
place determined by the majority of the members present. In such
an adjourned meeting the Board subject to at least four Directors
being present with at-least one Preferred Shares Director being
present, may proceed to adopt any of the following decisions
without the presence of a Series A Preferred Shares Director or a
Series B-1 Preferred Shares Director or a Series C-1 Preferred
Shares Director or an Ordinary Shares Director in the event that
(a) such director was absent from a meeting called in accordance
with Article 93 to discuss such decision(s) and (b) such director
received an additional notice in accordance with Article 93 of the
adjourned meeting called to discuss such decision(s):
(i) incur or repay indebtedness in any single transaction of
more than $200,000;
(ii) incur indebtedness exceeding the annual budget by an
aggregate amount of $200,000;
(iii) approve, subject to the prior recommendation of the
compensation committee of the Board and subject to the
affirmative vote of at-least one Preferred Shares Director,
the compensation and terms of employment of any officer,
executive or Director of the Company;
(iv) enter, subject to the affirmative vote of at-least one
Preferred Shares Director, subject to the prior
recommendation of the audit committee, into any interested
or related party transaction or dealing (as contemplated by
the Companies Law) including issuance of any shares or
other convertible securities to the Key Management;
(v) enter into transactions not in the ordinary course of
business of the Company;
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(vi) change the line of business of the Company;
(vii) transfer or license any assets of the Company or any of its
subsidiaries to any person other than a wholly-owned
subsidiary of the Company, except for sales of inventory or
licensing in the ordinary course of business;
65.3 In the event that the authorization of any of the issues specified
in Article 65.2 hereof requires, pursuant to the applicable
provisions of the Companies Law, shareholder approval or
ratification, such shareholder approval or ratification shall be
taken in accordance with the provisions of Article 65.1 hereof.
VOTES OF MEMBERS
66.
66.1 Members may vote either personally or by proxy or, if the member
is a company or cooperation society or any other corporation, by a
duly authorized attorney.
66.2 Subject to the provisions of Article 6.8 hereof and subject to any
terms as to voting upon which any shares may be issued, or may for
the time being be held, every member present in person or by proxy
shall have one vote on a show of hands and on a poll every member
who is present in person or by proxy shall have one vote for every
share of which he is the holder. A proxy need not be a member of
the Company.
67. On a poll votes may be given in person or by proxy.
68. On a poll a member entitled to more than one vote need not, if he votes,
use all his votes or cast all the votes he uses in the same way.
69. In the case of joint holders of a share the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and for this purpose
seniority shall be determined by the order in which the names stand in
the Register.
70. A member incapable by reason of mental disorder of managing and
administering his property and affairs, may vote, whether on a show of
hands or on a poll, by his committee, curator or receiver, or other
person authorized by any court of
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competent jurisdiction to act on his behalf, and such person may on a
poll vote by proxy.
71. No member shall be entitled to vote at any general meeting unless
all calls or other sums presently payable by him in respect of shares in
the Company have been paid.
72. No objection shall be raised to the qualification of any voter
except at the meeting or adjourned meeting or poll at which the vote
objected to is given or tendered, and every vote not disallowed at such
meeting shall be valid for all purposes. Any such objection made in due
time shall be referred to the Chairman of the meeting, whose decision
shall be final and conclusive.
73.
73.1 Proxy forms shall be sent by the Company to all persons
entitled to notice of and to attend and vote at any meeting, and
such proxy forms shall provide for two-way voting on all
resolutions to be proposed at that meeting other than resolutions
relating to the procedure of the meeting. The instrument of proxy
shall be in writing under the hand of the appointor or his
attorney, or, if such appointor is a corporation, under the hand
of a duly authorized Office Holder or attorney of such
corporation, but the execution of such instrument need not be
attested. Members are entitled to appoint as proxy any person or
corporation whether such person or corporation is entitled on his
or its behalf to be present and to vote at the meeting or not.
73.2 Any corporation which is a member of the Company may, by
resolution of its Board or other governing body authorize such
person as it thinks fit to act as its representative at any
meeting of the Company or of any class of members of the Company,
and the person so authorized shall be entitled to exercise the
same powers on behalf of the corporation which he represents as
that corporation could exercise if it were an individual member of
the Company, including the right to demand a poll or a vote on a
poll on behalf of the appointor.
73.3 The ordinary form of proxy shall be as follows:
XACCT TECHNOLOGIES (1997) LTD.
I _________________ of ______________ being a holder of __________
Voting Ordinary Shares/Series A Preferred Shares/Series B-1
Preferred Shares/Series C-1 Preferred Shares/Series D Preferred
Shares of XACCT Technologies (1997) Ltd., hereby appoint
________________ of
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_________________ as my proxy to vote for me and on my behalf at
the, ordinary or extraordinary, as the case may be, General
Meeting of the Company to be held on the ____ day of
______________ and at any adjournment thereof.
Signed this _____ day of _________.
74. The instrument of proxy and the power of attorney or other written
authority, if any, under which it is signed or an office or notarially
certified copy or a copy certified in accordance with the law, of such
power or written authority, shall be deposited at the Office, or at such
other place as shall be specified in the notice of meeting or any proxy
form or other document accompanying the same, before the time appointed
for holding the meeting or adjourned meeting at which the person named in
the instrument proposes to vote; unless so deposited the instrument of
proxy shall not be treated as valid.
75. A vote given in accordance with the terms of an instrument of proxy
shall be valid, notwithstanding the previous death or incapacity of the
principal, or revocation of the instrument of proxy or of the authority
under which the instrument of proxy was executed, provided that no
intimation in writing of such death, incapacity, or revocation shall have
been received by the Company at the Office, or other place referred to in
the preceding Article, before the commencement of the meeting or
adjourned meeting at which the instrument of proxy is used.
76. A member will be entitled to vote at the Meetings of the Company by
several proxies appointed by him, provided that each proxy shall be
appointed with respect to different shares held by the appointing member.
Every proxy so appointed on behalf of the same member shall be entitled
to vote as he sees fit.
NUMBER, APPOINTMENT AND REMOVAL OF DIRECTORS
77. The Company's Board shall be composed of up to seven (7) directors, out
of whom: one (1) Director (the "SERIES A PREFERRED SHARES DIRECTOR")
shall be designated by written notice to the Company by the holders of
the majority of the Series A Preferred Shares (including all Voting
Ordinary Shares received upon conversion or reclassification of Series A
Preferred Shares) except as set forth below, and shall be nominated in
writing by Ampal (as defined below); one (1) Director (the "SERIES B-1
PREFERRED SHARES DIRECTOR") shall be designated by written notice to the
Company by the holders of the majority of the Series B-1 Preferred Shares
(including all Voting Ordinary Shares received upon conversion or
reclassification of the Series B Preferred Shares and upon the conversion
or reclassification of the Non-voting Ordinary Shares) and nominated in
writing by Trident Capital
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Management-II, LLC; subject to the right of TCV III (Q), L.P. and
entities affiliated therewith ("TCV") set forth below one (1) Director
(the "SERIES C-1 PREFERRED SHARES DIRECTOR") shall be designated by
written notice to the Company by the holders of the majority of the
Series C-1 Preferred Shares (including all Voting Ordinary Shares
received upon conversion or reclassification of the Series C Preferred
Shares and upon the conversion or reclassification of the Non-voting
Ordinary Shares) and nominated in writing by TCV; and two (2) Directors
(the "ORDINARY SHARES DIRECTORS") shall be designated by written notice
to the Company by the holders, from time to time, of a majority of the
Voting Ordinary Shares (but excluding Voting Ordinary Shares received
upon conversion or reclassification of the Preferred Shares and upon the
conversion or reclassification of the Non-voting Ordinary Shares); in
addition, and subject to the consent in writing by the holders of the
majority of each class of shares (excluding holders of Series B-2
Non-voting Preferred Shares, the Series C-2 Non-voting Preferred Shares
and Non-voting Ordinary Shares), the Chief Executive Officer of the
Company (the "CEO"), shall serve as Director ex officio for so long as he
is CEO of the Company. The seventh Director, who shall be an industry
expert (the "ADDITIONAL DIRECTOR") shall be appointed by the majority of
the Board. Except as specifically stated in this Article 77, any vacancy
on the Board may only be filled by the holders of the class of shares or
member(s) that had the right to appoint the previous incumbent of such
vacancy. Notwithstanding the above said, for so long as the Company has
not received written notice to the contrary from Ampal-American Israel
Corporation or its representatives ("Ampal"), Ampal shall be entitled to
appoint one Series A Preferred Shares Director for so long as it is a
Series A Preferred Shareholder of the Company or holds, on an as
converted basis 4 (four) per cent or more of the issued and outstanding
share capital of the Company. Notwithstanding the above said, for so long
as the Company has not received written notice to the contrary from TCV
or its representatives, TCV shall be entitled to appoint and designate
the Series C-1 Preferred Shares Director for so long as TCV holds at
least 1,315,832 Series C Preferred Shares of the Company (as may be
adjusted in the event of a Recapitalization Event.
Notwithstanding the above said, the Founders shall be entitled to appoint
either Eran Wagner or Limor Schweitzer as one of the Ordinary Shares
Directors (the "FOUNDER APPOINTEE") for so long as (i) the Founders
collectively hold 5 (five) percent or more of the issued and outstanding
share capital of the Company, on an as converted basis, and not more than
50 (fifty) percent or more of the issued and outstanding Ordinary Shares,
and (ii) the Company has not received written notice to the contrary from
the Founders or their representatives; provided that if neither Founder
is employed by the Company, then the holders of a majority of the
Preferred Shares (excluding the Series B-2 Non-voting Preferred Shares
and the Series C-2 Non-voting Preferred Shares) may, by written notice,
veto the appointment of one Founder, in which case the Founder Appointee
shall be the other Founder.
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In addition to the Series A Preferred Shares Director, Series B-1
Preferred Shares Director and the Series C-1 Preferred Shares Director,
one authorized representative ("OBSERVER") of each of (i) Trident Capital
Management-II, L.L.C. and affiliated entities (collectively, "TRIDENT"),
(ii) Eucalyptus Venture Management L.L.C. and affiliated entities
(collectively "EUCALYPTUS"), (iii) Israel Seed Limited Partnership and
affiliated entities ("ISRAEL SEED"), (iv) subject to the Management
Rights Agreement, TCV, and (v) Deutsche Bank AG and/or affiliated
entities ("DB"), shall be entitled to receive notice of and attend all
meetings of the Board in a non-voting observer capacity, at its own
expense; provided that the Company reserves the right to withhold any
information from or to exclude any Observer(s) if the Company in
consultation with the Board, in its reasonable discretion, determines
that: (i) the sensitivity or confidentiality concerns relating to the
subject or matter specifically being discussed either in the meeting or
in writing makes it advisable to exclude such Observer(s) or exclude the
provision of information to such Observer(s) due to a risk of a conflict
of interest for such Observer(s) so excluded, (ii) the disclosure of such
information or attendance by such Observers on specifically designated
issues or matters could adversely affect the attorney-client privilege
between the Company and its counsel or (iii) the law would exclude an
officer or director in such circumstances. Each Observer shall have a
duty to advise the Board in the event of any issue with respect to which
such Observer has or may have a conflict of interest at the earliest
possible time but not later than the beginning of the first meeting of
the Board in which such issue is discussed or expected to be discussed.
Trident, Eucalyptus, Israel Seed, TCV, DB and the Observers shall
maintain the confidentiality of all financial, confidential and
proprietary information obtained by them and shall not make available any
information provided by the Company to any competitor or customer of, or
vendor to the Company or any affiliate or associate of such entity. For
the avoidance of doubt the Observers shall not be liable toward a party
hereto as to any action or inaction of the Board.
Subject to the above said, each Observer shall be entitled to receive all
notices, written documents and materials provided to Directors and to
attend and participate in all meetings of the Board. The Observers shall
not be entitled to vote.
The rights to the Series A Preferred Shares Director (including the
Director appointed by Ampal), the Series B-1 Preferred Shares Director,
the Series C-1 Preferred Shares Director (including the Director
appointed by TCV), the Ordinary Shares Directors (including the Founder
Appointee) and the Observers shall each terminate upon a Qualified IPO.
78. The Directors shall not be required to hold any shares in the Company to
qualify them for their office as Directors.
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79. The Board shall not be entitled to delegate any of its rights
without the prior approval of all the Directors, provided however that
the Board may delegate rights pursuant to Article 88.
80. The office of a Director shall be vacated in any of the following events,
namely:
80.1 if he resigns his office by notice in writing to the Company;
80.2 if he becomes bankrupt or makes any arrangement or composition
with his creditors generally;
80.3 if he becomes incapable by reason of mental disorder of
discharging his duties as a Director;
80.4 if pursuant to any provision of the Companies Law he is removed or
prohibited from being a Director;
80.5 if the member who appointed him a director pursuant to Article 81
ceases to be a member.
80.6 if the member or class or series of shareholders or body who
elected him a Director pursuant to Article 81 terminates his
appointment. The appointment of the Director nominated or elected
by a class or by a member or by a body can only be terminated or
vacated by such class or member or body.
81. The appointment and removal of a Director or Substitute Director (as
defined in the Companies Law) shall become valid at the date specified in
the written instrument, which date shall not be prior to delivery of the
instrument to the Company.
82. If any member of the Board is not appointed, or if the office of a
member of the Board is vacated, the continuing members of the Board may,
as long as their number does not fall below the quorum, act in every
matter. If the number of the Directors falls below the quorum, they shall
not act except in emergency.
REMUNERATION OF DIRECTORS
83. Subject to Article 65 and the provisions of the Companies law, the
Directors shall be paid out of the funds of the Company by way of
remuneration for their services such sums as the Company may from time to
time determine. Such remuneration shall be divided among them in such
proportion and manner as the Directors may determine. Subject as
aforesaid, a Director holding office for part only of a year shall be
entitled to a proportionate part of a full year's remuneration. The
Directors
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shall also be entitled to be repaid by the Company all such reasonable
traveling, including hotel and incidental, expenses as they may incur in
attending meetings of the Board, or of committees of the Board, or
general meetings, or which they may otherwise properly incur in or about
the business of the Company.
84. Any Director who by request of the Board performs special services
or goes or resides abroad for any purposes of the Company may be paid
such extra remuneration by way of salary, percentage of profits or
otherwise as the Board may determine and subject to the provisions of the
Companies Law.
POWERS OF DIRECTORS
85. Subject to the provisions of Article 65, the business of the Company
shall be managed by the Board, and the Board may exercise all such powers
of the Company as are not, by the Companies Law or by these Articles,
required to be exercised by the Company in General Meetings of the
Shareholders, subject nevertheless to any regulation of these Articles to
the provisions of the Companies Law and to such regulations and
provisions, as may be prescribed by the Company in a General Meeting of
the Shareholders.
86. The Board may from time to time by power of attorney appoint any
company, firm or person, or any fluctuating body of persons, whether
nominated directly or indirectly by the Board, to be the attorney or
attorneys of the Company for such purposes and with such powers,
authorities and discretion, not exceeding those vested in or exercisable
by the Board under these Articles, and for such period and subject to
such conditions as it may think fit. Any such power of attorney may
contain such provisions for the protection or convenience of persons
dealing with any such attorney as the Board may think fit and may also
authorize any such attorney to sub-delegate all or any of the powers,
authorities and discretions vested in him.
87. The Board may appoint any person or persons to accept and hold in
trust for the Company any shares or interest in other companies or
association in which the Company may be interested and generally any or
such of the property, rights and funds of any description whatsoever of
the Company, as the Directors may deem desirable.
88. Subject to Article 79 and the provisions of Section 112 (a) of the
Companies Law, the Board may delegate any of its powers to committees
consisting of not more than 4 (four) Directors, as long as the committee
is composed of at least two Preferred Shares Directors whose identity
shall be determined by the Board. The
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Board may, from time to time, revoke such delegation. The minimum necessary
initial quorum for any committee meeting shall be at least three committee
members of which at least two are Preferred Shares Directors. However, any
committee subject to at least two Directors being present, of which at-least one
is Preferred Shares Director, may proceed to adopt any resolution in a second
committee meeting held without a Series A Preferred Shares Director or a Series
B-1 Preferred Shares Director or a Series C-1 Preferred Shares Director or an
Ordinary Shares Director in the event that (a) such Director was absent from a
second meeting called in accordance with Article 93 to discuss such decision(s)
and (b) such Director received an additional notice in accordance with Article
93 of the second meeting called to discuss such decision(s). Any committee so
formed shall, in the exercise of the powers so delegated, conform to any
regulations that may be imposed on it by the Board and subject thereto shall be
governed by the provisions of these Articles regulating the proceedings and
meetings of the Board.
BORROWING POWERS
89.
89.1 Subject to the provisions of Article 65, the Board may exercise all
the powers of the Company to borrow money, and to mortgage or charge
its undertaking, property and uncalled capital and to issue debentures
and other securities, whether outright or as collateral security, for
any debt, liability or obligation of the Company or of any third
party.
89.2 The Board may for the purpose of securing payment of any such bonds or
debentures or other securities as aforesaid, or the payment of
interest on any moneys so borrowed as aforesaid, or payable under any
contract or otherwise, make and carry into effect any arrangement
which they may deem expedient, by assigning or conveying any property
of the Company, including its uncalled capital, to trustees.
CHIEF EXECUTIVE OFFICER, PRESIDENT AND MANAGING
DIRECTORS
90. Subject to Article 65, the Board may appoint one of its body to be a Chief
Executive Officer (CEO) and/or President, and one or more of its body to be
Managing Directors for the Company, either for a fixed term or without any
limitation as to the period for which he or they is or are to hold office,
and may from time to time (subject to any provisions of any contract
between him or them and the Company) remove or dismiss him or them from
office and appoint another or others in his or their place or places.
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91. The compensation of the CEO and/or President for his services as such shall
be determined by the Board (subject to the provisions of Article 65 and any
provisions of any contract between him or them and the Company), and may be
of any description and, without limiting the generality of the foregoing,
may include admission to or continuance of membership of any scheme or fund
instituted or established or financed or contributed to by the Company for
the provision of pensions, life assurance or other benefits for employees
or their dependents, or the payment of a pension or other benefits to him
or his dependents on or after retirement or death, apart from membership of
any such scheme or fund.
92. Subject to the provisions of Section 92(b) of the Companies Law and of
Article 79 above, the Board may entrust to and confer upon its CEO and/or
President any of the powers exercisable by it upon such terms and
conditions and with such restrictions as it thinks fit, either collaterally
with or to the exclusion of its own powers, and may from time to time
revoke, withdraw, or vary all or any of such powers.
PROCEEDINGS OF THE BOARD
93. Subject to the provisions of Article 65, the Board may meet for the
dispatch of business, adjourn and otherwise regulate its meetings as it
thinks fit. Questions arising at any meeting shall be determined upon a
majority vote. All the Directors in attendance at a meeting of the Board
who have been appointed by the same member shall have one vote per Director
and unless all such Directors agree their votes shall be deemed to have
been cast against any resolution proposed. In case of equality of votes the
Chairman shall not have a second or casting vote. Any Director may call a
meeting of the Board provided proper written notice is given at least five
business days prior thereto to all the Board. The meetings of the Board of
the Company shall be held in such place as determined by the majority of
the Preferred Shares Directors.
94. The Chairman may at any time convene a meeting of the Board and must
convene it at any time if required to do so by any member of the Board,
provided at-least five prior business days written notice is given to each
of the other members of the Board. The Chairman shall also convene a
meeting of the Board in any of the circumstances contemplated in Section 98
of the Companies Law in accordance therewith.
95. Subject to the provisions of Article 102 hereunder, in any case the quorum
necessary for the transaction of the business of the Board shall be 4
(four) Directors, comprised of at-least two Preferred Shares Directors and
at least 1 (one) Ordinary Shares Director. If within one (1) hour from the
time appointed for the meeting a
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quorum is not present, the meeting shall stand adjourned to the same day on
the next week, at the same time and place, or to such day and place as
determined by the majority of the Board members present. No business shall
be transacted at any adjourned meeting except business which might lawfully
have been transacted at the meeting as originally called. At such adjourned
meeting, any four (4) Directors present in person or represented by a
Substitute Director shall constitute a quorum. An adjourned meeting may be
held without the two Preferred Shares Directors or an Ordinary Shares
Director in the event that (a) such Director(s) was absent from a meeting
called in accordance with Article 93 and (b) such Director received an
additional notice in accordance with Article 93 of the adjourned meeting
concerning the agenda of the first meeting.
96. For the purpose of determining whether there exists the quorum as is
necessary for the transaction of the business of the Directors, Directors
communicating by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can
hear each other, will be counted in the quorum.
97. The Board may from time to time by a majority vote of its members elect one
of its members to be Chairman of the Board, and another of its members as
deputy Chairman, for initial terms of one year, renewable on an annual
basis for additional one year terms thereafter. The Chairman shall preside
at every meeting of the Board, or if there is no such Chairman or deputy
chairman is appointed, or neither is present within 15 (fifteen) minutes
after the time fixed for holding any meeting, the Directors present may
choose, with the consent of a Director nominated by the Preferred
Shareholders, one of their members to act as Chairman of such meeting.
98. A resolution in writing signed by all the Directors lawfully entitled under
the the Companies Law to vote on such resolution, shall be as valid and
effective as a resolution passed at a meeting of the Board duly convened
and held. Any such resolution in writing may consist of several documents
in like form each signed by one or more of such Directors or in the absence
of a Director by the substitute Director, if any, appointed by him. A
cable, facsimile or telex message sent by a Director or his substitute
shall be deemed to be a document signed by him for the purposes of this
Article.
99. All acts done by any meeting of the Board, or of a committee or
sub-committee of the Board, or by any person acting as a Director of by any
Substitute Director, shall, notwithstanding it be afterwards discovered
that there was some defect in the appointment or continuance in office of
any Director, substitute Director or person acting as aforesaid, or that
they or any of them were disqualified, or had vacated office or were not
entitled to vote, be as valid as if every such person had been duly
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appointed or had duly continued in office and was qualified and had
continued to be a Director or, as the case may be, a substitute Director
and had been entitled to vote.
MINUTES
100. The Board shall cause minutes to be made in books provided for the purpose:
100.1. of all appointments of Office Holders made by the Board;
100.2. of the names of the Directors present at each meeting of the Board
and of any committee of the Board;
100.3. of all resolutions and proceedings at all meetings of the: (i)
members of the Company, (ii) the Board and (iii) committees of the
Board;
100.4. of the names of the members present at each General Meeting;
100.5. of all directions given by the Board to any Committee of the Board;
Any such minutes, if purporting to be signed by the chairman of the meeting
to which they relate or of the meeting at which they are read, shall be
sufficient evidence without any further proof of the facts therein stated.
QUALIFICATION OF DIRECTORS; NOMINATION OF SUBSTITUTE
101. Subject to any provision of the Companies Law, a Director may hold any
other office or place of profit under the Company, other than the office of
Auditor, in conjunction with his office as Director, for such period and on
such terms, as to remuneration and otherwise, as the Board may determine,
and no Director or intending Director shall be disqualified by his office
from contracting with the Company either as regards his tenure of any such
office or place of profit, or as vendor, purchaser or otherwise, nor shall
any such contract or any contract or arrangement entered into by or on
behalf of the Company in which any Director is in any way interested, be
liable to be avoided, nor shall any Director so contracting or being so
interested be liable to account to the Company for any profit realized by
any such contract or arrangement by reason of such Director holding that
office or of the fiduciary relations thereby established, provided the
nature of his interest is disclosed by him no later than the meeting of the
Board at which the contract or arrangement is first considered, if his
interest then exists or, in any other case, at the first meeting of the
Board after the acquisition of his interest.
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102. After such disclosure, every Director whose interest is submitted for
approval before the Board shall not be present and shall not vote at such
Board's meetings. In such case all the Directors who are not interested
shall be the quorum. A general notice that a Director is a member of any
firm or company and is to be regarded as interested in all transactions
with this firm or company shall be a sufficient disclosure under this
Article and, after such general notice, it shall not be necessary to give
any special notice relating to any particular transaction with such firm or
company.
103. Subject to Article 65:
103.1 The Board may exercise the voting power conferred by the shares in
any company held or owned by the Company in such manner in all respect
as it thinks fit, including the exercise thereof in favor of any
resolution appointing its members or any of them Directors of such
company, or voting or providing for the payment of remuneration to the
Directors of such company.
103.2 Subject to the Provisions of the Companies Law, any Director may act
by himself or his firm in a professional capacity for the Company,
otherwise than as Auditor, and he or his firm shall be entitled to
remuneration for professional services as if he were not a Director.
104.
104.1 Subject to the provisions of Section 237 of the Companies Law, each
Director shall have the power at any time to appoint to the office of
a Substitute Director any other person approved for that purpose by a
resolution of the Board and, at any time, to terminate such
appointment. Any such substitute is referred to in these Articles as a
Substitute Director.
104.2 A Substitute Director shall have, subject to the provision in the
letter of appointment, all the powers conferred upon the Director he
has been appointed as substitute to. All notices to a Substitute
Director shall also be served upon the Director appointing the
Substitute Director. Should at any meeting appear both the Substitute
Director and the Director appointing him, the Substitute Director
shall cease to hold his office for such meeting.
104.3 The appointment of a Substitute Director shall automatically
terminate in any of the following events:
104.3.1. if his appointor shall terminate the appointment;
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104.3.2. on the happening of any event which, if he were a Director,
would cause him to vacate the office of Director;
104.3.3. if by writing under his hand left at the Office he shall
resign such appointment;
104.3.4. if his appointor shall cease for any reason to be a Director.
104.4 A Substitute Director shall, subject to his giving to the Company an
address at which notice may be served upon him, be entitled to receive
notices of meetings of the Board and of any committee of the Board of
which his appointor is a member and to attend and, in place of his
appointor, to vote and be counted for the purpose of a quorum at any
such meeting at which his appointor is not personally present and
generally to perform all functions as a Director of his appointor in
his absence.
104.5 Subject to the provisions of the Companies Law, a Substitute Director
may be repaid by the Company such expenses as might properly have been
repaid to him if he had been a Director but shall not in respect of
his office of Substitute Director be entitled to receive any
remuneration from the Company. A Substitute Director shall be entitled
to be indemnified by the Company to the same extent as if he were a
Director.
104.6 A Substitute Director shall, during his appointment, be an Office
Holder of the Company and shall not be deemed to be an agent of his
appointor.
104.7 Every appointment and removal of a Substitute Director shall be in
writing signed by the appointor and shall take effect, subject to any
approval required by Subarticle 104.1, upon receipt of such written
appointment or removal at the Office, or at a later date specified in
the written notice of appointment or removal if such later date is
specified.
ACCOUNTING RECORDS
105. The Directors shall cause accounting records to be kept and such other
books and registers as are necessary to comply with the provisions of the
Companies Law.
106. The accounting records shall be kept at the Office or subject to the
provisions of the Companies Law, at such other place as the Board thinks
fit, and shall at all times be open to inspection by any Director. No
member, not being a Director, shall have any right of inspecting any
account or book or document of the Company, except as conferred by the
Companies Law or authorized by the Board or by any ordinary resolution of
the Company.
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107. The Board shall in accordance with the Companies Law cause to be prepared
and to be laid before the Company in general meeting, or to be sent to the
shareholders of the Company, in accordance with Section 61 of the Companies
Law, such profit and loss accounts, balance sheets, group accounts if any,
and reports as are required by the Companies Law.
108. A printed copy of every balance sheet, including every document required by
law to be annexed thereto, which is to be laid before the Company in
general meeting and of the Directors' and Auditors' reports shall, at least
21 (twenty-one) days previously to the meeting, (if the Board resolves to
call such meeting) be delivered or sent by post to every member and to
every debenture holder of the Company of whose address the Company is
aware, or, in the case of joint holders of any share or debenture, to one
of the joint holders.
AUDITORS
109. The Auditors of the Company shall be appointed by a resolution of the
general meeting.
110. Auditors shall be appointed and their duties regulated in accordance with
the regulations of the Companies Law.
DIVIDENDS AND RESERVES
111. Any general meeting approving the recommendation of the Board to declare a
dividend may upon the recommendation of the Board, direct payment or
satisfaction of such dividend wholly or partly by the distribution of
specific assets and in particular of fully paid shares or debentures of any
other company, and the Board shall give effect to such direction. Where any
difficulty arises in regard to such distribution of such specific assets or
any part hereof the Board may determine that cash payment shall be made to
any members upon the footing of the value so fixed in order to adjust the
rights of those entitled to participate in the dividend, and may vest any
such specific assets in trustees, upon trust for the members entitled to
the dividend, as may seem expedient to the Board.
112. The Board may from time to time pay to the members such interim dividends
as appear to the Board to be justified by the profits of the Company, and
the Board may also pay the fixed dividend payable on any shares of the
Company with preferential rights half-yearly or otherwise on fixed dates
whenever such profits in the opinion of the Board justify that course.
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113. All premiums received on the issue of shares and all moneys realized of the
sale of any investment or other property or assets of the Company in excess
of the book price thereof and all other moneys in the nature of accretions
of capital, whether on sale of investments or other property or assets or
otherwise, shall be capital moneys, and shall be treated for all purposes
as such, and not as profits available for dividend. The Directors may
establish a Capital Reserve Account, and shall from time to time either
carry to the credit of such Reserve Account all sum premiums and capital
moneys, or apply the same in providing for deprecations or contingencies.
Any losses realized on the sale of investments or other property or assets
of the Company shall be carried to the debit of the Capital Reserve Account
unless the Directors shall determine to make such good losses out of other
funds of the Company. Any fund standing to the credit of the Capital
Reserve Account may be applied by the Directors in any manner authorized by
these Articles or by law.
114. The profits, and none otherwise than profits, of the Company available for
dividend and resolved to be distributed, shall be applied in the payment of
dividends to the members in accordance with their respective rights and
priorities as set forth herein.
115. INTENTIONALLY DELETED.
116. No dividend shall be payable in excess of the amount recommended by the
Board.
117. Subject to the provisions of Article 6 above, all dividends shall be
declared and paid according to the amounts paid on the shares in respect
whereof the dividend is paid; but no amount paid on a share in advance of
the date upon which a call is payable shall be treated for the purposes of
this Article or the next following Article as paid on the share.
118. Subject to Article 6.7, all dividends shall be apportioned and paid PRO
RATA according to the amounts paid or credited as paid on the shares during
any portion or portions of the period in respect of which the dividend is
paid; but, if any share is issued on terms providing that it shall rank for
dividend as from a particular date or be entitled to dividends declared
after a particular date, such share shall rank for or be entitled to
dividend accordingly.
119. The Board shall transfer to share premium account as required by the
Companies Law amounts equal to the amount or value of any premiums at which
any shares of the Company shall be issued.
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120. The Board may deduct from any dividend payable to any member on or in
respect of a share all sums of money, if any, presently payable by him to
the company on account of calls or otherwise in relation to shares in the
Company.
121. All dividends and interest shall belong and be paid, subject to any lien of
the Company, to those members whose names shall be on the Register at the
date at which such dividend shall be declared or at that date on which such
interest shall be payable respectively, or at such other date as the
Company by ordinary resolution or the Board may determine, notwithstanding
any subsequent transfer or transmission of shares.
122. The Board may pay the dividends or interest payable on shares in respect of
which any person is by transmission entitled to be registered as holder to
such person upon production of such certificate and evidence as would be
required if such person desired to be registered as a member in respect of
such shares.
123. No dividend or other moneys payable in respect of a share shall bear
interest against the Company. All dividends unclaimed for a period of 12
(twelve) years after having been declared shall be forfeited and shall
revert to the Company.
124. Unless the Board otherwise so resolves, any dividend may be paid by cheque
sent through the post to the address in the Register of the member or
person entitled hereto, and in case of joint holders to any one of such
joint holders, or to such person and to such other address as the holder or
joint holders may in writing direct. Every such cheque shall be made
payable to the order of the person to whom it is sent and shall be sent at
the member's risk, and payment of the cheque or warrant shall be a good
discharge to the Company.
125. If several persons are entered in the Register as joint holders of any
share, any one of them may give effectual receipts for any moneys payable
in respect of the share.
126. The Board may, before recommending any dividend, set aside out of the
profits of the Company such sums as it thinks proper as reserves which
shall, at the discretion of the Board, be applicable for any purpose to
which the profits of the Company may be properly applied, and pending any
such application may, at the like discretion, either be employed in the
business in the Company, as the Board may from time to time think fit. The
Board may also without placing the same to reserve carry forward any
profits which they may think prudent not to divide.
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CAPITALIZATION OF PROFITS
127.
127.1 The Company in a General Meeting of the Shareholders may, upon
recommendation of the Board, resolve that it is desirable to
capitalize all or any part of the profits of the Company to which this
Article applies and accordingly that the Board be authorized and
directed to appropriate the profits so resolved to be capitalized to
the members on the record date specified in the relevant resolution
who would have been entitled thereto if distributed by way of dividend
and in the same proportion.
127.2 Subject to any direction given by the Company, and subject to any
rights regarding votes in the Board, the Board shall make all
appropriations and applications of the profits resolved to be
capitalized by any such resolution, and such profits shall be applied
by the Board on behalf of the members entitled thereto either:
127.2.1 in or towards paying up the amounts, if any, for the time
being unpaid on any shares held by such members respectively;
or
127.2.2 in paying up in full unissued shares, debentures or
obligations of the Company, of a nominal amount equal to
such profits, for allotment and distribution credited as
fully paid up, to and amongst such members in the proportion
aforesaid, or partly in one way and partly in the other;
provided that the only purpose to which sums standing to
capital redemption reserve or share premium account shall be
applied pursuant to this Article shall be the payment up in
full of unissued shares to be allotted and distributed as
aforesaid.
127.3 The Board shall have power after the passing of any such resolution:
127.3.1 to make such provision, by the issue of fractional
certificates or by payment in cash or otherwise, as it
thinks fit for the case of shares debentures or obligations
becoming distributable in fractions; and
127.3.2 to authorize any person to enter, on behalf of all the members
entitled thereto, into an agreement with the Company
providing, as the case may require, either:
127.3.2.1 for the payment up by the Company on behalf of
such members, by the application thereto to be
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capitalized, of the amounts, or any part of the
amounts, remaining unpaid on their existing shares;
or
127.3.2.2 for the allotment to such members respectively
credited as fully paid up, of any further shares,
debentures or obligations to which they may be
entitled upon such capitalization;
and any agreement made under such authority shall
be effective and binding on all such members.
127.4 The profits of the Company to which this Article applies shall be
undivided profits of the Company not required for paying the fixed
dividends on any preference shares or other shares issued on special
conditions and shall include:
127.4.1 any profits arising from appreciation in capital assets,
whether realized by sale or ascertained by valuation; and
127.4.2 any amounts for the time being standing to any reserve or
reserves or to the capital redemption reserve or to share
premium or other special account.
NOTICES
128.
128.1 Any notice or document may be served by the Company on any member
either personally or by sending it through the post in a prepaid
letter addressed to such member at this address in the Register. In
the case of joint holders of a share all notices shall be given to
that one of the joint holders whose name stands first in the Register,
and notice so given shall be sufficient notice to all the joint
holders.
128.2 If a member has no registered address and has not supplied to the
Company an address for the giving of notices to him, a notice
addressed to him at his last known address shall be deemed to be duly
given to him according to Article 129. If no known address exists -
such a member should not be entitled to receive any notice from the
Company.
129. Any notice or other document, if served by post, shall be deemed to have
been served on the 4th (fourth) day following that on which the letter
containing the same is posted, by whatever class of post in the event that
the addressee
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is in the same country as the place from which the notice is posted; in the
event that the addressee is in any other country, such notice or other
documents, if served by federal express or similar overnight carrier, shall
be deemed to have been served upon receipt. In proving such service it
shall be sufficient to prove that the letter containing the notice or
document was properly addressed, stamped and posted. Notice may be sent by
telefax, telex or other electronic means and confirmed by post as
aforesaid, and such notice shall be deemed to be given 24 hours after it is
sent, or when it is actually received, whichever is earlier. If notice is
received, it shall be deemed to have been duly served when received,
notwithstanding that it is defectively addressed or that it fails to comply
with the provisions of this Article
130. Any notice of document sent by post to, or left at the address in the
Register of, any member in pursuance of these Articles shall,
notwithstanding such member be then deceased or bankrupt, and whether or
not the Company has notice of his death or bankruptcy, be deemed to have
been duly served in respect of any share, whether held solely or jointly
with other persons by such member, until some other person be registered in
his stead as holder or joint holder thereof, and such service shall for all
purposes be deemed a sufficient service of such notice or document on all
persons interested, whether jointly with or as claiming through or under
him, in such share.
131. Every person who by operation of law, transfer or other means whatsoever
shall become entitled to any share shall be bound by every notice in
respect of such share which, previously to his name and address being
entered in the Register, shall have been duly given to the person from whom
he derives his title to such share.
132.
132.1 Notice of every General Meeting shall be given in any manner
hereinbefore authorized to every member and each of the Directors
132.2 No other person shall be entitled to receive notices of General
Meetings.
133. Any member present, either personally or by proxy, at any General Meeting
shall, for all purposes, be deemed to have received due notice of such
General Meeting and, where requisite, of the purposes for which such
General Meeting was convened.
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SIGNATORY RIGHTS
134. The Board, shall with the consent of at-least two of the Series A Preferred
Shares Director, the Series B-1 Preferred Shares Director and the Series
C-1 Preferred Shares Director determine which signatures shall bind the
Company.
COMMISSION
135. The Company may pay a commission to any person in consideration of his
subscribing or agreeing to subscribe, whether absolutely or conditionally,
for any shares in the Company, or procuring or agreeing to procure
subscription, whether absolute or conditional, for any shares in the
Company, provided such commission does not exceed 10% (ten percent) on such
shares or any amount equivalent there to, and such commission may be paid
in cash or fully or partly paid shares of the Company, or partly in one way
and partly in another.
WINDING UP
136. If the Company shall be wound up, the liquidator may, subject to
Sub-article 6.1 proportionally divide amongst the members in cash the whole
or any part of the assets of the Company in such manner as described in
Sub-article 6.1, and may with the like sanction, vest the whole or any part
of such assets in trustees upon such trusts for the benefit of the members
as the liquidator with the like sanction shall think fit.
137. The power of sale of a liquidator shall include a power to sell wholly or
partially for shares or debentures, or other obligations of another
company, either then already constituted, or about to be constituted, for
the purpose of carrying out the sale.
INSURANCE AND INDEMNITY
138. The Company may insure any Office Holder, in full or in part, against any
of the following:
138.1 Breach of duty of care with respect to the Company or with respect to
any other person.
138.2 Breach of fiduciary duty with respect to the Company, provided that
such Office Holder acted bona fide and had a reasonable foundation to
assume such action would not harm the Company.
58
<PAGE>
138.3 Financial liability imposed upon him to the benefit of another person
due to an action taken by him in his capacity as an Office Holder of
the Company.
139. Subject to the provisions of Section 260 (b) (2) of the Companies Law, the
Company may indemnify any Office Holder of the Company for any of the
following:
139.1 Financial liability imposed by verdict upon him to the benefit of
another person, including judgment rendered, settlement or
arbitrator's judgment ratified by a court, arising from any act taken
or omission by him in his capacity as an Office Holder of the Company.
139.2 Reasonable litigation fees, including attorney's fees, incurred by
the Office Holder of the Company or imposed upon him by a court, in a
proceeding initiated against him by the Company or in its name by
another person, or in criminal proceedings in which he is acquitted,
in connection with any action taken by him in his capacity as an
Office Holder of the Company.
140. The provisions of Articles 138 and 139 above are not intended, and shall
not be interpreted, to restrict the Company in any manner in respect of the
procurement of insurance and/or in respect of indemnification (i) in
connection with any person who is not an Office Holder including, without
limitation, any employee, agent, consultant or contractor of the Company
who is not an Office Holder, and/or (ii) in connection with any Office
Holder to the extent that such insurance and/or indemnification is not
specifically prohibited under law.
141. In any case where insurance of liability of an Office Holder of the Company
or indemnification of such Office Holder is prohibited by any applicable
law, the Company shall not insure the liability of such Office Holder of
the Company, nor shall it indemnify such Office Holder.
59
<PAGE>
EXHIBIT 9.1
PROXY
I, the undersigned being a shareholder of XaCCT Technologies (1997) Ltd. ("the
Company") hereby appoint Ampal-American Israel Corporation and/or, any
representative thereof ("Ampal") as my agent and proxy to (i) vote on my behalf
all my shares in the Company; and (ii) to receive on my behalf all notices
relating to the Company including without derogating from the generality of the
above any notices of any shareholders meeting (general, ordinary or
extraordinary), first refusal rights, first offer rights, pre-emptive rights or
any other rights under the Articles of Association or any agreement. For as long
as this Proxy is effective, a notice received by Ampal shall be deemed received
by the undersigned.
Notwithstanding the foregoing Ampal sha11 be obligated to inform the undersigned
of any event which is materia1 and significant to the Company.
I hereby instruct the Company to act according to this Proxy as detailed above
and hereby declare that any right I may have as a holder of the Company's shares
may be exercised only by Ampal.
This Proxy shall be irrevocable until and terminable in the event that Mr. Raz
Steinmetz shall cease to control, directly or indirectly, Ampal-American Israel
Corporation.
Date: December 28, 1998
/s/ MARINERA LTD.
- ----------------------------
Marinera Ltd.
<PAGE>
EXHIBIT 9.2
PROXY
We, the undersigned being a shareholder of XaCCT Technologies (1997) Ltd. ("the
Company") hereby appoint Ampal-American Israel Corporation and/or any
representative thereof ("Ampa1") as my agent and proxy to (i) vote on my behalf
all my shares in the Company; and (ii) to receive on my behalf all notices
relating to the Company including without derogating from the generality of the
above any notices of any shareholders meeting (general, ordinary or
extraordinary), first refusal rights, first offer rights, pre-emptive rights or
any other rights under the Articles of Association or any agreement. For as long
as this Proxy is effective, a notice received by Ampal shall be deemed received
by the undersigned.
Notwithstanding the foregoing Ampal shall be obligated to inform the undersigned
of any event which is material and significant to the Company.
I hereby instruct the Company to act according to this Proxy as detailed above
and hereby declare that any right I may have as a holder of the Company's shares
may be exercised only by Ampal.
This Proxy shall be irrevocable until and terminable in the event that Mr.
Hillel Peled shall cease to serve as a director of Ampal-American Israel
Corporation.
Date: December 28, 1998
/s/ INVECO INTERNATIONAL INC. - PROFIT SHARING PLAN
-----------------------------------------------
Inveco International Inc. - Profit Sharing Plan
<PAGE>
EXHIBIT 9.3
PROXY
I, the undersigned being a shareholder of XACCT Technologies (1997) Ltd. ("the
Company") hereby appoint Richard H. Van Hoesen as my agent and proxy to:
(i) vote on my behalf all my shares in the Company.
(ii) receive on my behalf all notices relating to the Company including without
derogation from the generality of the above any notices of any shareholders
meeting (general, ordinary or extraordinary), first refusal rights, first offer
rights, preemptive rights or any other rights under the Articles of Association
or any agreement. For as long as this Proxy is effective, a notice received by
Richard H. Van Hoesen shall be deemed received by the undersigned.
Notwithstanding the foregoing Richard H. Van Hoesen shall be obligated to inform
the undersigned of any event that is material and significant to the Company.
I hereby instruct the Company to act according to this Proxy as detailed above
and hereby declare that any right I may have as a holder of the Company's shares
may be exercised only by Richard H. Van Hoesen.
This Proxy shall be irrevocable until any other decision by the undersigned.
Date: March , 2000
- ---------------------------------
By:
<PAGE>
EXHIBIT 10.1
INCENTIVE STOCK OPTION AGREEMENT
("OPTION AGREEMENT")
Made as of the ______ day of ______1999
By and between
XACCT TECHNOLOGIES (1997) LTD.
("THE COMPANY")
an Israeli Company located at
31 Lechi Street
Bnei-Brak 51200
Israel
OF THE FIRST PART
AND
("THE OPTIONEE")
OF THE SECOND PART
PREAMBLE
WHEREAS In July, 1998, the Company has adopted it's Option Plan, a copy of
which is attached hereto as EXHIBIT A, forming an integral part
hereof and -
WHEREAS The Company has determined that the Optionee be granted an Options
under the Option Plan to buy Shares of the Company, and the
Optionee has agreed to such grant, all on the terms and subject to
the conditions hereinafter provided.
<PAGE>
NOW, THEREFORE, it is agreed as follows:
1. PREAMBLE AND DEFINITIONS
1.1 The Preamble to this Option Agreement constitutes an integral part
hereof.
1.2 Unless otherwise defined herein, capitalized terms used herein
shall have the meaning ascribed to them in the Option Plan.
2. GRANT OF OPTION
2.1 The Company hereby grants the Optionee ISOs in a number set forth
in Section 2 of EXHIBIT B hereto (for purposes of this Option
Agreement - THE OPTION(S) subject in each case to the vesting
schedule thereof. Each Option is exercisable for One Ordinary
Share of a nominal value of NIS 0.01 (THE SHARE), at a price per
Ordinary Share as set forth in Section 3 of EXHIBIT B (THE OPTION
PRICE), in each case upon the terms and subject to the conditions
set forth herein. Each Share shall be allocated from the total
number of shares reserved from of the Company's authorized share
capital for the Option Plan
The Option Price will be paid in NIS in accordance with the
representative rate of exchange of the U.S. dollar, published by
the Bank of Israel and known on the date of giving the notice of
exercise (as set forth in Section 5.1 hereinafter).
2.2 The Optionee is aware that the Company intends to issue additional
shares in the future to various entities and individuals, as the
Company in its sole discretion shall determine.
3. PERIOD OF OPTION AND CONDITIONS OF EXERCISE
3.1 The terms of this Option Agreement shall commence on the date
hereof (THE DATE OF GRANT) and terminate at the Expiration Date
(as defined in Section 6 below), or at the time at which the
Option is completely terminated pursuant to the terms of the
Option Plan or pursuant to this Option Agreement.
3.2 The Options may be exercised by the Optionee in whole at any time
or in part from time to time, as determined by the Board, and to
the extent that the Options become vested and exercisable, prior
to the Expiration Date, and provided that, subject to the
provisions of Section 3.4 below, the Optionee is an employee of
the Company or any of its subsidiaries, at all times during the
period beginning with the granting of the Option and ending upon
the date of exercise.
3.3 Subject to the provisions of Section 3.4 below, in the event of
termination of the Optionees employment with the Company or any of
its subsidiaries, all Options granted to him or her will
immediately be expired. A notice of termination of employment by
either the Company or the Optionee shall be deemed to constitute
termination of employment.
2
<PAGE>
3.4 Notwithstanding anything to the contrary hereinabove, an Option
may be exercised after the date of termination of Optionee's
employment with the Company or any subsidiary of the Company
during an additional period of time beyond the date of such
termination, but only with respect to the number of Options
already vested at the time of such termination according to the
vesting periods of the Options, set forth in Section 4 below, if:
(I) prior to the date of such termination, the Committee shall
authorize an extension of the terms of all or part of the Options
beyond the date of such termination for a period not to exceed the
period during which the Options by their terms would otherwise
have been exercisable, (ii) termination is without Cause (as
defined below), in which event any Options still in force and
unexpired may be exercised within a period of 90 (ninety) days
from the date of such termination, but only with respect to the
number of shares purchasable at the time of such termination,
according to the vesting periods of the Options, (iii) termination
is the result of death or disability of the Optionee, in which
event any Options still in force and unexpired may be exercised
within a period of 3 (three) months from the date of termination,
but only with respect to the number of Options already vested at
the time of such termination according to the vesting periods of
the Options. The term CAUSE shall mean any action, omission or
state of affairs related to the Optionee which the Committee or
the Board decides, in its sole discretion, is against the best
interests of the Company.
3.5 The Options may be exercised only to purchase whole Shares, and in
no case may a fraction of a Share be purchased. If any fractional
Shares would be deliverable upon exercise, such fraction shall be
rounded up one-half or more, or otherwise rounded down, to the
nearest whole number.
4. VESTING
Subject to the requirements as to the number of Shares for which an
Option is exercisable, as set forth in Section 2.1 above, Options shall
vest (i.e., Options shall become exercisable) at the dates set forth in
Section 6 of Exhibit B hereto.
5. METHOD OF EXERCISE
Options shall be exercised by the Optionee by giving written notice to
the Company, in such form and method as may be determined by the Company
(THE EXERCISE NOTICE), which exercise shall be effective upon receipt of
such notice by the Company at its principal office. The notice shall
specify the number of Shares with respect to which the Option is being
exercised.
3
<PAGE>
6. TERMINATION OF OPTION
6.1 Except as otherwise stated in this Option Agreement, the Options,
to the extent not previously exercised, shall terminate forthwith
upon the earlier of: (I) the date set forth in Section 4 of
Exhibit B hereto; and - (ii) the expiration of any extended period
in any of the events set forth in Section 3.4 above (and such
earlier date shall be hereinafter referred to as THE EXPIRATION
DATE).
6.2 Without derogating from the above, the Committee may, with the
prior written consent of the Optionee, from time to time cancel
all or any portion of the Options then subject to exercise, and
the Company's obligation in respect of such Options may be
discharged by (I) payment to the Optionee of an amount in cash
equal to the excess, if any, of the fair market value of the
Shares pertaining to such canceled Options, at the date of such
cancellation, over the aggregate purchase price of such Shares;
(ii) the issuance or transfer to the Optionee of Shares of the
Company with a fair market value at the date of such transfer
equal to any such excess; or (iii) a combination of cash and
Shares with a combined value equal to any such excess, all
determined by the Committee in its sole discretion.
7. ADJUSTMENTS
7.1 If the Company is separated, reorganized, merged, consolidated or
amalgamated with or into another corporation while unexercised
Options remain outstanding under the Option Plan, there shall be
substituted for the Shares subject to the unexercised portions of
such outstanding Options an appropriate number of shares of each
class of shares or other securities of the separated, reorganized,
merged, consolidated or amalgamated corporation which were
distributed to the shareholders of the Company in respect of such
shares, and appropriate adjustments shall be made in the purchase
price per share to reflect such action. However, subject to any
applicable law, in the event the successor corporation does not
agree to assume the award as aforesaid, the Vesting Period a set
forth in section 4 above shall be accelerated so that any
unexercisable or unvested portion of the outstanding Options shall
be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the change in control.
7.2 If the Company is liquidated or dissolved while unexercised
Options remain outstanding, then all such outstanding Options may
be exercised in by the Optionee as of the effective date of any
such liquidation or dissolution of the Company without regard to
the installment exercise provisions hereof, by the Optionee giving
notice in writing to the Company of his or her intention to so
exercise.
4
<PAGE>
7.3 If the outstanding shares of the Company shall at any time be
changed or exchanged by declaration of a stock dividend, stock
split, combination or exchange of shares, re-capitalization, or
any other like event by or of the Company, and as often as the
same shall occur, then the number, class and kind of Shares
subject to the Option therefore granted, and the Option Price,
shall be appropriately and equitably adjusted so as to maintain
the proportionate number of Shares without changing the aggregate
Option Price; provided, however, that no adjustment shall be made
by reason of the distribution of subscription rights on
outstanding shares, all as will be determined by the Board whose
determination shall be final.
7.4 Anything herein to the contrary notwithstanding, if prior to the
completion of the IPO, all or substantially all of the shares of
the Company are to be sold, or upon a merger or reorganization or
the like, the shares of the Company, or any class thereof, are to
be exchanged for securities of another Company, then in such
event, the Optionee shall be obliged to sell or exchange (in
accordance with the value of his or her Shares in accordance to
the transaction) as the case may be, the Shares such Optionee
purchased hereunder, in accordance with the instructions then
issued by the Board, which will be given according to the decided
upon policy concerning Optionees under the Option Plan.
8. RIGHTS PRIOR TO EXERCISE OF OPTION; LIMITATIONS AFTER PURCHASE OF SHARES
8.1 Subject to the provisions of Section 8.2 below, the Optionee shall
not have any of the rights or privileges of shareholders of the
Company in respect of any Shares purchasable upon the exercise of
any part of an Option unless and until, following exercise,
registration of the Optionee as holder of such Shares in the
Companies register of members.
8.2 With respect to all Shares (in contrary to unexercised Options)
issued upon the exercise of Options and purchased by the Optionee,
the Optionee shall be entitled to receive dividends in accordance
with the quantity of such Shares, and subject to any applicable
taxation on distribution of dividends.
8.3 No Option purchasable hereunder, whether fully paid or not, shall
be assignable, transferable or given as collateral or any right
with respect to them given to any third party whatsoever, and
during the lifetime of the Optionee each and all of the Optionee's
rights to purchase Shares hereunder shall be exercisable only by
the Optionee.
Any action or dealing in contravention of the prohibitions set
forth in this Section 8.3 whether present or future, direct or
indirect, shall be null and void.
5
<PAGE>
8.4 The Optionee may be required by the Company, at the Company's
discretion, to give a representation in writing upon exercising
the Option, that he or she is acquiring the Shares for his or her
own account, for investment and not with a view to, or for sale in
connection with, the distribution of any part thereof.
8.5 The Optionee shall not dispose of any Option Shares in
transactions which, in the opinion of counsel to the Company,
violate the U.S. Securities Act of 1933, as amended (the "1933
Act"), or the rules and regulations thereunder, or any applicable
state securities or "blue sky" laws, including the securities laws
of the State of Israel.
8.6 If any Option Shares shall be registered under the 1933 Act, no
public offering (otherwise than on a national securities exchange,
as defined in the Securities Exchange Act of 1934, as amended) of
any Option Shares shall be made by the Optionee (or any other
person) under such circumstances that he or she (or such other
person) many be deemed an underwriter, as defined in the 1933 Act.
8.7 The Optionee agrees that the Company shall have the authority to
endorse upon the certificate or certificates representing the
Option Shares such legends referring to the foregoing
restrictions, and any other applicable restrictions, as it many
deem appropriate (which do not violate the Optionee's rights
according to this Option Agreement).
9. SHARES SUBJECT TO RIGHT OF FIRST REFUSAL
9.1 Notwithstanding anything to the contrary in the Articles of
Association of the Company, the Optionee shall not have a right of
first refusal in relation with any sale, transfer or allotment of
shares in the Company.
9.2 Until such time as the Company shall effectuate an IPO, the sale
of Shares issuable upon exercise of an Option, by the Optionee,
shall be subject to a right of first refusal on the part of the
Company's Founders, as defined in the Articles of Association of
the Company in effect in July 1998 (save, for the avoidance of
doubt, for other Optionees who already exercised their Options),
PRO RATA in accordance with their shareholding, by the Optionee
giving a notice of sale (THE NOTICE) to the Company who will
forward the Notice to the Founders.
The notice shall specify the Number of Shares offered for sale,
the price per Share and the payment terms. The Founders will be
entitled for 30 days from the day of receipt of the Notice ("THE
30 DAYS PERIOD"), to purchase all or part of the offered Shares,
PRO RATA in accordance with their shareholding. If by the end of
the 30 Days Period not all of the offered Shares have been
purchased by the Founders, the Optionee will be entitled to sell
such Shares at any time during the 90 days following the end of
the 30 Days Period on terms not more favorable than those set out
in the Notice.
6
<PAGE>
10. GOVERNMENT REGULATIONS
The Option Plan, and the granting and exercise of the Option thereunder,
and the Company's obligation to sell and deliver Shares or cash under the
Option, are subject to all applicable laws, rules and regulations,
whether of the State of Israel or of the United States or any other state
having jurisdiction over the Company and the Optionee, including the
registration of the Shares under the 1933 Act, and to such approvals by
any governmental agencies or national securities exchanges as may
required.
11. CONTINUANCE OF EMPLOYMENT
Nothing in this Option Agreement shall be construed to impose any
obligation on the Company or a subsidiary thereof to continue the
Optionee's employment with it, to confer upon the Optionee any right to
continue in the employ of the Company or a subsidiary thereof, or to
restrict the right of the Company or a subsidiary thereof to terminate
such employment at any time.
12. GOVERNING LAW & JURISDICTION
This Option Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Israel applicable to contracts
made and to be performed therein, without giving effect to the principles
of conflict of laws. The competent courts of Tel-Aviv, Israel shall have
sole and exclusive jurisdiction in any matters pertaining to this Option
Agreement.
13. TAX CONSEQUENCES
Any tax consequences arising from the grant or exercise of any Option,
from the payment for Shares covered thereby or from any other event or
act (of the Company or the Optionee), hereunder, shall be borne solely by
the Optionee. The Company shall withhold taxes according to the
requirements under the applicable laws, rules, and regulations, including
the withholding of taxes at source. Furthermore, the Optionee shall agree
to indemnify the Company and hold it harmless against and from any and
all liability for any such tax or interest or penalty thereon, including
without limitation, liabilities relating to the necessity to withhold, or
to have withheld, any such tax from any payment made to the Optionee.
7
<PAGE>
14. FAILURE TO ENFORCE NOT A WAIVER
The failure of the any party to enforce at any time any provisions of
this Option Agreement shall in no way be construed to be a waiver of such
provision or of any other provision hereof.
15. PROVISIONS OF THE OPTION PLAN
The Options provided for herein are granted pursuant to the Option Plan,
and said Options and this Option are in all respects governed by the
Option Plan and subject to all of the terms and provisions whether such
terms and provisions are incorporated in this Option Agreement solely by
reference or are expressly cited herein.
Any interpretation of this Option Agreement will be made in accordance
with the Option Plan and in the event there is any contradiction between
the provisions of this Option Agreement and the Option Plan, the
provisions of the Plan will prevail.
16. BINDING EFFECT
This Option Agreement shall be binding upon the heirs, executors,
administrators, and successors of the parties hereof.
17. NOTICES
Any notice required or permitted under this Option Agreement shall be
deemed to have been duly given if delivered, faxed or mailed, if
delivered by certified or registered mail or return receipt requested,
either to the Optionee at his or her address set forth above or such
other address as he or she may designate in writing to the Company, or to
the Company at the address set forth above or such other address as the
Company may designate in writing to the Optionee, within one from time to
time.
18. ENTIRE AGREEMENT
This Option Agreement exclusively concludes all the terms of the
Optionee's Option Plan, and, subject to the provisions of Section 20 of
the Option Plan, annuls and supersedes any other agreement, arrangement
or understanding, whether oral or in writing, relating to the grant of
options to the Optionee. Any change of any kind to this Option Agreement
will be valid only if made in writing and signed by both the Optionee and
the Company's authorized member and has received the approval of the
Board.
8
<PAGE>
IN WITNESS WHEREOF, the Company executed this Option Agreement in duplicate on
the day and year first above written.
XACCT Technologies (1997) Ltd.
By: Eric Gries, President and CEO
-------------------------------
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Option Agreement.
- -------------------------------
The Optionee
9
<PAGE>
EXHIBIT A
XACCT TECHNOLOGIES (1997)
LTD.
THE 1998
STOCK OPTION PLAN
10
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
THE 1998
STOCK OPTION PLAN
1. NAME
This 1998 Stock Option Plan, as amended from time to time, shall be known
as the XaCCT Technologies (1997) Ltd. 1998 Stock Option Plan (the "OPTION
PLAN"). For the purposes of this Option Plan the reference to or the use
of the term "Stock" or "stock" shall mean and refer to a "share" as
defined in Section 1 of the Israeli Companies Ordinance New Version
(5743-1983) (the "Ordinance") and not "stock" within the meaning Section
146 of the Ordinance.
2. PURPOSE OF THE OPTION PLAN
The Option Plan is intended as an incentive to retain, in the employ of
XaCCT Technologies (1997) Ltd.("THE COMPANY") and its subsidiaries,
persons of training, experience, and ability, to attract new employees,
directors and consultants whose services are considered valuable, to
encourage the sense of proprietorship of such persons, and to stimulate
the active interest of such persons in the development and financial
success of the Company by providing them with opportunities to purchase
shares in the Company, pursuant to the Option Plan approved by the board
of directors of the company ("THE BOARD"). Options granted under the 1998
Plan may or may not contain such terms as will qualify the Options as
Incentive Stock Options ("ISOS") within the meaning of Section 422(b) of
the United States Internal Revenue Code of 1986, as amended (the "CODE").
Options which shall not contain terms as will qualify them as ISOs shall
be referred to herein as Non - Qualified Stock Options ("NQSOS"). (All
options granted hereunder shall be referred to herein together as the
"OPTIONS").
3. ADMINISTRATION OF THE OPTION PLAN
The Board or a share option committee appointed and maintained by the
Board for such purpose ("THE COMMITTEE") shall have the power to
administer the Option Plan. Notwithstanding the above, the Board shall
automatically have a residual authority if no Committee shall be
constituted or if such Committee shall cease to operate for any reason
whatsoever.
11
<PAGE>
The Committee shall consist of such number of members (not less than two
(2) in number) as may be fixed by the Board. The Committee shall select
one of its members as its chairman ("THE CHAIRMAN") and shall hold its
meetings at such times and places as the Chairman shall determine. The
Committee shall keep records of its meetings and shall make such rules
and regulations for the conduct of its business as it shall deem
advisable.
Any member of such Committee shall be eligible to receive Options under
the Option Plan while serving on the Committee, unless otherwise
specified herein.
The Committee shall have full power and authority (i) to designate
participants (ii) to determine the terms and provisions of respective
Option agreements (which need not be identical) including, but not
limited to, the number of shares in the Company to be covered by each
Option, provisions concerning the time or times when and the extent to
which the Options may be exercised and the nature and duration of
restrictions as to transferability or restrictions constituting
substantial risk of forfeiture; (iii) to accelerate the right of an
Optionee to exercise, in whole or in part, any previously granted Option;
(iv) to designate Options as Incentive Stock Options or as Non -
Qualified Stock Options, (v) to interpret the provisions and supervise
the administration of the Option Plan; and - (vi) to determine any other
matter which is necessary or desirable for, or incidental to
administration of the Option Plan.
The Committee shall have the authority to grant, in its discretion, to
the holder of an outstanding Option, in exchange for the surrender and
cancellation of such Option, a new Option having a purchase price equal
to, lower than or higher than the purchase price provided in the Option
so surrendered and canceled, and containing such other terms and
conditions as the Committee may prescribe in accordance with the
provisions of the Option Plan.
All decisions and selections made by the Board or the Committee pursuant
to the provisions of the Option Plan shall be made by a majority of its
members except that no member of the Board or the Committee shall vote
on, or be counted for quorum purposes, with respect to any proposed
action of the Board or the Committee relating to any Option to be granted
to that member. Any decision reduced to writing and signed by a majority
of the members who are authorized to make such decision shall be fully
effective as if it had been made by a majority at a meeting duly held.
The interpretation and construction by the Committee of any provision of
the Option Plan or of any Option thereunder shall be final and conclusive
unless otherwise determined by the Board.
Subject to the Company decision, each member of the Board or the
Committee shall be indemnified and held harmless by the Company against
any cost or expense (including counsel fees) reasonably incurred by him
or her, or any liability (including any sum paid in settlement of a claim
with the approval of the Company) arising out of any act or omission to
act in connection with the Option Plan unless arising out of such
member's own fraud or bad faith, to the extent permitted by applicable
law. Such indemnification shall be in addition to any rights of
indemnification the member may have as a director or otherwise under the
Company's Articles of Association, any agreement, any vote of
shareholders or disinterested directors, insurance policy or otherwise.
12
<PAGE>
4. DESIGNATION OF PARTICIPANTS
The persons eligible for participation in the Option Plan as recipients
of Options shall include any employees, directors and consultants of the
Company or of any subsidiary of the Company. The grant of an Option
hereunder shall neither entitle the recipient thereof to participate nor
disqualify him or her from participating in, any other grant of Options
pursuant to this Option Plan or any other option or share option plan of
the Company or any of its affiliates.
5. SHARES RESERVED FOR THE OPTION PLAN; RESTRICTION THEREON
5.1 Subject to adjustments as set forth in Section 8 below, a total of
______Ordinary Shares, of NIS 0.01n.v. each ("THE SHARES") shall
be subject to the Option Plan. The foregoing number of shares may
be increased or decreased by the events set forth in Section 8
("ADJUSTMENT") hereof. The Shares subject to the Option Plan are
hereby reserved for such purpose in the authorized share capital
of the Company and may only be issued in terms hereof. Any of such
Shares which may remain unissued and which are not subject to
outstanding Options at the termination of the Option Plan shall
cease to be reserved for the purpose of the Option Plan, but until
termination of the Option Plan the Company shall at all times
reserve sufficient number of Shares to meet the requirements of
the Option Plan. Should any Option for any reason expire or be
canceled prior to its exercise or relinquishment in full, the
Shares therefore subject to such Option may again be subjected to
an Option under the Option Plan.
5.2 Each Option granted pursuant to the Plan, shall be evidenced by a
written agreement between the Company and the Optionee (the
"OPTION AGREEMENT"), in such form as the Board or the Committee
shall from time to time approve. Each Option Agreement shall state
the number of ordinary shares to which the Option relates and the
type of option granted thereunder (whether an ISO or an NQSO).
6. OPTION PRICE
6.1 The purchase price of each Share subject to an Option or any
portion thereof shall be determined by the Committee in its sole
and absolute discretion in accordance with applicable law, subject
to any guidelines as may be determined by the Board from time to
time. In the case of an ISO, the exercise price shall not be less
than 100% of the fair market value thereof, as determined by the
Board or the Committee in its sole discretion.
6.2 The Option price shall be payable upon the exercise of the Option
in a form satisfactory to the Committee, including without
limitation, by cash or check. The Committee shall have the
authority to postpone the date of payment on such terms as it may
determine.
13
<PAGE>
7. ADJUSTMENTS
Upon the occurrence of any of the following described events, Optionee's
rights to purchase Shares under the Option Plan shall be adjusted as
hereafter provided:
7.1 If the Company is separated, reorganized, merged, consolidated or
amalgamated with or into another corporation while unexercised
Options remain outstanding under the Option Plan, there shall be
substituted for the Shares subject to the unexercised portions of
such outstanding Options an appropriate number of shares of each
class of shares or other securities of the separated, reorganized,
merged, consolidated or amalgamated corporation which were
distributed to the shareholders of the Company in respect of such
shares, and appropriate adjustments shall be made in the purchase
price per share to reflect such action. However, subject to any
applicable law, in the event the successor corporation does not
agree to assume the award as aforesaid, the Vesting Period a set
forth in section 4 above shall be accelerated so that any
unexercisable or unvested portion of the outstanding Options shall
be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the change in control.
7.2 If the Company is liquidated or dissolved while unexercised
Options remain outstanding under the Option Plan, then all such
outstanding Options may be exercised in full by the Optionees as
of the effective date of any such liquidation or dissolution of
the Company without regard to the installment exercise provisions
of Section 8(2), by the Optionees giving notice in writing to the
Company of their intention to so exercise.
7.3 If the outstanding shares of the Company shall at anytime be
changed or exchanged by declaration of a share dividend, share
split, combination or exchange of shares, recapitalization, or any
other like event by or of the Company, and as often as the same
shall occur, then the number, class and kind of Shares subject to
this Option Plan or subject to any Options therefore granted, and
the Option prices, shall be appropriately and equitably adjusted
so as to maintain the proportionate number of Shares without
changing the aggregate Option price, provided, however, that no
adjustment shall be made by reason of the distribution of
subscription rights on outstanding shares. Upon happening of any
of the foregoing, the class and aggregate number of Shares
issuable pursuant to the Option Plan (as set forth in Section 5
hereof), in respect of which Options have not yet been exercised,
shall be appropriately adjusted, all as will be determined by the
Board whose determination shall be final.
7.4 Anything herein to the contrary notwithstanding, if prior to the
completion of an initial public offering of the Company's
securities (IPO), all or substantially all of the shares of the
Company are to be sold, or upon a merger or reorganization or the
like, the shares of the Company, or any class thereof, are to be
exchanged for securities of another Company, then in such event,
each Optionee shall be obliged to sell or exchange, as the case
may be, the shares such Optionee purchased under the Option Plan,
in accordance with the instructions then issued by the Board whose
determination shall be final.
14
<PAGE>
8. TERM AND EXERCISE OF OPTIONS
8.1 Options shall be exercised by the Optionee by giving written
notice to the Company, in such form and method as may be
determined by the Company, which exercise shall be effective upon
receipt of such notice by the Company at its principal office. The
notice shall specify the number of Shares with respect to which
the Option is being exercised.
8.2 Each Option granted under this Option Plan shall be exercisable
following the exercise dates and for the number of Shares as shall
be provided in Exhibit B to the Option Agreement. However, (i)
subject to the provisions of section 8.6 below, no option shall be
exercisable after the expiration of ten (10) years from the Date
of Grant as defined for each Optionee in his or her Option
Agreement and (ii) no ISO may be granted to a person who at the
time of the grant owns more than 10% of the voting power or value
of all classes of shares of the Company or its subsidiary. However
no Option shall be exercisable after the Expiration Date.
8.3 Options granted under the Option Plan shall not be transferable by
Optionees other than by will or laws of descent and distribution,
and during an Optionee's lifetime shall be exercisable only by
that Optionee.
8.4 The Options may be exercised by the Optionee in whole at any time
or in part from time to time, to the extent that the Options
become vested and exercisable, prior to the Expiration Date, and
provided that, subject to the provisions of Section 8.6 below (i)
the Optionee is an employee of the Company or any of its
subsidiaries, at all times during the period beginning with the
granting of the Option and ending upon the date of exercise (ii)
the director or the consultant is serving the Company or any of
its subsidiaries, at all times during the period beginning with
the granting of the Option and ending upon the date of exercise.
8.5 Subject to the provisions of Section 8.6 below, in the event of
termination of employees employment with the Company or any of its
subsidiaries, or the termination of services given by directors or
consultants to the Company or any of its subsidiaries, all Options
granted to them will immediately be expired. A notice of
termination of employment or services shall be deemed to
constitute termination of employment or services.
15
<PAGE>
8.6 Notwithstanding anything to the contrary hereinabove, an Option
may be exercised after the date of termination of Optionee's
service or employment with the Company or any subsidiary of the
Company during an additional period of time beyond the date of
such termination, but only with respect to the number of Options
already vested at the time of such termination according to the
vesting periods of the Options set forth in Section 4 of such
Optionee's Option Agreement, if: (i) prior to the date of such
termination, the Committee shall authorize an extension of the
terms of all or part of the Options beyond the date of such
termination for a period not to exceed the period during which the
Options by their terms would otherwise have been exercisable, (ii)
termination is without Cause (as defined below), in which event
any Options still in force and unexpired may be exercised within a
period of ninety (90) days from the date of such termination, but
only with respect to the number of shares purchasable at the time
of such termination, according to the vesting periods of the
Options, (iii) termination is the result of death or disability of
the Optionee, in which event any Options still in force and
unexpired may be exercised within a period of twelve (12) months
from the date of termination, but only with respect to the number
of Options already vested at the time of such termination
according to the vesting periods of the Options. The term "CAUSE"
shall mean any action, omission or state of affairs related to the
Optionee which the Committee or the Board decides, in its sole
discretion, is against the best interests of the Company.
8.7 Subject to the provisions of Section 12 below, the holders of
Options shall not have any of the rights or privileges of
shareholders of the Company in respect of any Shares purchasable
upon the exercise of any part of an Option unless and until,
following exercise, registration of the Optionee as holder of such
Shares in the Companies register of members.
8.8 Any form of Option agreement authorized by the Option Plan may
contain such other provisions as the Committee may, from time to
time, deem advisable. Without limiting the foregoing, the
Committee may, with the consent of the Optionee, from time to time
cancel all or any portion of any Option then subject to exercise,
and the Company's obligation in respect of such Option may be
discharged by (i) payment to the Optionee of an amount in cash
equal to the excess, if any, of the Fair Market Value of the
Shares at the date of such cancellation subject to the portion of
the Option so canceled over the aggregate purchase price of such
Shares, (ii) the issuance or transfer to the Optionee of Shares of
the Company with a Fair Market Value at the date of such transfer
equal to any such excess, or (iii) a combination of cash and
shares with a combined value equal to any such excess, all as
determined by the Committee in its sole discretion.
16
<PAGE>
9. INCENTIVE STOCK OPTIONS
Options intended to constitute ISOs, shall be subject to the following
special terms and conditions in addition to the general terms and
conditions of the Plan:
9.1 With respect to ISO granted to employees, the aggregate fair
market value of the shares (determined as of the grant of the ISO)
with respect to which ISO are exercisable, for the first time by
any grantee during any calendar year shall not exceed the
limitation provided under Section 422(d) of the Internal Revenue
Code.
9.2 The Options issued as ISOs must be granted within 10 years of the
date that the Plan was adopted or the date that the plan is
approved by the shareholders, whichever is earlier.
9.3 Any Options issued as ISOs, must by its terms be exercisable only
within 10 years from the date it is granted.
9.4 The exercise price of any ISO must not be less than the fair
market value of the shares at the time the ISO is granted. This
requirement shall be deemed satisfied if there has been a good
faith attempt to value the shares accurately for thus purpose.
9.5 The ISO by its terms must be non-transferable other than at death
and must be exercisable during the Optionee's lifetime only by the
Optionee.
10. PURCHASE OF INVESTMENT
Unless Shares covered by the Plan have been listed for trade on any stock
exchange (of any jurisdiction), or the Company has determined that such
registration is unnecessary, each person exercising an Option under the
Plan may be required by the Company to give a representation in writing
that he is acquiring such shares for his or her own account, for
investment and not with a view to, or for sale in connection with, the
distribution of any part thereof.
11. SHARES SUBJECT TO RIGHT OF FIRST REFUSAL
11.1 Notwithstanding anything to the contrary in the Articles of
Association of the Company, none of the Optionees shall have a
right of first refusal in relation with any sale, transfer or
allotment of shares in the Company.
17
<PAGE>
11.2 Until such time as the Company shall effectuate an IPO, the sale
of Shares issuable upon exercise of an Option, by the Optionee,
shall be subject to a right of first refusal on the part of the
Company's Founders, as defined in the Articles of Association of
the Company in effect in July 1998 (save, for the avoidance of
doubt, for other Optionees who already exercised their Options),
PRO RATA in accordance with their shareholding, by the Optionee
giving a notice of sale (THE NOTICE) to the Company who will
forward the Notice to the Founders.
The notice shall specify the number of Shares offered for sale,
the price per Share and the payment terms. The Founders will be
entitled for 30 days from the day of receipt of the Notice ("THE
30 DAYS PERIOD"), to purchase all or part of the offered Shares,
PRO RATA in accordance with their shareholding. If by the end of
the 30 Days Period not all of the offered Shares have been
purchased by the Founders, the Optionee will be entitled to sell
such Shares at any time during the 90 days following the end of
the 30 Days Period on terms not more favorable than those set out
in the Notice.
12. DIVIDENDS
With respect to all Shares (in contrary to unexercised Options) issued
upon the exercise of Options and purchased by the Optionee, the Optionee
shall be entitled to receive dividends in accordance with the quantity of
such Shares, and subject to any applicable taxation on distribution of
dividends.
13. ASSIGNABILITY AND SALE OF OPTIONS
No Option, purchasable hereunder, whether fully paid or not, shall be
assignable, transferable or given as collateral or any right with respect
to them given to any third party whatsoever, and during the lifetime of
the Optionee each and all of such Optionee's rights to purchase Shares
hereunder shall be exercisable only by the Optionee.
14. TERM OF THE OPTION PLAN
The Option Plan shall be effective as of the day it was adopted by the
Board and shall terminate at the end of 60 months from such day of
adoption.
18
<PAGE>
15. AMENDMENTS OR TERMINATION
The Board may, at any time and from time to time, amend, alter or
discontinue the Option Plan, except that no amendment or alteration shall
be made which would impair the rights of the holder of any Option
therefore granted, without his or her consent.
16. GOVERNMENT REGULATIONS
The Option Plan, and the granting and exercise of Options hereunder, and
the obligation of the Company to sell and deliver Shares under such
Options, shall be subject to all applicable laws, rules, and regulations,
whether of the State of Israel or of the United States or any other state
having jurisdiction over the Company and the Optionee, including the
registration of the Shares under the United States Securities Act of
1933, and to such approvals by any governmental agencies or national
securities exchanges as may be required.
17. CONTINUANCE OF EMPLOYMENT OR OTHER ENGAGEMENT
Neither the Option Plan nor the Option Agreement with the Optionee shall
impose any obligation on the Company or a subsidiary thereof, to continue
any Optionee in its employ or engagement, and nothing in the Option Plan
or in any Option granted pursuant thereto shall confer upon any Optionee
any right to continue in the employ or engagement of the Company or a
subsidiary thereof or restrict the right of the Company or a subsidiary
thereof to terminate such employment or such engagement at any time.
18. GOVERNING LAW & JURISDICTION
This Option Plan shall be governed by and construed and enforced in
accordance with the laws of the State of Israel applicable to contracts
made and to be performed therein, without giving effect to the principles
of conflict of laws. The competent courts of Tel-Aviv, Israel shall have
sole and exclusive jurisdiction in any matters pertaining to this Plan.
19
<PAGE>
19. TAX CONSEQUENCES
Any tax consequences arising from the grant or exercise of any Option,
from the payment for Shares covered thereby or from any other event or
act (of the Company or the Optionee), hereunder, shall be borne solely by
the Optionee. The Company shall withhold taxes according to the
requirements under the applicable laws, rules, and regulations, including
withholding taxes at source. Furthermore, the Optionee shall agree to
indemnify the Company and hold it harmless against and from any and all
liability for any such tax or interest or penalty thereon, including
without limitation, liabilities relating to the necessity to withhold, or
to have withheld, any such tax from any payment made to the Optionee.
20. NON-EXCLUSIVITY OF THE OPTION PLAN
The adoption of the Option Plan by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive
arrangements or as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of share Options otherwise
then under the Option Plan, and such arrangements may be either
applicable generally or only in specific cases. For the avoidance of
doubt, prior grant of options to employees of the Company under their
employment agreements, and not in the framework of any previous option
plan, shall not be deemed an approved incentive arrangement for the
purpose of this Section.
21. MULTIPLE AGREEMENTS
The terms of each Option may differ from other Options granted under the
Option Plan at the same time, or at any other time. The Committee may
also grant more than one Option to a given Optionee during the term of
the Option Plan, either in addition to, or in substitution for, one or
more Options previously granted to that Optionee.
20
<PAGE>
EXHIBIT B
TERMS OF THE INCENTIVE STOCK OPTIONS
- ------------------------------------------------------------------------------
1. Name of the Optionee:
- ------------------------------------------------------------------------------
2. Number of ISOs granted:
- ------------------------------------------------------------------------------
3. Price per Share:
- ------------------------------------------------------------------------------
4. Expiration Date: 8 years from the Date of Grant
- ------------------------------------------------------------------------------
5. Date of Grant:
- ------------------------------------------------------------------------------
6. Vesting schedule 4 years
- ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
% OF THE OPTIONS VESTING DATE
- ------------------------------------------------------------------------------
6.25 Every 3 months, starting from the 3rd month
from the Date of Grant (unless stated
differently in employee's contract
- ------------------------------------------------------------------------------
Optionee Signature
------------------------
21
<PAGE>
EXHIBIT 10.2
102 OPTION AGREEMENT
("OPTION AGREEMENT")
Made and entered into as of the __ of _________ _____
By and between
XACCT TECHNOLOGIES (1997) LTD.
("THE COMPANY")
an Israeli Company located at
31 Lechi Street
Bnei-Brak, Israel 51200
OF THE FIRST PART
AND
_____________________
ID#
("THE OPTIONEE")
OF THE SECOND PART
PREAMBLE
WHEREAS In 23-July-1998, the Company adopted its Option Plan, a copy of which
is attached hereto as EXHIBIT A, forming an integral part hereof; and
WHEREAS The Company has determined that the Optionee be granted an Options
under the Option Plan to buy Shares of the Company, and the Optionee
has agreed to such grant, all upon the terms and subject to the
conditions hereinafter provided.
<PAGE>
NOW, THEREFORE, it is agreed as follows:
1. PREAMBLE AND DEFINITIONS
1.1 The preamble to this Option Agreement constitutes an integral part
hereof.
1.2 Unless otherwise defined herein, capitalized terms used herein shall
have the meaning ascribed to them in the Option Plan.
2. GRANT OF OPTION
2.1 The Company hereby grants the Optionee Options in a number set forth
in Section 2 of EXHIBIT B hereto (THE OPTION(S)), subject in each case
to the vesting schedule thereof. Each Option is exercisable for one
Ordinary Share of a nominal value of NIS 0.01 (THE SHARE), at a price
per Ordinary Share as set forth in Section 3 of Exhibit B (THE OPTION
PRICE), in each case upon the terms and subject to the conditions as
set forth herein. Each Share shall be allocated from the total number
of shares reserved from of the Company's authorized share capital for
the Option Plan.
The Option Price will be paid in NIS in accordance with the
representative rate of exchange of the U.S. dollar, published by the
Bank of Israel and known on the date of giving the notice of exercise
(as set forth in Section 5.1 hereinafter).
2.2 The Optionee is aware that the Company intends to issue additional
shares in the future to various entities and individuals, as the
Company in its sole discretion shall determine.
3. PERIOD OF OPTION AND CONDITIONS OF EXERCISE
3.1 The terms of this Option Agreement shall commence on the date hereof
(THE DATE OF GRANT) and terminate at the Expiration Date (as defined
in Section 6 below), or at the time at which the Option is completely
terminated pursuant to the terms of the Option Plan or pursuant to
this Option Agreement.
3.2 The Options may be exercised by the Optionee in whole at any time or
in part from time to time, as determined by the Board, and to the
extent that the Options become vested and exercisable, prior to the
Expiration Date, and provided that, subject to the provisions of
Section 3.4 below, the Optionee is an employee of the Company or any
of its subsidiaries, at all times during the period beginning with the
granting of the Option and ending upon the date of exercise.
3.3 Subject to the provisions of Section 3.4 below, in the event of
termination of the Optionees employment with the Company or any of its
subsidiaries, all Options granted to him or her will immediately be
expired. A notice of termination of employment by either the Company
or the Optionee shall be deemed to constitute termination of
employment.
2
<PAGE>
3.4 Notwithstanding anything to the contrary hereinabove, an Option may be
exercised after the date of termination of Optionee's employment with
the Company or any subsidiary of the Company during an additional
period of time beyond the date of such termination, but only with
respect to the number of Options already vested at the time of such
termination according to the vesting periods of the Options, set forth
in Section 4 below, if: (i) prior to the date of such termination, the
Committee shall authorize an extension of the terms of all or part of
the Options beyond the date of such termination for a period not to
exceed the period during which the Options by their terms would
otherwise have been exercisable, (ii) termination is without Cause (as
defined below), in which event any Options still in force and
unexpired may be exercised within a period of 90 (ninety) days from
the date of such termination, but only with respect to the number of
shares purchasable at the time of such termination, according to the
vesting periods of the Options, (iii) termination is the result of
death or disability of the Optionee, in which event any Options still
in force and unexpired may be exercised within a period of 3 (three)
months from the date of termination, but only with respect to the
number of Options already vested at the time of such termination
according to the vesting periods of the Options. The term CAUSE shall
mean any action, omission or state of affairs related to the Optionee
which the Committee or the Board decides, in its sole discretion, is
against the best interests of the Company.
3.5 The Options may be exercised only to purchase whole Shares, and in no
case may a fraction of a Share be purchased. If any fractional Shares
would be deliverable upon exercise, such fraction shall be rounded up
one-half or more, or otherwise rounded down, to the nearest whole
number.
4. VESTING
Subject to the requirements as to the number of Shares for which an Option
is exercisable, as set forth in Section 2.1 above, Options shall vest
(i.e., Options shall become exercisable) at the dates set forth in Section
6 of Exhibit B hereto.
5. METHOD OF EXERCISE
5.1 Options shall be exercised by the Optionee by giving written notice to
the Company, in such form and method as may be determined by the
Company and the Trustee (THE EXERCISE NOTICE), which exercise shall be
effective upon receipt of such notice by the Company at its principal
office. The notice shall specify the number of Shares with respect to
which the Option is being exercised.
3
<PAGE>
5.2 The Shares shall be issued to the Trustee and be held by the Trustee
in accordance with the provisions of Section 5 of the Option Plan. The
Trustee will transfer the Shares to the Optionee upon demand but in no
event earlier than two years (24 months) from Date of Grant. If any
law or regulation requires the Company to take any action with respect
to the Shares so demanded before the issuance thereof, then the date
of their issuance shall be extended for the period necessary to take
such action. The Optionee hereby authorizes the Trustee to sign an
agreement with the Company whereby Shares will not be transferred
without deduction of taxes at source. The Optionee hereby undertakes
to exempt the Trustee from any liability in respect of any action or
decision duly taken and BONA FIDE executed in relation with the Option
Plan, or any Option or Share granted to him or her thereunder.
6. TERMINATION OF OPTION
6.1 Except as otherwise stated in this Option Agreement, the Options, to
the extent not previously exercised, shall terminate forthwith upon
the earlier of: (i) the date set forth in Section 4 of Exhibit B
hereto; and (ii) the expiration of any extended period in any of the
events set forth in Section 3.4 above (and such earlier date shall be
hereinafter referred to as THE EXPIRATION DATE).
6.2 Without derogating from the above, the Committee may, with the prior
written consent of the Optionee, from time to time cancel all or any
portion of the Options then subject to exercise, and the Company's
obligation in respect of such Options may be discharged by (i) payment
to the Optionee of an amount in cash equal to the excess, if any, of
the fair market value of the Shares pertaining to such canceled
Options, at the date of such cancellation, over the aggregate purchase
price of such Shares; (ii) the issuance or transfer to the Optionee of
Shares of the Company with a fair market value at the date of such
transfer equal to any such excess; or (iii) a combination of cash and
Shares with a combined value equal to any such excess, all determined
by the Committee in its sole discretion.
7. ADJUSTMENTS
7.1 If the Company is separated, reorganized, merged, consolidated or
amalgamated with or into another corporation while unexercised Options
remain outstanding under the Option Plan, there shall be substituted
for the Shares subject to the unexercised portions of such outstanding
Options an appropriate number of shares of each class of shares or
other securities of the separated, reorganized, merged, consolidated
or amalgamated corporation which were distributed to the shareholders
of the Company in respect of such shares, and appropriate adjustments
shall be made in the purchase price per share to reflect such action.
However, subject to any applicable law, in the event the successor
corporation does not agree to assume the award as aforesaid, the
Vesting Period a set forth in section 4 above shall be accelerated so
that any unexercisable or unvested portion of the outstanding Options
shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the change in control.
4
<PAGE>
7.2 If the Company is liquidated or dissolved while unexercised Options
remain outstanding, then all such outstanding Options may be exercised
in full by the Optionee as of the effective date of any such
liquidation or dissolution of the Company without regard to the
installment exercise provisions hereof, by the Optionee giving notice
in writing to the Company of his or her intention to so exercise.
7.3 If the outstanding shares of the Company shall at any time be changed
or exchanged by declaration of a stock dividend, stock split,
combination or exchange of shares, re-capitalization, or any other
like event by or of the Company, and as often as the same shall occur,
then the number, class and kind of Shares subject to the Option
therefore granted, and the Option Price, shall be appropriately and
equitably adjusted so as to maintain the proportionate number of
Shares without changing the aggregate Option Price; provided, however,
that no adjustment shall be made by reason of the distribution of
subscription rights on outstanding shares, all as will be determined
by the Board whose determination shall be final.
7.4 Anything herein to the contrary notwithstanding, if prior to the
completion of the IPO, all or substantially all of the shares of the
Company are to be sold, or upon a merger or reorganization or the
like, the shares of the Company, or any class thereof, are to be
exchanged for securities of another Company, then in such event, the
Optionee shall be obliged to sell or exchange (in accordance with the
value of his or her Shares in accordance to the transaction) as the
case may be, the Shares such Optionee purchased hereunder, in
accordance with the instructions then issued by the Board, which will
be given according to the decided upon policy concerning Optionees
under the Option Plan.
8. RIGHTS PRIOR TO EXERCISE OF OPTION; LIMITATIONS AFTER PURCHASE OF SHARES
8.1 Subject to the provisions of Section 8.2 below, the Optionee shall not
have any of the rights or privileges of shareholders of the Company in
respect of any Shares purchasable upon the exercise of any part of an
Option unless and until, following exercise but in case of Options and
Shares held by the Trustee, subject always to the provisions of
section 5 of the Option Plan, registration of the Optionee as holder
of such Shares in the Companies register of members.
8.2 With respect to all Shares (in contrary to unexercised Options) issued
upon the exercise of Options purchased by the Optionee and held by the
Trustee, the Optionee shall be entitled to receive dividends in
accordance with the quantity of such Shares, and subject to any
applicable taxation on distribution of dividends. During the period in
which Shares issued to the Trustee on behalf of a Optionee are held by
the Trustee, the cash dividends paid with respect thereto shall be
paid directly to the Optionee.
5
<PAGE>
8.3 No Option exercisable hereunder, whether fully paid or not, shall be
assignable, transferable or given as collateral or any right with
respect to them given to any third party whatsoever, and during the
lifetime of the Optionee each and all of the Optionee's rights to
purchase Shares hereunder shall be exercisable only by the Optionee.
As long as the Shares are held by the Trustee in favor of the
Optionee, then all rights the Optionee possesses over the Shares are
personal, can not be transferred, assigned, pledged or mortgaged,
other than by will or laws of descent and distribution.
Any action or dealing in contravention of the prohibitions set forth
in this Section 8.3 whether present or future, direct or indirect,
shall be null and void.
8.4 Until the consummation of an IPO, Shares shall be voted by a proxy
pursuant to the directions of the Board, such proxy to be to the
person or persons designated by the Board. A copy of the proxy is
attached hereto as Exhibit "C".
8.4 Optionee acknowledges that once the Company's shares will be traded in
any public market, his or her right to sell his or her Shares may be
subject to some limitations, as set forth by the Companies
underwriters. In such event, the Optionee will unconditionally agree
to any such limitations.
8.5 The Optionee shall not dispose of any Shares in transactions which
violate, in the opinion of the Company, any applicable rules and
regulations.
8.6 The Optionee agrees that the Company shall have the authority to
endorse upon the certificate or certificates representing the Shares
such legends referring to the foregoing restrictions, and any other
applicable restrictions, as it may deem appropriate (which do not
violate the Optionee's rights according to this Option Agreement).
9. SHARES SUBJECT TO RIGHT OF FIRST REFUSAL
9.1 Notwithstanding anything to the contrary in the Articles of
Association of the Company, the Optionee shall not have a right of
first refusal in relation with any sale, transfer or allotment of
shares in the Company.
9.2 Until such time as the Company shall effectuate an IPO, the sale of
Shares issuable upon exercise of an Option, by the Optionee, shall be
subject to a right of first refusal on the part of the Company's
existing Founders, as defined in the Articles of Association of the
Company in effect in July 1998 (save, for the avoidance of doubt, for
other Optionees who already exercised their Options), PRO RATA in
accordance with their shareholding, by the Optionee giving a notice of
sale (THE NOTICE) to the Company who will forward the Notice to the
Founders.
6
<PAGE>
The notice shall specify the number of Shares offered for sale, the
price per Share and the payment terms. The Founders will be entitled
for 30 days from the day of receipt of the Notice ("THE 30 DAYS
PERIOD"), to purchase all or part of the offered Shares, PRO RATA in
accordance with their shareholding. If by the end of the 30 Days
Period not all of the offered Shares have been purchased by the
Founders, the Optionee will be entitled to sell such Shares at any
time during the 90 days following the end of the 30 Days Period on
terms not more favorable than those set out in the Notice.
10. GOVERNMENT REGULATIONS
The Option Plan, and the granting and exercise of the Option thereunder,
and the Company's obligation to sell and deliver Shares or cash under the
Option, are subject to all applicable laws, rules and regulations, whether
of the State of Israel or of the United States or any other state having
jurisdiction over the Company and the Optionee, including the registration
of the Shares under the United States Securities Act of 1933, and to such
approvals by any governmental agencies or national securities exchanges as
may required.
11. CONTINUANCE OF EMPLOYMENT
Nothing in this Option Agreement shall be construed to impose any
obligation on the Company or a subsidiary thereof to continue the
Optionee's employment with it, to confer upon the Optionee any right to
continue in the employ of the Company or a subsidiary thereof, or to
restrict the right of the Company or a subsidiary thereof to terminate such
employment at any time.
12. GOVERNING LAW & JURISDICTION
This Option Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Israel applicable to contracts
made and to be performed therein, without giving effect to the principles
of conflict of laws. The competent courts of Tel-Aviv, Israel shall have
sole and exclusive jurisdiction in any matters pertaining to this Agreement
except as expressly set forth in Section 13 below.
7
<PAGE>
13. ARBITRATION
Any dispute in relation with this Option Agreement and the exercise of
rights thereunder, shall be brought to arbitration in front of a sole
arbitrator to be chosen by the Company in its sole discretion, ("THE
ARBITRATOR"), who shall decide on such dispute in accordance with the
provisions of the Arbitration Law - 1968 and its schedules. Notwithstanding
the aforesaid the Arbitrator shall be bound to apply the substantive law of
the State of Israel in any arbitration proceeding. The decision of the
Arbitrator shall be final and shall bind the Company and the Optionee.
14. TAX CONSEQUENCES
Any tax consequences arising from the grant or exercise of any Option, from
the payment for Shares covered thereby or from any other event or act (of
the Company, the Trustee or the Optionee), hereunder, shall be borne solely
by the Optionee. The Company and/or the Trustee shall withhold taxes
according to the requirements under the applicable laws, rules, and
regulations, including the withholding of taxes at source. Furthermore, the
Optionee shall agree to indemnify the Company and the Trustee and hold them
harmless against and from any and all liability for any such tax or
interest or penalty thereon, including without limitation, liabilities
relating to the necessity to withhold, or to have withheld, any such tax
from any payment made to the Optionee.
The Committee and/or the Trustee shall not be required to release any Share
certificate to an Optionee until all required payments have been fully
made.
The Optionee hereby declares that he or she will not transfer the Shares
nor any other shares received subsequently following any realization of
rights, by a way of tax - exempt transfer or a transfer under sections 104
(a), 104 (b) or 97 (a) of the Israeli Income Tax Ordinance, New Version
(1961).
15. FAILURE TO ENFORCE NOT A WAIVER
The failure of the any party to enforce at any time any provisions of this
Option Agreement shall in no way be construed to be a waiver of such
provision or of any other provision hereof.
8
<PAGE>
16. PROVISIONS OF THE OPTION PLAN
The Options provided for herein are granted pursuant to the Option Plan,
and said Options and this Option Agreement are in all respects governed by
the Option Plan and subject to all of the terms and provisions whether such
terms and provisions are incorporated in this Option Agreement solely by
reference or are expressly cited herein.
Any interpretation of this Option Agreement will be made in accordance with
the Option Plan but in the event there is any contradiction between the
provisions of this Option Agreement and the Option Plan, the provisions of
this Option Agreement will prevail.
17. BINDING EFFECT
This Option Agreement shall be binding upon the heirs, executors,
administrators, and successors of the parties hereof.
18. NOTICES
Any notice required or permitted under this Option Agreement shall be
deemed to have been duly given if delivered, faxed or mailed, if delivered
by certified or registered mail or return receipt requested, either to the
Optionee at his or her address set forth above or such other address as he
or she may designate in writing to the Company, or to the Company at the
address set forth above or such other address as the Company may designate
in writing to the Optionee, from time to time.
19. ENTIRE AGREEMENT
This Option Agreement exclusively concludes all the terms of the Optionee's
Option Plan, and, subject to the provisions of Section 20 of the Option
Plan, annuls and supersedes any other agreement, arrangement or
understanding, whether oral or in writing, relating to the grant of options
to the Optionee. Any change of any kind to this Option Agreement will be
valid only if made in writing and signed by both the Optionee and the
Company's authorized member and has received the approval of the Board.
9
<PAGE>
IN WITNESS WHEREOF, the Company executed this Option Agreement in duplicate on
the day and year first above written.
XaCCT Technologies (1997) Ltd.
By: Eric Gries
The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Option Agreement.
- ------------
The Optionee
10
<PAGE>
EXHIBIT A
XACCT TECHNOLOGIES (1997) LTD.
THE 1998
SECTION 102 SHARE OPTION PLAN
<PAGE>
XACCT TECHNOLOGIES (1997) LTD.
THE 1998
SECTION 102 SHARE OPTION PLAN
1. NAME
This 102 Share Option Plan, as amended from time to time, shall be known as
the XaCCT Technologies (1997) Ltd. . 1998 Section 102 Share Option Plan
("THE OPTION PLAN").
2. PURPOSE OF THE OPTION PLAN
The Option Plan is intended as an incentive to retain, in the employ of
XaCCT Technologies (1997) Ltd. ("THE COMPANY") and its subsidiaries,
persons of training, experience, and ability, to attract new employees,
whose services are considered valuable, to encourage the sense of
proprietorship of such persons, and to stimulate the active interest of
such persons in the development and financial success of the Company by
providing them with opportunities to purchase shares in the Company,
pursuant to the Option Plan approved by the board of directors of the
company ("THE BOARD"), which is designed to benefit from, and is made
pursuant to, the provisions of Section 102 of the Israeli Income Tax
Ordinance (New Version) 1961 and any regulations, rules, orders of
procedures promulgated thereunder ("SECTION 102") with respect to Options
granted to employees of the Company pursuant to the Option Plan ("THE
OPTIONS").
3. ADMINISTRATION OF THE OPTION PLAN
The Board or a share option committee appointed and maintained by the Board
for such purpose ("THE COMMITTEE") shall have the power to administer the
Option Plan. Notwithstanding the above, the Board shall automatically have
a residual authority if no Committee shall be constituted or if such
Committee shall cease to operate for any reason whatsoever.
The Committee shall consist of such number of members (not less than two
(2) in number) as may be fixed by the Board. The Committee shall select one
of its members as its chairman ("THE CHAIRMAN") and shall hold its meetings
at such times and places as the Chairman shall determine. The Committee
shall keep records of its meetings and shall make such rules and
regulations for the conduct of its business as it shall deem advisable.
12
<PAGE>
Any member of such Committee shall be eligible to receive Options under the
Option Plan while serving on the Committee, unless otherwise specified
herein.
The Committee shall have full power and authority (i) to designate
participants; (ii) to determine the terms and provisions of respective
Option agreements (which need not be identical) including, but not limited
to, the number of shares in the Company to be covered by each Option,
provisions concerning the time or times when and the extent to which the
Options may be exercised and the nature and duration of restrictions as to
transferability or restrictions constituting substantial risk of
forfeiture; (iii) to accelerate the right of an Optionee to exercise, in
whole or in part, any previously granted Option; (iv) to interpret the
provisions and supervise the administration of the Option Plan; and - (v)
to determine any other matter which is necessary or desirable for, or
incidental to administration of the Option Plan.
The Committee shall have the authority to grant, in its discretion, to the
holder of an outstanding Option, in exchange for the surrender and
cancellation of such Option, a new Option having a purchase price equal to,
lower than or higher than the purchase price provided in the Option so
surrendered and canceled, and containing such other terms and conditions as
the Committee may prescribe in accordance with the provisions of the Option
Plan.
All decisions and selections made by the Board or the Committee pursuant to
the provisions of the Option Plan shall be made by a majority of its
members except that no member of the Board or the Committee shall vote on,
or be counted for quorum purposes, with respect to any proposed action of
the Board or the Committee relating to any Option to be granted to that
member. Any decision reduced to writing and signed by a majority of the
members who are authorized to make such decision shall be fully effective
as if it had been made by a majority at a meeting duly held.
The interpretation and construction by the Committee of any provision of
the Option Plan or of any Option thereunder shall be final and conclusive
unless otherwise determined by the Board.
Subject to the Company decision, each member of the Board or the Committee
shall be indemnified and held harmless by the Company against any cost or
expense (including counsel fees) reasonably incurred by him or her, or any
liability (including any sum paid in settlement of a claim with the
approval of the Company) arising out of any act or omission to act in
connection with the Option Plan unless arising out of such member's own
fraud or bad faith, to the extent permitted by applicable law. Such
indemnification shall be in addition to any rights of indemnification the
member may have as a director or otherwise under the Company's Articles of
Association, any agreement, any vote of shareholders or disinterested
directors, insurance policy or otherwise.
13
<PAGE>
4. DESIGNATION OF PARTICIPANTS
The persons eligible for participation in the Option Plan as recipients of
Options shall include any employees of the Company or of any subsidiary of
the Company. The grant of an Option hereunder shall neither entitle the
recipient thereof to participate nor disqualify him from participating in,
any other grant of Options pursuant to this Option Plan or any other option
or share plan of the Company or any of its affiliates.
Anything in the Option Plan to the contrary notwithstanding, all grants of
Options to directors and office holders ("Nosei Misra" - as such term is
defined in the Companies Ordinance (New Version), 1983 - "THE COMPANIES
ORDINANCE") shall be authorized and implemented only in accordance with the
provisions of the Companies Ordinance, as in effect from time to time.
5. TRUSTEE
The Options which shall be granted to employees of the Company and/or any
Shares (as defined below) issued upon exercise of such Options and/or other
shares received subsequently following any realization of rights, shall be
issued to a Trustee nominated by the Committee, and approved in accordance
with the provisions of Section 102 ("THE TRUSTEE") and held for the benefit
of the Optionees for a period of not less than two years (24 months) from
the date of grant.
Anything to the contrary notwithstanding, the Trustee shall not release any
Options and/or any Shares issued upon exercise of Options, prior to the
full payment of the Optionee's tax liabilities arising from Options which
were granted to him or her and/or any Shares issued upon exercise of such
Options.
Upon receipt of the Option, the Optionee will sign an undertaking to exempt
the Trustee from any liability in respect of any action or decision duly
taken and BONA FIDE executed in relation with the Option Plan, or any
Option or Share granted to him or her thereunder.
14
<PAGE>
6. SHARES RESERVED FOR THE OPTION PLAN; RESTRICTION THEREON
6.1 Subject to adjustments as set forth in Section 8 below, a total of
80,000 Ordinary Shares, of NIS 0.01 n.v. each ("THE SHARES") shall be
subject to the Option Plan. The Shares subject to the Option Plan are
hereby reserved for such purpose in the authorized share capital of
the Company and may only be issued in terms hereof. Any of such Shares
which may remain unissued and which are not subject to outstanding
Options at the termination of the Option Plan shall cease to be
reserved for the purpose of the Option Plan, but until termination of
the Option Plan the Company shall at all times reserve sufficient
number of Shares to meet the requirements of the Option Plan. Should
any Option for any reason expire or be canceled prior to its exercise
or relinquishment in full, the Shares therefore subject to such Option
may again be subjected to an Option under the Option Plan.
6.2 An employee who purchased Shares hereunder upon exercise of Options
shall have no voting rights as a shareholder (in any and all matters
whatsoever) until the consummation of a public offering of the
Company's shares (the "IPO"). Until an IPO, such Shares shall be voted
by a proxy pursuant to the directions of the Board, such proxy to be
to the person or persons designated by the Board. All Shares issued
upon exercise of the Options shall entitle the holder thereof to
receive dividends and other distributions thereon.
7. OPTION PRICE
7.1 The purchase price of each Share subject to an Option or any portion
thereof shall be determined by the Committee in its sole and absolute
discretion in accordance with applicable law, subject to any
guidelines as may be determined by the Board from time to time.
7.2 The Option price shall be payable upon the exercise of the Option in a
form satisfactory to the Committee and conforming Section 102,
including without limitation, by cash or check. The Committee shall
have the authority to postpone the date of payment on such terms as it
may determine.
15
<PAGE>
8. ADJUSTMENTS
Upon the occurrence of any of the following described events, Optionee's
rights to purchase Shares under the Option Plan shall be adjusted as
hereafter provided:
8.1 If the Company is separated, reorganized, merged, consolidated or
amalgamated with or into another corporation while unexercised Options
remain outstanding under the Option Plan, there shall be substituted
for the Shares subject to the unexercised portions of such outstanding
Options an appropriate number of shares of each class of shares or
other securities of the separated, reorganized, merged, consolidated
or amalgamated corporation which were distributed to the shareholders
of the Company in respect of such shares, and appropriate adjustments
shall be made in the purchase price per share to reflect such action.
However, subject to any applicable law, in the event the successor
corporation does not agree to assume the award as aforesaid, the
Vesting Period a set forth in section 4 above shall be accelerated so
that any unexercisable or unvested portion of the outstanding Options
shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the change in control.
8.2 If the Company is liquidated or dissolved while unexercised Options
remain outstanding under the Option Plan, then all such outstanding
Options may be exercised in full by the Optionees as of the effective
date of any such liquidation or dissolution of the Company without
regard to the installment exercise provisions of Section 9(2), by the
Optionees giving notice in writing to the Company of their intention
to so exercise.
8.3 If the outstanding shares of the Company shall at anytime be changed
or exchanged by declaration of a share dividend, share split,
combination or exchange of shares, recapitalization, or any other like
event by or of the Company, and as often as the same shall occur, then
the number, class and kind of Shares subject to this Option Plan or
subject to any Options therefore granted, and the Option prices, shall
be appropriately and equitably adjusted so as to maintain the
proportionate number of Shares without changing the aggregate Option
price, provided, however, that no adjustment shall be made by reason
of the distribution of subscription rights on outstanding shares. Upon
happening of any of the foregoing, the class and aggregate number of
Shares issuable pursuant to the Option Plan (as set forth in Section 6
hereof), in respect of which Options have not yet been exercised,
shall be appropriately adjusted, all as will be determined by the
Board whose determination shall be final.
8.4 Anything herein to the contrary notwithstanding, if prior to the
completion of an initial public offering of the Company's securities
(IPO), all or substantially all of the shares of the Company are to be
sold, or upon a merger or reorganization or the like, the shares of
the Company, or any class thereof, are to be exchanged for securities
of another Company, then in such event, each Optionee shall be obliged
to sell or exchange, as the case may be, the shares such Optionee
purchased under the Option Plan, in accordance with the instructions
then issued by the Board whose determination shall be final.
16
<PAGE>
9. TERM AND EXERCISE OF OPTIONS
9.1 Options shall be exercised by the Optionee by giving written notice to
the Company, in such form and method as may be determined by the
Company and the Trustee and conforming Section 102, which exercise
shall be effective upon receipt of such notice by the Company at its
principal office. The notice shall specify the number of Shares with
respect to which the Option is being exercised.
9.2 Each Option granted under this Option Plan shall be exercisable
following the exercise dates and for the number of Shares as shall be
provided in Exhibit B to the Option Agreement. However no Option shall
be exercisable after the Expiration Date, as defined for each Optionee
in his or her Option Agreement.
9.3 Options granted under the Option Plan shall not be transferable by
Optionees other than by will or laws of descent and distribution, and
during an Optionee's lifetime shall be exercisable only by that
Optionee.
9.4 The Options may be exercised by the Optionee in whole at any time or
in part from time to time, to the extent that the Options become
vested and exercisable, prior to the Expiration Date, and provided
that, subject to the provisions of Section 9.6 below, the Optionee is
an employee of the Company or any of its subsidiaries, at all times
during the period beginning with the granting of the Option and ending
upon the date of exercise.
9.5 Subject to the provisions of Section 9.6 below, in the event of
termination of Optionee's employment with the Company or any of its
subsidiaries, all Options granted to him or her will immediately be
expired. A notice of termination of employment shall be deemed to
constitute termination of employment.
17
<PAGE>
9.6 Notwithstanding anything to the contrary hereinabove, an Option may be
exercised after the date of termination of Optionee's employment with
the Company or any subsidiary of the Company during an additional
period of time beyond the date of such termination, but only with
respect to the number of Options already vested at the time of such
termination according to the vesting periods of the Options set forth
in Section 4 of such Optionee's Option Agreement, if: (i) prior to the
date of such termination, the Committee shall authorize an extension
of the terms of all or part of the Options beyond the date of such
termination for a period not to exceed the period during which the
Options by their terms would otherwise have been exercisable; (ii)
termination is without Cause (as defined below), in which event any
Options still in force and unexpired may be exercised within a period
of ninety (90) days from the date of such termination, but only with
respect to the number of shares purchasable at the time of such
termination, according to the vesting periods of the Options; (iii)
termination is the result of death or disability of the Optionee, in
which event any Options still in force and unexpired may be exercised
within a period of three (3) months from the date of termination, but
only with respect to the number of Options already vested at the time
of such termination according to the vesting periods of the Options.
The term "CAUSE" shall mean any action, omission or state of affairs
related to the Optionee which the Committee or the Board decides, in
its sole discretion, is against the best interests of the Company.
9.7 Subject to the provisions of Section 10 below, the holders of Options
shall not have any of the rights or privileges of shareholders of the
Company in respect of any Shares purchasable upon the exercise of any
part of an Option unless and until, following exercise but subject
always to the provisions of Section 5 above, registration of the
Optionee as holder of such Shares in the Companies register of
members.
9.8 Any form of Option agreement authorized by the Option Plan may contain
such other provisions as the Committee may, from time to time, deem
advisable. Without limiting the foregoing, the Committee may, with the
consent of the Optionee, from time to time cancel all or any portion
of any Option then subject to exercise, and the Company's obligation
in respect of such Option may be discharged by (i) payment to the
Optionee of an amount in cash equal to the excess, if any, of the Fair
Market Value of the Shares at the date of such cancellation subject to
the portion of the Option so canceled over the aggregate purchase
price of such Shares, (ii) the issuance or transfer to the Optionee of
Shares of the Company with a Fair Market Value at the date of such
transfer equal to any such excess, or (iii) a combination of cash and
shares with a combined value equal to any such excess, all as
determined by the Committee in its sole discretion.
10. SHARES SUBJECT TO RIGHT OF FIRST REFUSAL
10.1 Notwithstanding anything to the contrary in the Articles of
Association of the Company, none of the Optionees shall have a right
of first refusal in relation with any sale, transfer or allotment of
shares in the Company.
10.2 Until such time as the Company shall effectuate an IPO, the sale of
Shares issuable upon
18
<PAGE>
exercise of an Option, by the Optionee, shall be subject to a right of
first refusal on the part of the Company's Founders, as defined in the
Articles of Association of the Company in effect in July 1998 (save,
for the avoidance of doubt, for other Optionees who already exercised
their Options), PRO RATA in accordance with their shareholding, by the
Optionee giving a notice of sale (THE NOTICE) to the Company who will
forward the Notice to the Founders.
The notice shall specify the Number of Shares offered for sale, the
price per Share and the payment terms. The Founders will be entitled
for 30 days from the day of receipt of the Notice ("THE 30 DAYS
PERIOD"), to purchase all or part of the offered Shares, PRO RATA in
accordance with their shareholding. If by the end of the 30 Days
Period not all of the offered Shares have been purchased by the
Founders, the Optionee will be entitled to sell such Shares at any
time during the 90 days following the end of the 30 Days Period on
terms not more favorable than those set out in the Notice.
11. DIVIDENDS
With respect to all Shares (in contrary to unexercised Options) issued upon
the exercise of Options purchased by the Optionee and held by the Trustee,
the Optionee shall be entitled to receive dividends in accordance with the
quantity of such Shares, and subject to any applicable taxation on
distribution of dividends. During the period in which Shares issued to the
Trustee on behalf of a Optionee are held by the Trustee, the cash dividends
paid with respect thereto shall be paid directly to the Optionee.
12. ASSIGNABILITY AND SALE OF OPTIONS
No Option, purchasable hereunder, whether fully paid or not, shall be
assignable, transferable or given as collateral or any right with respect
to them given to any third party whatsoever, and during the lifetime of the
Optionee each and all of such Optionee's rights to purchase Shares
hereunder shall be exercisable only by the Optionee.
As long as the Shares are held by the Trustee in favor of the Optionee,
than all rights the last possesses over the Shares are personal, can not be
transferred, assigned, pledged or mortgaged, other than by will or laws of
descent and distribution.
13. TERM OF THE OPTION PLAN
The Option Plan shall be effective as of the day it was adopted by the
Board and shall terminate at the end of ___ years from such day of
adoption.
19
<PAGE>
14. AMENDMENTS OR TERMINATION
The Board may, at any time and from time to time, subject to the written
consent of the Trustee, amend, alter or discontinue the Option Plan, except
that no amendment or alteration shall be made which would impair the rights
of the holder of any Option therefore granted, without his consent.
15. GOVERNMENT REGULATIONS
The Option Plan, and the granting and exercise of Options hereunder, and
the obligation of the Company to sell and deliver Shares under such
Options, shall be subject to all applicable laws, rules, and regulations,
whether of the State of Israel or of the United States or any other State
having jurisdiction over the Company and the Optionee, including the
registration of the Shares under the United States Securities Act of 1933,
and to such approvals by any governmental agencies or national securities
exchanges as may be required.
16. CONTINUANCE OF EMPLOYMENT
Neither the Option Plan nor the Option Agreement with the Optionee shall
impose any obligation on the Company or a subsidiary thereof, to continue
any Optionee in its employ, and nothing in the Option Plan or in any Option
granted pursuant thereto shall confer upon any Optionee any right to
continue in the employ of the Company or a subsidiary thereof or restrict
the right of the Company or a subsidiary thereof to terminate such
employment at any time.
17. GOVERNING LAW & JURISDICTION
This Option Plan shall be governed by and construed and enforced in
accordance with the laws of the State of Israel applicable to contracts
made and to be performed therein, without giving effect to the principles
of conflict of laws. The competent courts of Tel-Aviv, Israel shall have
sole jurisdiction in any matters pertaining to this Option Plan except as
expressly set forth in Section 18 below.
20
<PAGE>
18. ARBITRATION
Any dispute in relation with this Option Plan and the exercise of rights
thereunder, shall be brought to arbitration in front of a sole arbitrator
to be chosen by the Company in its sole discretion, ("THE ARBITRATOR"), who
shall resolve such dispute in accordance with the provisions of the
Arbitration Law - 1968 and its schedules. Notwithstanding the aforesaid the
Arbitrator shall be bound to apply the substantive law of the State of
Israel in any arbitration proceeding. The decision of the Arbitrator shall
be final and shall bind the Company and the Optionee.
19. TAX CONSEQUENCES
Any tax consequences arising from the grant or exercise of any Option, from
the payment for Shares covered thereby or from any other event or act (of
the Company, the Trustee or the Optionee), hereunder, shall be borne solely
by the Optionee. The Company and/or the Trustee shall withhold taxes
according to the requirements under the applicable laws, rules, and
regulations, including withholding taxes at source. Furthermore, the
Optionee shall agree to indemnify the Company and the Trustee and hold them
harmless against and from any and all liability for any such tax or
interest or penalty thereon, including without limitation, liabilities
relating to the necessity to withhold, or to have withheld, any such tax
from any payment made to the Optionee.
The Committee and/or the Trustee shall not be required to release any Share
certificate to an Optionee until all required payments have been fully
made.
20. NON-EXCLUSIVITY OF THE OPTION PLAN
The adoption of the Option Plan by the Board shall not be construed as
amending, modifying or rescinding any previously approved incentive
arrangements or as creating any limitations on the power of the Board to
adopt such other incentive arrangements as it may deem desirable,
including, without limitation, the granting of share Options otherwise then
under the Option Plan, and such arrangements may be either applicable
generally or only in specific cases. FOR THE AVOIDANCE OF DOUBT, PRIOR
GRANT OF OPTIONS TO EMPLOYEES OF THE COMPANY UNDER THEIR EMPLOYMENT
AGREEMENTS, AND NOT IN THE FRAMEWORK OF ANY PREVIOUS OPTION PLAN, SHALL NOT
BE DEEMED AN APPROVED INCENTIVE ARRANGEMENT FOR THE PURPOSE OF THIS
SECTION.
21. MULTIPLE AGREEMENTS
The terms of each Option may differ from other Options granted under the
Option Plan at the same time, or at any other time. The Committee may also
grant more than one Option to a given Optionee during the term of the
Option Plan, either in addition to, or in substitution for, one or more
Options previously granted to that Optionee.
21
<PAGE>
EXHIBIT B
TERMS OF THE OPTION
1. Name of the Optionee:
--------------------------------------
2. Number of Options granted:
--------------------------------------
3. Price per Share:
--------------------------------------
4. Expiration Date: 8 years from the date of grant
--------------------------------------
5. Date of Grant:
--------------------------------------
6. Vesting schedule
---------------------------------------------------------------------------
% OF THE OPTIONS VESTING DATE
---------------------------------------------------------------------------
---------------------------------------------------------------------------
6.25% Every 3 months, starting from the 3rd
month from the Date of Grant, up to
100% full vesting that includes the
part vested immediately
---------------------------------------------------------------------------
Employee Signature
----------------------------
22
<PAGE>
EXHIBIT C
PROXY
Mr. Eran Wagner and Mr. Limor Schweitzer, or any of them, with power of
substitution in each, are hereby authorized to represent the undersigned at any
and all general meetings of XaCCT Technologies (1997) Ltd. (the "Company")
(including general meetings convened for the purpose of adopting extraordinary
resolutions) and to vote thereat on any and all matters the same number of
Ordinary Shares of the Company as the undersigned would be entitled to vote if
then personally present.
- ------------------------------------- -------------------------------
NAME DATE
-------------------------------
SIGNATURE
23
<PAGE>
EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made as of January __, 1997 by and
between XaCCT Technologies (1997) Ltd., an Israeli corporation (the "Company"),
XaCCT Technologies Inc., a Delaware corporation (the "Subsidiary") and Eric
Gries (the "Executive").
1. EMPLOYMENT AND DUTIES. Effective as of January 27th, Executive shall
be employed as President and Chief Executive Officer of the Company and
Subsidiary, reporting to the respective Board of Directors, and assuming and
discharging such responsibilities as are commensurate with such office and
position. Executive shall comply with and be bound by the Company's operating
policies, procedures and practices as in effect from time to time during the
term of Executive's employment hereunder. During the term of Executive's
employment with the Company, Executive shall devote his full business time,
skill and attention to his duties and responsibilities, and shall perform them
faithfully, diligently and competently, and Executive shall use his best efforts
to further the business of the Company and its affiliated entities including,
without limitation, the Subsidiary. In the event that other subsidiaries are
formed, Executive shall be President and Chief Executive Officer of such other
subsidiaries.
2. AT-WILL EMPLOYMENT. The Company and Executive acknowledge that
Executive's employment hereunder is and shall continue to be at-will (as defined
under applicable law), and may be terminated at any time, with or without cause,
at the option of either party, with or without notice. If Executive's
employment terminates for any reason, Executive shall not be entitled to any
payments, benefits, damages, awards or compensation other than as specifically
provided by this Agreement. No provision of this Agreement shall be construed as
conferring upon Executive a right to continue as an employee of the Company. As
a condition of his employment, Executive agrees to enter into the attached
Confidential Information and Invention Assignment Agreement attached hereto.
3. SALARY. In consideration of Executive's services, Executive will
initially be paid a gross base salary by the Subsidiary at the rate of $190,000
per year, to be paid in bi-weekly installments in accordance with the Company's
standard payroll practices. As long as Executive is employed by the Company or
Subsidiary, his base salary shall not be less than $190,000 per year.
4. NOMINATION TO BOARD OF DIRECTORS. The Company shall nominate Executive
for the Company's Board of Directors on the Company's slate of nominees to be
presented at the next shareholder meeting of the Company. Election to the board
of directors shall be determined by, and be at the discretion of, the
shareholders of the Company.
5. SIGNING AND PERFORMANCE BONUS. In consideration for entering into this
agreement with the Company, Executive shall receive a lump-sum bonus equal to
$30,000 to be paid by February 3, 1998. Executive shall not receive a
performance bonus during his first year of employment with the Company. Upon
completion of Executive's first year of employment, the Company and Executive
shall establish mutually agreed upon performance criteria on which future
performance bonuses shall be based.
<PAGE>
6. BENEFITS: EXPENSES, VACATION. The Company plans to establish a health
insurance plan (which will include provision for family coverage), long term
disability plan and 401k plan, effective in the first quarter of calendar year
1998, in which the Executive, to the extent eligible, will be permitted to
participate. In addition, the Company shall provide Executive with a life
insurance policy, the face value of which will be equal to two times Executive's
initial base salary. Executive shall further be entitled to three weeks paid
vacation on an annual basis.
The Company shall reimburse Executive for all reasonable business and
travel expenses actually incurred or paid by Executive in the performance of
Executive's services on behalf of the Company, in accordance with the Company's
expense reimbursement policy as in effect from time to time.
7. STOCK OPTION. Effective upon the completion of the next round of
preferred stock financing, Executive will be granted an option under the
Subsidiary's 1998 Stock Option Plan (the "Plan") to purchase five percent (5%)
of the Ordinary Shares of the Company (the "Option"). The Option shall have an
exercise price equal to the fair market value of the shares on the date of
grant. (A Board meeting with respect to approval of this Agreement and the
transactions contemplated thereby will be held within thirty days of the date of
this Agreement.) The Option shall have a term of seven (7) years, but shall
terminate to the extent not exercised within 90 days after Executive's
employment with the Company has been terminated for any reason by Executive or
by the Company. Subject to accelerated vesting provisions set forth in Section
9(a) of this Agreement, the Option will vest, based upon Executive's continued
employment with the Company, as to twenty-five percent (25%) of the shares
subject to the Option one year after the start of Executive's employment with
the Company (the "Start Date"), and as to one-thirty-sixth (1/36th) of the
remaining shares subject to the Option each month thereafter, so that the Option
shall be one hundred percent (100%) vested after four years. The Option shall be
governed in all respects by the terms of the Plan and shall be evidenced by a
Stock Option Agreement in the form approved by the Board of Directors of the
Company.
8. PLACE OF PERFORMANCE. Executive shall be located at Company/Subsidiary
facilities to be located in the San Francisco Bay Area.
9. TERMINATION.
(a) TERMINATION WITHOUT CAUSE.
(i) SEVERANCE. In the event Executive's employment hereunder
is terminated by the Company without Cause (as hereinafter defined), the Company
shall pay Executive severance equal to twelve months of Executive's base salary
(measured as of the date of termination), less applicable taxes and other
required withholdings and any amounts owed by Executive to the Company, which
severance shall be paid quarterly in equal installments with the first
installment paid on the date of termination. Severance pay shall be considered
wages for the purpose of any bankruptcy or involuntary proceedings.
-2-
<PAGE>
(ii) OPTION ACCELERATION. In the event that Executive's
employment is terminated without cause within one year of the date of this
Agreement, the Company shall accelerate vesting and exercisability as to twenty
five percent (25%) of the shares subject to the option. In the event that
Executive's employment is terminated without Cause after the Executive has been
employed by the Company for one year, but not more than two years, the Company
shall accelerate the vesting and exercisability of the shares subject to the
Option, so that, after such acceleration, the Option shall be vested and
exercisable as to fifty percent (50%) of the total number of shares subject to
Option. In the event that Executive's employment is terminated without Cause
after the Executive has been employed by the Company for more than two years but
less than three years, the Company shall accelerate the vesting and
exercisability of the Option as to fifty percent (50%) of the total number of
shares subject to the Option which have not vested on the date of the
termination of Executive's employment (in addition to those shares which have
already vested). In the event that Executive's employment is terminated without
Cause after three years from the date of this Agreement, the Company shall
accelerate the vesting and exercisability of all the shares subject to the
Option.
(iii) CONSTRUCTIVE TERMINATION. For purposes of this Section
9(a), Executive's resignation following a diminution by the Company in the
Executive's position or responsibilities with the Company, the Subsidiary or an
affiliate thereof, or subsequent to a sale of the Company, of the surviving
entity, that results in Executive's position or responsibilities not being
commensurate with the position of president and Chief Executive Officer of the
Company, shall be deemed termination by the Company without Cause.
(b) TERMINATION WITH CAUSE. If Executive's employment hereunder
shall be terminated by the Company with Cause, this Agreement shall terminate as
of the date of such termination of employment with respect to (i), (ii), (iii)
and (iv) below and upon forty five (45) days notice with respect to (v) below,
and Executive shall have no right to any severance or other compensation or
benefits other than that which is accrued and owing as of the date of
termination. The term "Cause" is defined as anyone or more of the following
occurrences:
(i) Executive's conviction by, or entry of a plea of guilty or
nolo contendere in, a court of competent and final jurisdiction for any crime
which constitutes a felony in the jurisdiction involved, which felony materially
injures the Company, the Subsidiary , or any of their respective affiliates; or
(ii) Executive's commission of a material act of fraud or
misappropriation of funds, whether prior to or subsequent to the date hereof,
upon the Company, the Subsidiary , or any of their respective affiliates; or
(iii) Gross negligence by the Executive in the scope of
Executive's services to the Company, the Subsidiary, or any of their respective
affiliates; or
(iv) A willful breach by Executive of a material provision of
this Agreement; or
-3-
<PAGE>
(v) A willful failure of Executive to substantially perform
his duties hereunder.
(c) DEATH. The death of Executive shall immediately terminate this
Agreement, and no severance or other compensation or benefits shall be owed to
Executive's estate other than that which is accrued and owing as of the date of
termination or as otherwise provided in any Company benefit plan in effect as of
such date.
(d) DISABILITY. If, as a result of incapacity due to physical or
mental illness or injury, Executive shall have been unable to perform the
material duties of his position on a fu11-time basis for a period of six
consecutive months, or for a total of six months in any twelve month period,
then thirty days after written notice to the Executive (which notice may be
given before or after the end of the aforementioned periods, but which shall not
be effective earlier than the last day of the applicable period), the Company
may terminate Executive's employment hereunder if Executive is unable to resume
his fu11-time duties at the conclusion of such notice period. If Executive's
employment is terminated as a result of Executive's disability, Executive shall
receive no severance or other compensation or benefits under this Agreement
other than that which is accrued and pending as of the date of termination or as
otherwise provided in any Company benefit plan in effect as of such date.
10. ARBITRATION. Any claim, dispute or controversy arising out of this
Agreement, the interpretation, validity or enforceability of this Agreement or
the alleged breach thereof shall be submitted by the parties to binding
arbitration by the American Arbitration Association in Santa Clara County,
California; PROVIDED, however, that the parties may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary
injunction, or other interim or conservatory relief, as necessary , without
breach of this arbitration agreement and without abridgement of the powers of
the arbitrator. The fees and expenses of the arbitrators' for any arbitration
under this Agreement shall be split in half between Executive and the Company or
the Subsidiary, as the case may be. The fees and expenses of counsel and experts
retained by each party shall be paid by the party not prevailing in the
arbitration. Judgment may be entered on the award of the arbitration in any
court having jurisdiction.
EXECUTIVE HAS READ AND UNDERSTANDS THIS ARBITRATION AGREEMENT. EXECUTIVE
UNDERSTANDS THAT BY SIGNING THIS AGREEMENT, EXECUTIVE AGREES TO SUBMIT ANY
FUTURE CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH HIS EMPLOYMENT,
OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH, OR
TERMINATION THEREOF TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE
CONSTITUTES A WAIVER OF EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE
RESOLUTION OF ALL DISPUTES RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE
RELATIONSHIP, INCLUDING, BUT NOT LIMITED TO, ANY AND ALL CLAIMS ARISING OUT OF
ANY LAWS AND REGULATIONS, SUCH AS THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF
1967, RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.
-4-
<PAGE>
11. GOVERNING LAW AND CONSENT TO JURISDICTION. This Agreement shall be
governed by and construed in accordance with the internal substantive laws, but
not the choice of law rules, of the State of California. Executive hereby
consents to the personal jurisdiction of the state and federal courts located in
California for any action or proceeding arising from or relating to this
Agreement or relating to any arbitration in which the parties are participants.
12. INTEGRATION. This Agreement and any written Company or the Subsidiary
plans and written agreements between the parties that are referenced herein
represent the entire agreement and understanding between the parties as to the
subject matter hereof and supersede all prior or contemporaneous agreements,
whether written or oral. No waiver, alteration, or modification, if any, of the
provisions of this Agreement shall be binding unless in writing and signed by
duly authorized representatives of the parties hereto.
13. ASSIGNMENT. This Agreement and all rights under this Agreement shall
be binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective personal or legal representatives, executors,
administrators, heirs, distributees, devisees, legatees and permitted successors
and assigns. The Company may assign or transfer this Agreement to (i) any of its
affiliates, PROVIDED that such assignment will not relieve the Company of its
obligations hereunder, or (ii) any successor or assignee to the Company's
business and assets which assumes all of Company's obligations hereunder.
14. NOTICES. For purposes of this Agreement, notices and other
communications shall be in writing and shall be delivered personally or sent by
United States certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to Executive: 823 Rorke Way, Palo Alto, CA 94303
If to the Company or the Subsidiary: Halechi 31, Bnei-Brak 51200, Israel
or to such other address or the attention of such other person as the recipient
party has previously furnished to the other party in writing in accordance with
this paragraph.
15. COUNTERPARTS. This Agreement may be executed in counterparts, which
together will constitute one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-5-
<PAGE>
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company and the Subsidiary by their duly authorized officer, as
of the day and year first set forth above.
XACCT TECHNOLOGIES (1997) LTD.
By: /s/ ERAN WAGNER
-------------------
Title:
---------------
Xacct Technologies (1997) Ltd.
51-249311-5
XACCT TECHNOLOGIES INC. EXECUTIVE
By: /s/ ERAN WAGNER /s/ ERIC GRIES
------------------- ---------------
Title: Eric Gries
---------------
Xacct Technologies (1997) Ltd.
51-249311-5
-6-
<PAGE>
[LETTERHEAD]
AMENDMENT TO ERIC GRIES EMPLOYMENT CONTRACT
The following shall be added and become an integral part of Mr. Eric Gries'
employment contract dates January 27, 1998:
"If the Company or the Subsidiary is separated, reorganized, merged,
consolidated or amalgamated with or into another corporation while unexercised
Options remain outstanding under the Plan, the vesting period shall be
accelerated so that any unexercisable or unvested portion of the outstanding
Options shall be immediately exercisable and vested in full as of the date ten
(10) days prior to the date of the change in control."
XaCCT Technologies (1997), LTD XaCCT Technologies, Inc.
By: /s/ ERAN WAGNER By: /s/ ERAN WAGNER
------------------- -------------------
Title: Chairman Title: Chairman
---------------- ----------------
Acknowledged:
/s/ ERIC GRIES
- -----------------
Eric Gries
Page 1
<PAGE>
The undersigned hereby agrees that so long as Eric Gries ("Executive") is
Chief Executive Officer and President of XaCCT Technologies, Inc., an Israel
corporation (the "Company") the undersigned will vote all of its shares held by
it in the Company to elect Executive to the Board of Directors of the Company.
By: /s/ LIMOR SCHWEITZER
--------------------
<PAGE>
The undersigned hereby agrees that so long as Eric Gries ("Executive")
is Chief Executive Officer and President of XaCCT Technologies, Inc., an Israel
corporation (the "Company") the undersigned will vote all of its shares held by
it in the Company to elect Executive to the Board of Directors of the Company.
By: /s/ EVAN WAGNER
-------------------
<PAGE>
EXHIBIT 10.7
[LETTERHEAD]
MARCH 26, 1998
Mr. Anil Uberoi
44987 Naragnsett Court
Fremont, CA 94539
Dear Anil:
I am pleased to offer you a position with XaCCT Technologies, Inc., a
Delaware corporation (the "Company"), as its Vice President of Marketing,
commencing on April 1, 1998. You shall report to the Company's President, and
shall assume and discharge such responsibilities as are commensurate with such
position and as the Company's President may direct. During the term of your
employment you shall devote your full time, skill and attention to your duties
and responsibilities and shall perform them faithfully, diligently and
competently. In addition, you shall comply with the policies, procedures and
practices of the Company as in effect from time to time.
You will receive a monthly salary of $12,500 a month, which will be
paid semi-monthly in accordance with the Company's normal payroll procedures. As
a Company employee, you will also be eligible to receive certain employee
benefits including participation in the Company's health insurance plan and 401K
program when the Company establishes such program and plan and to the extent
of your eligibility under their terms. You should note that the Company might
modify salaries and benefits from time to time as it deems necessary.
We will recommend to the Board of Directors of XaCCT Technologies,
LTD., an Israeli corporation ("XaCCT Ltd.") that, at its next board meeting you
be granted an incentive stock option entitling you to purchase up to the
equivalent of 2% of common stock of XaCCT Ltd. At the then current fair market
value as determined by XaCCT Ltd's Board at that meeting. Such options shall be
subject to the term and conditions of XaCCT Ltd's stock option plan and stock
options agreement, including vesting requirement. In the event that the Company
merges into or is acquired by another party and is not the surviving company,
then to the extent permitted by XaCCT Ltd's stock option plan and stock option
agreement and applicable law, all of the unvested portion of stock options
granted pursuant to this offer will immediately vest.
Page 1
<PAGE>
You shall be eligible to receive incentive bonus based on special individual
objectives in 1998 and 1999. Your manager will set these objectives. Your
incentive bonus for 1998 shall be an incentive stock option entitling you to
purchase up to 0.25% of common stocks of XaCCT Ltd. at the then current fair
market value as determined by XaCCT Ltd's Board in its first meeting after
January 1, 1999. Your incentive bonus for 1999 shall be an incentive stock
option entitling you to purchase up to 0.25% of common stocks of XaCCT Ltd. at
the then current fair market value as determined by XaCCT Ltd's Board in its
first meeting after January 1, 2000.
You should be aware that your employment with the Company is for no
specified period and constitutes at will employment. As a result, you are free
to resign at any time, for any reason or for no reason. Similarly, the Company
is free to conclude its employment relationship with you at any time, with or
without cause, and with or without notice.
In the event that the Company terminates your employment relationships
without cause, you will continue to receive your monthly salary and benefits for
three months following the effective date of termination.
For purposes of federal immigration law, you will be required to
provide to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us
within three (3) business days of your date of hire, or our employment
relationship with you may be terminated.
You agree that, during the term of your employment with the Company,
you will not actively engage in any other employment, occupation, consulting or
other business directly or indirectly related to the business in which the
Company or XaCCT Ltd. is now involved or becomes involved during the term of
your employment, nor will you engage in any other activities that conflict with
your obligations to the Company or XaCCT Ltd.
As a Company employee, you will be expected to abide by the Company's
and XaCCT LTD's rules and regulations. You will be expected to sign and comply
with an Employment, Confidential Information, and Invention Assignment Agreement
which requires, among other provisions, the assignment of patent rights to any
invention made during your employment at the Company and non-disclosure of
proprietary information. Normal working hours are from 8:30 a.m. to 6:00 p.m.,
Monday through Friday. Of course as an exempt employee you will be expected to
work additional hours as required by your assignments.
Page 2
<PAGE>
To indicate your acceptance of the Company's offer, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, sets forth the terms
of your employment with the Company and supersedes any prior representations or
agreements, whether written or oral. This letter may not be modified or amended
except by a written agreement, signed by an officer of the Company and by you.
We look forward to working with you.
Sincerely,
XaCCT Technologies, Inc.
/s/ ERIC GRIES
Eric Gries
President and CEO
ACCEPTED AND AGREED TO
This 27 day of MARCH, 1998
-- ----- --
/s/ ANIL UBEROI
- ---------------------------
Anil Uberoi
Enclosures: Duplicate Original Letter Employment, Confidential Information, and
Invention Assignment Agreement
Page 3
<PAGE>
21
EXHIBIT B
TERMS OF THE INCENTIVE STOCK OPTIONS
- -------------------------------------------------------------------------------
1. Name of the Optionee: Anil Uberoi
- --------------------------------------------------------------------------------
2. Number of ISOs granted: 4,000
- --------------------------------------------------------------------------------
3. Exercise Price: $2.45
- --------------------------------------------------------------------------------
4. Expiration Date: 8 years from the Date of Grant
- --------------------------------------------------------------------------------
5. Date of Grant: 12-August-1999
- --------------------------------------------------------------------------------
6. Vesting schedule 4 years
- --------------------------------------------------------------------------------
--------------------------------------------------------------------------
% OF THE OPTIONS VESTING DATE
--------------------------------------------------------------------------
Every 3 months, starting from the 3rd month from
6.25 the Date of Grant (unless stated differently in
employee's contract)
--------------------------------------------------------------------------
Optionee Signature /s/ ANIL UBEROI 9/2/99
--------------------------------------------------
21
<PAGE>
EXHIBIT 10.8
[LETTERHEAD]
AUGUST 15, 1998
Mr. Eran Wagner
HAND DELIVERY
Dear Eran:
I am pleased to offer you a position with XaCCT Technologies, Inc., a
Delaware corporation (the "Company"), as its Executive Vice President --
Technical Services, commencing on September 25, 1998. You shall report to the
Company's President, and shall assume and discharge such responsibilities as are
commensurate with such position and as the Company's President may direct.
During the term of your employment you shall devote your full time, skill and
attention to your duties and responsibilities and shall perform them faithfully,
diligently and competently. In addition, you shall comply with the policies,
procedures and practices of the Company as in effect from time to time.
You will receive a monthly salary of $12,000 a month, which will be
paid semi-monthly in accordance with the Company's normal payroll procedures. As
a Company employee, you will also be eligible to receive certain employee
benefits including participation in the Company's 401K program and health
insurance plan when the Company establishes such program and plan and to the
extent of your eligibility under their terms. You should note that the Company
might modify salaries and benefits from time to time as it deems necessary.
You should be aware that your employment with the Company is for no
specified period and constitutes at will employment. As a result, you are free
to resign at any time, for any reason or for no reason. Similarly, the Company
is free to conclude its employment relationship with you at any time, with or
without cause, and with or without notice.
In the event your employment is terminated by the Company without
cause, the Company will pay you severance equal to six months (6) of your base
salary (as measured as of the date of termination), less applicable taxes and
other required withholdings and any amount owed by you to the Company, which
severance shall be paid quarterly in equal installments with the first
installment paid on the date of termination. Severance pay shall be considered
wages for the purpose of any bankruptcy or involuntary proceedings.
Page 1
<PAGE>
In the event your employment hereunder shall be terminated by the
Company with cause, this agreement shall be terminate as of the date of such
termination of employment with respect to (i), (ii), (iii) and (iv) below and
upon forty five (45) days notice with respect to (v) below, and you will not
have no right to any severance or other compensation or benefits other than that
which is accrued and owing as of the date of termination. The term "Cause" is
defined as any one or more of the following occurrences:
(i) Your conviction by, or entry of a plea of guilty of nolo
contendere in, a court of competent and final jurisdiction
for any crime which constitute a felony in the jurisdiction
involved, which felony materially injured the Company o any
of its respective affiliates; or
(ii) Your commission of a material act of fraud or
misappropriation of funds, whether prior to or subsequent to
the date hereof, upon the Company or any of its respective
affiliates; or
(iii) Gross negligence by you in the scope of your services
to the Company or any of its respective affiliates; or
(iv) A willful breach by you of a material provision of this
agreement; or
(v) A willful failure by you to substantially perform your
duties hereunder
For purposes of federal immigration law, you will be required to
provide to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us
within three (3) business days of your date of hire, or our employment
relationship with you may be terminated.
You agree that, during the term of your employment with the Company,
you will not actively engage in any other employment, occupation, consulting or
other business directly or indirectly related to the business in which the
Company or XaCCT Ltd. is now involved or becomes involved during the term of
your employment, nor will you engage in any other activities that conflict with
your obligations to the Company or XaCCT Ltd.
As a Company employee, you will be expected to abide by the Company's
and XaCCT LTD's rules and regulations. You will be expected to sign and comply
with an Employment, Confidential Information, and Invention Assignment Agreement
which requires, among other provisions, the assignment of patent rights to any
invention made during your employment at the Company and non-disclosure of
proprietary information. Normal working hours is from 8:30 a.m. to 6:00 p.m.,
Monday through Friday. Of course as an exempt employee you will be expected to
work additional hours as required by your assignments.
Page 2
<PAGE>
To indicate your acceptance of the Company's offer, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, sets forth the terms
of your employment with the Company and supersedes any prior representations or
agreements, whether written or oral. This letter may not be modified or amended
except by a written agreement, signed by an officer of the Company and by you.
We look forward to working with you.
Sincerely,
XaCCT Technologies, Inc.
/s/ ERIC GRIES
Eric Gries
President and CEO
ACCEPTED AND AGREED TO
This 20 day of AUGUST, 1998
--- ------ ---
/s/ ERAN WAGNER
- ---------------------
Eran Wagner
Enclosures: Duplicate Original Letter
Employment, Confidential Information, and Invention
Assignment Agreement
Page 3
<PAGE>
EXECUTIVE MANAGEMENT BONUS PLAN -- FY 1999
ERAN WAGNER -- EXECUTIVE VICE PRESIDENT, TECHNICAL SERVICES
- - Combination of cash and XACCT Technologies, Ltd. stock options.
- - Executive is assigned a set of targeted KPIs. Each KPI has its assigned
value (in percentage). Achieving them will determine the amount of the
bonus. See below the list of your KPIs and their assigned percentage.
- - Bonus will be paid annually.
- - The vesting period for the option portion of the bonus will start on
January 1999.
- - The bonus award will be on January 2000 and no later than February 2000.
- - The bonus will be on a sliding scale starting from 80% - 100% of attainment
of goals.
- - Achieving more than 100% of goals will result in acceleration bonus. The
CEO will recommend to the Compensation Committee the size of the
accelerated portion.
---------------------------------------------------------------------------
KPI PERCENTAGE
---------------------------------------------------------------------------
Perform at least 10 successful(1) installations in 30%
Major(2) NSPs
---------------------------------------------------------------------------
Annual Sales - $4 Million 20%
---------------------------------------------------------------------------
Adhere to FY 1999 departmental Budget 20%
---------------------------------------------------------------------------
Execute 2 successful beta program 20%
---------------------------------------------------------------------------
Deliver 2 training sessions per quarter 10%
---------------------------------------------------------------------------
Bonus at 100% attainment:
- - Cash - $25,440
- - Options - 5,088
I have read the above information.
/s/ ERAN WAGNER 1/15/99
- ----------------------- -------------
Eran Wagner Date
- -----------------------
(1) "Successful installation" is defined as an installation in which a PO has
been issued and the product is installed and running in the customer's site.
(2) "Major" is defined as a leading, national, NSP such as Sprint, Northpoint,
US West, Time Warner etc.
<PAGE>
EXHIBIT 10.9
December 28, 1999
Mr. Limor Schweitzer
Dear Limor,
We are pleased to offer you a position with XACCT Technologies, Inc.,
a Delaware corporation (the "Company"), as a Chief Technology Officer starting
on or about January 1, 2000. In this position, you will report to the President
and Chief Executive Officer for the Company, and shall assume and discharge such
responsibilities as are commensurate with a senior position. During the term of
your employment you shall devote your full time, skill and attention to your
duties and responsibilities and shall perform them faithfully, diligently and
competently. In addition, you shall comply with the policies, procedures and
practices of the Company as in effect from time to time.
You will receive a monthly base salary of $13,750.00 which will be
paid bi-weekly in accordance with the Company's normal payroll procedures; you
will also receive a $16,500 annual bonus contingent upon your achieving specific
performance objectives. To assist you in your relocation, we will pay actual
relocation costs up to $10,000; if charges exceed $10,000 they will be reviewed
on an individual case basis. If you are unable to secure housing prior to your
expected start date, we will provide up to 45 days temporary housing; we will
provide up to 45 days car rental while you arrange for a personal vehicle. When
you have arranged more permanent housing, we will pay for the installation and
continued use of a Pacific Bell DSL line. So that you do not lose touch with
your family in Israel, we will pay for one round-trip visit per year to Israel
for you and your immediate family. After at least one year, at the conclusion of
your assignment in the United States, we will pay for your relocation back to
Israel. In the event you should leave the company prior to completing one year's
service, you will be required to repay the bonus and relocation expenses on a
prorated basis. As a Company employee, you will also be eligible to receive
certain employee benefits including participation in the Company's health
insurance plan and 401K program to the extent of your eligibility under their
terms. You should note that the Company might modify salaries and benefits from
time to time as it deems necessary.
<PAGE>
You should be aware that your employment with the Company is for no
specified period and constitutes "at-will" employment. As a result, you are free
to resign at any time, for any reason or for no reason. In the event the Company
wishes to conclude its employment relationship with you without cause, we will
provide you with 45 days notice and you will be paid during this time.
Termination with cause will be immediate, with or without notice, and you will
be paid up to the day of your termination. In either case, we will pay for your
relocation back to Israel.
For purposes of federal immigration laws, you will be required to
provide to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us
within three (3) business days of your date of hire, or our employment
relationship with you may be terminated.
You agree that, during the term of your employment with the Company,
you will not actively engage in any other employment, occupation, consulting or
other business directly or indirectly related to the business in which the
Company or XACCT Ltd. is now involved or becomes involved during the term of
your employment, nor will you engage in any other activities that conflict with
your obligations to the Company or XACCT Ltd.
As a Company employee, you will be expected to abide by the Company's
and XACCT Ltd's rules and regulations. You will be expected to sign and comply
with an Employment, Confidential Information, and Invention Assignment Agreement
that requires, among other provisions, the assignment of patent rights to any
invention made during your employment at the Company and non-disclosure of
proprietary information. Normal working hours are from 8:30a.m. to 6:00p.m,
Monday through Friday. Of course as an exempt employee you will be expected to
work additional hours as required by your assignments.
To indicate your acceptance of the Company's offer, please sign and
date this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, sets forth the terms
of your employment with the Company and supersedes any prior representations or
agreements, whether written or oral.
<PAGE>
This letter may not be modified or amended except by a written
agreement, signed by an officer of the Company and by you.
We look forward to having you on board.
Sincerely,
XACCT Technologies, Inc.
/s/ Eric Gries
Eric Gries
President and CEO
ACCEPTED AND AGREED TO
This ____ day of ________, 2000__.
/s/ Limor Schweitzer
- --------------------------------
Limor Schweitzer
Enclosures: Duplicate Original Letter Employment, Confidential Information,
and Invention Assignment Agreement
<PAGE>
EXHIBIT 10.10
[LETTERHEAD]
January 14, 2000
Mr. Richard Van Hoesen
19727 Saint Ann Court
Saratoga, CA 95070
HAND DELIVERED
Dear Richard:
We are pleased to offer you a position with XACCT Technologies, Inc., a
Delaware corporation (the "Company"), as Vice President and Chief Financial
Officer, starting January 14, 2000. In this position, you will report to Eric
Gries, President and Chief Executive Officer for the Company, and shall assume
such authority and discharge such responsibilities as are commensurate with this
senior executive position. During the term of your employment you shall devote
your full time, skill and attention to your duties and responsibilities and
shall perform them faithfully, diligently and competently. In addition, you
shall comply with the policies, procedures and practices of the Company as in
effect from time to time.
You will receive a monthly salary of $16,666, commencing February 15, 2000
which will be paid in accordance with the Company's normal payroll procedures
for U.S. employees. Your compensation for the period January 14, 2000 through
February 15, 2000 will be $1.00. Upon joining the Company you will receive a
signing bonus in the amount of $100,000 which shall be repayable in the event
you voluntarily terminate your employment prior to February 15, 2001. As a
Company employee, you will also be eligible to receive those benefits available
to senior executives, including participation in the Company's health insurance
plan and 401K program to the extent of your eligibility under their terms. You
should note that the Company might modify salaries and benefits from time to
time as it deems necessary.
Additionally, we will recommend to the Board of Directors of XACCT
Technologies (1997), Ltd., an Israeli corporation ("XACCT Ltd."), at its next
board meeting that you be granted incentive stock options entitling you to
purchase up to approximately 63,900 shares of common stock (the equivalent of
2%) of XACCT Ltd., at the then current fair market value, as determined by XACCT
Ltd's Board of Directors at that meeting. Such options shall be subject to the
term and conditions
<PAGE>
of XACCT Ltd's stock option plan and stock options agreement, and shall vest 25%
one year after your employment date, and thereafter quarterly in equal amounts
until all options are vested four (4) years after your employment date. In the
event that the Company merges into or is acquired by another party and is not
the surviving company, then to the extent permitted by applicable law, all of
the unvested portion of the stock options granted pursuant to this offer will
immediately vest. In the event you voluntarily resign or are terminated for
"cause" (which shall mean (i) any act of personal dishonesty taken in connection
with your responsibilities as an employee which is intended to result in
substantial personal enrichment, (ii) conviction of a felony which the Board of
Directors reasonably believes has had or will have a material detrimental effect
on the Company's reputation or business, (iii) a willful act which constitutes
misconduct and is injurious to the Company, and (iv) continued willful
violations of your obligations to the Company after there has been delivered a
written demand for performance from the Company which describes the basis for
the Company's belief that you have not substantially performed your duties) from
your position earlier than 12 months from the starting date, no options will be
vested.
You will be entitled to a performance bonus, based upon quarterly and
annual goals that will be assigned to you by the President and Chief Executive
Offer. Total annual earnable bonus compensation for the achievement of quarterly
and annual goals will be $100,000.
In the event your employment is terminated by the Company for other than
cause you will be eligible to receive one (1) year of base salary.
You should be aware that your employment with the Company is for no
specified period and constitutes "at-will" employment. As a result, you are free
to resign at any time, for any reason or for no reason. Similarly, the Company
is free to conclude its employment relationship with you at any time, with or
without cause, and with or without notice.
For purposes of federal immigration laws, you will be required to provide
to the Company documentary evidence of your identity and eligibility for
employment in the United States. Such documentation must be provided to us
within three (3) business days of your date of hire, or our employment
relationship with you may be terminated.
You agree that, during the term of your employment with the Company, you
will not actively engage in any other employment, occupation, consulting or
other business directly or indirectly related to the business in which the
Company or XACCT Ltd. is now involved or becomes involved during the term of
your employment, nor will you engage in any other activities that conflict with
your obligations to the Company or XACCT Ltd.
As a Company employee, you will be expected to abide by the Company's and
XACCT Ltd's rules and regulations. You will be expected to sign and comply with
an Employment, Confidential Information, and Invention Assignment Agreement
which requires, among other provisions, the assignment of patent rights to any
invention made during your employment at the Company and non-disclosure of
proprietary information. Normal working hours are from 8:30 a.m.
2
<PAGE>
to 6:00 p.m., Monday through Friday. Of course as an exempt employee you will be
expected to work additional hours as required by your assignments.
To indicate your acceptance of the Company's offer, please sign and date
this letter in the space provided below and return it to me. A duplicate
original is enclosed for your records. This letter, along with the agreement
relating to proprietary rights between you and the Company, sets forth the terms
of your employment with the Company and supersedes any prior representations or
agreements, whether written or oral.
This letter may not be modified or amended except by a written agreement,
signed by an officer of the Company and by you.
We look forward to having you on board.
Sincerely,
XACCT Technologies, Inc.
/s/ Eric Gries
Eric Gries
President and Chief Executive Officer
ACCEPTED AND AGREED TO
This ____ day of January, 2000.
/s/ Richard Van Hoesen
- --------------------------------
Richard Van Hoesen
Enclosures: Duplicate Original Letter Employment, Confidential Information,
and Invention Assignment Agreement
3
<PAGE>
EXHIBIT 10.11
TRANSLATION FROM THE HEBREW
Lease Agreement
Beit Hacrystal
UNPROTECTED LEASE AGREEMENT
Made and signed in Bnei-Brak on December 31, 1999
By and between:
Nichsei Crystal Lemischar (Ramat-Gan)
(Private Company Registration No. 51-036459-9)
A private company duly registered in Israel
Whose address for the purpose of this agreement is
at 12, Hachilazon St., Ramat-Gan.
(hereinafter: the "Lessor")
of the first part
And:
XACCT Technologies (1997) Ltd.
(Private Company Registration No. 51-249311-5)
Whose address for the purpose of this agreement is
at 31, Halehi Street, Bnei Brak
(hereinafter: the "Lessee")
of the other part
Whereas the Lessor is the registered owner of the property known as
Parcel No. 365 in Block No. 6109, situated at 12, Hachilazon
Street, Ramat Gan, covering a registered area of approximately
2,852 sq.m. gross (hereinafter: the "Lot"); and
Whereas the Lessor has built on the Lot, inter alia, a project
consisting of an 8-10 floor office building, a commercial level
and a gallery, with four basement levels, covering a total area
of circa 9,500 sq.m. for office use, circa 1,000 sq.m. for
commercial use and circa 12,000 sq.m. basements, the basement
levels primarily to
<PAGE>
2
consist of an underground parking lot and approximately 1,200
sq.m. technical space (hereinafter: the "Building"); and
Whereas the Lessor is, accordingly, also the holder and owner of a
Building unit on the second floor above the ground floor facing
north-east covering approximately 455 sq.m. gross (including a
pro rata share in the common property) (hereinafter: the
"Second-Floor Leasehold"), as well as a unit covering the entire
area of the third floor above the ground floor covering
approximately 1,200 sq.m. gross (including a pro rata share in
the common property) (hereinafter: the "Third-Floor Leasehold"),
all as marked in the area encircled by red in the attached
diagram (hereinafter: the "Diagram"), marked A, constituting an
inseparable part hereof (the Second-Floor Leasehold and the
Third-Floor Leasehold shall hereinafter be referred to as: the
"Leasehold"); and
Whereas the Lessee wishes to lease the Leasehold under unprotected
lease pursuant to the Tenants Protection Law (Combined Version)
5732-1972 (hereinafter: the "Law") or any other law; and
Whereas the Lessor wishes to lease the Leasehold under an unprotected
lease pursuant to the Tenants Protection Law (Combined Version),
5732-1972, or any other law;
NOW, THEREFORE, IT IS AGREED AND STIPULATED BY AND BETWEEN THE PARTIES AS
FOLLOWS:
1. PREAMBLE, APPENDIXES AND HEADINGS:
1.1 The Preamble hereto constitutes an inseparable part hereof.
1.2 The appendixes hereto constitute an inseparable part hereof
and shall be deemed as the provisions hereof.
1.3 The headings herein are for convenience only and shall not be
used for the interpretation of the contents thereof.
<PAGE>
3
2. PARTIES' DECLARATIONS
2.1 The Lessor hereby declares that it is the sole holder and
Owner of the Leasehold, that it is authorized to lease the
Leasehold to the Lessee and that there is no impediment of
whatever nature to leasing the Leasehold to the Lessee.
2.2 The Lessee hereby declares that it has viewed and examined the
Leasehold, that following such examination it has found same
fit for its purposes and objectives and that it waives any
contention with respect to defect, the right to cancel the
transaction due to a defect or incompatibility with respect to
the Leasehold other than hidden defect, with respect to the
location of the Leasehold and the identification thereof, and
it agrees to accept the Leasehold in its condition on the date
of entering into this Agreement, subject to the completions
pursuant to the plans and technical specification attached
hereto.
3. TRANSACTION AND TERM THEREOF
3.1 The original term of lease
The Lessor hereby leases the Leasehold to the Lessee and the
Lessee hereby leases the Leasehold from the Lessor for a lease
term commencing no later than 60 days as of the date of
delivery of the Third-Floor Leasehold's interior plans by the
Lessee and no later than 75 days as of the date of delivery of
the Second-Floor Leasehold's interior plans and ending three
years as of the commencement of the lease of the Second-Floor
Leasehold (hereinafter: the "Original Term of Lease"). The
Lessee shall deliver complete and adapted interior plans no
later than 30 days following the date of signature hereof. It
is agreed that a delay by the Lessor in handing over the
Leasehold of up to 14 days vis-a-vis the said dates shall not
constitute a breach.
<PAGE>
4
3.2 Option
3.2.1 The Lessee is hereby granted an optional right
(option) to extend the Original Term of Lease for
three additional years as of the end of the Original
Term of Lease (hereinafter: the "First Option Term"),
subject to giving the Lessor a 90-days prior written
notice before the end of the Original Term of Lease
of its wish to exercise the option, and subject
further to the provisions of sub-clause 3.2.2.
3.2.2 The right to extend the Lease Agreement as aforesaid
shall be subject to the Lessee's fulfillment of all
the provisions hereof throughout the Original Term of
Lease, including payment of the rent applicable to it
hereunder with respect thereto, as well as full and
timely fulfillment of all its other obligations. It
is agreed that all the provisions hereof pertaining
to the Original Term of Lease shall also apply during
the First Option Term, subject to the changes herein
set out.
3.3 Shortening the Original Term of Lease
3.3.1 The Lessee declares that it is aware that the
duration of the Original Term of Lease is a
fundamental provision hereof and hence the Lessee
shall not be entitled to shorten the Original Term of
Lease without the Lessor's prior written approval.
Should the Lessee leave the Leasehold prior to the
end of the Original Term of Lease, for whatever
reason, without the Lessor's prior written approval,
the Lessee shall continue paying the full rent for
the Leasehold hereunder to the Lessor, up to the end
of the Original Term of Lease.
3.3.2 The provisions hereof shall also apply to the
management fee payable by the Lessee to the
management company as
<PAGE>
5
hereinafter specified, as well as all other financial
obligations payable by it pursuant to this Agreement,
solong as the duty to pay rent applies to the Lessee.
3.3.3 Notwithstanding the foregoing the Lessee may find an
alternative lessee or a sub-lessee under the same
terms, provided that such alternative or sub-lessee
shall be acceptable to the Lessor and shall furnish
sureties to the Lessor's full satisfaction. The
Lessor shall not unreasonably withhold its consent
with respect to such alternative or sub-lessee.
4. RENT AND ADDITIONAL PAYMENTS
4.1 Rent during the Original Term of Lease and date of payment:
In consideration for the rights to lease the Leasehold during
the Original Term of Lease, the Lessee undertakes to pay rent
to the Lessor in the amounts and installments as follows:
4.1.1 The rent for each month during the Original Term of
Lease shall be as follows:
a. For the Third-Floor Leasehold - the amount
of NIS 97,344 (agreed representative rate
- NIS 4.16 per one American dollar x $19.5
x 1200 sq.m.) per month, plus VAT at law.
b. For the Second-Floor Leasehold - the amount
of NIS 36,910 (agreed representative rate
- NIS 4.16 per one American dollar x $19.5
x 455 sq.m.) per month, plus VAT at law.
The rent for the Third-Floor Leasehold
together with the rent for the Second-Floor
Leasehold shall hereinafter be referred to
as: the "Rent").
<PAGE>
6
4.1.2 The parties agree that the Rent shall be linked to
the Consumer Price Index (hereinafter: the "Linkage
Differences") as follows:
Index differences shall be added to each payment
(hereinafter: the "Differences") so that where it is
clarified that the new index exceeds the basic index
in respect of any payment on account of the Rent, the
Lessee shall pay an increment on the Rent to the
Lessee at the rate equivalent to the increase of the
new index vis-a-vis the basic index, the Linkage
Differences increment being paid together with each
payment on account of the Rent.
In this Agreement:
"Index" - means the Consumer Price Index (including
vegetables and fruits, without neutralizing any of
the index components) that is published monthly by
the Central Bureau of Statistics or any other entity
superseding same, or any other index published in its
place (subject to the ratio between such indexes).
It is agreed that the basic index means the index for
November 1999 published on December 15, 1999.
"New Index" - the Consumer Price Index last published
prior to the actual payment of any of the Rent
payments.
4.1.3 Linkage Differences, as aforesaid, shall be added to
each payment. In addition to the Linkage Differences,
the Lessee shall pay VAT at its present rate under
law on the actual date of payment to the Lessor,
against receipt of tax invoice at law, by means of a
postdated check for the date such VAT is payable by
the Lessor.
<PAGE>
7
4.1.4 The Rent for the Original Term of Lease shall be paid
on the following dates:
a. On the date of signature hereof the Lessee
shall pay Rent to the Lessor for 9 months in
advance (NIS 402,756 with the addition of
VAT at law).
b. The balance of the Rent, together with the
Linkage Differences and the VAT at law,
shall be paid by the Lessee to the Lessor in
consecutive equal quarterly installments on
the first of the Gregorian month following
three months from the commencement of the
Lease, and every three Gregorian months up
to the end of the Lease.
4.1.5 Full and timely payment of the Rent or any other
payment applicable to the Lessee hereunder, is a
fundamental provision hereof, and failure to timely
settle any payment shall be deemed as a fundamental
breach hereof by the Lessee, and shall grant the
Lessor all the relief hereunder and pursuant to the
Law, including the right to claim removal of the
Lessee from the Leasehold immediately after the delay
in payment provided that any delay of up to 5 working
days shall [handwritten: "not" (-signed-),(-stamped &
signed-)] constitute a fundamental breach of this
Agreement.
4.1.6 In addition to the Leasehold, the Lessee hereby
leases from the Lessor the right to use 5 reserved
parking places and 50 non-reserved parking places.
4.1.7 In consideration for the right to use the parking
places, the Lessee shall pay the Lessor monthly
amounts as follows:
a. For the monthly right to use 5 reserved
parking places - the amount of NIS 2,808
(agreed
<PAGE>
8
representative rate of NIS 4.16 per
one American dollar x 5 x 135$) with the
addition of VAT and Linkage Differences.
b. For the monthly right to use 50 non-reserved
parking places - the amount of NIS 20,800
(agreed representative rate of NIS 4.16 per
one American dollar x 50 x 100$) with the
addition of VAT and Linkage Differences.
c. The Rent for the use of the parking places
is in addition to the Rent for the
Leasehold and shall be paid jointly, on the
date of each payment on account of the Rent.
4.1.8 The Lessee is hereby granted the option to lease at
least 30 more non-reserved parking places during the
Term of Lease at $100 (to be converted into New
Shekels on the date of exercising the option, linked
to the index) per parking place, with the addition of
VAT and Linkage Differences.
4.1.9 To remove any doubts, it is hereby clarified that the
Lessor shall pay the municipal property tax for the
parking lot.
4.2 The Rent during the First Option Term shall increase by 10%
as follows:
4.2.1 The Rent during the First Option Term shall be NIS
147,680 per month ($35,000 at the agreed
representative rate of NIS 4.16 per American dollar)
with the addition of VAT at law, linked as of the
date of the basic index.
4.2.2 All the provisions of this Agreement with respect to
the Original Term of Lease, including, without
derogating from the generality of the aforesaid, the
manner of linkage
<PAGE>
9
of the basic monthly Rent during the Option Term to
the index, the addition of VAT and the date of
payment of the Rent, shall fully apply to the Option
Term, respectively.
4.3 Taxes and obligatory payments
4.3.1 The Lessee shall pay all taxes and obligatory
payments applicable to the holder of a Leasehold and,
inter alia, shall bear payments of general rates,
business tax, sign fees, electricity, water,
telephone (including permanent usage fees), payment
to the management and services company and all other
and/or additional current expenses with respect to
current maintenance of the Leasehold, as of the date
of accepting possession in the Leasehold.
4.3.2 The Lessee declares that it is aware that a
management and services company is and/or shall be in
operation in the Building for the purpose of
providing maintenance, operation, repair and upkeep
services of the Building, its facilities and the
common property therein, including gardening,
lighting, air-conditioning, operation of elevators,
guarding the Building, etc.
The Lessee undertakes to fully and timely effect, as
provided herein and/or in the management agreement,
all the payments payable to the management company
and/or the Lessor in consideration for the
management services.
4.4 Stamping
Stamping fees with respect to this Agreement, if necessary,
apply to the Lessee and be fully borne by it.
4.5 Effecting an obligatory payment by the Lessor
4.5.1 Should the Lessee fail to timely effect any of the
payments applicable to it pursuant to the provisions
of clause 4
<PAGE>
10
herein (including all sub-clauses thereof) the Lessor
may pay in such event any such payment in place of
the Lessee and the Lessee shall have to refund same
to the Lessor upon the Lessor's first demand.
To remove any doubts it is hereby clarified that
nothing in the foregoing shall constitute an
undertaking by the Lessor to make any payment in
place or on behalf of the Lessee.
4.5.2 In the event that any of the parties makes any
payment in place of the other party or on its behalf,
as aforesaid, the other party shall refund any such
payment to the paying party immediately upon demand
and any such payment shall be subject to the
provisions of clause 9.1 hereinbelow.
5. TERMS OF LEASE
5.1 Changes to the Leasehold
5.1.1 The Lessee may perform interior changes to the
Leasehold at its expense solely pursuant to a plan to
be submitted to the Lessor for its prior written
approval. The Lessee shall not make any changes to
the Leasehold which are not interior changes nor
shall it make any changes relating to the Building's
construction or systems (including air- conditioning,
plumbing, elevators systems and so forth).
5.1.2 The Lessor shall not unreasonably withhold its
approval to the Lessee with respect to planning the
interior of the Leasehold as the Lessee deems fit,
and for this purpose to make changes in the Leasehold
(other than prohibited changes as aforesaid), subject
to the approval of the management company which shall
not unreasonably withhold such approval.
<PAGE>
11
5.1.3 In the event that the Lessee violates its foregoing
undertaking, the Lessor shall be entitled to restore
the Leasehold to its former condition at the Lessee's
expense.
5.1.4 The Lessee undertakes to perform the completions
and/or changes, if any, to the best of its ability,
prudently, without causing any damage to the
Leasehold and/or the Building, in compliance with the
management company's instructions, if any, with
respect to the manner of performing the works.
The Lessee shall bear any direct or indirect damages
and the consequences thereof caused to the Leasehold
or the Building due to performing the completions
and/or arising from such type of changes in the
Leasehold.
5.2 Signs and telephones
The Lessee may not install any sign on the exterior space of
the Leasehold. Signs shall only be installed at the spots
designated therefor, after obtaining the prior written
approval of the management company and the Lessor, both with
respect to the actual placement of the sign, and the size and
shape thereof.
The Lessor has no objection to the Lessee installing telephone
lines in the Leasehold, at its expense.
5.3 Orderly maintenance and Lessor's inspection
5.3.1 The Lessee hereby undertakes to look after the
Leasehold and everything attached therein by the
Lessor and/or by the Lessee throughout the Original
Term of Lease, and to upkeep the Leasehold and
procure the orderly maintenance thereof.
<PAGE>
12
5.3.2 Any failure or damage caused by the Lessee, its
employees, agents, or visitors, other than damage due
to reasonable wear, shall be repaired by the Lessee
within a reasonable period of time, at its expense.
Any failure that is the fault of the Lessor shall be
repaired by the Lessor within a reasonable period of
time.
5.3.3 Should the Lessee fail to repair such damages and
failures within a reasonable period of time, taking
into account the type of repair, after notice has
been given and which the Lessee has failed to rectify
within 7 days, the Lessor may, however, is not
obligated to, repair same and the Lessee shall bear
all the expenses of the repairs made by the Lessor.
5.3.4 The Lessee shall make any payment to the Lessor
pursuant to sub-clause 5.3.3 above within 7 days from
the date on which the invoice for the repairs has
been submitted to it, and any such payment shall be
subject to the provisions of sub-clause 9.1 hereof.
5.3.5 The Lessee hereby undertakes to permit the Lessor,
its employees and agents, to enter the Leasehold at
reasonable times, after prior coordination, in the
course of the Original Term of Lease, to examine the
condition of the Leasehold and to perform any
maintenance works therein.
5.3.6 The Lessor, its employees and agents may further
enter the Leasehold at reasonable times, subject to
prior coordination, in the course of the last six
months of the lease, to show same to prospective
purchasers or lessees.
5.3.7 The Lessor's duty to coordinate entry into the
Leasehold in advance as aforesaid shall not apply to
emergencies such as fire, flood, and so forth
requiring immediate entry into the Leasehold.
<PAGE>
13
5.4 Prohibited uses
5.4.1 The Lessee may only use the Leasehold for the purpose
of hi-tech and offices and not for any other purpose.
5.4.2 Without derogating from the foregoing in sub-clause
5.4.1 above, the Lessee may not:
a) Perform in the Leasehold any work making
unreasonable noise or spreading smoke,
odors, pollution etc.
b) Use the Leasehold for purposes which are
prohibited under any law.
5.4.3 In the event that the use under the purpose of the
lease requires a license under law, the Lessee
undertakes to obtain such license.
The Lessee shall bear any liability with respect to
managing a business in the Building without a license
where a license is necessary.
5.5 Renovation of the Leasehold
5.5.1 To remove any doubt, it is hereby clarified that any
renovations performed in the Building (including
renovations made in whole or in part by and at the
Lessee's expense) shall be the exclusive property and
ownership of the Lessor and the Lessee shall not be
entitled to any compensation or indemnification due
to such renovations, and the Lessee shall deliver
possession in the Leasehold to the Lessor upon
completion of the Term of Lease, the property being
clean and tidy, including all renovations and
improvements made in the property.
<PAGE>
14
5.5.2 Without derogating from the generality of the
foregoing with respect to the Lessee's obligations
relating to the use of the Leasehold and the
operation thereof, it is hereby expressly agreed and
stipulated by the parties that the Lessee shall be
exclusively responsible for obtaining all approvals,
permits, and licenses necessary for operating its
business in the Leasehold under the provisions of any
law, including a business license, a sign license and
any other license or permit required for the purpose
of performing the renovations.
6. DAMAGES TO THIRD PARTIES AND INSURANCE
6.1 Without derogating from the Lessee's liability under this
Agreement and/or under any law, the Lessee hereby undertakes
to issue the following insurance policies at its expense:
The Lessor shall not bear any liability whatever for damage
caused to the Lessee's body or property, to its employees,
customers, visitors, invitees or any third party, including
tenants adjacent to the Leasehold, caused in consequence of or
due to the use of the Leasehold by the Lessee or anyone on its
behalf.
The Lessee undertakes to indemnify the Lessor for any amount
the Lessor is obligated to pay as aforesaid, if any, including
any ancillary expense, such as the cost of legal proceedings.
(Handwritten: [-Stamped & Signed-] On the other hand, the
Lessor undertakes to notify the Lessee of any such demand
within 7 days of the date it learned thereof, so as to enable
it to defend against same.)
INSURING THE CONTENTS OF THE LEASEHOLD
6.1.1 The Lessee undertakes to insure the contents of the
Leasehold and, without derogating from the generality
of
<PAGE>
15
the foregoing, the furniture, the equipment,
facilities and inventory therein, as well as any
change, improvements, renovation and additions to the
Leasehold made and/or to be made in the Leasehold by
the Lessee and/or on its behalf, of whatever nature,
all the foregoing being at restoration value against
loss or damage due to risks of fire, explosion,
earthquake, riots, strikes, malicious damage, storm,
tempest, flood, water damages, electrical damages,
burglary and robbery, injury by aircraft, supersonic
explosion and collision.
6.1.2 The Lessee undertakes to update the amounts of the
insurance, from time to time, so as to reflect at all
times the full value of the insured property as
aforesaid in sub-clause 5.1.1 above.
6.1.3 The Lessee undertakes at all times that the policy
issued by it as aforesaid in sub-clause 6.1.1 above,
or any other policy issued by it, shall incorporate
an express clause whereby the insurer expressly
waives any subrogation right vis-a-vis the Lessor,
and the management company and/or their
representatives. Such waiver of subrogation shall
also apply to the other lessees/tenants in the
Building (provided that the insurance policies of
the tenants' and the lessees' contents incorporate
a clause with respect to waiver of indemnification
vis-a-vis all the lessees and/or tenants in the
Building) and/or anyone on behalf of the foregoing.
The aforesaid respecting waiver of the subrogation
right shall not apply in the event of malicious
damage.
The Lessee hereby exempts the Lessor and the
management company and anyone acting on their behalf
from liability with respect to loss or damage for
which the Lessee is or should have been entitled for
indemnity under the policy to be issued as aforesaid.
<PAGE>
16
EMPLOYERS AND THIRD PARTY
6.1.4 THIRD PARTY - the Lessee undertakes to issue a policy
covering liability to third parties insuring the
Lessee's liability for bodily and/or property damage
of any person and/or entity arising from operating in
and/or in the vicinity of the Leasehold.
The insurance shall be for a limit of liability of no
less than the NIS equivalent of US$500,000 per event
per period.
The insurance shall be extended to indemnify the
Lessor for its liability to the Lessee's actions
and/or omissions subject to a cross liability clause
under which the insurance shall be deemed as if
issued separately for each of the insured's
individuals.
Such insurance shall not be subject to any limitation
on liabilities arising from fire, explosion, alarm,
lifting, loading and unloading devices, defective
sanitary devices, poisoning, any harmful substance in
drinks or foods, strikes and lockouts as well as a
subrogation claim on the part of the National
Insurance Institute.
EMPLOYERS' LIABILITY - the Lessee undertakes to issue
at its expense an employer's liability insurance
covering the Lessee's liability to its employees for
bodily damage arising from and while at work, in a
limit of liability of no less than the NIS equivalent
of US$5,000,000 per event per period.
The insurance shall be extended to indemnify the
Lessor for its liability to the Lessee's employees
where it is established that it is their employer.
<PAGE>
17
Such insurance shall not include any limitation on
works at altitude and at depth, work hours,
contractors, sub- contractors and youth employment.
6.1.5 The policies issued by the Lessee as aforesaid in
clause 6 hereof shall be referred to as the
"Lessee's Policies".
CROSS LIABILITY
6.1.6 Furthermore, the Lessee hereby undertakes that any
third party and employer's insurance issued by it
hereunder shall be subject to a "cross liability"
clause under which the insurance shall be deemed as
if made separately for each of the insured's
individuals.
POLICIES IN EFFECT
6.1.7 The Lessee undertakes to fulfill all the terms of the
Lessee's Policies and to ensure timely payment of the
premiums.
INSURER'S APPROVAL
6.1.8 The Lessee shall present to the Lessor, no later than
30 days as of the signature hereof, an approval from
the insurance company stating that the Lessee's
policies were issued for the Lessee. Such approvals
shall be presented once every insurance year by the
Lessee without the Lessor's demand. It is hereby
expressly agreed that the presentation of such
approvals or presentation of the Lessee's Policies
and the examination thereof by the Lessor or anyone
on its behalf shall not constitute approval that the
Lessee's Policies or such approvals are in compliance
with the contents of the insurance clause and same
shall not derogate from the Lessee's responsibility
hereunder.
<PAGE>
18
CANCELLATION OF POLICIES
6.1.9 It is further agreed that the Lessee's Policies shall
incorporate an express clause under which the
policies may not be canceled unless written notice
thereof is given by registered mail to the Lessor at
least 60 days in advance. (Handwritten: [-Stamped &
Signed-] Nothing in the foregoing shall derogate from
the Lessee's duty to procure alternative insurance.)
DAMAGE ARISING FROM RISKS
6.1.10 The Lessee hereby declares that it shall have no
claim and/or demand against the Lessor and the
management company and/or anyone acting on its behalf
due to damage arising from risks which the Lessee
undertook to insure as aforesaid in the above
clauses, and it exempts the Lessor and the management
company and/or anyone acting on their behalf from any
liability for such damages.
This clause is aimed at adding rather than derogating
from any other provision herein.
Breach of the insurance clause shall constitute a
fundamental breach of this Agreement.
6.2 If and to the extent that funds are obtained from the
insurance company for damages to the Leasehold or the common
property, such funds shall be used at the first phase for
repairing the Leasehold or other assets in the Building, and
the balance thereof shall be transferred to the Lessee.
7. VACATING THE LEASEHOLD AND RENOVATIONS THERETO
7.1 Vacating the Leasehold
<PAGE>
19
Subject to the provisions of sub-clause 3.3 above, the Lessee
undertakes to vacate the Leasehold at the end of the Original
Term of Lease or the Option Term or, in the event of
cancellation of the Agreement, prior to the end of the
Original Term of Lease, and return the same to the Lessor, it
being vacant of any person and chattel, in good, orderly and
serviceable condition, in the same condition as it was
received when it was first leased, other than reasonable
normal wear.
7.2 Renovations to the Leasehold
7.2.1 45 days prior to returning the Leasehold by the
Lessee to the Lessor the Lessor shall conduct an
examination of the Leasehold. At such time a protocol
shall be recorded, specifying the list of repairs
which the Lessee is obligated to perform pursuant to
the provisions of this Agreement, including repair of
damage and failures and repairs pertaining to
restoring the Leasehold to its previous condition,
other than ordinary wear arising from reasonable use
of the property. The Lessee shall make the necessary
repairs in accordance with the protocol.
7.2.2 It is agreed that the parties shall deem the period
necessary for making the repairs set out in
sub-clause 7.2.1 hereof as a period in which the
Lessee was in delay of vacating the Leasehold, and
such period shall be subject to all the provisions of
this Agreement with respect to delay in vacating the
Leasehold.
8. GENERAL PROVISIONS
8.1 Management agreement
8.1.1 The Lessee undertakes to enter into a management
agreement with the management company for the
<PAGE>
20
provision of services and maintenance to the
Building's facilities, upon signature of this
Agreement or at any other time, pursuant to the
Lessor's instructions to the Lessee. The form of the
management agreement is attached hereto, constituting
an inseparable part hereof.
8.1.2 The provisions and terms of the management agreement
shall be deemed as the provisions and terms hereof,
and any breach thereof or failure to fulfill same
shall be deemed as a breach of or non-compliance with
the provisions and terms of this Agreement.
8.1.3 The management fees (hereinafter: the "Management
Expenses") shall be linked to the index and be paid
by the Lessee to the Lessor or to the management
company as set out in sub-clause 8.a. of the services
agreement signed and/or to be signed by the Lessor
and the services company in the Building, and where
there is no reference in such clause, the Management
Expenses shall be paid as follows:
1. The Management Expenses shall be paid once
every three months, for three months in
advance, on the dates herein set forth for
payment of the Rent, being linked to the
index as aforesaid herein, however, in no
event shall the Management Expenses per
quarter be less than the Management Expenses
actually paid (including Linkage
Differences) for the preceding quarter.
2. The Lessee shall deliver to the Lessor, 7
(seven) days prior to the date of handing
over the Leasehold, 4 (four) checks signed
by it, each at the rate of the Management
Expenses anticipated for the quarter, with
the addition of Linkage Differences to the
index, as of the basic index up to
<PAGE>
21
the index known on the date of delivery of
the checks, payable on the 1st of each
quarter.
3. On the 1st of each quarter the Lessee shall
hand over to the Lessor as follows:
A check for the Linkage Differences as of
the index known on the date of delivering
the checks, as set forth in sub-clause 2, up
to the new index for the Management Expenses
for such quarter.
A check to cover the Management Expenses for
the quarter following the last quarter for
which a check was given to the Lessor for
Management Expenses, with the addition of
Linkage Differences to the index, as of the
basic index up to the index known on the
date of delivering the check.
4. Only actual payment of the checks shall be
deemed as payment of the Management
Expenses.
5. A tax invoice shall be furnished to the
Lessee within seven (7) days of the date of
actual payment.
8.2 Transfer of rights in the Leasehold
8.2.1 The Lessor shall be entitled to transfer or mortgage
its rights hereunder at any time, and to transfer or
mortgage its rights in the Leasehold or lease and
sell the Leasehold, provided it gives notice to the
transferee or the purchaser or leaseholder of the
rights (as the case may be) of the existence of this
Agreement, and the transferee or the purchaser or
leaseholder shall undertake all the Lessor's
undertakings hereunder. In such event the Lessee
shall have no claims or contentions with respect to
the transfer
<PAGE>
22
of the rights and the sale thereof or
due to the lease of the Leasehold by the Lessor.
8.2.2 The Lessee shall not be entitled to transfer all or
any of its rights hereunder, nor permit others to use
all or any Part of the Leasehold whether for a
consideration or otherwise, or lease the same under
a sub-lease, directly or indirectly, to any person or
entity, all subject to sub-clause 3.3.3 above.
Notwithstanding the foregoing, the Lessee may include
another lessee from the group of the Lessee's
subsidiaries or affiliated companies (hereinafter:
the "Additional Lessee") in the Leasehold, and
provided further that the Additional Lessee shall
sign a promissory note to vacate the Leasehold on the
date when the Lessee is obligated to vacate the
Leasehold, and the Lessee shall be responsible for
all its undertakings pursuant to this Agreement as if
no additional lessee had been included in the
Leasehold.
Notwithstanding the foregoing, the Lessee may lease
the Second-Floor Leasehold by a sub-lease to a lessee
as agreed in coordination and consultation with the
Lessor. The Lessor shall not unreasonably withhold
its approval.
8.3 Denial of the applicability of tenants' protection laws
The Lessee hereby declares that it is aware that the Leasehold
and the Building wherein it is situated are a new leasehold
and building built after 1968, so that on the date of
commencing of the Tenant's Protection Law (Various Provisions)
5728-1968 there was no tenant in the Leasehold entitled to
have possession therein, that no key money whatsoever has been
paid or received with respect to the Leasehold or the lease
relationship created hereunder, nor any other consideration
whatsoever other than the Rent, and hence the provisions of
the Tenant's Protection Law (Combined Version), 5732-1872 or
any other law superseding same, or any other law designated or
to be designated to protect
<PAGE>
23
tenants, shall not apply to this Agreement nor to the lease
hereunder, and in no event shall the Lessee be deemed as a
protected tenant, nor shall it be entitled to payment of any
key money or other payment upon vacating the Leasehold, and it
shall have to vacate the Leasehold on the date of vacation
and return same to the Lessor, it being free of any person and
chattel placed or installed by it in the Leasehold.
8.4 SURETIES
8.4.1 As surety to secure all the Lessee's undertakings
pursuant to this Agreement, including, without
derogating from the Lessee's other undertakings,
vacating the Leasehold on time, payment for any
damage caused to the Leasehold, payment of the Rent
and the payments applicable to the Lessee pursuant
to this Agreement, the Lessee shall furnish to the
Lessor, no later than 7 days as of the signature
hereof, an autonomous independent bank guarantee,
index linked, in the amount of NIS 402,756 (three
month Rent for the Leasehold) (in NIS, linked to the
Consumer Price Index) in effect for one year as of
the date of issuance thereof, and same shall be
extended on a yearly basis by 60 days following the
end of the Original Term of Lease and/or the Option,
as the case may be. The guarantee shall be returned
to the Lessee upon vacating the Leasehold and
settling all its undertakings pursuant to this
Agreement, including presentation of receipts with
respect to payment of municipal property tax and
payment to the maintenance company.
8.4.2 If the Lessee breaches any of its undertakings
pursuant to this Agreement, without derogating
from the generality of the definition, and in
particular should it fail to timely make any payment
applicable to it hereunder, and/or should it fail
to timely vacate the Leasehold, and/or if it
causes damage to the Leasehold, the Lessor may
exercise
<PAGE>
24
the guarantee and use the funds for rectifying the
breach and as compensation for such breach,
provided it warns the Lessee that it is about to
exercise the guarantees at least 14 days in advance.
The balance, if any, shall be returned to the
Lessee only after it actually vacates the Leasehold,
being linked to the Consumer's Price Index as of
the date of exercise of the guarantee up to the
date of returning the balance.
9. BREACHES AND RELIEF
9.1 In the event that the Lessee fails to make any of the payments
applicable to it hereunder in timely fashion, the
following provisions shall apply:
9.1.1 Any amount payable by the Lessee to the Lessor and/or
to the management company hereunder which has not
been settled on time, shall bear arrears interest at
the maximum rate then charged by Bank Leumi Le'Israel
Ltd. with respect to unauthorized deviations, as of
the date of payment herein set forth up to the actual
date thereof with the addition of VAT at law.
9.1.2 In the event that the Lessee fails to fulfill any of
its undertakings pursuant to this Agreement,
including payments to any person, the Lessor and/or
the management company, may, however are not
obligated to, after giving prior notice to the
Lessee, effect any payment and/or undertaking as
aforesaid at their discretion, and charge the linkage
as of the date of effecting the payment, pending
receipt of the actual refund with the addition of 10%
(ten percent) handling fees.
9.2 Without derogating from the provisions of sub-clause 9.1
above, in the event that the Lessee breaches this Agreement
and fails to rectify such breach within 14 days as of receipt
of the Lessor's
<PAGE>
25
notice, the Lessor and/or the management company shall be
entitled to all or any part of the relief, at their exclusive
discretion, as the case may be, as follows:
The Lessee shall pay the Lessor on the date of vacating or of
failing to hand over the Leasehold, as the case may be, in
addition to any damage caused to it, pre-estimated agreed
compensation at the rate of 3 months Rent hereunder, or the
last Rent actually paid by the Lessee to the Lessor prior to
the breach, whichever is latest, together with Linkage
Differences up to the actual date of vacating.
9.3 The relief granted to the Lessor and/or the management company
as set forth in sub-clause 9.2 above, shall also apply in the
following occurrences:
9.3.1 If bankruptcy or liquidation proceedings are
instituted against the Lessee and are not cancelled
within 30 days.
9.3.2 If a receiver is appointed for the Lessee and/or its
property and such appointment is not cancelled within
30 days.
9.4 Without derogating from any of the Lessor's rights and without
derogating from the provisions of sub-clauses 9.1, 9.2 and 9.3
above, in the event that the Lessee fails to vacate the
Leasehold at the end of the Term of Lease or on the date set
forth in sub-clause 9.2.1 above, the following provisions
shall apply:
9.4.1 The Lessee shall pay appropriate usage fees at the rate of 3
(three) month's Rent for each month of delay in vacating. Such
payment shall be effected on the last day of each month of
delay in vacating for the preceding month.
9.4.2 The Lessee shall pay all the amounts, payments and taxes
applicable to it hereunder, including management fees.
<PAGE>
26
9.4.3 The payment set forth in this clause shall not create a lease
relationship between the Lessee and the Lessor with respect to
the period following termination of the Term of Lease or
vacating the Leasehold as herein set forth.
9.4.4 To remove any doubts it is hereby expressly declared that
nothing stated in this clause shall be deemed as a waiver of
the Lessor's rights, or consent that the Lessee shall be in
delay of vacating the Leasehold. Failure to vacate the
Leasehold on the date of vacating shall be deemed as a
fundamental breach of this Agreement, and the Lessor may
enforce such vacating in any manner available to it under law.
10. OFFSET
10.1 The Lessor and/or the management company may offset any amount
payable to either of them by the Lessee hereunder, and/or any
amount necessary for the performance of the Lessee's
undertakings pursuant to this Agreement, from any amount
payable to the Lessee and/or available to it in the account of
either of them.
10.2 The Lessee may not offset any amounts from its payments to the
Lessor and/or the management company.
10.3 Any claim of whatever nature on the part of the Lessee against
the management company shall not constitute a cause of
action on its part against the Lessor.
11. MISCELLANEOUS
11.1 There shall be no effect to any waiver, acquittal or extension
granted or made by either party unless given and made
expressly and in writing, and no waiver, acquittal or
extension with respect to any breach of this Agreement may be
interpreted or deduced from the mere action or omission which
is not an express written
<PAGE>
27
notice. Delay or failure to utilize any right by any of the
parties hereunder shall in no event and under no circumstances
be deemed as waiver or a basis for estoppel against them by
any of the parties.
11.2 This Agreement cancels any prior agreement between the
parties whether granted, made or concluded orally or in
writing.
11.3 The Tel-Aviv courts shall have exclusive jurisdiction to hear
any matter pertaining to this Agreement and/or arising
herefrom including the implementation, breach or cancellation
hereof.
11.4 Any payment and/or any of the Lessee's undertakings shall be
made and/or granted, unless otherwise expressly stated herein,
at the Lessor's offices as stated in the preamble hereto.
11.5 Any notice pursuant to this Agreement shall only be made in
writing and sent to the parties in accordance to the addresses
stated in the preamble hereto or at the address respecting
which the Lessee gave notice to the Lessor in writing
following the signature hereof, or at the Leasehold.
Any notice from one party to the other shall be sent by
registered mail and shall be deemed to have been delivered to
its destination within 72 (seventy two) hours from its
dispatch for delivery by registered mail at a post office in
Israel being properly addressed.
IN WITNESS WHEREOF THE PARTIES HAVE SIGNED:
<PAGE>
EXHIBIT 10.12
2900 LAKESIDE
OFFICE BUILDING LEASE
BY AND BETWEEN
PRINCETON INVESTMENT GROUP LLC
("LANDLORD")
AND
XACCT TECHNOLOGIES, INC.
A DELAWARE CORPORATION
("TENANT")
November 12, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
1. TERM 1
2. POSSESSION 1
3. BASIC RENT 1
4. RENTAL ADJUSTMENT 2
5. SECURITY DEPOSIT 3
6. USE 4
7. NOTICES 5
8. BROKERS 6
9. HOLDING OVER 6
10. TAXES ON TENANT'S PROPERTY 6
11. CONDITION OF PREMISES 6
12. ALTERATIONS 7
13. REPAIRS 7
14. LIENS 7
15. ENTRY BY LANDLORD 8
16. UTILITIES AND SERVICES 8
17. BANKRUPTCY 8
18. INDEMNIFICATION 9
19. DAMAGE TO TENANT'S PROPERTY 9
20. TENANT'S INSURANCE 9
21. DAMAGE OR DESTRUCTION 10
22. EMINENT DOMAIN 11
23. DEFAULTS AND REMEDIES 11
24. ASSIGNMENT AND SUBLETTING 13
25. SUBORDINATION 14
26. ESTOPPEL CERTIFICATE 14
27. SIGNAGE 14
28. RULES AND REGULATIONS 14
29. CONFLICT OF LAW 15
30. SUCCESSORS AND ASSIGNS 15
31. SURRENDER OF PREMISES 15
32. ATTORNEYS' FEES 15
33. PERFORMANCE BY TENANT 15
34 MORTGAGEE PROTECTION 15
35. DEFINITION OF LANDLORD 15
36. WAIVER 16
37. IDENTIFICATION OF TENANT 16
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
38. PARKING 16
39. TERMS AND HEADINGS 16
40. FINANCIAL STATEMENTS 16
41. TIME 16
42. PRIOR AGREEMENT; AMENDMENTS 17
43. SEPARABILITY 17
44. RECORDING 17
45. CONSENTS 17
46. LIMITATION OF LIABILITY 17
47. RIDERS 17
48 EXHIBITS 17
49. MODIFICATION FOR LENDER 18
50. OPTION TO EXTEND 18
<PAGE>
TABLE OF EXHIBITS
-----------------
EXHIBIT A THE PREMISES
EXHIBIT B WORK LETTER AGREEMENT
EXHIBIT C STANDARDS FOR UTILITIES AND SERVICES
EXHIBIT D RULES AND REGULATIONS
EXHIBIT E PARKING RULES AND REGULATIONS
<PAGE>
OFFICE BUILDING LEASE
THIS LEASE is made as of November 12, 1999 by and between Princeton
Investment Group LLC ("Landlord"), and XACCT Technologies, Inc., a Delaware
Corporation, ("Tenant").
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
Suite Number 100 (the "Premises") outlined on the floor plan attached hereto and
marked Exhibit A, the Premises being agreed, for the purposes of this Lease, to
have an area of approximately 10,970 rentable square feet and being situated on
the First floor of that certain office building located at 2900 Lakeside Drive,
Santa Clara, California, 95054 (the "Building").
The parties hereto agree that said letting and hiring is upon and subject
to the terms, covenants and conditions herein set forth. Tenant covenants, as a
material part of the consideration for this Lease to keep and perform each and
all of said terms, covenants and conditions for which Tenant is liable and that
this Lease is made upon the condition of such performance.
Prior to the commencing of the term of this Lease the Premises shall be
improved by the Tenant Improvements described in the Work Letter marked Exhibit
B attached hereto.
1. TERM
The term of this Lease shall be for Sixty (60) months commencing January
1, 2000 or upon the substantial completion of tenant improvements as described
in EXHIBIT B, and ending on the last day of the month immediately preceding the
month in which the anniversary of the commencement date occurs, unless such term
shall be sooner terminated as hereinafter provided.
As soon as the commencement date is determined, the parties shall enter
into an amendment of this Lease setting forth the precise commencement and
termination dates of this Lease. Failure to enter into such an amendment,
however, shall not affect Tenant's liability hereunder for the term of the
Lease. Reference in this Lease to a "Lease Year" shall mean each successive
twelve-month period commencing with the commencement date.
2. POSSESSION
Tenant agrees that, if Landlord is unable to deliver possession of the
Premises to Tenant on the scheduled commencement of the term of this Lease, this
Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for
any loss or damage resulting therefrom, but in such event the term of this Lease
shall not commence until Landlord tenders possession of the Premises to Tenant
with the Tenant Improvements substantially completed. If Landlord completes
construction of the Tenant Improvements prior to the date scheduled in the Work
Letter, Landlord shall deliver possession of the Premises to Tenant upon such
completion and the term of this Lease shall thereupon commence. Tenant shall
have the right to access the Premises from the date of execution of this Lease
until the Commencement Date for the purpose of installing furniture, trade
fixtures and equipment, and data and communication systems. Tenant shall not
conduct its business from the Premises during this early access period. Such
early occupancy shall be subject to all of the provisions of this Lease,
excluding the commencement of Rent. The preceding notwithstanding, Tenant may
terminate Lease if Landlord is unable to deliver possession of the Premises on
or before February 29, 2000.
3. BASIC RENT
(a) Tenant agrees to pay Landlord Basic Rent for the Premises (subject to
adjustments as hereinafter provided) as follows:
MONTHS OF TERM MONTHLY BASIC RENT
- -------------- ------------------
01 -12 $30,168 PER MONTH
13- 24 $31,265 PER MONTH
25 -36 $32,362 PER MONTH
37 -48 $33,459 PER MONTH
49 -60 $34,556 PER MONTH
1
<PAGE>
The Basic Rent shall be paid monthly, in advance on the fist (1st) day
of each calendar month during the term, except that the fIrst month's rent shall
be paid on execution hereof. If Tenant's obligation to pay rent commences or
ends on a day other than the first day of a calendar month, then the rental for
such period shall be prorated in the proportion that the number of days this
Lease is in effect during such period bears to number of days in such month. In
addition to the Basic Rent, Tenant agrees to pay as additional rental the amount
of rental adjustments and other charges required by this Lease. All rental shall
be paid to Landlord, without prior demand and without any deduction or offset,
in lawful money of the United States of America, at the address of Landlord
designated on the signature page of this Lease or to such other person or at
such other place as Landlord may from time to time designate in writing.
(b) In the event Tenant fails to pay any installment of rent when due or in
the event Tenant fails to make any other payment of which Tenant is obligated
under this Lease when due, then Tenant shall pay to Landlord a LATE CHARGE
EQUAL TO TEN PERCENT(10 %)MONTHLY of the amount due to compensate Landlord for
the extra costs incurred as a result of such late payment. If any rent or other
payment remains delinquent for a period in excess of 14 days then, in addition
to such late charge, Tenant shall pay to Landlord interest on such rent or other
payment at the maximum rate permitted by law from the date such rent or other
payment became due until paid.
4. RENTAL ADJUSTMENT
(a) For the purpose of this Article 4, the following terms are defined as
follows:
(i) TENANT'S PERCENTAGE. That portion of the Building occupied by
Tenant divided by the total square footage of the Building, which result is
the following 33.08%.
(ii) DIRECT EXPENSES BASE. The amount of the annual Direct
Expenses which Landlord has included in Basic Rent, which amount is the Direct
Expenses incurred for calendar year 2000 actual Direct Expenses.
(iii)DIRECT EXPENSES. The term "Direct Expenses" shall include:
(A) All real and personal property taxes and assessments imposed
by any governmental authority or agency on the Building and the land on which
the Building is located (including a pro rata portion of any taxes levied on any
common areas); any assessments levied in lieu of taxes; any non-progressive tax
on or measured by gross rentals received from the rental of space in the
Building; and any other costs levied or assessed by, or at the direction of, any
federal, state, or local government authority in connection with the use or
occupancy of the Premises or the parking facilities serving the Premises; any
tax on this transaction or any document to which Tenant is a party creating or
transferring an interest in the Premises, and any expenses, including cost of
attorneys or experts, reasonably incurred by Landlord in seeking reduction by
the taxing authority of the above-referenced taxes, less tax refunds obtained as
a result of an application for review thereof; but shall not include any net
income, franchise, capital stock, estate or inheritance taxes.
(B) Operating costs consisting of costs incurred by Landlord in
maintaining and operating the Building, exclusive of costs required to be
capitalized for federal income tax purposes, and including (without limiting the
generality of the foregoing) the following: costs of utilities, supplies and
insurance, costs of services of independent contractors, managers and other
suppliers, the fair rental value of the Building office, costs of compensation
(including employment taxes and fringe benefits) of all persons who perform
regular and recurring duties connected with the management, operation,
maintenance, and repair of the Building, its equipment, parking facilities and
the common areas, including, without limitation, engineers, janitors, foremen,
floor waxers, window washers, watchmen and gardeners, but excluding persons
performing services not uniformly available to or performed for substantially
all Building tenants; a reasonable management fee; cost of maintaining,
repairing and replacing landscaping, sprinkler systems, concrete walkways, paved
parking areas, signs, and site lighting.
(C) Amortization of such capital improvements as Landlord may
have installed: (a) for the purpose of reducing operating costs, (b) to comply
with governmental rules and regulations promulgated after completion of the
Building, and (c) for the purpose of replacing existing capital items and
improvements, provided that such cost together with interest at the maximum rate
allowed by law shall be amortized over such reasonable period as
2
<PAGE>
Landlord shall determine, and only the monthly amortized cost shall be included
in Direct Expenses.
(b) If Tenant's Percentage of the Direct Expenses paid or incurred by
Landlord for any calendar year after the first calendar year exceeds the Direct
Expenses Base included in Tenant's rent, then Tenant shall pay such excess as
additional rent. Accordingly, for each year after the first calendar year, or
portion thereof, Tenant shall pay Tenant's Percentage of Landlord's estimate of
the amount by which Direct Expenses for that year shall exceed the Direct
Expenses Base ("Landlord Estimate"). This estimated amount shall be divided into
twelve equal monthly installments. Tenant shall pay to Landlord, concurrently
with the regular monthly rent payment next due following the receipt of such
statement, an amount equal to one monthly installment multiplied by the number
of months from January in the calendar year in which said statement is submitted
to the month of such payment, both months inclusive. Subsequent installments
shall be payable concurrently with the regular monthly rent payments for the
balance of that calendar year and shall continue until the next calendar year's
statement is rendered. As soon as possible after the end of each calendar year,
Landlord shall provide Tenant with a statement showing the amount of Tenant's
Percentage of Direct Expenses, the amount of Landlord's Estimate actually paid
by Tenant and the amount of the Direct Expenses Base. Thereafter, Landlord shall
reconcile the above amounts and shall either bill Tenant for the balance due
(payable on demand by Landlord) or credit any over payment by Tenant towards the
next monthly installment of Landlord's Estimate falling due, as the case may be.
For purposes of making these calculations, in no event shall Tenant's Percentage
of the Direct Expenses be deemed to be less than the Direct Expenses Base.
(c) Even though the term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant's Percentage of Direct Expenses
for the year in which this Lease terminates, Tenant shall immediately pay any
increase due over the estimated expenses paid and, conversely, any over payment
made in the event said expenses decrease shall be rebated by Landlord to Tenant.
5. SECURITY DEPOSIT AND ADDITIONAL DEPOSIT (LETTER OF CREDIT)
(a) Tenant shall deposit with Landlord, upon execution of this Lease, the
sum of Thirty four thousand and five hundred fifty six Dollars and
no/lOOths ($34,556.00). Said sum shall be held by Landlord as security
for the faithful performance by Tenant of all of Tenant's obligations
hereunder. If Tenant defaults with respect to any provision of this
Lease, including but not limited to the provisions relating to the
payment of rent, Landlord may (but shall not be required to) use,
apply or retain all or any part of this security deposit for the
payment of any rent or any other sum in default, or for the payment of
any other amount which Landlord may spend or become obligated to spend
by reason of Tenant's default or to compensate Landlord for any other
loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of the deposit is so used or applied, Tenant
shall, upon demand, deposit cash with Landlord in an amount sufficient
to restore the security deposit to its original amount. Tenant's
failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this security deposit separate from its
general funds. If Tenant shall fully and faithfully perform all of its
obligations under this Lease, the security deposit or any balance
thereof shall be returned to Tenant (or , at Landlord's option, to the
last assignee of Tenant's interest hereunder) at the expiration of the
Lease term, provided that Landlord may retain the security deposit
until such time as any amount due from Tenant in accordance with
Article 4 hereof has been determined and paid in full.
(b) Letter of Credit in the amount of $300,000.00
1. Delivery of Letter of Credit. Tenant shall on execution of this
Lease, deliver to Landlord and cause to be in effect during the
Lease Term an unconditional, irrevocable letter of credit ("LOC")
in the amount of$300,000.00. The LOC shall be in a form
acceptable to Landlord and shall be issued by an LOC bank
selected by Tenant and acceptable to Landlord. An LOC bank is a
bank that accepts deposits, maintains account, has a local office
that will negotiate a letter of credit and the deposits of which
are insured by the Federal Deposit Insurance Corporation. Tenant
shall pay all expenses, points, or fees incurred by Tenant in
obtaining the LOC. The LOC shall not be mortgaged, assigned or
encumbered in any manner whatsoever by Tenant without the prior
written consent of Landlord. Tenant acknowledges that Landlord
has the right
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to transfer or mortgage its interest in the Project, the Building
and in this Lease. And Tenant agrees that in the event of any
such transfer or mortgage Landlord shall have the right to
transfer or assign the LOC and/or the LOC Security Deposit (as
defined below) to the transferee or mortgagee, and in the event
of such transfer, Tenant shall look solely to such transferee or
mortgagee for the return of the LOC.
2. Replacement of Letter of Credit: Tenant may, from time to time,
replace any existing LOC with a new LOC if the new LOC (a)
becomes effective at least thirty (30) days before expiration of
the LOC that it replaces, (b) is in the required LOC amount;
(c) is issued by an LOC bank acceptable to Landlord; and (d)
otherwise complies with the requirements of the Paragraph 5(b)
3. Landlord's Right to Draw on Letter of Credit. Landlord shall hold
the LOC as additional security for the performance of Tenant's
obligations under this Lease. If, after notice and failure to
cure within any applicable period provided in this Lease, Tenant
defaults on any provision of this Lease, Landlord may without
prejudice to any other remedy it has, draw on that portion of the
LOC necessary to (a) pay Rent or other sum in default; (b) payor
reimburse Landlord for any amount that Landlord may spend or
become obligated to spend in exercising Landlord's right under
Paragraph 23 (Defaults and Remedies); and/or (c) compensate
Landlord for any expense, loss or damage that Landlord may suffer
because of Tenant's default. If Tenant fails to renew or replace
the LOC at least thirty (30) days before its expiration, Landlord
may, without prejudice to any other remedy it has, draw on the
entire amount of the LOC.
4. LOC Security Deposit. Any amount of the LOC that is drawn on by
Landlord but not applied by Landlord shall be held by Landlord as
security deposit (the LOC Security Deposit") in accordance with
Paragraph 5 of this Lease.
5. Restoration of Letter of Credit and LOC Security Deposit. If
Landlord draws on any portion of the LOC and/or applies all or
any portion of such draw, Tenant shall, within five (5) business
days after demand by Landlord, either (a) deposit cash with
Landlord in an amount that, when added to the amount remaining
under the LOC and the amount of any LOC Security Deposit, shall
equal the LOC Amount then required under this Paragraph 5(b ); or
(b) reinstate the LOC to the full LOC Amount.
6. Reduction in Letter of Credit. At any time after the third
anniversary of the Lease, and only in the event Tenant satisfies
each of the following conditions to Landlord's reasonable
satisfaction, the LOC Amount may be reduced to an amount equal to
One Hundred Fifty Thousand and no/100 Dollars ($150,000.00).: (i)
Tenant is not and has not been in default under the terms of this
Lease beyond any applicable cure period; (ii) Tenant shall
deliver to Landlord for review Tenant's financial statements
prepared in accordance with generally accepted accounting
principles and audited by a nationally recognized public
accounting firm acceptable to Landlord, and any other financial
information reasonably requested by Landlord ("Tenant's
Financial Information"); and (iii) Tenant provides to Landlord
ten (10) days prior written notice of any such deduction; and
(iv) the LOC provides that the issuing bank shall notify Landlord
in writing i at least five (5) business days prior to any such
reduction. In the event that such reduction to the LOC is made
and, subsequently, Tenant fails to meet any of the above
conditions for a period of (thirty (30) days following delivery
by Landlord of written notice of any such failure. Tenant shall
within forty-eight (48) hours, increase the face amount of the
LOC to an amount equal to $300,000.00.
6. USE
(a) Tenant shall use the Premises for general offices, including software
engineering development and support, marketing, and shall not use or permit
the Premises to be used for any other purpose without the prior written
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consent of Landlord. Nothing contained herein shall be deemed to give Tenant any
exclusive right to such use in the Building. Tenant shall not use or occupy
the Premises in violation of law or the certificate of occupancy issued for the
Building, and shall, upon written notice from Landlord, discontinue any use of
the Premises which is declared by any! governmental authority having
jurisdiction to be a violation of law or of the certificate of occupancy. Tenant
shall comply with any direction of any governmental authority having
jurisdiction which. shall, by reason of the nature of Tenants use or
occupancy of the Premises, pose a duty upon Tenant or Landlord With respect to
the Premises or with respect to the use or occupation thereof. Tenant shall not
do or permit to be done anything which will invalidate or increase the cost of
any fire, extended coverage or any other insurance policy covering the Building
and/or property is located therein and shall comply with all rules, orders,
regulations and requirements of the Insurance Service Offices, formerly known as
the Pacific Fire Rating Bureau or any other organization performing a similar
function. Tenant shall promptly, upon demand, reimburse Landlord for any
additional premium charged for such policy by reason of Tenant's failure to
comply with the provisions of this article. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way obstruct or
interfere with the rights of other tenants of the Building, or injure or annoy
them, or use or allow the Premises to be used for any improper, immoral,
unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit
any nuisances in, on or about the Premises. Tenant shall not commit or suffer to
be committed any waste in or upon the Premises.
(b) Tenant shall not use, store or dispose of any hazardous, toxic or
radioactive materials or substances, including those materials identified as
hazardous pursuant to Article II of Title 22 of the California Code of
Regulations, Division 4, Chapter 20, as they may be amended from time to time
("Hazardous Materials"), in, on or about the Premises or the Building without
the prior written co sent of Landlord. If Landlord consents to Tenant's use of
any Hazardous Materials in or on the Premises, Tenant shall comply with all
applicable federal state and local laws, statutes, ordinances, rules and
regulations relating to the use, storage and disposal of Hazardous Materials.
7. NOTICES
Any notice required or permitted hereunder must be in writing and may be
given by personal delivery, overnight courier service, or by mail, and given
by mail shall be deemed sufficiently given if sent by registered or certified
mail addressed to Tenant at the Premises, or to Landlord at its address set
forth at the end of this Lease. Either party may specify a different address
for notice purposes by written notice to the other except that the Landlord may
in any event use the Premises as Tenant's address for notice purposes.
ADDRESS TO MAIL RENT STATEMENT TO: PRINCETON INVESTMENT GROUP
P.0. BOX 22196,
SAN FRANCISCO, CA 94122
ATTN: FRANCES LIM
CHIEF EXECUTIVE OFFICER
ADDRESS TO MAIL NOTICES STATEMENT TO: PRINCETON INVESTMENT GROUP LLC
C/O HYCD, INC.
5300 STEVENS CREEK BLVD. SUITE 450
SAN JOSE, CA 95129
ATTN: DIANE LING
CHIEF EXECUTIVE OFFICER
AND
PRINCETON INVESTMENT GROUP P.0. BOX 22196,
SAN FRANCISCO, CA 94122
ATTN: FRANCES LIM
CHIEF EXECUTIVE OFFICER
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8. BROKERS
Tenant warrants that it has had no dealings with any real estate broker or
agent in connection with the negotiation of the Lease, except CB Richard Ellis
and David Marley Associates whose commissions shall be payable by Landlord in
accordance with Landlord's standard commission schedule, and that it knows of no
other real estate, broker or agent who is or might be entitled to a commission
in connection with this Lease. If Tenant has dealt with any other person or real
estate broker with respect to leasing or renting space in the Building, Tenant
shall be solely responsible for the payment of any fee due said person or firm
and Tenant shall hold Landlord free and harmless against any liability in
respect thereto, including attorneys' fees and costs.
9. HOLDING OVER
If Tenant holds over after the expiration or earlier termination of the
term hereof without the express written consent of Landlord, Tenant shall
become a Tenant at sufferance only, at a rental rate equal to one hundred fifty
percent (150%) of the rent in effect upon the date of such expiration (subject
to adjustment as provided in paragraph 4 hereof and prorated on a daily basis),
and otherwise subject to the terms, covenants and conditions herein specified,
so far as applicable. Acceptance by Landlord of rent after such expiration or
earlier termination shall not result in a renewal of this Lease. The foregoing
provisions of this Article 9 are in addition to and do not affect Landlord's
right of reentry or any rights of Landlord hereunder or as otherwise provided by
law. If Tenant fails to surrender the Premises upon the expiration of this Lease
despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord
harmless from all loss or liability, including without limitation, any claim
made by any succeeding tenant founded upon or resulting from such failure to
surrender, and any attorneys' fees and costs.
10. TAXES ON TENANT'S PROPERTY
(a) Tenant shall be liable for and shall pay, at least ten days before
delinquency, all taxes levied against any personal property or trade fixtures
placed by Tenant in or about the Premises. If any such taxes on Tenant's
personal property or trade fixtures are levied against Landlord or Landlord's
property or if the assessed value of the Premises is increased by the inclusion
therein of a value placed upon such personal property or trade fixtures of
Tenant and if Landlord, after written notice to Tenant, pays the taxes based
upon such increased assessment, which Landlord shall have the right to do
regardless of the validity thereof, but only under proper protest if requested
by Tenant, Tenant shall, upon demand, repay to Landlord the taxes so levied
against Landlord, or the portion of such taxes resulting from such increase in
the assessment.
(b) If the Tenant Improvements in the Premises, whether installed, and/or
paid for by Landlord or Tenant and whether or not affixed to the real property
so as to become a part thereof, are assessed for real property tax purposes at a
valuation higher than the valuation at which Tenant Improvements conforming to
Landlord's "Building Standard" in other space in the Building are assessed, then
the real property taxes and assessments levied against the Building by reason of
such excess assessed valuation shall be deemed to be taxes levied against
personal property of Tenant and shall be governed by the provisions of Paragraph
10(a), above. If the records of the county assessor are available and
sufficiently detailed to serve as a basis for determining whether said Tenant
Improvements are assessed at a higher valuation than Landlord's Building
Standard, such records shall be binding on both the Landlord and the Tenant. If
the records of the county assessor are not available or sufficiently detailed to
serve as a basis for making said determination, the actual cost of construction
shall be used.
11. CONDITION OF PREMISES
Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Premises or the Building
or with respect to the suitability of either for the conduct of Tenant's
business. The taking of possession of the Premises by Tenant shall conclusively
establish that the Premises and the Building were in satisfactory condition at
such time. The preceding notwithstanding, Landlord represents that all Building
Systems shall be in good order and operating condition at the commencement of
the Lease.
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12. ALTERATIONS
(a) Tenant shall make no alterations, additions or improvements in or to
the Premises without Landlord's prior written consent, and then only by
contractors or mechanics approved by Landlord. Tenant agrees that there shall be
no construction of partitions or other obstruction which might interfere with
Landlord's free access to mechanical installations or service facilities of the
Building or interfere with the moving of Landlord's equipment to or from the
enclosures containing said installations or facilities. All such work shall be
done at such times and in such manner as Landlord may from time to time
designate. Tenant covenants and agrees that all work done by Tenant shall be
performed in full compliance with all laws, rules, orders, ordinances,
regulations and requirements of all governmental agencies, offices, and boards
having jurisdiction, and in full compliance with the rules, regulations and
requirements of the Insurance Service Offices formerly known as the Pacific Fire
Rating Bureau, and of any similar body. Before commencing any work, Tenant shall
give Landlord at least ten (10) days written notice of the proposed commencement
of such work and shall, if required by Landlord, secure at Tenant's own cost and
expense, a completion and lien indemnity bond, satisfactory to Landlord, for
said work. Tenant further covenants and agrees that any mechanic's lien filed
against the Premises or against the Building for work claimed to have been done
for, or materials claimed to have been furnished to, Tenant will be discharged
by Tenant, by bond or otherwise, within ten (10) days after the filing thereof,
at the cost and expense of Tenant. All alterations, additions or improvements
upon the Premises made by either party, including (without limiting the
generality of the foregoing) all wall covering, built-in cabinet work, paneling
and the like, shall, unless Landlord elects otherwise, become the property of
Landlord, and shall remain upon, and be surrendered with the Premises, as a part
thereof, at the end of the term hereof, except that Landlord may, by written
notice to Tenant, require Tenant to remove all partitions, counters, railings
and the like installed by Tenant, and Tenant shall repair all damage resulting
from such removal or, at Landlord's option, shall pay to Landlord all costs
arising from such removal.
(b) All articles of personal property and all business and trade fixtures,
machinery and equipment, furniture and movable partitions owned by Tenant or
installed by Tenant at its expense in the Premises shall be and remain the
property of Tenant and may be removed by Tenant at any time during the lease
term when Tenant is not in default hereunder. If Tenant shall fail to remove all
of its effects from the Premises upon termination of this Lease for any cause
whatsoever, Landlord may, at its option, remove the same in any manner that
Landlord shall choose, and store said effects without liability to Tenant for
loss thereof. In such event, Tenant agrees to pay Landlord upon demand any and
all expenses incurred in such removal, including court costs and attorneys' fees
and storage charges at its option, without notice, sell said effects, or any of
the same, at private sale and without legal process, for such price as Landlord
may obtain and apply the proceeds of such sale upon any amounts due under this
Lease from Tenant to Landlord and upon the expense incident to the removal and
sale of said effects.
13. REPAIRS
(a) By entry hereunder, Tenant accepts the Premises as being in good and
sanitary order, condition and repair. Tenant shall keep, maintain and preserve
the Premises in first class condition and repair, and shall, when and if needed,
at Tenant's sole cost and expense, make all repairs to the Premises and every
part thereof. Tenant shall, upon the expiration or sooner termination of the
term hereof, surrender the Premises to Landlord in the same condition as when
received, usual and ordinary wear and tear excepted. Landlord shall have no
obligation to alter, remodel, improve, repair, decorate, or paint the Premises
or any part thereof. The parties hereto affirm that Landlord has made no
representations to Tenant respecting the condition of the Premises or the
Building except as specifically herein set forth.
(b) Anything contained in Paragraph 13(a) above to the contrary
notwithstanding, Landlord shall repair and maintain the structural portions of
the Building, including the foundation, building shell, and roof structure, all
at Landlord's expense, unless such maintenance and repairs are caused in part or
in whole by the act, neglect, or omission of any duty of Tenant, its agents,
employees, or invitees, in which event Tenant shall reimburse Landlord, as
additional rent, for the reasonable cost of such maintenance and repairs.
Landlord shall also repair and maintain the basic plumbing, elevators, life
safety systems and other building systems, heating, ventilating, air
conditioning and electrical systems installed or furnished by Landlord, the
roof membrane, the parking areas, driveways, sidewalks, landscaping, project
signs and exterior site lighting. The cost of the foregoing repairs and
maintenance shall be billed to Tenant as operating costs pursuant to Paragraph
4. Landlord shall not be liable for any failure to make any such repairs or to
perform any maintenance unless such failure shall persist for an unreasonable
time after written notice of the need of
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such repairs or maintenance is given to Landlord by Tenant. Except as provided
in Article 21 hereof, there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant's business
arising from the making of any repairs, alterations or improvements in or to any
portion of the Building or the Premises or in or to fixtures, appurtenances and
equipment therein. Tenant waives the right to make repairs at Landlord's expense
under any law, statute or ordinance now or hereafter in effect.
14. LIENS
Tenant shall not permit any mechanics, materialmen's or other liens to be
filed against the Building nor against Tenant's leasehold interest in the
Premises. Landlord shall have the right at all reasonable times to post and keep
posted on the Premises any notices, which it deems necessary for protection from
such liens. If any such liens are filed, Landlord may, without waiving its
rights and remedies based on such breach of Tenant and without releasing Tenant
from any of its obligations, cause such liens to be released by any means it
shall deem proper, including payments in satisfaction of the claim giving rise
to such lien. Tenant shall pay to Landlord at once, upon notice by Landlord, any
sum paid by Landlord to remove such liens, together with interest at the maximum
rate per annum permitted by law from the date of such payment by Landlord.
15. ENTRY BY LANDLORD
Landlord reserves and shall at any and all times have the right to enter
the Premises to inspect the same, to supply janitor service and any service to
be provided by Landlord to Tenant hereunder, to show the Premises to prospective
purchasers or tenants, to post notices of non-responsibility to alter, improve
or repair the Premises or any other portion of the Building, all without being
deemed guilty of any eviction of Tenant and without abatement of rent. Landlord
may, in order to carry out such purposes, erect scaffolding and other necessary
structures where reasonably required by the character of the work to be
performed, provided that the business of Tenant shall be interfered with as
little as is reasonably practicable. Tenant hereby waives any claim for damages
for any injury or inconvenience to or interference with Tenant's business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss in,
upon and about the Premises. Landlord shall at all times have and retain a key
with which to unlock all doors in the Premises. Any entry to the Premises
obtained by Landlord by any of said means, or otherwise, shall not be construed
or deemed to be a forcible or unlawful entry into the Premises, or an eviction
of Tenant from the Premises or any portion thereof, and any damages caused on
account thereof shall be paid by Tenant. It is understood and agreed that no
provision of this Lease shall be construed as obligating Landlord to perform any
repairs, alterations or decorations except as otherwise expressly agreed herein
by Landlord.
16. UTILITIES AND SERVICES
Provided that Tenant is not in default under this Lease, Landlord agrees to
furnish or cause to be furnished to the Premises the utilities and services
described in the Standards for Utilities and Services, attached hereto as
Exhibit, subject to the conditions and in accordance with the standards set
forth therein. Landlord's failure to furnish any of the foregoing items when
such failure is caused by: (i) accident, breakage, or repairs; (ii) strikes,
lockouts or other labor disturbance or labor dispute of any character; (iii)
governmental regulation, moratorium or other governmental action; (iv) inability
despite the exercise of reasonable diligence to obtain electricity, water or
fuel; or (v) any other cause beyond Landlord's reasonable control, shall not
result in any liability to Landlord. In addition, Tenant shall not be entitled
to any abatement or reduction of rent by reason of such failure, no eviction of
Tenant shall result from such failure and Tenant shall not be relieved from the
performance of any covenant or agreement in this Lease because of such failure.
In the event of any failure, stoppage or interruption thereof, Landlord shall
diligently attempt to resume service promptly.
17. BANKRUPTCY
If Tenant shall file a petition in bankruptcy under any provision of the
Bankruptcy code as then in effect, or if Tenant shall be adjudicated a bankrupt
in involuntary bankruptcy proceedings and such adjudication shall not have been
vacated within thirty (30) days from the date thereof, or if a receiver or
trustee shall be appointed of Tenant's property and the order appointing such
receiver or trustee shall not be set aside or vacated within thirty (30) days
after the entry thereof, or if Tenant shall assign Tenant's estate or effects
for the benefit of creditors, or if this Lease shall, by
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operation of law or otherwise, pass to any person or persons other than Tenant,
then in any such event Landlord may terminate this Lease, if Landlord so elects,
with or without notice of such election and with or without entry or action by
Landlord. In such case, notwithstanding any other provisions of this Lease,
Landlord, in addition to any and all rights and remedies allowed by law or
equity, shall, upon such termination, be entitled to recover damages in the
amount provided in Paragraph 23(b) hereof. Neither Tenant nor any person
claiming through or under Tenant or by virtue of any statute or order of any
court shall be entitled to possession of the Premises but shall surrender the
Premises to Landlord. Nothing contained herein shall limit or prejudice the
right of Landlord to recover damages by reason of any such termination equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved; whether
or not such amount is greater, equal to, or less than the amount of damages
recoverable under the provisions of this Article 17.
18. INDEMNIFICATION
Tenant shall indemnify, defend and hold Landlord harmless from all claims
arising from Tenant's use of the I Premises or the conduct of its business or
from any activity, work, or thing done, permitted or suffered by Tenant in or
about the Premises. Tenant shall further indemnify, defend and hold Landlord
harmless from all claims arising from any breach or default in the performance
of any obligation to be performed by Tenant under the terms of this Lease, or
arising from any act, neglect, fault or omission of Tenant or of its agents or
employees, and from and against all costs, attorneys' fees, expenses and
liabilities incurred in or about such claim or any action or proceeding brought
thereon. In case any action or proceeding shall be brought against Landlord by
reason of any such claim, Tenant upon notice from Landlord shall defend the same
at Tenant's expense by counsel approved in writing by Landlord. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to person in, upon or about the Premises from any
cause whatsoever except that which is caused by the failure of Landlord to
observe any of the terms and conditions of this Lease where such failure has
persisted for an unreasonable period of time after written notice of such
failure. Tenant hereby waives all its claims in respect thereof against Landlord
except as permitted by previous sentence.
19. DAMAGE TO TENANT'S PROPERTY
Notwithstanding the provisions of Article 18 to the contrary, Landlord or
its agents shall not be liable for (i) any damage to any property entrusted to
employees of the Building, (ii) loss or damage to any property by theft or
otherwise, (iii) any injury or damage to persons or property resulting from
fIre, explosion, falling plaster, steam, gas, electricity, water or rain which
may leak from any part of the Building or from the pipes, appliances or plumbing
work therein or from the roof, street or sub-surface or from any other place or
resulting from dampness or (iv) any other cause whatsoever, except to the extent
due to the gross negligence or willful misconduct of Landlord. Landlord or its
agents shall not be liable for interference with light or other incorporeal
heraditaments, nor shall Landlord be liable for any latent defect in the
Premises or in the Building. Tenant shall give prompt notice to Landlord in case
off Ire or accidents in the Premises or in the Building or of defects therein or
in the fixtures or equipment.
20. TENANT'S INSURANCE
(a) Tenant shall, during the term hereof and any other period of occupancy,
at it's sole cost and expense, keep in full force and effect the following
insurance:
(i) Standard form property insurance insuring against the perils of
fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All Risk") and sprinkler leakage. This insurance policy shall be
upon all property owned by Tenant, for which Tenant is legally liable or
that was installed at Tenant's expense, and which is located in the
Building including, without limitation, furniture, fittings, installations,
fixtures ( other than Tenant Improvements installed by Landlord), and any
other personal property, in an amount not less than the full replacement
cost thereof. In the event that there shall be a dispute as to the amount
which comprises full replacement cost, the decision of Landlord or any
mortgagees of Landlord shall be conclusive. This insurance policy shall also be
upon direct or indirect loss of Tenant's earnings attributable to Tenant's
inability to use fully or obtain access to the Premises or Building in an amount
as will properly reimburse Tenant. Such policy shall name Landlord and any
mortgagees of Landlord as insured parties, as their respective interests may
appear.
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(ii) Commercial liability insurance insuring Tenant against any
liability arising out of the lease, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of $3,000,000.00 combined single limit for injury to, or death of one or
more persons in an occurrence, and for damage to tangible property (including
loss of use) in an occurrence, with such liability amount to be adjusted from
year to year to reflect increases in the Consumer Price Index. The policy shall
insure the hazards of premises and operations, independent contractors,
contractual liability (covering the indemnity contained in Paragraph 18 hereof)
and shall (1) name Landlord as an additional insured, and (2) contain a
provision that "the insurance provided the Landlord hereunder shall be primary
and noncontributing with any other insurance available to the Landlord."
(iii) Workers' compensation and employer's liability insurance (as
required by state law).
(iv) Any other form or forms of insurance as Tenant or Landlord or any
mortgagees of Landlord may reasonably require from time to time in form, in
amounts and for insurance risks against which a prudent tenant would protect
itself.
(b) All policies shall be written in a form satisfactory to Landlord and
shall be taken out with insurance companies holding a General Policy holders
Rating of "A" and a Financial Rating of "X" or better, as set forth in the most
current issue of Bests Insurance Guide. Within ten (10) days after the execution
of this LeaSe, Tenant shall deliver to Landlord copies of policies or
certificates evidencing the existence of the amounts and forms of coverage
satisfactory to Landlord. No such policy shall be cancelable or reducible in
coverage except after thirty (30) days prior written notice to Landlord. Tenant
shall, within ten (10) days prior to the expiration of such policies, furnish
Landlord with renewals or "binders" thereof, or Landlord may order such
insurance and charge the cost thereof to Tenant as additional rent. If Landlord
obtains any insurance that is the responsibility of Tenant under this section,
Landlord shall deliver to Tenant a written statement setting forth the cost of
any such insurance and showing in reasonable detail the manner in which it has
been computed.
21. DAMAGE OR DESTRUCTION
(a) If the Building and/or the Premises is damaged by fire or other
perils covered by Landlord's insurance, Landlord shall have the following rights
and obligations:
(i) In the event of total destruction, Landlord shall, at
Landlord's option, commence repair, reconstruction and restoration of the
Building and/or the Premises as soon as reasonably possible, and diligently
prosecute the same to completion, in which event this Lease shall remain in full
force and effect. If Landlord elects not to so repair, reconstruct or restore
the Building and/or the Premises, this Lease shall terminate as of the date of
such total destruction. In either event, Landlord shall give Tenant written
notice of its intention within sixty (60) days after the date of damage or
destruction.
(ii) In the event of a partial destruction of the Building and/or
the Premises, Landlord shall promptly restore the Building and/or the Premises
unless Landlord elects to terminate this Lease as permitted herein. Landlord
shall have the right to terminate this Lease if (1) the damage to the Building
and/or the Premises exceeds twenty-five percent (25%) of the full insurable
value thereof, (2) the damage to the Building and/or the Premises is such that
the Building and/or the Premises cannot be repaired, reconstructed or restored
within one hundred eighty (180) days from the date of damage or destruction, or
(3) insurance proceeds received by Landlord will not be sufficient to cover the
cost of such repairs, reconstruction and restoration. Landlord shall give
written notice to Tenant of its intention within sixty (60) days after the date
of damage or destruction. If Landlord elects not to restore the Building and/or
the Premises, this Lease shall be deemed to have terminated as of the date of
such partial destruction.
(b) Upon any termination of this Lease under any of the provisions of
this Article 21, the parties shall be released without further obligation to the
other from the date possession of the Premises is surrendered to Landlord except
for items which have theretofore accrued and are then unpaid.
(c) In the event of repair, reconstruction and restoration by
Landlord as herein provided, the rental payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration.
Tenant shall not be entitled to any compensation
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or damages for loss the use of the whole or any part of the Premises and/or any
inconvenience or annoyance occasioned by such damage, repair, reconstruction or
restoration.
(d) Tenant shall not be released from any of its obligations under
this Lease except to the extent and upon the conditions express stated in this
Article 21. Notwithstanding anything to the contrary contained in this Article
21, if Landlord is delayed or prevented from repairing or restoring the damaged
Premises within one year after the occurrence of such damage or destruction by
reason of acts of God, war, governmental restrictions, inability to obtain the
necessary labor or materials, or other cause beyond the control of Landlord,
Landlord shall be relieved of its obligation to make such repairs of restoration
and Tenant shall be released from its obligations under this Lease as of the end
of said one year period.
(e) If age is due to any cause other than fire or other peril covered
by All-Risk insurance, Landlord may elect to terminate this Lease.
(f) If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall be obligated to make repair or restoration only
of those portions of the Building and the Premises which were originally
provided at Landlord's expense, and the repair and restoration of items not
provided at Landlord's expense shall be the obligation of Tenant.
(g) Not withstanding anything to the contrary contained in this
Article 21, Landlord shall not have any obligation whatsoever to repair,
reconstruct or restore the Premises when the damage resulting from any casualty
covered under this Article 21, occurs during the last twelve (12) months of the
term of this Lease or any extension hereof.
(h) The revisions of California Civil Code Section 1932, Subsection 2,
and Section 1933, Subsection 4, which permit termination of a lease upon
destruction of the leased premises, are hereby waived by Tenant; and the
provisions of this article shall govern in case of such destruction.
22. EMINENT DOMAIN
If all of the Premises, or such part thereof as shall substantially
interfere with Tenant's use and occupancy of the Premises, shall be taken for
any public or quasi-public purpose by any lawful power or authority by exercise
of the right of appropriation, condemnation or eminent domain, or sold to
prevent such taking, either party may terminate this Lease effective as of the
date possession is required to be surrendered to said authority. Tenant shall
not assert any claim against Landlord or the taking authority for any
compensation because of such taking, and Landlord shall be entitled to receive
the entire amount of any award without deduction for any estate or interest of
Tenant. If neither party terminates this Lease as permitted herein, Landlord
shall be entitled to the entire amount of the award without deduction for any
estate or interest of Tenant, Landlord shall restore the Premises to
substantially their same condition prior to such partial taking, and rent shall
be abated for the time and to the extent Tenant is prevented from using the
Premises on account of such taking and restoration. Nothing contained in this
paragraph shall be deemed to give Landlord any interest in any award made to
Tenant for the taking of personal property and fixtures belonging to Tenant or
for Tenants moving or relocation expenses.
23. DEFAULTS AND REMEDIES
(a) The occurrence of anyone or more of the following events shall
constitute a default hereunder by Tenant:
(i) The vacation or abandonment of the Premises by Tenant.
Abandonment is herein defined to include, but is not limited to, any absence by
Tenant from the Premises for five (5) business days or longer while in default
of any provision of this Lease.
(ii) The failure by Tenant to make any payment of rent where such
failure shall continue for a period of three (3) day after written notice
thereof from Landlord to Tenant; provided however, that any such notice shall be
in lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section 1161
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regarding unlawful detainer actions.
(iii) The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in Subparagraph 23(a)(i) or (ii)
above, where such failure shall continue for a period often (10)days after
written notice thereof from Landlord to Tenant. Any such notice shall be in lieu
of, and not in addition to, any notice required under California Code of Civil
Procedure Section 1161 regarding unlawful detainer actions. If the nature of
Tenant's default is such that more than ten (10) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant shall
commence such cure within said ten-day period and thereafter diligently
prosecute such cure to completion, which completion shall occur not later than
sixty (60) days from the date of such notice from Landlord.
(iv) (1) The making by Tenant of any general assignment for the
benefit of creditors (2) the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within thirty (30) days); (3) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty (30) days; or (4) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease where such seizure
is not discharged within thirty (30) days.
(b) In the event of any such default by Tenant, in addition to any
other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder.
In the event that Landlord shall elect to so terminate this Lease then Landlord
may recover from Tenant:
(i) the worth at the time of award of any unpaid rent which had
been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for all
detriment approximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom.
As used in Subparagraphs 23(b)(i) and (ii) above, the "worth at the time of
award" is computed by allowing interest at the maximum rate permitted by law. As
used in Subparagraph 23(b)(iii) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
(c) In the event of any such default Landlord shall also have the
right to continue this Lease in full force and effect, and this Lease shall
continue in full force and effect as long as Landlord does not terminate this
Lease, and Landlord shall have the right to collect rent as it becomes due.
(d) Landlord shall also have the right, with or without terminating
this Lease, to reenter the Premises and remove all persons and property from the
Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant. No reentry or taking
possession of the Premises by Landlord pursuant to this Paragraph 23(c) shall
be construed as an election to terminate this Lease unless a written notice of
such intention is given to Tenant or unless the termination thereof is decreed
by a court of competent jurisdiction.
(e) All rights, options and remedies of Landlord contained in this
Lease shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other. Landlord shall have the right to pursue anyone or
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all of such remedies or any other remedy or relief which may be provided by law,
whether or not stated in this Lease. No waiver of any default of Tenant
hereunder shall be implied from any acceptance by Landlord of any rent or other
payments due hereunder or any omission by Landlord to take any action on account
of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Landlord to or of any act by Tenant requiring Landlord's consent or
approval shall not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant.
24. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not voluntarily assign or encumber its interest in
this Lease or in the Premises, or sublease all or any part of the Premises, or
allow any other person or entity to occupy or use all or any part of the
Premises, without fIrst obtaining Landlord's prior written consent. Any
assignment, encumbrance or sublease without Landlord's prior written consent
shall be voidable, at Landlord's election, and shall constitute a default and at
the option of the Landlord shall result in a termination of this Lease. No
consent to assignment, encumbrance, or sublease shall constitute a further
waiver of the provisions of this paragraph. Tenant shall notify Landlord in
writing of Tenant's intent to sublease, encumber or assign this Lease and
Landlord shall, within thirty (30) days of receipt of such written notice, elect
one of the following: (i) consent to such proposed assignment or sublease or;
(ii) refuse such consent, which refusal shall be on reasonable grounds; or (iii)
elect to terminate this Lease.
(b) As a condition for granting its consent to any assignment,
encumbrance or sublease, thirty (30) days prior to any anticipated assignment or
sublease Tenant shall give Landlord written notice (the "Assignment Notice"),
which shall set forth the name, address and business of the proposed assignee or
sublessee, information (including references) concerning the character,
ownership and financial condition of the proposed assignee or sublessee, the
Assignment Date, any ownership or commercial relationship between Tenant and the
proposed assignee or sublessee, all in such detail as Landlord shall reasonably
require. If Landlord requests additional detail, the Assignment Notice shall not
be deemed to have been received until Landlord received such additional detail,
and Landlord may withhold consent to any assignment or sublease until such
additional detail is provided to it. Further, Landlord may require that the
sublessee or assignee remit directly to Landlord on a monthly basis, all monies
due to Tenant by said assignee or sublessee.
(c) The consent by Landlord to any assignment or subletting shall not
be construed as relieving Tenant or any assignee of this Lease or sublessee of
the Premises from obtaining the express written consent of Landlord to any
further assignment or subletting or as releasing Tenant or any assignee or
sublessee of Tenant from any liability or obligation hereunder whether or not
then accrued. In the event Landlord shall consent to an assignment or sublease,
Tenant shall pay Landlord as additional rent a reasonable attorneys' and
administration fee not to exceed $1,000 for costs incurred in connection with
evaluating the Assignment Notice. This section shall be fully applicable to all
further sales, hypothecation, transfers, assignments and subleases of any
portion of the by any successor or assignee of Tenant, or any sublessee of the
Premises.
(d) As used in this section, the subletting of substantially all of
the Premises for substantially all of the remaining term of this Lease shall be
deemed an assignment rather than a sublease. Notwithstanding the foregoing,
Landlord shall consent to the assignment, sale or transfer if the Assignment
Notice states that Tenant desires to assign the Lease to any entity into which
Tenant is merged, with which Tenant is consolidated or which acquires all of
substantially all of the assets of Tenant, provided that the assignee first
executes, acknowledges and delivers to Landlord an agreement whereby the
assignee agrees to be bound by all of the covenants and agreements in this Lease
which Tenant has agreed to keep, observe or perform, that the assignee agrees
that the provisions of this section shall be binding upon it as if it were the
original Tenant hereunder and that the assignee shall have a net worth
(determined in accordance with generally accepted accounting principles
consistently applied) immediately after such assignment which is at least equal
to the net worth (as so determined) of Tenant at the commencement of this Lease.
(e) Except as provided above, Landlord's consent to any sublease shall
not be unreasonably withheld. A condition to such consent shall be delivery by
Tenant to Landlord of a true copy of any such sublease. If for any proposed
assignment or sublease Tenant receives rent or other consideration, either
initially or over the term of the assignment or sublease, in excess of the rent
called for hereunder, or, in case of the sublease of a portion of the Premises,
in excess of such rent fairly allocable to such portion, after appropriate
adjustments to assure that all other payments
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called for hereunder are taken into account, Tenant shall pay to Landlord as
additional rent hereunder three-quarters (3/4) of the excess of each such
payment of rent or other consideration received by Tenant promptly after its
receipt. Landlord's waiver or consent to any assignment or subletting shall not
relieve Tenant from any obligation under this lease. The parties intend that the
preceding sentence shall not apply to any sublease rentals respecting a portion
of the Premises that during the entire term of this Lease was not occupied by
Tenant for its own use, but was always subleased by Tenant and/or kept vacant.
For the purposes of this section, the rent for each square foot of floor space
in the Premises shall be deemed equal.
25. SUBORDINATION
Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, and at the election of
Landlord or any mortgagee with a lien on the building or any ground lessor with
respect to the building, this Lease shall be subject and subordinate at all
times to:
(i) All ground leases or underlying leases which may now exist or
hereafter be executed affecting the building or the land upon which the building
is situated or both;
(ii) The lien of any mortgage or deed of trust which may now
exist or hereafter be executed in any amount for which the building, land,
ground leases, or underlying leases, or Landlord's interest or estate in any of
said items is specified as security .Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be subordinated any such leases
or underlying leases or any such liens to this Lease. In the event that any
ground lease or underlying lease terminates for any reason or any mortgage or
deed of trust is foreclosed or a conveyance in lieu of foreclosure is made for
any reason, Tenant shall, notwithstanding any subordination, attorney to and
become the Tenant of the successor in interest to Landlord, at the option of
such successor in interest. Tenant covenants and agrees to execute and deliver,
upon demand by Landlord and in the form requested by Landlord, any additional
documents evidencing the priority or subordination of this Lease with respect to
any such ground leases or underlying leases or in the lien of any such mortgage
or deed of trust. Tenant hereby irrevocably appoints Landlord as
attorney-in-fact of Tenant to execute, deliver and record any such document in
the name and on behalf of Tenant.
26. ESTOPPEL CERTIFICATE
(a) Within ten (10) days following any written request which Landlord
may make from time to time, Tenant shall execute and deliver to Landlord a
statement certifying: (i) the date of commencement of this Lease; (ii) the fact
that this Lease is unmodified and in full force and effect (or, if there have
been modifications); (iii) the date to which the rental and other sums payable
under this Lease have been paid; (iv) that there are no current defaults under
this Lease by either Landlord or Tenant except as specified in Tenant's
statement; and (v) such other matters requested by Landlord. Landlord and Tenant
intend that any statement delivered pursuant to this Article 26 may be relied
upon by any mortgage, beneficiary, purchaser, or prospective purchaser of the
building or any interest therein.
(b) Tenant's failure to deliver such statement within such time shall
be conclusive upon Tenant: (i) that this Lease is in full force and effect,
without modification except as may be represented by Landlord, (ii) that there
are no uncured defaults in Landlord's performance, and (iii) that not more than
one month's rental has been paid in advance.
27. SIGNAGE
Landlord shall provide for Tenant the opportunity to have a Tenant
identification sign at the entry to the Premises and the right to have Tenant's
name placed upon the building directory sign and a monument or building signage
at Landlord's election. Tenant shall have no other right to maintain a Tenant
identification sign in any other location in, on or about the Premises, the
building, or the Project. Tenant's identification sign shall be subject to
Landlord's written reasonable approval prior to installation. The cost of the
installation of the sign, and its maintenance and removal expense, shall be at
Tenant's sole expense. If Tenant fails to maintain its sign or if Tenant fails
to remove its sign upon termination of this Lease or restore the appearance of
the Premises to its condition prior to the placement of said sign, Landlord may
do so at Tenant's expense and Tenant's reimbursement to Landlord for such
amounts shall be deemed additional rent. All signs shall comply with rules and
regulations set forth by Landlord as may be modified
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from time to time.
28. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the "Rules and
Regulations," a copy of which is attached 1% hereto and marked EXHIBIT D and all
reasonable and nondiscriminatory modifications thereof and additions thereto
from time to time put into effect by Landlord. Landlord shall not be
responsible to Tenant for the violation or nonperformance by any other tenant
or occupant of the building of any of said Rules and Regulations.
29. CONFLICT OF LAW
This Lease shall be governed by and construed pursuant to the laws of
the State of California.
30. SUCCESSORS AND ASSIGNS
Except as otherwise provided in this Lease, all of the covenants,
conditions, and provisions of this Lease shall be bindIng upon and shall inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors, and assigns.
31. SURRENDER OF PREMISES
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies.
32. ATTORNEY'S FEES
(a) If Landlord should bring suit for possession of the Premises, for
the recovery of any sum due under this Lease, or because of the breach of any
provisions of this Lease, or for any other relief against Tenant hereunder, or
in the event of any other litigation between the parties with respect to this
Lease, then all costs and expenses, including reasonable attorney's fees,
incurred by the prevailing party therein shall be paid by the other party which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment. (b) If Landlord is named as a defendant in
any suit brought against Tenant in connection with or arising out of Tenant's
occupancy hereunder, Tenant shall pay to Landlord its costs and expenses
incurred in such suit, including reasonable attorney's fees.
33. PERFORMANCE BY TENANT
All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent. If Tenant shall fail to pay any sum
of money owed to any party other than Landlord, for which it is liable
hereunder, or if Tenant shall fail to perform any other act on its part to be
performed hereunder and such failure shall continue for ten (10) days after
notice thereof by Landlord, Landlord may, without waiving or releasing Tenant
from obligations of Tenant, but shall not be obligated to, make any such payment
or perform any such other act to be made or performed by Tenant. All sums so
paid by Landlord and all necessary incidental costs together with interest
thereon at the maximum rate permissible by law, from the date of such payment by
Landlord, shall be payable to Landlord on demand. Tenant covenants to pay any
such sums and Landlord shall have (in addition to any other right or remedy of
Landlord) all rights and remedies in the event of the nonpayment thereof by
Tenant as are set forth in Article 23 hereof.
34. MORTGAGEE PROTECTION
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Tenant, and shall offer such beneficiary or mortgagee a reasonable opportunity
to cure the default, including time to obtain
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possession of the Premises by power of sale or a judicial foreclosure, if such
should prove necessary to effect a cure.
35. DEFINITION OF LANDLORD
The term "Landlord", as used in this Lease, so far as covenants or
obligations on the part of the Landlord are concerned, shall be limited to mean
and include only the owners, at the time in question, of the fee title of the
Premises or the lessees under any ground lease, if any. In the event of any
transfer, assignment, or other conveyances, the then grantor shall be
automatically freed and relieved from and after the date of such transfer,
assignment, or conveyance of all liability as respects the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed. Without further agreement, the transferee of such
title shall be deemed to have assumed and agreed to observe and perform any
and all obligations of Landlord hereunder, during its ownership of the
Premises. Landlord may transfer its interest in the Premises without the consent
of Tenant and such transfer or subsequent transfer shall not be deemed a
violation on Landlord's part of any of the terms and conditions of this Lease.
36. WAIVER
The waiver by Landlord of any breach of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant, or condition herein contained,
nor shall any custom or practice which may grow up between the parties in the
administration of the terms hereof be deemed a waiver of or in any way affect
the right of Landlord to insist upon the performance by Tenant in strict
accordance with said terms. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant, or condition of this Lease, other than the failure of Tenant
to pay the particular rent so accepted, regardless of Landlord's knowledge of
such preceding breach at the time of acceptance of such rent.
37. IDENTIFICATION OF TENANT
If more than one person executes this Lease as Tenant:
(i) Each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions,
provisions, and agreements of this Lease to be kept, observed and performed by
Tenant, and
(ii) The term "Tenant" as used in this Lease shall mean and
include each of them jointly and severally. The act of or notice from, or notice
or refund to, or the signature of anyone or more of them, with respect to the
tenancy of the Lease, including, but not limited to any renewal, extension,
expiration, termination, or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refund or so signed.
38. PARKING
The use by Tenant, its employees and invitees, of the parking
facilities of the building shall be on the terms and conditions set forth in
Exhibit E attached hereto and by this reference incorporated herein and shall be
subject to such other agreement between Landlord and Tenant as may hereinafter
be established.
39. TERMS AND HEADINGS
The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. Words used in any gender include other genders.
The paragraph headings of this Lease are not a part of this Lease and shall have
i no effect upon the construction or interpretation of any part hereof.
40.FINANCIAL STATEMENTS
Tenant shall deliver to Landlord within ten (10) days after written
request therefor, the current financial statements of Tenant, and financial
statements for the two (2) years prior to the current financial statements year,
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including a balance sheet and profit and loss statement for the most recent
prior year, all prepared in accordance with generally accepted accounting
principles.
41. TIME
Time is of the essence with respect to the performance of every
provision of this Lease in which time or performance is a factor.
42. PRIOR AGREEMENT; AMENDMENTS
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provisions of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective successors
in interest.
43. SEPARABILITY
Any provision of this Lease which shall prove to be invalid, void, or
illegal in no way affects, impairs, or invalidates any other provision hereof,
and any such other provisions shall remain in full force and effect.
44. RECORDING
Neither Landlord nor Tenant shall record this Lease nor a short form
memorandum thereof without the consent of the other.
45. CONSENTS
Whenever the consent of either party is required hereunder such
consent shall not be unreasonably withheld.
46. LIMITATION OF LIABILITY
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach, or default hereunder by Landlord:
(a) The sole exclusive remedy shall be against the Landlord's interest
in the building;
(b) No partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) No service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the partnership);
(d) No partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(e) No judgment will be taken against any partner of Landlord;
(f) Any judgment taken against any partner of Landlord may be vacated
and set aside at any time nunc pro tunc;
(g) No writ of execution will ever be levied against the assets of
any partner of Landlord;
(h) These covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
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47. RIDERS
Clauses, plats, and riders, if any, signed by Landlord and Tenant and
affixed to this Lease are a part hereof.
48. EXHIBITS
All exhibits attached hereto are incorporated into this Lease.
49. MODIFICATION FOR LENDER
If, in connection with obtaining construction, interim, or
permanent financing for the building the lender shall request reasonable
modifications in this Lease as a condition to such financing, Tenant will not
unreasonably withhold, delay, or defer its consent thereto, provided that such
modifications do not increase the obligations of Tenant hereunder or materially
adversely affect the leasehold interest hereby created or Tenant's rights
hereunder.
50. OPTION TO EXTEND
(a) Provided that Tenant is not in default hereunder either at
the time of exercise or at the time the extended term commences, Tenant shall
have the option to extend the initial term of this Lease for one (1) additional
period of Three (3) years ("Option Period") on the same terms, covenants and
conditions provided herein, except that upon such renewal the monthly
installments of Annual Basic Rent due hereunder shall be determined at the time
notice to extend is given. Tenant shall exercise its option by giving Landlord
written notice ("Option Notice") no later than one hundred eighty (180) days
prior to the expiration of the initial term.
(b) The monthly installments of Annual Basic Rent for the Option
Period shall be determined as follows:
(i) Within fifteen (15) business days after Landlord's receipt of
the Option Notice, the parties shall attempt to agree on the monthly rent for
the Option Period in question based upon the then fair market rental value of
the Premises. If the parties agree on the monthly rent for the Option Period
within such fifteen (15) day period, they shall immediately execute an
amendment to this Lease stating the monthly rent for the Option Period.
(ii) The "then fair market rental value of the Premises" shall
mean the fair market monthly rental value of the premises as of the commencement
of the Option Period, taking into consideration the uses permitted under this
Lease, the quality, size, design and location of the Premises, and comparable
buildings located within a one (1) mile radius of the Premises. In no event
shall the then fair market monthly rental value of the Premises for the Option
Period be less than the monthly installments of Annual Basic Rent last payable
under the Lease.
(iii) Within seven (7) days after the expiration of the fifteen
(15) day period, each party, at its cost and by giving notice to the other
party, shall appoint a real estate appraiser or commercial leasing salesperson
("Appraiser") with at least five (5) years' full-time commercial appraisal or
leasing experience in the area in which the Premises are located to appraise and
set the then fair market monthly rent for the Premises for the Option Period.
(c) If Tenant objects to the monthly rent that has been determined,
Tenant shall have the right to rescind its exercise of the option to extend and
have this Lease expire at the end of the initial term, provided that Tenant pays
for all reasonable costs incurred by Landlord in connection with the appraisal
procedure. Tenant's election to allow this Lease to expire at the end of the
initial term must be exercised by delivering written notice of exercise to
Landlord within ten (10) days after the rent determination procedure has been
completed and Tenant has received notice of the monthly rent as determined by
appraisal. If Tenant does not so exercise its election to terminate this Lease
within the ten (10) day period, the initial term of this Lease shall be extended
as provided in this paragraph. Notwithstanding the foregoing, if Tenant elects
to so rescind exercise of its option to extend and, at the time of such election
there are less than one hundred eighty (180) days remaining on the initial term
of the Lease, then, the termination of this Lease shall not be effective until
one hundred eighty (180) days after Landlord's receipt of Tenant's notice of
rescission. During any period that the term of this Lease is so extended beyond
the original termination date, Tenant shall be required to
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pay the amount of monthly rent determined pursuant to the appraisal procedure.
(d) This option to extend and any rights granted to Tenant hereunder
shall be personal to Tenant and any of its affiliates and subsidiaries. No
rights granted to Tenant pursuant to this paragraph shall be in any way
applicable to subtenants or assignees of Tenant unless such subtenant or
assignee is an affiliate or subsidiary of Tenant.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lease as of
the date first written above.
LANDLORD ADDRESS:
- -------- --------
PRINCETON INVESTMENT GROUP LLC 5300 STEVENS CREEK BLVD, SUITE 450
SAN JOSE, CA 95129
\s\ Paul Ling
By ------------------------
Paul Ling
President
TENANT ADDRESS:
- ------ --------
XACCT
By /s/ Eric Gries
------------------------
Its President & CEO
------------------------
20
<PAGE>
EXHIBIT A
OUTLINE OF TENANT'S FLOOR PLAN
2900 LAKESIDE
SANTA CLARA, CA 95054
1
<PAGE>
EXHIBIT B
WORK LETTER AGREEMENT
This Work Letter Agreement is entered into as of the day of November 12,
1999, by and between Princeton Investment Group LLC, ("Landlord") and XACCT, A
DELAWARE CORPORATION ("TENANT").
RECITALS:
A. Concurrently with the execution of this Work Letter Agreement, Landlord
and Tenant have entered into a lease (the "Lease") covering certain premises
(the "Premises") more particularly described in Exhibit A attached to the Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Work Letter
Agreement may apply thereto) and in consideration of the mutual covenants
hereinafter contained, Landlord and Tenant hereby agree as follows:
1. COMPLETION SCHEDULE
Within ten (10) days after the execution of the Lease, Landlord shall
deliver to Tenant, for Tenant's review and approval, a schedule (the "Work
Schedule") setting forth a timetable for the planning and completion of the
installation of the Tenant Improvements to be construction in the Premises. The
Work Schedule shall set forth each of the various items of work to be done by or
approval to be given by Landlord and Tenant in connection with the completion of
the Tenant Improvements. Such schedule shall be submitted to Tenant for its
approval and, upon approval by both Landlord and Tenant, such schedule shall
become the basis for completing the Tenant Improvement work. If Tenant shall
fail to approve the Work Schedule, as it may be modified after discussions
between Landlord and Tenant, within five (5) working days after the date such
schedule is first received by Tenant, Landlord may, at its option, terminate the
Lease and all of its obligations thereunder.
2. TENANT IMPROVEMENTS
Reference herein to "Tenant Improvements" shall be a build out per the E2C
plans dated (DATE TO BE ENTERED HERE AFTER SPACE PLANNING IS FINALIZED), to
the extent that such construction and/or build out does not exceed the "Tenant
Improvement Allowance" provided in Section 6 of this Work Letter Agreement and
shall be subject to all provisions in Section 6 of this Work Letter Agreement.
3. TENANT IMPROVEMENT PLANS
Immediately after the execution of the Lease, Tenant agrees to meet with
Landlord's architect and/or space planner to prepare a space plan for the layout
of the Premises. Based upon such space plan, Landlord's architect shall prepare
final working drawings and specifications for the Tenant Improvements. Such
final working drawings and specifications may be referred to herein as the
"Tenant Improvement Plans."
4. FINAL PRICING AND DRAWING SCHEDULE
After the preparation of the space plan and after Tenant's written approval
thereof, in accordance with the Work Schedule, Landlord shall cause its
architect to prepare and submit to Tenant the final working drawings and
specifications referred to in Paragraph Three (3) hereof. Such working drawings
shall be approved by Landlord and Tenant in accordance with the Work Schedule
and shall thereafter be submitted to the appropriate governmental body for plan
checking and a building permit. Landlord, with Tenant's cooperation, shall cause
to be made any changes in the plans and specifications necessary to obtain the
building permit. Concurrent with the plan checking, Landlord shall have prepared
a final pricing for Tenant's approval, taking into account any modifications
which may be required to reflect changes in the plans and specifications
required by the city or county in which the Premises are located. After final
approval of the working drawings, no further changes to the Tenant Improvement
Plans may be made without the prior written approval from both Landlord and
Tenant, and then only after agreement by Tenant to pay any excess costs
resulting from such changes.
2
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5. CONSTRUCTION OF TENANT IMPROVEMENTS
After the Tenant Improvements Plans have been prepared and approved,
the final pricing has been approved and a building permit for the Tenant
Improvements has been issued, Landlord shall enter into a construction contract
with its contractor for the installation of the Tenant Improvements in
accordance with the Tenant Improvement Plans. Landlord shall supervise the
completion of such work and shall use its best efforts to secure completion of
the work in accordance with the Work Schedule. The cost of such work shall be
paid as provided in Paragraph Six (6) hereof.
6. PAYMENT OF COST OF THE TENANT IMPROVEMENTS
(a) Landlord hereby grants to Tenant a "Tenant Allowance" of Six
Dollars ($6.00) per rentable square foot of the Premises for a total not to
exceed Sixty-five Thousand Eight Hundred Twenty Dollars and no/100ths
($65,820.00). Tenant shall bear the sole responsibility for all improvement
expenses in excess of the allowance ("overage") provided, if any, except due to
any required ADA improvements. Such overage shall be paid to Landlord by Tenant
within Five (5) days of receipt of invoice from Landlord. Such Tenant Allowance
shall be used only for:
(i) Payment of the cost of preparing the space plan and the final
working drawings and specifications, including mechanical, electrical and
structural drawings and of all other aspects of the Tenant Improvement Plans.
The Tenant Allowance will not be used for the payment of extraordinary design
work not included within the scope of Landlord's building standard improvements
or for payments to any other consultants, designers, or architects other than
Landlord's architect and/or space planner;
(ii) The payment of permit and license fees relating to
construction of the Tenant Improvements;
(iii) Construction of the Tenant Improvements, including, without
limitation, the following:
(1) Installation within the Premises of all partitioning,
doors, floor coverings, finishes, ceilings, wall coverings and painting,
millwork, and similar items;
(2) All electrical wiring, lighting fixtures, outlets, and
switches, and other electrical work to be installed within the Premises;
(3) The furnishing and installation of all duct work,
terminal boxes, fuses and accessories required for the completion of the
heating, ventilation and air conditioning systems within the Premises, including
the cost of meter and key control for after-hour air conditioning;
(4) Any additional Tenant requirements including, but not
limited to odor control, special heating, ventilation and air conditioning,
noise or vibration control, or other special systems;
(5) All fire and life safety control systems such as fire
walls, sprinklers, halon, fire alarms, including piping, wiring, and accessories
installed within the Premises; and
(6) All plumbing, fixtures, pipes, and accessories to be
installed within the Premises.
b) The cost of each item shall be charged against the Tenant
Allowance. In the event that the cost of installing the Tenant Improvements, as
established by Landlord's final pricing schedule, shall exceed the Tenant
Allowance, or if any of the Tenant Improvements are not to be paid out of the
Tenant Allowance as provided in Paragraph Six (6) above, the excess shall be
paid by Tenant to Landlord prior to the commencement of construction of the
Tenant Improvements.
(c) In the event that, after the Tenant Improvement Plans have been
prepared and a price therefor established by Landlord, Tenant shall require any
changes or substitutions to the Tenant Improvement Plans, any additional costs
thereof shall be paid by Tenant to Landlord prior to the commencement of such
work.
3
<PAGE>
7. COMPLETION AND RENTAL COMMENCEMENT DATE
The commencement of the term of this Lease and Tenant's obligation for the
payment of rental under the Lease shall not commence until substantial
completion of construction of the Tenant Improvements. However, if there shall
be a delay in substantial completion of the Tenant Improvements as a result
of:
(i) Tenant's failure to approve any item or perform any other
obligation in accordance with and by the date specified in the Work Schedule;
(ii) Tenant's request for materials, finishes or installations
other than those readily available; or
(iii) Tenant's changes in the Tenant Improvement Plans after
their approval by Tenant;
then commencement of the term of the Lease and the rental commencement date
shall be accelerated by the number of days of such delay.
IN WITNESS WHEREOF, the parties have executed this Lease as of
the date first written above
LANDLORD ADDRESS:
- -------- --------
PRINCETON INVESTMENT GROUP LLC 5300 STEVENS CREEK BLVD, SUITE 450
SAN JOSE, CA 95129
By /s/ Paul Ling
------------------
Paul Ling
President
TENANT ADDRESS:
XACCT
By /s/ Eric Gries
------------------
Its President & CEO
------------------
<PAGE>
EXHIBIT C
STANDARDS FOR UTILITIES AND SERVICES
The following Standards for Utilities and Services are in effect.
Landlord reserves the right to adopt nondiscriminatory
modifications and additions hereto.
As long as Tenant is not in default under any of the terms, covenants,
conditions, provisions, or agreements of this Lease, Landlord shall:
(a) Provide non-attended automatic elevator facilities Monday
through Friday, except holidays, from 8:00 a.m. to 6:00 p.m.
(b) On Monday through Friday, except holidays, from 7:00 a.m.- 6:00
p.m. (and other times for a reasonable additional charge to be fixed by
Landlord), ventilate the Premises and furnish air conditioning or heating on
such days and hours, when in the judgment of Landlord it may be required for the
comfortable occupancy of the Premises. The air conditioning system achieves
maximum cooling when the window coverings are closed. Landlord shall not be
responsible for room temperatures if Tenant does not keep all window coverings
in the Premises closed whenever the system is in operation. Tenant agrees to
cooperate fully at all times with Landlord, and to abide by all regulations and
requirements which Landlord may prescribe for the proper function and protection
of the air conditioning system. Tenant agrees not to connect any apparatus,
device, conduit, or pipe to the building chilled and hot water air conditioning
supply lines. Tenant further agrees that neither Tenant nor its servants,
employees, agents, visitors, licensees, or contractors shall at any time enter
mechanical installations or facilities of the building or adjust, tamper with,
touch or otherwise in any manner affect said installations or facilities. The
cost of maintenance and service calls to adjust and regulate the air
conditioning system shall be charged to Tenant if the need for maintenance work
results from either Tenant's adjustment of room thermostats or Tenant's failure
to comply with its results from either Tenant's adjustment of room thermostats
or Tenant's failure to comply with its obligations under this section, including
keeping window coverings closed as needed. Such work shall be charged at hourly
rates equal to then current journeymen's wages for air conditioning mechanics.
(c) Landlord shall furnish to the Premises, during the usual
business hours on business days, electric current as required by the Building
standard office lighting and fractional horsepower office business machines in
the amount of approximately two and one-half (2.5) KWH watts per square foot.
Tenant agrees, should its electrical installation or electrical consumption be
in excess of the aforesaid quantity or extend beyond normal business hours, to
reimburse Landlord monthly for the measured consumption at the average cost per
kilowatt hour charged to the building during the period. If a separate meter is
not installed at Tenant's cost, such excess costs will be established by an
estimate agreed upon by Landlord and Tenant, and if the parties fail to agree,
as established by an independent licensed engineer. Said estimates to be
reviewed and adjusted quarterly. Tenant agrees not to use any apparatus or
device in, or upon, or about the Premises which may in any way increase the
amount of such services usually furnished or supplied to said Premises, and
Tenant further agrees not to connect any apparatus or device with wire,
conduits, pipes, or other means by which such services are supplied, for the
purpose of using additional or unusual amounts of such services without written
consent of Landlord. Should Tenant use the same to excess, the refusal on the
part of Tenant to pay upon demand of Landlord the amount established by Landlord
for such excess charge shall constitute a breach of the obligation to pay rent
under this Lease and shall entitle Landlord to the rights therein granted for
such breach. At all times Tenant's use of electric current shall never exceed
the capacity of the feeders to the building or the risers or wiring installation
and Tenant shall not install or use or permit the installation or use of an
excessive amount of computers or electronic data processing equipment in the
premises, without the prior written consent of Landlord.
(d) Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses, or consumes water for any purposes
in addition to ordinary drinking and lavatory purposes of which fact Tenant
constitutes Landlord to be the sole judge, Landlord may install a water meter
and thereby measure Tenant's water consumption for all purposes. Tenant shall
pay Landlord for the cost of the meter and the cost of the installation thereof
and throughout the duration of Tenant's occupancy, Tenant shall keep said meter
and installation equipment in good working order and repair at Tenant's own cost
and expense, in default of which Landlord may cause such meter and equipment
replaced or repaired and collect the cost thereof from Tenant. Tenant agrees to
pay for water consumed, as shown on said meter, as and when bills are rendered,
and on default in making such payment, Landlord may pay such
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<PAGE>
charges and collect the same from Tenant. Any such costs or expenses incurred,
or payments made by Landlord for any of the reasons or purposes hereinabove
stated shall be deemed to be additional rent payable by Tenant and collectible
by Landlord as such.
(e) Provide janitor service to the Premises, provided the same are
kept reasonably in order by Tenant, and if to be kept clean by Tenant, no one
other than persons approved by Landlord shall be permitted to enter the Premises
for such purposes. If the Premises are not used exclusively as offices, they
shall be kept clean and in order by Tenant, at Tenant's expense, and to the
satisfaction of Landlord, and by persons approved by Landlord. Tenant shall pay
to Landlord the cost of removal of any of Tenant's refuse and rubbish, to the
extent that the same exceeds the refuse and rubbish usually attendant upon the
use of the Premises as offices.
Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning, and electric systems, when necessary, by reason
of accident or emergency or for repairs, alterations or improvements, in the
judgment of Landlord desirable or necessary to be made, until said repairs,
alterations or improvements shall have been completed, and shall further have no
responsibility or liability for failure to supply elevator facilities, plumbing,
ventilating, air conditioning, or electric service, when prevented from so doing
by strike or accident or by any cause beyond Landlord's reasonable control, or
by laws, rules, orders, ordinances, directions, regulations, or requirements of
any federal, state, county, or municipal authority or failure of gas, oil, or
other suitable fuel supply or inability by exercise of reasonable diligence to
obtain gas, oil, or other suitable fuel. It is expressly understood and agreed
that any covenants on Landlord's part to furnish any service pursuant to any of
the terms, covenants, conditions, provisions, or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, shall not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever beyond Landlord's control.
2
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
1. Except as specifically provided in the Lease to which these rules and
regulations are attached, no sign, placard, picture, advertisement,
name, or notice shall be installed or displayed on any part of the
outside or inside of the building without the prior written consent of
Landlord. Landlord shall have the right to remove, at Tenant's expense
and without notice, any sign installed or displayed in violation of
this rule. All approved signs or lettering on doors and walls shall be
printed, painted, affixed, or inscribed at the expense of Tenant by a
person approved by Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades,
screens, or hanging plants or other similar objects attached to or
used in connection with any window or door of the Premises, or placed
on any window sill, which is visible from the exterior of the
Premises, Tenant shall immediately discontinue such use. Tenant shall
not place anything against or near glass partitions, doors, or windows
which may appear unsightly from outside the Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators, or stairways of the building. The
halls, passages, exits, entrances, shopping malls, elevators, and
stairways are not open to the general public, but are open, subject to
reasonable regulation, to Tenant's business invitee. Landlord shall in
all cases retain the right to control and prevent access thereto of
all persons whose presence in the judgment of Landlord would be
prejudicial to the safety, character, reputation, and interest of the
building and its tenants; provided that nothing herein contained shall
be construed to prevent such access to persons with whom any tenant
normally deals in the ordinary course of its business, unless such
persons are engaged in illegal or unlawful activities. No tenant and
no employee or invitee of any tenant shall go upon the roof of the
building.
4. The directory of the building will be provided exclusively for the
display of the name and location of tenants only, and Landlord
reserves the right to exclude any other names therefrom.
5. All cleaning and janitorial services for the building and the
Premises shall be provided exclusively through Landlord, and except
with the written consent of Landlord, no person or persons other than
those approved by Landlord shall be employed by Tenant or permitted to
enter the building for the purpose of cleaning the same. Tenant shall
not cause any unnecessary labor by carelessness or indifference to the
good order and cleanliness of the Premises.
6. Landlord will furnish Tenant, free of charge, with two keys to each
door lock in the Premises. Landlord may make a reasonable charge for
any additional keys. Tenant shall not make or have additional keys,
and Tenant shall not alter any lock or install a new additional lock
or bolt on any door of its Premises. Tenant, upon the termination of
its tenancy, shall deliver to Landlord the keys of all doors which
have been furnished to Tenant, and in the event of loss of any keys so
furnished, shall pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm, or
similar services, it shall first obtain, and comply with, Landlord's
instructions in their installation.
8. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to
carry and which is allowed by law. Landlord shall have the right to
prescribe the weight, size, and position of all equipment, materials,
furniture, or other property brought into the building. Heavy objects
shall, if considered necessary by Landlord, stand on such platforms as
determined by Landlord to be necessary to properly distribute the
weight, which platforms shall be provided at Tenant's expense.
Business machines and mechanical equipment belonging to Tenant, which
cause noise or vibration that may be transmitted to the structure of
the building or to any space therein to such a degree as to be
objectionable to Landlord or to any tenants in the building, shall be
placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to eliminate noise or
vibration. The
EXHIBIT D
<PAGE>
persons employed to move such equipment in or out of the building must
be acceptable to Landlord. Landlord will not be responsible for loss
of, or damage to, any such equipment or other property from any cause,
and all damage done to the building by maintaining or moving such
equipment or other property shall be repaired at the expense of
Tenant.
9. Tenant shall not use or keep in the Premises any kerosene,
gasoline, inflammable, or combustible fluid or material other than
those limited quantities necessary for the operation of maintenance of
office equipment. Tenant shall not use or permit to be used in the
Premises any foul or noxious gas or substance, or permit or allow the
Premises to be occupied or used in a manner offensive or objectionable
to Landlord or other occupants of the building by reason of noise,
odors, or vibrations, nor shall Tenant bring into or keep in or about
the Premises any birds or animals.
10. Tenant shall not use any method of heating or air conditioning
other than that supplied by Landlord.
11. Tenant shall not waste electricity, water, or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective
operation of the building's heating and air conditioning and to comply
with any governmental energy-saving rules, laws, or regulations
of which Tenant has actual notice.
12. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of
the building.
13. Landlord reserves the right to exclude from the building between
the hours of 6:30 p.m. and 6:30 a.m. the following day, or such other
hours as may be established from time to time by Landlord, and on
Sundays and legal holidays, any person unless that person is known to
the person or employee in charge of the building and has a pass or is
properly identified. Tenant shall be responsible for all persons for
whom it requests passes and shall be liable to Landlord for all acts
of such persons. Landlord shall not be liable for damages for any
error with regard to the admission to or exclusion from the building
of any person.
14. The toilet rooms, toilets, urinals, wash bowls, and other
apparatus shall not be used for any purpose other than that for which
they were constructed and no foreign substance of any kind whatsoever
shall be thrown therein. The expense of any breakage, stoppage, or
damage resulting from the violation of this rule shall be borne by the
tenant who, or whose employees or invitees, shall have caused it.
15. Tenant shall not sell, or permit the sale at retail, of
newspapers, magazines, periodicals, theater tickets, or any other
goods or merchandise to the general public in or on the Premises.
Tenant shall not make any room-to-room solicitation of business from
other tenants in the building. Tenant shall not use the Premises for
any business or activity other than that specifically provided for in
Tenant's Lease.
16. Tenant shall not install any radio or television antenna,
loudspeaker, or other devices on the roof or exterior walls of the
building. Tenant shall not interfere with radio or television
broadcasting or reception from or in the building or elsewhere.
17. Tenant shall not mark, drive nails, screws, or drill into the
partitions, woodwork, or plaster or in any way deface the Premises or
any part thereof, except in accordance with the provisions of the
Lease pertaining to alterations. Landlord reserves the right to direct
electricians as to where and how telephone and telegraph wires are to
be introduced to the Premises. Tenant shall not cut or bore holes for
wires. Tenant shall not affix any floor covering to the floor of the
Premises in any manner except as approved by Landlord. Tenant shall
repair any damage resulting from noncompliance with this rule.
18. Tenant shall not install, maintain, or operate upon the Premises
any vending machines without the written consent of Landlord.
19. Canvassing, soliciting, and distribution of handbills or any other
written material, and peddling in the building are prohibited and
Tenant shall cooperate to prevent such activities.
EXHIBIT D
<PAGE>
20. Landlord reserves the right to exclude or expel from the building
any person who, in Landlord's judgement, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the
Rules or Regulations of the building.
21. Tenant shall store all its trash and garbage within its Premises
or in other facilities provided by Landlord. Tenant shall not place in
any trash box or receptacle any material which cannot be disposed of
in the ordinary and customary manner of trash and garbage disposal.
All garbage and refuse disposal shall be made in accordance with
directions issued from time to time by Landlord.
22. The Premises shall not be used for the storage of merchandise held
for sale to the general public, or for lodging or for manufacturing of
any kind, not shall the Premises be used for any improper, immoral, or
objectionable purpose. No cooking shall be done or permitted on the
Premises without Landlord's consent, except that the use by Tenant of
Underwriter' Laboratory approved equipment for brewing coffee, tea,
hot chocolate, and similar beverages or use of microwave ovens for
employee uses shall be permitted, provided such equipment and use is
in accordance with all applicable federal, state, county, and city
laws, codes, ordinances, rules, and regulations.
23. Tenant shall not use in any space or in the public halls of the
building any hand truck except those equipped with rubber tires and
side guards or such other material-handling equipment as Landlord may
approve. Tenant shall not bring any other vehicles of any kind into
the building.
24. Without the written consent of Landlord, Tenant shall not use the
name of the building in connections with or in promoting or
advertising the business of Tenant except as Tenant's address.
25. Tenant shall comply with all safety, fire protection, and evacuations
procedures and regulations established by Landlord or any governmental
agency.
26. Tenant assumes any and all responsibility for protecting its
Premises from theft, robbery, and pilferage, which includes keeping
doors locked and other means of entry to the Premises closed.
27. Tenant's requirements will be attended to only upon appropriate
application to the building management office by an authorized
individual. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special
instructions from Landlord, and no employee of Landlord will admit any
person (Tenant or otherwise) to any office without specific
instructions from Landlord.
28. Landlord may waive anyone or more of these Rules and Regulations
for the benefit of Tenant or any other tenant, but no such waiver by
Landlord shall be construed as a waiver of such Rules and Regulations
in favor of Tenant or any other tenant, nor prevent Landlord from
thereafter enforcing any such Rules and Regulations against any or all
of the tenants of the building.
29. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the
terms, covenants, agreements, and conditions of Tenant's lease of its
Premises in the building.
30. Landlord reserves the right to make such other and reasonable
Rules and Regulations as, in its judgment, may from time to time be
needed for safety and security, for care and cleanliness of the
building and for the preservation of good order therein. Tenant agrees
to abide by all such Rules and Regulations hereinabove stated and any
additional rules and regulations which are adopted.
31. Tenant shall be responsible for the observance of all of the
foregoing rules by Tenant's employees, agents, clients, customers,
invitees, and guests.
EXHIBIT D
<PAGE>
EXHIBIT E
PARKING RULES AND REGULATIONS
The following rules and regulations shall govern use of the parking facilities
which are appurtenant to the building.
1. Tenant shall not park or permit the parking of any vehicle under its
control in any parking designated by Landlord as areas for parking by visitors
to the building. Tenant shall not leave vehicles in the parking areas overnight
nor park any vehicles in the parking areas other than automobiles, motorcycles,
motor driven or non-motor driven bicycles or four-wheeled trucks.
2. Parking stickers or any other device or form of identification
supplied by Landlord as a condition of use of the parking facilities shall
remain the property of Landlord. Such parking identification device must be
displayed as requested and may not be mutilated in any manner. The serial number
of the parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.
3. No overnight or extended term storage of vehicles shall be permitted.
4. Vehicles must be parked entirely within the painted stall lines of a
single parking stall.
5. All directional signs and arrows must be observed.
6. The speed limit within all parking areas shall be 5 miles per hour.
7. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posted;
(d) on ramps;
(e) in cross hatched areas; and
(f) in such other areas as may be designated by Landlord.
8. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicle is assumed by the parker.
9. Loss or theft of parking identification devices from automobiles
must be reported immediately, and a lost or stolen report must be filed by
the customer at that time. Landlord has the right to exclude any car from
the parking facilities that does not have an identification device.
10. Any parking identification devices found by the purchaser must be
reported immediately to avoid confusion.
11. Lost or stolen devices found by the purchaser must be reported
immediately to avoid confusion.
12. Washing, waxing, cleaning, or servicing of any vehicle in any area
not specifically reserved for such purpose is prohibited.
13. Landlord reserves the right to modify and/or adopt such other
reasonable and non-discriminatory rules and regulations for the parking
facilities as it deems necessary for the operation of the parking facilities.
Landlord may refuse to permit any person who violates these rules to park in the
parking facilities, and any violation of the rules shall subject the car to
removal.
14. Landlord shall grant to Tenant forty-two (42) non-reserved parking
stalls in the parking lot adjacent to the office building. There shall be no
charge for said non-reserved parking stalls. In the event that the ratio of
parking stalls to rentable area in the building decreases, Landlord shall have
the right, at that time, to reduce Tenant's parking allotment.
EXHIBIT E
<PAGE>
ADDENDUM
to
2900 Lakeside
OFFICE BUILDING LEASE
Dated November 12, 1999
1. Exhibit B, Work Letter Agreement is hereby modified as follows:
a. Tenant shall be permitted to select and use the architect, contractors
and/or space planner of its choice to design and construct Tenant's
improvements.
b. Tenant shall be entitled to payment of $6.00 per square foot in the same
manner as if Tenant were to use Landlord's architect, contractor and/or
space planner.
c. Tenant shall deliver to Landlord, for Landlord's review and approval, a
work schedule within 5 business days of execution of the Lease.
2. The Lease commencement date and obligation of Tenant to commence the
payment of rent shall begin on January 16, 2000 whether or not the
Premises are ready for occupancy.
3. In the event a tenant vacates any space in the Building during the term
of the Lease, Landlord shall first offer such space for lease by Tenant
prior to making such space available for lease by any third party on
the same terms and conditions.
Executed as of the date first written above.
LANDLORD ADDRESS:
-------- --------
Princeton Investment Group LLC 5300 Stevens Creek Blvd, Suite 450
San Jose, CA 95129
By \s\Paul Ling
-----------------
Paul Ling
President
TENANT ADDRESS:
-------- --------
XACCT Technologies, Inc. 2855 Kifer Road, Suite 105
Santa Clara, CA 95051
By \s\Eric Gries
-----------------
Eric Gries
President & CEO
<PAGE>
EXHIBIT 10.13
2900 LAKESIDE, SUITE 201
OFFICE BUILDING LEASE
BY AND BETWEEN
PRINCETON INVESTMENT GROUP LLC
("LANDLORD")
AND
XACCT TECHNOLOGIES, INC.
A DELAWARE CORPORATION
("TENANT")
January 28, 2000
02/02/00
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
1. TERM 1
2. POSSESSION 1
3. BASIC RENT 1
4. RENTAL ADJUSTMENT 2
5. SECURITY DEPOSIT 3
6. USE 4
7. NOTICES 5
8. BROKERS 5
9. HOLDING OVER 5
10. TAXES ON TENANT'S PROPERTY 6
11. CONDITION OF PREMISES 6
12. ALTERATIONS 6
13. REPAIRS 7
14. LIENS 7
15. ENTRY BY LANDLORD 7
16. UTILITIES AND SERVICES 8
17. BANKRUPTCY 8
18. INDEMNIFICATION 8
19. DAMAGE TO TENANT'S PROPERTY 9
20. TENANT'S INSURANCE 9
21. DAMAGE OR DESTRUCTION 10
22. EMINENT DOMAIN 11
23. DEFAULTS AND REMEDIES 11
24. ASSIGNMENT AND SUBLETTING 12
25. SUBORDINATION 13
26. ESTOPPEL CERTIFICATE 13
27. SIGNAGE 14
28. RULES AND REGULATIONS 14
29. CONFLICT OF LAW 14
30. SUCCESSORS AND ASSIGNS 14
31. SURRENDER OF PREMISES 14
32. ATTORNEYS' FEES 14
33. PERFORMANCE BY TENANT 15
34 MORTGAGEE PROTECTION 15
35. DEFINITION OF LANDLORD 15
36. WAIVER 15
37. IDENTIFICATION OF TENANT 15
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE PAGE
- ------- ----
38. PARKING 16
39. TERMS AND HEADINGS 16
40. FINANCIAL STATEMENTS 16
41. TIME 16
42. PRIOR AGREEMENT; AMENDMENTS 16
43. SEPARABILITY 16
44. RECORDING 16
45. CONSENTS 16
46. LIMITATION OF LIABILITY 17
47. RIDERS 17
48 EXHIBITS 17
49. MODIFICATION FOR LENDER 17
50. OPTION TO EXTEND 17
<PAGE>
TABLE OF EXHIBITS
-----------------
Exhibit A The Premises
Exhibit B Work Letter Agreement
Exhibit C Standards for Utilities and Services
Exhibit D Rules and Regulations
Exhibit E Parking Rules and Regulations
<PAGE>
OFFICE BUILDING LEASE
This LEASE is made as of FEBRUARY 2,2000 by and between PRINCETON
INVESTMENT GROUP LLC ("Landlord"), and XACCT TECHNOLOGIES, INC., A DELAWARE
CORPORATION, ("Tenant").
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
SUITE NUMBER 201 (the "Premises") outlined on the floor plan attached hereto and
marked Exhibit A, the Premises being agreed, for the purposes of this Lease, to
have an area of approximately 5,212 RENTABLE SQUARE FEET and being situated on
the SECOND FLOOR of that certain office building located at 2900 Lakeside Drive,
Santa Clara, California. 95054 (the "Building").
The parties hereto agree that said letting and hiring is upon and subject
to the terms, covenants and conditions here set forth. Tenant covenants, as a
material part of the consideration for this Lease to keep and perform each and
all of saId terms, covenants and conditions for which Tenant is liable and that
this Lease is made upon the condition of such performance.
Prior to the commencing of the term of this Lease the Premises shall be
improved by the Tenant Improvements described in the Work Letter marked EXHIBIT
B attached hereto.
1. TERM
The term of this Lease shall be for FIFTY SEVEN (57) MONTHS commencing
APRIL 11, 2000, and ending on JANUARY 15TH, 2005, unless such term shall be
sooner terminated as hereinafter provided. Reference in this Lease to a "Lease
Year" shall mean each successive twelve-month period commencing with the
commencement date.
2. POSSESSION
Tenant agrees that, if Landlord is unable to deliver possession of the
Premises to Tenant on the scheduled commencement of the term of this Lease, this
Lease shall not be void or voidable, nor shall Landlord be liable to Tenant for
any loss or damage resulting therefrom, but in such event the term of this Lease
shall not commence until Landlord tenders possession of the Premises to Tenant
with the Tenant Improvements substantially completed. If Landlord completes
construction of the Tenant Improvements prior to the date scheduled in the Work
Letter. Landlord shall deliver possession of the Premises to Tenant upon such
completion and the term of this Lease shall thereupon commence. Tenant shall
have the right to access the Premises from APRIL 1, 2000 until the Commencement
Date for the purpose of insta11ing furniture, trade fixtures and equipment, and
data and communication systems. Tenant shall not conduct its business from the
Premises during this early access period. Such early occupancy shall be subject
to all of the provisions of this Lease, excluding the commencement of Rent. The
preceding notwithstanding, Tenant may terminate Lease if Landlord is unable to
deliver possession of the Premises on or before JUNE 30, 2000.
3. BASIC RENT
(a) Tenant agrees to pay Landlord Basic Rent for the Premises (subject to
adjustments as hereinafter provided) as follows:
MONTHS OF TERM MONTHLY BASIC RENT
-------------- ------------------
01-12 $14,333 PER MONTH
13-24 $14,854 PER MONTH
25-36 $15,375 PER MONTH
37-48 $15,897 PER MONTH
49-60 $16,418 PER MONTH
The Basic Rent shall be paid monthly, in advance on the first (1st) day of
each calendar month during the term, except that the first month's rent shall be
paid on execution hereof. If Tenant's obligation to pay rent commences or ends
on a day other than the first day of a calendar month, then the rental for such
period shall be prorated in the proportion that the number of days this Lease is
in effect during such period bears to number of days in such month. In addition
to the Basic Rent, Tenant agrees to pay as additional rental the amount of
rental adjustments and other charges required by this Lease.
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<PAGE>
All rental shall be paid to Landlord, without prior demand and without any
deduction or offset, in lawful money of the United States of America, at the
address of Landlord designated on the signature page of this Lease or to such
other person or at such other place as Landlord may from time to time designate
in writing.
(b) In the event Tenant fails to pay any installment of rent when due or
in the event Tenant fails to make any other payment of which Tenant is obligated
under this Lease when due, then Tenant shall pay to Landlord a LATE CHARGE EQUAL
TO TEN PERCENT (10%) MONTHLY of the amount due to compensate Landlord for the
extra costs incurred as a result of such late payment. If any rent or other
payment remains delinquent for a period in excess of 14 days then, in addition
to such late charge, Tenant shall pay to Landlord interest on such rent or other
payment at the maximum rate permitted by law from the date such rent or other
payment became due until paid.
4. RENTAL ADJUSTMENT
(a) For the purpose of this Article 4, the following terms are defined as
follows:
(i) TENANT'S PERCENTAGE. That portion of the Building occupied by
Tenant divided by the total square footage of the Building, which result is the
following 14.41%.
(ii) DIRECT EXPENSES BASE. The amount of the annual Direct Expenses
which Landlord has included in Basic Rent, which amount is the Direct Expenses
incurred for calendar year 2000 actual Direct Expenses.
(iii) DIRECT EXPENSES. The term "Direct Expenses" shall include:
(A) All real and personal property taxes and assessments imposed
by any governmental authority or agency on the Building and the land on which
the Building is located (including a pro rata portion of any taxes levied on any
common areas); any assessments levied in lieu of taxes; any non-progressive tax
on or measured by gross rentals received from the rental of space in the
Building; and any other costs levied or assessed by, or at the direction of, any
federal, State, or local government authority in connection with the use or
occupancy of the Premises or the parking facilities serving the Premises; any
tax on this transaction or any document to which Tenant is a party creating or
transferring an interest in the Premises, and any expenses, including cost of
attorneys or experts, reasonably incurred by Landlord in seeking reduction by
the taxing authority of the above-referenced taxes, less tax refunds obtained as
a result of an application for review thereof; but shall not include any net
income, franchise, capital stock, estate or inheritance taxes.
(B) Operating costs consisting of costs incurred by Landlord in
maintaining and operating the Building, exclusive of costs required to be
capitalized for federal income tax purposes, and including (without limiting the
generality of the foregoing) the following: costs of utilities, supplies and
insurance, costs of services of independent contractors, managers and other
suppliers, the fair rental value of the Building office, costs of compensation
(including employment taxes and fringe benefits) of all persons who perform
regular and recurring duties connected with the management, operation,
maintenance, and repair of the Building, its equipment, parking facilities and
the common areas, including, without limitation, engineers, janitors, foremen,
floor waxers, window washers, watchmen and gardeners, but excluding persons
performing services not uniformly available to or performed for substantially
all Building tenants; a reasonable management fee; cost of maintaining,
repairing and replacing landscaping, sprinkler systems, concrete walkways, paved
parking areas, signs, and site lighting.
(C) Amortization of such capital improvements as Landlord may
have installed: (a) for the purpose of reducing operating costs, (b) to comply
with governmental roles and regulations promulgated after completion of the
Building, and (c) for the purpose of replacing existing capital items and
improvements, provided that such cost together with interest at the maximum rate
allowed by law shall be amortized over such reasonable period as Landlord shall
determine, and only the monthly amortized cost shall be included in Direct
Expenses.
(b) If Tenant's Percentage of the Direct Expenses paid or incurred by
Landlord for any calendar year after the first calendar year exceeds the Direct
Expenses Base included in Tenant's rent, then Tenant shall pay such excess as
additional rent. Accordingly, for each year after the first calendar year, or
portion thereof, Tenant shall pay Tenant's Percentage of Landlord's estimate of
the amount by which Direct Expenses for that year shall exceed the Direct
Expenses Base ("Landlord Estimate"). This estimated amount shall be divided into
twelve equal monthly installments. Tenant shall
2
<PAGE>
pay to Landlord, concurrently with the regular monthly rent payment next due
following the receipt of such statement, an amount equal to one monthly
installment multiplied by the number of months from January in the calendar
year in which said statement is submitted to the month of such payment, both
months inclusive. Subsequent installments shall be payable concurrently with the
regular monthly rent payments for the balance of that calendar year and shall
continue until the next calendar year's statement is rendered. As soon as
possible after the end of each calendar year, Landlord shall provide Tenant with
a statement showing the amount of Tenant's Percentage of Direct Expenses, the
amount of Landlord's Estimate actually paid by Tenant and the amount of the
Direct Expenses Base. Thereafter, Landlord shall reconcile the above amounts and
shall either bill Tenant for the balance due (payable on demand by Landlord) or
credit any overpayment by Tenant towards the next monthly installment of
Landlord's Estimate falling due, as the case may be. For purposes of making
these calculations, in no event shall Tenant's Percentage of the Direct Expenses
be deemed to be less than the Direct Expenses Base.
(c) Even though the term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant's Percentage of Direct Expenses
for the year in which this Lease terminates, Tenant shall immediately pay any
increase due over the estimated expenses paid and, conversely, any overpayment
made in the event said expenses decrease shall be rebated by Landlord to Tenant.
5. SECURITY DEPOSIT AND ADDITIONAL DEPOSIT (LETTER OF CREDIT)
(a) Tenant shall deposit with Landlord, upon execution of this Lease, the
sum of SIXTEEN THOUSAND FOUR HUNDRED EIGHTEEN DOLLARS AND NO/1OOTHS ($16,418).
Said sum shall be held by Landlord as security for the faithful performance by
Tenant of all of Tenant's obligations hereunder. If Tenant defaults with respect
to any provision of this Lease, including but not limited to the provisions
relating to the payment of rent, Landlord may (but shall not be required to)
use, apply or retain all or any part of this security deposit for the payment of
any rent or any other sum in default, or for the payment of any other amount
which Landlord may spend or become obligated to spend by reason of Tenant's
default or to compensate Landlord for any other loss or damage which Landlord
may suffer by reason of Tenant's default. If any portion of the deposit is so
used or applied, Tenant shall, upon demand, deposit cash with Landlord in an
amount sufficient to restore the security deposit to its original amount.
Tenant's failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this security deposit separate from its general
funds. If Tenant shall fully and faithfully perform all of its obligations under
this Lease, the security deposit or any balance thereof shall be returned to
Tenant (or, at Landlord's option, to the last assignee of Tenant's interest
hereunder) at the expiration of the Lease term, provided that Landlord may
retain the security deposit until such time as any amount due from Tenant in
accordance with Article 4 hereof has been determined and paid in full.
(b) Letter of Credit in the amount of $50,000.00
1. Delivery of Letter of Credit. Tenant shall on execution of this
Lease, deliver to Landlord and cause to be in effect during the
Lease Term an unconditional, irrevocable letter of credit ("LOC")
in the amount of $50,000.00. The LOC shall be in a form
acceptable to Landlord and shall be issued by an LOC bank
selected by Tenant and acceptable to Landlord. An LOC bank is a
bank that accepts deposits, maintains account, has a local office
that will negotiate a letter of credit and the deposits of which
are insured by the Federal Deposit Insurance Corporation. Tenant
shall pay all expenses, points, or fees incurred by Tenant in
obtaining the LOC. The LOC shall not be mortgaged, assigned or
encumbered in any manner whatsoever by Tenant without the prior
written consent of Landlord. Tenant acknowledges that Landlord
has the right to transfer or mortgage its interest in the
Project, the Building and in this Lease. And Tenant agrees that
in the event of any such transfer or mortgage Landlord shall have
the right to transfer or assign the LOC and/or the LOC Security
Deposit (as defined below) to the transferee or mortgagee, and in
the event of such transfer, Tenant shall look solely to such
transferee or mortgagee for the return of the LOC.
2. Replacement of Letter of Credit: Tenant may, from time to time,
replace any existing LOC with a new LOC if the new LOC (a)
becomes effective at least thirty (30) days before expiration of
the LOC that it replaces, (b) is in the required LOC amount;
(c) is issued by an LOC bank acceptable to Landlord; and (d)
otherwise complies with the requirements of the Paragraph 5(b)
3
<PAGE>
3. Landlord's Right to Draw on Letter of Credit. Landlord shall
hold the LOC as additional security for the performance of
Tenant's obligations under this Lease. If, after notice and
failure to cure within any applicable period provided in this
Lease, Tenant defaults on any provision of this Lease, Landlord
may without prejudice to any other remedy it has, draw on that
portion of the LOC necessary to (a) pay Rent or other sum in
default; (b) payor reimburse Landlord for any amount that
Landlord may spend or become obligated to spend in exercising
Landlord's right under Paragraph 23 (Defaults and Remedies);
and/or (c) compensate Landlord for any expense, loss or damage
that Landlord may suffer because of Tenant's default. If Tenant
fails to renew or replace the LOC at least thirty (30) days
before its expiration, Landlord may, without prejudice to any
other remedy it has, draw on the entire amount of the LOC.
4. LOC Security Deposit. Any amount of the LOC that is drawn on by
Landlord but not applied by Landlord shall be held by Landlord as
security deposit (the LOC Security Deposit") in accordance with
Paragraph 5 of this Lease.
5. Restoration of Letter of Credit and LOC Security Deposit. If
Landlord draws on any portion of the LOC and/or applies all or
any portion of such draw, Tenant shall, within five (5) business
days after demand by Landlord, either (a) deposit cash with
Landlord in an amount that, when added to the amount remaining
under the LOC and the amount of any LOC Security Deposit, shall
equal the LOC Amount then required under this Paragraph 5(b);,or
(b) reinstate the LOC to the full LOC Amount.
6. USE
(a) Tenant shall use the Premises for GENERAL OFFICES, INCLUDING SOFTWARE
ENGINEERING DEVELOPMENT AND SUPPORT, MARKETING, AND shall not use or permit the
Premises to be used for any other purpose without the prior written consent of
Landlord. Nothing contained herein shall be deemed to give Tenant any exclusive
right to such use in the Building. Tenant shall not use or occupy the Premises
in violation of law or the certificate of occupancy issued for the Building, and
shall, upon written notice from Landlord, discontinue any use of the Premises
which is declared by any governmental authority having jurisdiction to be a
violation of law or of the certificate of occupancy. Tenant shall comply with
any direction of any governmental authority having jurisdiction which shall, by
reason of the nature of Tenant's use or occupancy of the Premises, impose a duty
upon Tenant or Landlord with respect to the Premises or with respect to the use
or occupation thereof. Tenant shall not do or permit to be done anything which
will invalidate or increase the cost of any fire, extended coverage or any other
insurance policy covering the Building and/or property located therein and shall
comply with all rules, orders, regulations and requirements of the insurance
Service Offices, formerly known as the Pacific Fire Rating Bureau or any other
organization performing a similar function. Tenant shall promptly, upon demand,
reimburse Landlord for any additional premium charged for such policy by reason
of Tenant's failure to comply with the provisions of this article. Tenant shall
not do or permit anything to be done in or about the Premises which will in any
way obstruct or interfere with the rights of other tenants of the Building, or
injure or annoy them, or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisances in, on or about the Premises. Tenant shall not commit or
suffer to be committed any waste in or upon the Premises.
(b) Tenant shall not use, store or dispose of any hazardous, toxic or
radioactive materials or substances, including those materials identified as
hazardous pursuant to Article II of Title 22 of the California Code of
Regulations, Division 4, Chapter 20, as they may be amended from time to time
("Hazardous Materials"), in, on or about the Premises or the Building without
the prior written consent of Landlord. If Landlord consents to Tenant's use of
any Hazardous Materials in or on the Premises, Tenant shall comply with all
applicable federal state and local laws, statutes, ordinances, rules and
regulations relating to the use, storage and disposal of Hazardous Materials.
4
<PAGE>
7. NOTICES
Any notice required or permitted hereunder must be in writing and may be
given by personal delivery, overnight courier service, or by mail, and if given
by mail shall be deemed sufficiently given if sent by registered or certified
mail addressed to Tenant at the Premises, or to Landlord at its address set
forth at the end of this Lease. Either party may specify a different address for
notice purposes by written notice to the other except that the Landlord may in
any event use the Premises as Tenant's address for notice purposes.
ADDRESS TO MAIL RENT STATEMENT TO: PRINCETON INVESTMENT GROUP
P. 0. BOX 22196,
SAN FRANCISCO, CA 94122
ATTN: FRANCES LIM
CHIEF EXECUTIVE OFFICER
ADDRESS TO MAIL NOTICES STATEMENT TO: PRINCETON INVESTMENT GROUP LLC
C/O HYCD, INC.
5300 STEVENS CREEK BLVD. SUITE 450
SAN JOSE, CA 95129
ATTN: DIANE LING
CHIEF EXECUTIVE OFFICER
AND
PRINCETON INVESTMENT GROUP
P. 0. BOX 22196,
SAN FRANCISCO, CA 94122
ATTN: FRANCES LIM
CHIEF EXECUTIVE OFFICER
8. BROKERS
Tenant warrants that it has had no dealings with any real estate broker or
agent in connection with the negotiation of the Lease. Tenant knows of no real
estate broker or agent who is or might be entitled to a commission in connection
with this Lease. If Tenant has dealt with any other person or real estate broker
with respect to leasing or renting space in the Building, Tenant shall be solely
responsible for the payment of any fee due said person or firm and Tenant shall
hold Landlord free and harmless against any liability in respect thereto,
including attorneys' fees and costs.
9. HOLDING OVER
If Tenant holds over after the expiration or earlier termination of the
term hereof without the express written consent of Landlord, Tenant shall become
a Tenant at sufferance only, at a rental rate equal to one hundred fifty percent
(150%) of the rent in effect upon the date of such expiration (subject to
adjustment as provided in paragraph 4 hereof and prorated on a daily basis), and
otherwise subject to the terms, covenants and conditions herein specified, so
far as applicable. Acceptance by Landlord of rent after such expiration or
earlier termination shall not result in a renewal of this Lease. The foregoing
provisions of this Article 9 are in addition to and do not affect Landlord's
right of reentry or any rights of Landlord hereunder or as otherwise provided by
law. If Tenant fails to surrender the Premises upon the expiration of this Lease
despite demand to do so by Landlord, Tenant shall indemnify and hold Landlord
harmless from all loss or liability, including without limitation, any claim
made by any succeeding tenant founded upon or resulting from such failure to
surrender, and any attorneys' fees and costs.
5
<PAGE>
10. TAXES ON TENANT'S PROPERTY
(a) Tenant shall be liable for and shall pay, at least ten days
before delinquency, all taxes levied against any personal property or trade
fixtures placed by Tenant in or about the Premises. If any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays the
taxes based upon such increased assessment, which Landlord shall have the right
to do regardless of the validity thereof, but only under proper protest if
requested by Tenant, Tenant shall, upon demand, repay to Landlord the taxes so
levied against Landlord, or the portion of such taxes resulting from such
increase in the assessment.
(b) If the Tenant Improvements in the Premises, whether installed,
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which Tenant Improvements
conforming to Landlord's "Building Standard" in other space in the Building are
assessed, then the real property taxes and assessments levied against the
Building by reason of such excess assessed valuation shall be deemed to be taxes
levied against personal property of Tenant and shall be governed by the
provisions of Paragraph 10(a), above. If the records of the county assessor are
available and sufficiently detailed to serve as a basis for determining whether
said Tenant Improvements are assessed at a higher valuation than Landlord's
Building Standard, such records shall be binding on both the Landlord and the
Tenant. If the records of the county assessor are not available or sufficiently
detailed to serve as a basis for making said determination, the actual cost of
construction shall be used.
11. CONDITION OF PREMISES
Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation or warranty with respect to the Premises or the Building
or with respect to the suitability of either for the conduct of Tenant's
business. The taking of possession of the Premises by Tenant shall conclusively
eStablish that the Premises and the Building were in satisfactory condition at
such time. The preceding notwithstanding, Landlord represents that all Building
Systems shall be in good order and operating condition at the commencement of
the Lease.
12. ALTERATIONS
(a) Tenant shall make no alterations, additions or improvements in or to
the Premises without Landlord's prior written consent, and then only by
contractors or mechanics approved by Landlord. Tenant agrees that there shall be
no construction of partitions or other obstruction which might interfere with
Landlord's free access to mechanical installations or service facilities of the
Building or interfere with the moving of Landlord's equipment to or from the
enclosures containing said installations or facilities. All such work shall be
done at such times and in such manner as Landlord may from time to time
designate. Tenant covenants and agrees that all work done by Tenant shall be
performed in full compliance with all laws, rules, orders, ordinances,
regulations and requirements of all governmental agencies, offices, and boards
having jurisdiction, and in full compliance with the rules, regulations and
requirements of the Insurance Service Offices formerly known as the Pacific Fire
Rating Bureau, and of any similar body. Before commencing any work, Tenant shall
give Landlord at least ten (10) days written notice of the proposed
commencement of such work and shall, if required by Landlord, secure at Tenant's
own cost and expense, a completion and lien indemnity bond, satisfactory to
Landlord, for said work. Tenant further covenants and agrees that any mechanic's
lien filed against the Premises or against the Building for work claimed to have
been done for, or materials claimed to have been furnished to, Tenant will be
discharged by Tenant, by bond or otherwise, within ten (10) days after the
filing thereof, at the cost and expense of Tenant. All alterations, additions or
improvements upon the Premises made by either party, including (without limiting
the generality of the foregoing) all wallcovering, built-in cabinet work,
paneling and the like, shall, unless Landlord elects otherwise, become the
property of Landlord, and shall remain upon, and be surrendered with the
Premises, as a part thereof, at the end of the term hereof, except that Landlord
may, by written notice to Tenant, require Tenant to remove all partitions,
counters, railings and the like installed by Tenant, and Tenant shall repair all
damage resulting from such removal or, at Landlord's option, shall pay to
Landlord all costs arising from such removal.
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(b) All articles of personal property and all business and trade
fixtures, machinery and equipment, furniture and movable partitions owned by
Tenant or installed by Tenant at its expense in the Premises shall be and remain
the property of Tenant and may be removed by Tenant at any time during the lease
term when Tenant is not in default hereunder. If Tenant shall fail to remove all
of its effects from the Premises upon termination of this Lease for any cause
whatsoever, Landlord may, at its option, remove the same in any manner that
Landlord shall choose, and store said effects without liability to Tenant for
loss thereof In such event, Tenant agrees to pay Landlord upon demand any and
all expenses incurred in such removal, including court costs and attorneys' fees
and storage charges at its option, without notice, sell said effects, or any of
the same, at private sale and without legal process, for such price as Landlord
may obtain and apply the proceeds of such sale upon any amounts due under this
Lease from Tenant to Landlord and upon the expense incident to the removal and
sale of said effects.
13. REPAIRS
(a) By entry hereunder, Tenant accepts the Premises as being in good and
sanitary order, condition and repair. Tenant shall keep, maintain and preserve
the Premises in first class condition and repair, and shall, when and if
needed, at Tenant's sole cost and expense, make all repairs to the Premises and
every part thereof Tenant shall, upon the expiration or sooner termination of
the term hereof, surrender the Premises to Landlord in the same condition as
when received, usual and ordinary wear and tear excepted. Landlord shall have no
obligation to alter, remodel. improve, repair, decorate, or paint the Premises
or any part thereof The parties hereto affirm that Landlord has made no
representations to Tenant respecting the condition of the Premises or the
Building except as specifically herein set forth.
(b) Anything contained in Paragraph 13(a) above to the contrary
notwithstanding, Landlord shall repair and maintain the structural portions of
the Building, including the foundation, building shell. and roof structure, all
at Landlord's expense, unless such maintenance and repairs are caused in part or
in whole by the act, neglect, or omission of any duty of Tenant, its agents,
employees, or invitees, in which event Tenant shall reimburse Landlord, as
additional rent, for the reasonable cost of such maintenance and repairs.
Landlord shall also repair and maintain the basic plumbing, elevators, life
safety systems and other building systems, heating, ventilating, air
conditioning and electrical systems installed or furnished by Landlord, the roof
membrane, the parking areas, driveways, sidewalks, landscaping, project signs
and exterior site lighting. The cost of the foregoing repairs and maintenance
shall be billed to Tenant as operating costs pursuant to Paragraph 4. Landlord
shall not be liable for any failure to make any such repairs or to perform any
maintenance unless such failure shall persist for an unreasonable time after
written notice of the need of such repairs or maintenance is given to Landlord
by Tenant. Except as provided in Article 21 hereof, there shall be no abatement
of rent and no liability of Landlord by reason of any injury to or interference
with Tenant's business arising from the making of any repairs, alterations or
improvements in or to any portion of the Building or the Premises or in or to
fixtures, appurtenances and equipment therein. Tenant waives the right to make
repairs at Landlord's expense under any law, statute or ordinance now or
hereafter in effect.
14. LIENS
Tenant shall not permit any mechanics, materialmen's or other liens to
be filed against the Building nor against Tenant's leasehold interest in the
Premises. Landlord shall have the right at all reasonable times to post and keep
posted on the Premises any notices, which it deems necessary for protection from
such liens. If any such liens are filed, Landlord may, without waiving its
rights and remedies based on such breach of Tenant and without releasing Tenant
from any of its obligations, cause such liens to be released by any means it
shall deem proper, including payments in satisfaction of the claim giving rise
to such lien. Tenant shall pay to Landlord at once, upon notice by Landlord, any
sum paid by Landlord to remove such liens, together with interest at the maximum
rate per annum permitted by law from the date of such payment by Landlord.
15. ENTRY BY LANDLORD
Landlord reserves and shall at any and all times have the right to enter
the Premises to inspect the same, to supply janitor service and any service to
be provided by Landlord to Tenant hereunder, to show the Premises to prospective
purchasers or tenants, to post notices of non-responsibility, to alter, improve
or repair the Premises or any other portion of the Building, all without being
deemed guilty of any eviction of Tenant and without abatement of rent. Landlord
may, in order to carry out such purposes, erect scaffolding and other necessary
structures where reasonably required by the character of the work to be
performed, provided that the business of Tenant shall be interfered with as
little as is reasonably practicable. Tenant hereby waives any claim for damages
for any injury or inconvenience to or interference with Tenant's
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business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss in, upon and about the Premises. Landlord shall at all times have and
retain a key with which to unlock all doors in the Premises. Any entry to the
Premises obtained by Landlord by any of said means, or otherwise, shall not be
construed or deemed to be a forcible or unlawful entry into the Premises, or an
eviction of Tenant from the Premises or any portion thereof, and any damages
caused on account thereof shall be paid by Tenant. It is understood and agreed
that no provision of this Lease shall be construed as obligating Landlord to
perform any repairs, alterations or decorations except as otherwise expressly
agreed herein by Landlord.
16. UTILITIES AND SERVICES
Provided that Tenant is not in default under this Lease, Landlord agrees to
furnish or cause to be furnished to the Premises the utilities and services
described in the Standards for Utilities and Services, attached hereto as
Exhibit C, subject to the conditions and in accordance with the standards set
forth therein. Landlord's failure to furnish any of the foregoing items when
such failure is caused by: (i) accident, breakage, or repairs; (ii) strikes,
lockouts or other labor disturbance or labor dispute of any character, (iii)
governmental regulation, moratorium or other governmental action; (iv) inability
despite the exercise of reasonable diligence to obtain electricity, water or
fuel; or (v) any other cause beyond Landlord's reasonable control, shall not
result in any liability to Landlord. In addition, Tenant shall not be entitled
to any abatement or reduction of rent by reason of such failure, no eviction of
Tenant shall result from such failure and Tenant shall not be relieved from the
performance of any covenant or agreement in this Lease because of such failure.
In the event of any failure, stoppage or interruption thereof, Landlord shall
diligently attempt to resume service promptly.
17. BANKRUPTCY
If Tenant shall file a petition in bankruptcy under any provision of the
Bankruptcy code as then in effect, or if Tenant shall be adjudicated a bankrupt
in involuntary bankruptcy proceedings and such adjudication shall not have been
vacated within thirty (30) days from the date thereof, or if a receiver or
trustee shall be appointed of Tenant's property and the order appointing such
receiver or trustee shall not be set aside or vacated within thirty (30) days
after the entry thereof, or if Tenant shall assign Tenant's estate or effects
for the benefit of creditors, or if this Lease shall, by operation of law or
otherwise, pass to any person or persons other than Tenant, then in any such
event Landlord may terminate this Lease, if Landlord so elects, with or without
notice of such election and with or without entry or action by Landlord. In such
case, notwithstanding any other provisions of this Lease, Landlord, in addition
to any and all rights and remedies allowed by law or equity, shall, upon such
termination, be entitled to recover damages in the amount provided in Paragraph
23 (b) hereof. Neither Tenant nor any person claiming through or under Tenant
or by virtue of any statute or order of any court shall be entitled to
possession of the Premises but shall surrender the Premises to Landlord. Nothing
contained herein shall limit or prejudice the right of Landlord to recover
damages by reason of any such termination equal to the maximum allowed by any
statute or rule of law in effect at the time when, and governing the proceedings
in which, such damages are to be proved; whether or not such amount is greater,
equal to, or less than the amount of damages recoverable under the provisions of
this Article 17.
18. INDEMNIFICATION
Tenant shall indemnify, defend and hold Landlord harmless from all claims
arising from Tenant's use of the Premises or the conduct of its business or
from any activity, work, or thing done, permitted or suffered by Tenant in or
about the Premises. Tenant shall further indemnify, defend and hold Landlord
harmless from all claims arising from any breach or default in the performance
of any obligation to be performed by Tenant under the terms of this Lease, or
arising from any act, neglect, fault or omission of Tenant or of its agents or
employees, and from and against all costs, attorneys' fees, expenses and
liabilities incurred in or about such claim or any action or proceeding brought
thereon. In case any action or proceeding shall be brought against Landlord by
reason of any such claim, Tenant upon notice from Landlord shall defend the same
at Tenant's expense by counsel approved in writing by Landlord. Tenant, as a
material part of the consideration to Landlord, hereby assumes all risk of
damage to property or injury to person in, upon or about the Premises from any
cause whatsoever except that which is caused by the failure of Landlord to
observe any of the terms and conditions of this Lease where such failure has
persisted for an unreasonable period of time after written notice of such
failure. Tenant hereby waives all its claims in respect thereof against Landlord
except as permitted by previous sentence.
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19. DAMAGE TO TENANT'S PROPERTY
Notwithstanding the provisions of Article 18 to the contrary, Landlord or
its agents shall not be liable for (i) any damage to any property entrusted to
employees of the Building, (ii) loss or damage to any property by theft or
otherwise, (iii) any injury or damage to persons or property resulting from
fire, explosion, falling plaster, steam, gas, electricity, water or rain which
may leak from any part of the Building or from the pipes, appliances or
plumbing work therein or from the roof, street or sub-surface or from any other
place or resulting from dampness or (iv) any other cause whatsoever, except to
the extent due to the gross negligence or willful misconduct of Landlord.
Landlord or its agents shall not be liable for interference with light or other
incorporeal heraditaments, nor shall Landlord be liable for any latent defect in
the Premises or in the Building. Tenant shall give prompt notice to Landlord in
case of fire or accidents in the Premises or in the Building or of defects
therein or in the fixtures or equipment.
20. TENANT'S INSURANCE
(a) Tenant shall, during the term hereof and any other period of
occupancy, at it's sole cost and expense, keep in full force and effect the
following insurance:
(i) STANDARD FORM PROPERTY INSURANCE insuring against the perils
of fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All Risk") and sprinkler leakage. This insurance policy shall be
upon all property owned by Tenant, for which Tenant is legally liable or that
was installed at Tenant's expense, and which is located in the Building
including, without limitation, furniture, fittings, installations, fixtures
(other than Tenant Improvements installed by Landlord), and any other personal
property, in an amount not less than the full replacement cost thereof. In the
event that there shall be a dispute as to the amount which comprises full
replacement cost, the decision of Landlord or any mortgagees of Landlord shall
be conclusive. This insurance policy shall also be upon direct or indirect loss
of Tenant's earnings attributable to Tenant's inability to use fully or obtain
access to the Premises or Building in an amount as will properly reimburse
Tenant. Such policy shall name Landlord and any mortgagees of Landlord as
insured parties, as their respective interests may appear.
(ii) COMMERCIAL LIABILITY INSURANCE insuring Tenant against any
liability arising out of the lease, use, occupancy or maintenance of the
Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of $3,000,000.00 combined single limit for injury to, or death of one or
more persons in an occurrence, and for damage to tangible property (including
loss of use) in an occurrence, with such liability amount to be adjusted from
year to year to reflect increases in the Consumer Price Index. The policy shall
insure the hazards of premises and operations, independent contractors,
contractual liability (covering the indemnity contained in Paragraph 18 hereof)
and shall (1) name Landlord as an additional insured, and (2) contain a
provision that the insurance provided the Landlord hereunder shall be primary
and noncontributing with any other insurance available to the Landlord.
(iii) WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY INSURANCE (AS
REQUIRED BY STATE LAW).
(iv) Any other form or forms of insurance as Tenant or Landlord or
any mortgagees of Landlord may reasonably require from time to time in form, in
amounts and for insurance risks against which a prudent tenant would protect
itself.
(b) All policies shall be written in a form satisfactory to Landlord
and shall be taken out with insurance companies holding a General Policyholders
Rating of "A" and a Financial Rating of "X" or better, as set forth in the most
current issue of Bests Insurance Guide. Within ten (10) days after the execution
of this Lease, Tenant shall adhere to Landlord copies of policies or
certificates evidencing the existence of the amounts and forms of coverage
satisfactory to Landlord. No such policy shall be cancelable or reducible in
coverage except after thirty (30) days prior written notice to Landlord. Tenant
shall, within ten (10) days prior to the expiration of such policies, furnish
Landlord with renewals or "binders" thereof, or Landlord may order such
insurance and charge the cost thereofto Tenant as additional rent. If Landlord
obtains any insurance that is the responsibility of Tenant under this section,
Landlord shall deliver to Tenant a Written statement setting forth the cost of
any such insurance and showing in reasonable detail the manner in which it has
been computed.
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21. DAMAGE OR DESTRUCTION
(a) If the Building and/or the Premises is damaged by fire or other
perils covered by Landlord's insurance, Landlord shall have the following rights
and obligations:
(i) In the event of total destruction, Landlord shall, at
Landlord's option, commence repair, reconstruction and restoration of the
Building and/or the Premises as soon as reasonably possible, and diligently
prosecute the same to completion, in which event this Lease shall remain in full
force and effect. If Landlord elects not to so repair, reconstruct or restore
the Building and/or the Premises, this Lease shall terminate as of the date of
such total destruction. In either event, Landlord shall give Tenant written
notice of its intention within sixty (60) days after the date of damage or
destruction.
(ii) In the event of a partial destruction of the Building and/or
the Premises, Landlord shall promptly restore the Building and/or the Premises
unless Landlord elects to terminate this Lease as permitted herein. Landlord
shall have the right to terminate this Lease if (1) the damage to the Building
and/or the Premises exceeds twenty-five percent (25%) of the full insurable
value thereof, (2) the damage to the Building and/or the Premises is such that
the Building and/or the Premises cannot be repaired, reconstructed or restored
within one hundred eighty (180) days from the date of damage or destruction, or
(3) insurance proceeds received by Landlord will not be sufficient to cover the
cost of such repairs, reconstruction and restoration. Landlord shall give
written notice to Tenant of its intention within sixty (60) days after the date
of damage or destruction. If Landlord elects not to restore the Building and/or
the Premises, this Lease shall be deemed to have terminated as of the date of
such partial destruction.
(b) Upon any termination of this Lease under any of the provisions of
this Article 21, the parties shall be released without further obligation to
the other from the date possession of the Premises is surrendered to Landlord
except for items which have theretofore accrued and are then unpaid.
(c) In the event of repair, reconstruction and restoration by Landlord
as herein provided, the rental payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration. Tenant
shall not be entitled to any compensation or damages for loss in the use of the
whole or any part of the Premises and/or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction or restoration.
(d) Tenant shall not be released from any of its obligations under this
Lease except to the extent and upon the conditions expressly stated in this
Article 21. Notwithstanding anything to the contrary contained in this Article
21, if Landlord is delayed or prevented from repairing or restoring the damaged
Premises within one year after the occurrence of such damage or destruction by
reason of acts of God, war, governmental restrictions, inability to obtain the
necessary labor or materials, or other cause beyond the control of Landlord,
Landlord shall be relieved of its obligation to make such repairs of restoration
and Tenant shall be released from its obligations under this Lease as of the end
of said one year period.
(e) If damage is due to any cause other than fire or other peril covered
by A1l-Risk insurance, Landlord may elect to terminate this Lease.
(f) If Landlord is obligated to or elects to repair or restore as herein
provided, Landlord shall be obligated to make repair or restoration only of
those portions of the Building and the Premises which were originally provided
at Landlord's expense, and the repair and restoration of items not provided at
Landlord's expense shall be the obligation of Tenant.
(g) Notwithstanding anything to the contrary contained in this Article
21, Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article 21, occurs during the last twelve (12) months of the term of this
Lease or any extension hereof.
(h) The provisions of California Civil Code Section 1932, Subsection 2,
and Section 1933, Subsection 4, which permit termination of a lease upon
destruction of the leased premises, are hereby waived by Tenant; and the
provisions of this article shall govern in case of such destruction.
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22. EMINENT DOMAIN
If all of the Premises, or such part thereof as shall substantially
interfere with Tenant's use and occupancy of the Premises, shall be taken for
any public or quasi-public purpose by any lawful power or authority by exercise
of the right of appropriation, condemnation or eminent domain, or sold to
prevent such taking, either party may terminate this Lease effective as of the
date possession is required to be surrendered to said authority. Tenant shall
not assert any claim against Landlord or the taking authority for any
compensation because of such taking, and Landlord shall be entitled to receive
the entire amount of any award without deduction for any estate or interest of
Tenant. If neither party terminates this Lease as permitted herein, Landlord
shall be entitled to the entire amount of the award without deduction for any
estate or interest of Tenant, Landlord shall restore the Premises to
substantially their same condition prior to such partial taking, and rent shall
be abated for the time and to the extent Tenant is prevented from using the
Premises on account of such taking and restoration. Nothing contained in this
paragraph shall be deemed to give Landlord any interest in any award made to
Tenant for the taking of personal property and fixtures belonging to Tenant or
for Tenant's moving or relocation expenses.
23. DEFAULTS AND REMEDIES
(a) The occurrence of anyone or more of the following events shall
constitute a default hereunder by Tenant:
(i) The vacation or abandorunent of the Premises by Tenant.
Abandorunent is herein defined to include, but is not limited to, any absence by
Tenant from the Premises for five (5) business days or longer while in default
of any provision of this Lease.
(ii) The failure by Tenant to make any payment of rent where such
failure shall continue for a period of three (3) days after written notice
thereof from Landlord to Tenant; provided however, that any such notice shall be
in lieu of, and not in addition to, any notice required under California Code of
Civil Procedure Section ll61 regarding unlawful detainer actions.
(iii) The failure by Tenant to observe or perform any of the express
or implied covenants or provisions of this Lease to be observed or performed by
Tenant, other than as specified in Subparagraph 23(a)(i) or (ii) above, where
such failure shall continue for a period often (10) days after written notice
thereof from Landlord to Tenant. Any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section ll61 regarding unlawful detainer actions. If the nature of Tenant's
default is such that more than ten (10) days are reasonably required for its
cure, then Tenant shall not be deemed to be in default if Tenant shall commence
such cure within said ten-day period and thereafter diligently prosecute such
cure to completion, which completion shall occur not later than sixty (60) days
from the date of such notice from Landlord.
(iv) (1) The making by Tenant of any general assigment for the
benefit of creditors (2) the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within thirty (30) days); (3) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not reStored to Tenant within thirty (30) days; or (4) the attachment,
execution or other judicial seizure of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease where such seizure
is not discharged within thirty (30) days.
(b) In the event of any such default by Tenant, in addition to any
other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder.
In the event that Landlord shall elect to so terminate this Lease then Landlord
may recover from Tenant:
(i) the worth at the time of award of any unpaid rent which had
been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term
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after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided; plus
(iv) any other amount necessary to compensate Landlord for all
detriment aproximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom.
As used in Subparagraphs 23(b)(i) and (ii) above, the "worth at the time of
award" is computed by allowing interest at the maximum rate permitted by law.
As used in Subparagraph 23 (b)(iii) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
(c) In the event of any such default Landlord shall also have the right
to continue this Lease in full force and effect, and this Lease shall continue
in full force and effect as long as Landlord does not terminate this Lease, and
Landlord shall have the right to collect rent as it becomes due.
(d) Landlord shall also have the right, with or without terminating
this Lease, to reenter the Premises and remove all persons and property from
the Premises; such property may be removed and stored in a public warehouse or
elsewhere at the cost of and for the account of Tenant No reentry or taking
possession of the Premises by Landlord pursuant to this Paragraph 23(c) shall
be construed as an election to terminate this Lease unless a written notice of
such intention is given to Tenant or unless the termination thereof is decreed
by a court of competent jurisdiction.
(e) All rights, options and remedies of Landlord contained in this Lease
shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other. Landlord shall have the right to pursue anyone or all
of such remedies or any other remedy or relief which may be provided by law,
whether or not stated in this Lease. No waiver of any default of Tenant
hereunder shall be implied from any acceptance by Landlord of any rent or oilier
payments due hereunder or any omission by Landlord to take any action on account
of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Landlord to or of any act by Tenant requiring Landlord's consent or
approval shall not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant.
24. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not voluntarily assign or encumber its interest in this
Lease or in the Premises, or sublease all or any part of the Premises, or allow
any other person or entity to occupy or use all or any part of the Premises,
without first obtaining Landlord's prior written consent Any assignment,
encumbrance or sublease without Landlord's prior written consent shall be
voidable, at Landlord's election, and shall constitute a default and at the
option of the Landlord shall result in a termination of this Lease. No consent
to assignment, enc1mIbrance, or sublease shall constitute a further waiver
other provisions of this paragraph. Tenant shall notify Landlord in writing of
Tenant's intent to sublease, encumber or assign this Lease and Landlord shall,
within thirty (30) days of receipt of such written notice, elect one of the
following: (i) consent to such proposed assignment or sublease or; (ii) refuse
such consent, which refusal shall be on reasonable grounds; or (iii) elect to
terminate this Lease.
(b) As a condition for granting its consent to any assignment,
encumbrance or sublease, thirty (30) days prior to any anticipated assignment or
sublease Tenant shall give Landlord written notice (the "Assignment Notice"),
which shall set forth the name, address and business other proposed assignee or
sublessee, information (including references) concerning the character,
ownership and financial condition of the proposed assignee or sublessee, the
Assignment Date, any ownership or commercial relationship between Tenant and
the proposed assignee or sublessee, all in such detail as Landlord shall
reasonably require. If Landlord requests additional detail, the Assignment
Notice shall not be deemed to have been received until Landlord received such
additional detail, and Landlord may withhold consent to any assignment or
sublease until such additional detail is provided to it Further, Landlord may
require that the sublessee or assignee remit directly to Landlord on a monthly
basis, all monies due to Tenant by said assignee or sublessee.
(c) The consent by Landlord to any assignment or subletting shall not
be construed as relieving Tenant or any assignee of this Lease or sublessee
other Premises from obtaining the express written consent of Landlord to any
further assignment or subletting or as releasing Tenant or any assignee or
sublessee of Tenant from any liability or obligation hereunder whether or not
then accrued. In the event Landlord shall consent to an assignment or sublease,
Tenant shall pay
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Landlord as additional rent a reasonable attorneys' and administration fee not
to exceed $1,000 for costs incurred in connection with evaluating the Assignment
Notice. This section shall be fully applicable to all further sales,
hypothecation, transfers, assignments and subleases of any portion of the by any
successor or assignee of Tenant, or any sublessee of the Premises.
(d) As used in this section, the subletting of substantially all of the
Premises for substantially all of the remaining item of this Lease shall be
deemed an assignment rather than a sublease. Notwithstanding the foregoing,
Landlord shall consent to the assignment, sale or transfer if the Assignment
Notice states that Tenant desires to assign the Lease to any entity into which
Tenant is merged, with which Tenant is consolidated or which acquires all of
substantially all of the assets of Tenant, provided that the assignee first
executes, acknowledges and delivers to Landlord an agreement whereby the
assignee agrees to be bound by all of the covenants and agreements in this Lease
which Tenant has agreed to keep, observe or perform, that the assignee agrees
that the provisions of this section shall be binding upon it as if it were the
original Tenant hereunder and that the assignee shall have a net worth
(determined in accordance with generally accepted accounting principles
consistently applied) immediately after such assignment which is at least equal
to the net worth (as so determined) of Tenant at the commencement of this Lease.
(e) Except as provided above, Landlord's consent to any sublease shall
not be unreasonably withheld. A condition to such consent shall be delivery by
Tenant to Landlord of a true copy of any such sublease. If for any proposed
assignment or sublease Tenant receives rent or other consideration, either
initially or over the term of the assignment or sublease, in excess of the rent
called for hereunder, or, in case of the sublease of a portion of the Premises,
in excess of such rent fairly allocable to such portion, after appropriate
adjustments to assure that all other payments called for hereunder are taken
into account, Tenant shall pay to Landlord as additional rent hereunder
three-quarters (3/4) of the excess of each such payment of rent or other
consideration received by Tenant promptly after its receipt. Landlord's waiver
or consent to any assignment or subletting shall not relieve Tenant from any
obligation under this lease. The parties intend that the preceding sentence
shall not apply to any sublease rentals respecting a portion of the Premises
that during the entire term of this Lease was not occupied by Tenant for its own
use, but was always subleased by Tenant and/or kept vacant. For the purpose of
this section, the rent for each square foot of floor space in the Premises shall
be deemed equal.
25. SUBORDINATION
Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination, and at the election of Landlord or
any mortgagee with a lien on the building or any ground lessor with respect to
the building, this Lease shall be subject and subordinate at all times to:
(i) All ground leases or underlying leases which may now exist or
hereafter be executed affecting the building or the land upon which the building
is situated or both;
(ii) The lien of any mortgage or deed of trust which may now exist
or hereafter be executed in any amount for which the building, land, ground
leases, or underlying leases, or Landlord's interest or estate in any of said
items is specified as security. Notwithstanding the foregoing, Landlord shall
have the right to subordinate or cause to be subordinated any such leases or
underlying leases or any such liens to this Lease. In the event that any ground
lease or underlying lease terminates for any reason or any mortgage or deed of
trust is foreclosed or a conveyance in lieu of foreclosure is made for any
reason, Tenant shall, notwithstanding any subordination, attorn to and become
the Tenant of the successor in interest to Landlord, at the option of such
successor in interest. Tenant covenants and agrees to execute and deliver, upon
demand by Landlord and in the form requested by Landlord, any additional
documents evidencing the priority or subordination of this Lease with respect to
any such ground leases or underlying leases or in the lien of any such mortgage
or deed of trust. Tenant hereby irrevocably appoints Landlord as
attorney-in-fact of Tenant to execute, deliver and record any such document in
the name and on behalf of Tenant.
26. ESTOPPEL CERTIFICATE
(a) Within ten (10) days following any written request which Landlord
may make from time to time, Tenant shall execute and deliver to Landlord a
statement certifying: (i) the date of commencement of this Lease; (ii) the fact
that this Lease is unmodified and in full force and effect (or, if there have
been modifications); (iii) the date to which the rental and
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other sums payable under this Lease have been paid; (iv) that there are no
current defaults under this Lease by either Landlord or Tenant except as
specified in Tenant's statement; and (v) such other matters requested by
Landlord. Landlord and Tenant intend that any statement delivered pursuant to
this Article 26 may be relied upon by any mortgage, beneficiary, purchaser, or
prospective purchaser of the building or any interest therein.
(b) Tenant's failure to deliver such statement within such time shall be
conclusive upon Tenant: (i) that this Lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) that there are no
uncured defaults in Landlord's performance, and (iii) that not more than one
month's rental has been paid in advance.
27. SIGNAGE
Landlord shall provide for Tenant the opportunity to have a Tenant
identification sign at the entry to the Premises and the right to have Tenant's
name placed upon the building directory sign. Tenant shall have no other right
to maintain a Tenant identification sign in any other location in, on or about
the Premises, the building, or the Project. Tenant's identification sign shall
be subject to Landlord's written reasonable approval prior to installation. The
cost of the installation of the sign, and its maintenance and removal expense,
shall be at Tenant's sole expense. If Tenant fails to maintain its sign or if
Tenant fails to remove its sign upon termination of this Lease or restore the
appearance of the Premises to its condition prior to the placement of said sign,
Landlord may do so at Tenant's expense and Tenant's reimbursement to Landlord
for such amounts shall be deemed additional rent All signs shall comply with
rules and regulations set forth by Landlord as may be modified from time to
time.
28. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the "Rules and
Regulations," a copy of which is attached hereto and marked EXHIBIT D and all
reasonable and nondiscriminatory modifications thereof and additions thereto
from time to time put into effect by Landlord. Landlord shall not be responsible
to Tenant for the violation or nonperformance by any other tenant or occupant of
the building of any of said Rules and Regulations.
29. CONFLICT OF LAW
This Lease shall be governed by and construed pursuant to the laws of the
State of California.
30. SUCCESSORS AND ASSIGNS
Except as otherwise provided in this Lease, all of the covenants,
conditions, and provisions of this Lease shall be binding upon and shall inure
to the benefit of the parties hereto and their respective heirs, personal
representatives, successors, and assigns.
31. SURRENDER OF PREMISES
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases or
subtenancies.
32. ATTORNEY'S FEES
(a) If Landlord should bring suit for possession of the Premises, for
the recovery of any sum due under this Lease, or because of the breach of any
provisions of this Lease, or for any other relief against Tenant hereunder, or
in the event of any other litigation between the parties with respect to this
Lease, then all costs and expenses, including reasonable attorney's fees,
incurred by the prevailing party therein shall be paid by the other party, which
obligation on the part of the other party shall be deemed to have accrued on the
date of the commencement of such action and shall be enforceable whether or not
the action is prosecuted to judgment.
(b) If Landlord is named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including
reasonable attorney's fees.
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33. PERFORMANCE BY TENANT
All covenants and agreements to be performed by Tenant under any other
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent. If Tenant shall fail to pay any sum
of money owed to any party other than Landlord, for which it is liable
hereunder, or if Tenant shall fail to perform any other act on its part to be
performed hereunder and such failure shall continue for ten (10) days after
notice thereof by Landlord, Landlord may, without waiving or releasing Tenant
from obligations of Tenant, but shall not be obligated to, make any such payment
or perform any such other act to be made or performed by Tenant All sums so
paid by Landlord and all necessary incidental costs together with interest
thereon at the maximum rate permissible by law, from the date of such payment
by Landlord, shall be payable to Landlord on demand. Tenant covenants to pay any
such sums and Landlord shall have (in addition to any other right or remedy of
Landlord) all rights and remedies in the event other nonpayment thereof by
Tenant as are set forth in Article 23 hereof.
34. MORTGAGEE PROTECTION
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Tenant, and shall offer such beneficiary or mortgagee a reasonable opportunity
to cure the default, including time to obtain possession of the Premises by
power of sale or a judicial foreclosure, if such should prove necessary to
effect a cure.
35. DEFINITION OF LANDLORD
The term "Landlord", as used in this Lease, so far as covenants or
obligations on the part of the Landlord are concerned, shall be limited to
mean and include only the owners, at the time in question, other fee title
other Premises or the lessees under any ground lease, if any. In the event of
any transfer, assignment, or other conveyances, the lien grantor shall be
automatically freed and relieved from and after the date of such transfer,
assignment, or conveyance of all liability as respects the performance of any
covenants or obligations on the part of Landlord contained in this Lease
thereafter to be performed. Without further agreement, the transferee of such
title shall be deemed to have assumed and agreed to observe and perform any and
all obligations of Landlord hereunder, during its ownership other Premises.
Landlord may transfer its interest in the Premises without the consent of
Tenant and such transfer or subsequent transfer shall not be deemed a violation
on Landlord's part of any other terms and conditions of this Lease.
36. WAIVER
The waiver by Landlord of any breach of any term, covenant, or condition
herein contained shall not be deemed it to be a waiver of any subsequent breach
other same or any oilier term, covenant, or condition herein contained, nor
shall ~ any custom or practice which may grow up between the parties in the
administration of the terms hereof be deemed a waiver of or in any way affect
the right of Landlord to insist upon the performance by Tenant in strict
accordance with said terms. If the subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant, or condition of this Lease, other than the failure of
Tenant to pay the particular rent so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such rent.
37. IDENTIFICATION OF TENANT
If more than one person executes this Lease as Tenant:
(i) Each of them is jointly and severally liable for the keeping,
observing and performing of all of the terms, covenants, conditions,
provisions, and agreements of this Lease to be kept, observed and performed by
Tenant, and
(ii) The term "Tenant" as used in this Lease shall mean and include
each of them jointly and severally. The act of or notice from, or notice or
refund to, or the signature of anyone or more of them, with respect to the
tenancy other Lease, including, but not limited to any renewal, extension,
expiration, termination, or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refln1d or so signed.
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38. PARKING
The use by Tenant, its employees and invitees, of the parking facilities of
the building shall be on the terms and conditions set forth in EXHIBIT E
attached hereto and by this reference incorporated herein and shall be subject
to such other agreement between Landlord and Tenant as may hereinafter be
established.
39. TERMS AND HEADINGS
The words "Landlord" and "Tenant" as used herein shall include the plural
as well as the singular. Words used in any gender include other genders. The
paragraph headings of this Lease are not a part of this Lease and shall have no
effect upon the construction or interpretation of any part hereof.
40. FINANCIAL STATEMENTS
Tenant shall deliver to Landlord within ten (10) days after written
request therefor, the current financial statements of Tenant, and financial
statements for the two (2) years prior to the current financial statements year,
including a balance sheet and profit and loss statement for the most recent
prior year, all prepared in accordance with generally accepted accounting
principles.
41. TIME
Time is of the essence with respect to the performance of every provision
of this Lease in which time or performance is a factor.
42. PRIOR AGREEMENT; AMENDMENTS
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No? provisions of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or theIr respective successors
in interest.
43. SEPARABILITY
Any provision of this Lease which shall prove to be invalid, void, or
illegal in no way affects, impairs, or invalidates any other provision hereof,
and any such other provisions shall remain in full force and effect.
44. RECORDING
Neither Landlord nor Tenant shall record this Lease nor a short form
memorandum thereof without the consent of the other.
45. CONSENTS
Whenever the consent of either party is required hereunder such consent
shall not be unreasonably withheld.
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46. LIMITATION OF LIABILITY
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach, or default hereunder by Landlord:
(a) The sole exclusive remedy shall be against the Landlord's
interest in the building;
(b) No partner of Landlord shall be sued or named as a party in
any suit or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) No service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the partnership;
(d) No partner of Landlord shall be required to answer or
otherwise plead to any service of process;
(e) No judgment will be taken against any partner of Landlord;
(f) Any judgment taken against any partner of Landlord may be
vacated and set aside at any time nune pro tune.
(g) No writ of execution will ever be levied against the assets of
any partner of Landlord;
(h) These covenants and agreements are enforceable both by
Landlord and also by any partner of Landlord.
47. RIDERS
Clauses, plats, and riders, if any, signed by Landlord and Tenant and
affixed to this Lease are a part hereof
48. EXHIBITS
All exhibits attached hereto are incorporated into this Lease.
49. MODIFICATION FOR LENDER
If, in connection with obtaining construction, interim, or permanent
financing for the building the lender shall request reasonable modifications in
this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay, or defer its consent thereto, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
50. OPTION TO EXTEND
(a) Provided that Tenant is not in default hereunder either at the time
of exercise or at the time the extended term commences, Tenant shall have the
option to extend the initial term of this Lease FOR ONE (1) ADDITIONAL PERIOD OF
THREE (3) YEARS ("Option Period") on the same terms, covenants and conditions
provided herein, except that upon such renewal the monthly installments of
Annual Basic Rent due hereunder shall be determined at the time notice to extend
is given. Tenant shall exercise its option by giving Landlord written notice
("Option Notice") no later than one hundred eighty (180) days prior to the
expiration of the initial term.
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(b) The monthly installments of Annual Basic Rent for the Option Period
shall be determined as follows:
(i) Within fifteen (15) business days after Landlord's receipt of
the Option Notice, the parties shall attempt to agree on the monthly rent for
the Option Period in question BASED UPON THE THEN FAIR MARKET RENTAL VALUE of
the Premises. If the parties agree on the monthly rent for the Option Period
within such fifteen (15) day period, they shall immediately execute an amendment
to this Lease stating the monthly rent for the Option Period.
(ii) The "then fair market rental value of the Premises" shall mean
the fair market monthly rental value of the premises as of the commencement of
the Option Period, taking into consideration the uses permitted under this
Lease, the quality, size, design and location of the Premises, and comparable
buildings located within a one (1) mile radius of the Premises. In no event
shall the then fair market monthly rental value of the Premises for the Option
Period be less than the monthly installments of Annual Basic Rent last payable
under the Lease.
(iii) Within seven (7) days after the expiration of the fifteen (15)
day period, each party, at its cost and by giving notice to the other party,
shall appoint a real estate appraiser or commercial leasing salesperson
("Appraiser") with at least five (5) years' full-time commercial appraisal or
leasing experience in the area in which the Premises are located to appraise and
set the then fair market monthly rent for the Premises for the Option Period.
(c) If Tenant objects to the monthly rent that has been determined,
Tenant shall have the right to rescind its exercise of the option to extend and
have this Lease expire at the end of the initial term, provided that Tenant pays
for all reasonable costs incurred by Landlord in connection with the appraisal
procedure. Tenant's election to allow this Lease to expire at the end of the
initial term must be exercised by delivering written notice of exercise to
Landlord within ten (10) days after the rent determination procedure has been
completed and Tenant has received notice of the monthly rent as determined by
appraisal. If Tenant does not so exercise its election to terminate this Lease
within the ten (10) day period, the initial term of this Lease shall be extended
as provided in this paragraph. Notwithstanding the foregoing, if Tenant elects
to so rescind exercise of its option to extend and, at the time of such election
there are less than one hundred eighty (180) days remaining on the initial term
of the Lease, then, the termination of this Lease shall not be effective until
one hundred eighty (180) days after Landlord's receipt of Tenant's notice of
rescission. During any period that the term of this Lease is so extended beyond
the original termination date, Tenant shall be required to pay the amount of
monthly rent determined pursuant to the appraisal procedure.
(d) This option to extend and any rights granted to Tenant hereunder
shall be personal to Tenant and any of its affiliates and subsidiaries. No
rights granted to Tenant pursuant to this paragraph shall be in any way
applicable to subtenants or assignees of Tenant unless such subtenant or
assignee is an affiliate or subsidiary of Tenant.
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IN WITNESS WHEREOF. the parties have executed this Lease as of the date
first written above.
LANDLORD ADDRESS:
- -------- -------
PRINCETON INVESTMENT GROUP LLC 5300 STEVENS CREEK BLVD, SUITE 450
SAN JOSE, CA 95129
By /s/ PAUL LING
---------------------------
Paul Ling
President
TENANT ADDRESS:
- ------ -------
XACCT
By /s/ ERIC GRIES
----------------------------
Its Pres & Ceo
---------------------------
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EXHIBIT A
OUTLINE OF TENANT'S FLOOR PLAN
2900 LAKESIDE, SUITE 201
SANTA CLARA, CA 95054
EXHIBIT B
1
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WORK LETTER AGREEMENT
This Work Letter Agreement is entered into as of the day of February
2,2000, by and between Princeton Investment Group LLC, ("Landlord") and XACCT, A
DELAWARE CORPORATION ("TENANT").
RECITALS:
A. Concurrently with the execution of this Work Letter Agreement, Landlord and
Tenant have entered into a lease (the "Lease") covering certain premises (the
"Premises") more particularly described in EXHIBIT A attached to the Lease.
B. In order to induce Tenant to enter into the Lease (which is hereby
incorporated by reference to the extent that the provisions of this Work Letter
Agreement may apply thereto) and in consideration of the mutual covenants
hereinafter contained, Landlord and Tenant hereby agree as follows:
1. COMPLETION SCHEDULE
Within ten (10) days after the execution of the Lease, Landlord shall
deliver to Tenant, for Tenant's review and approval, a schedule (the "Work
Schedule") setting forth a timetable for the planning and completion of the
installation of the Tenant Improvements to be construction in the Premises. The
Work Schedule shall set forth each of the various items of work to be done by or
approval to be given by Landlord and Tenant in connection with the completion of
the Tenant Improvements. Such schedule shall be submitted to Tenant for its
approval and, upon approval by both Landlord and Tenant, such schedule shall
become the basis for completing the Tenant Improvement work. If Tenant shall
fail to approve the Work Schedule, as it may be modified after discussions
between Landlord and Tenant, within five (5) working days after the date such
schedule is first received by Tenant, Landlord may, at its option, terminate the
Lease and all of its obligations thereunder.
2. TENANT IMPROVEMENTS
Reference herein to "Tenant Improvements" shall be a build out per the RICHARD
MINOR PLAN dated (DATE TO BE ENTERED HERE AFTER SPACE PLANNING FINALIZED), to
the extent that such construction and/or build out does not exceed the "Tenant
Improvement Allowance" provided in Section 6 of this Work Letter Agreement and
shall be subject to all provisions in Section 6 of this Work Letter Agreement.
3. TENANT IMPROVEMENT PLANS
Immediately after the execution of the Lease, Tenant agrees to meet with
Landlord's architect and/or space planner to prepare a space plan for the layout
of the Premises. Based upon such space plan, Landlord's architect shall prepare
final working drawings and specifications for the Tenant Improvements. Such
final working drawings and specifications may be referred to herein as the
"Tenant Improvement Plans."
4. FINAL PRICING AND DRAWING SCHEDULE
After the preparation of the space plan and after Tenant's written approval
thereof, in accordance with the Work Schedule, Landlord shall cause its
architect to prepare and submit to Tenant the final working drawings and
specifications referred to in Paragraph Three (3) hereof Such working drawings
shall be approved by Landlord and Tenant in accordance with the Work Schedule
and shall thereafter be submitted to the appropriate governmental body for plan
checking and a building permit. Landlord, with Tenant's cooperation, shall cause
to be made any changes in the plans and specifications necessary to obtain the
building permit. Concurrent with the plan checking, Landlord shall have prepared
a final pricing for Tenant's approval, taking into account any modifications
which may be required to reflect changes in the plans and specifications
required by the city or county in which the Premises are located. After final
approval of the working drawings, no further changes to the Tenant Improvement
Plans may be made without the prior written approval from both Landlord and
Tenant, and then only after agreement by Tenant to pay any excess costs
resulting from such changes.
5. CONSTRUCTION OF TENANT IMPROVEMENTS
After the Tenant Improvements Plans have been prepared and approved, the
final pricing has been approved and a
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building permit for the Tenant Improvements has been issued, Landlord shall
enter into a construction contract with its contractor for the installation of
the Tenant Improvements in accordance with the Tenant Improvement Plans.
Landlord shall supervise the completion of such work and shall use its best
efforts to secure completion of the work in accordance with the Work Schedule.
The cost of such work shall be paid as provided in Paragraph Six (6) hereof.
6. PAYMENT OF COST OF THE TENANT IMPROVEMENTS
(a) Landlord hereby grants to Tenant a "Tenant Allowance" of a total not to
exceed SIX THOUSAND DOLLARS AND NO/100THS ($6,000.00). TENANT SHALL BEAR THE
SOLE RESPONSIBILITY FOR AN IMPROVEMENT EXPENSES IN EXCESS OF THE ALLOWANCE
("OVERAGE") PROVIDED, IF ANY. Such Tenant Allowance shall be used only for:
(i) Payment of the cost of preparing the space plan and the final working
drawings and specifications, including mechanical, electrical and structural
drawings and of all other aspects of the Tenant Improvement Plans. The Tenant
Allowance will not be used for the payment of extraordinary design work not
included within the scope of Landlord's building standard improvements or for
payments to any other consultants, designers, or architects other than
Landlord's architect and/or space planner;
(ii) The payment of permit and license fees relating to construction of
the Tenant Improvements;
(iii) Construction of the Tenant Improvements, including, without
limitation, the following:
(1) Installation within the Premises of all partitioning, doors,
floor coverings, finishes, ceilings, wall coverings and painting, millwork, and
similar items;
(2) All electrical wiring, lighting fixtures, outlets, and switches,
and other electrical work to be installed within the Premises;
(3) The furnishing and installation of all duct work, tem1inal
boxes, fuses and accessories required for the completion of the heating,
ventilation and air conditioning systems within the Premises, including the cost
of meter and key control for after-hour air conditioning;
(4) Any additional Tenant requirements including, but not limited to
odor control, special heating, ventilation and air conditioning, noise or
vibration control, or other special systems;
(5) All fire and life safety control systems such as fire walls,
sprinklers, halon, fire alarms, including piping, wiring, and accessories
installed within the Premises; and
(6) All plumbing, fixtures, pipes, and accessories to be installed
within the Premises.
(b) The cost of each item shall be charged against the Tenant Allowance. In
the event that the cost of installing the Tenant Improvements, as established by
Landlord's final pricing schedule, shall exceed the Tenant Allowance, or if any
of the Tenant Improvements are not to be paid out of the Tenant Allowance as
provided in Paragraph Six (6) above, the excess shall be paid by Tenant to
Landlord prior to the commencement of construction of the Tenant Improvements.
(c) In the event that, after the Tenant Improvement Plans have been prepared
and a price therefor established by Landlord, Tenant shall require any changes
or substitutions to the Tenant Improvement Plans, any additional costs thereof
shall be paid by Tenant to Landlord prior to the commencement of such work.
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7. COMPLETION AND RENTAL COMMENCEMENT DATE
The commencement of the term of this Lease and Tenant's obligation for the
payment of rental under the Lease shall not commence until substantial
completion of construction of the Tenant improvements. However, if there shall
be a delay in substantial completion of the Tenant improvements as a result of:
(i) Tenant's failure to approve any item or perform any other
obligation in accordance with and by the date specified in the Work Schedule;
(ii) Tenant's request for materials, finishes or installations other
than those readily available; or
(iii) Tenant's changes in the Tenant improvement Plans after their
approval by Tenant;
then commencement of the term of the Lease and the rental
commencement date shall be accelerated by the number of days of such delay.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first written above.
LANDLORD ADDRESS:
- -------- --------
PRINCETON INVESTMENT GROUP LLC 5300 STEVENS CREEK BLVD, SUITE 450
SAN JOSE, CA 95129
By /s/ PAUL LING
----------------------------
Paul Ling
President
TENANT ADDRESS:
- ------ --------
XACCT
By /s/ ERIC GRIES
------------------------------
Eric Gries
Its Pres & Ceo
-----------------------------
4
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EXHIBIT C
STANDARDS FOR UTILITIES AND SERVICES
The following Standards for Utilities and Services are in effect. Landlord
resources the right to adopt nondiscriminatory modifications and additions
hereto.
As long as Tenant is not in default under any of the terms, covenants,
conditions, provisions, or agreements of this Lease, Landlord shall:
(a) Provide non-attended automatic elevator facilities Monday through Friday,
except holidays, from 8:00 a.m. to 6:00 p.m.
(b) On Monday through Friday, except holidays, from 7:00 a.m. - 6:00 p.m.
(and other times for a reasonable additional charge to be fixed by Landlord),
ventilate the Premises and furnish air conditioning or heating on such days and
hours, when in the judgment of Landlord it may be required for the comfortable
occupancy of the Premises. The air conditioning system achieves maximum cooling
when the window coverings are closed. Landlord shall not be responsible for room
temperatures if Tenant does not keep all window coverings in the Premises closed
whenever the system is in operation. Tenant agrees to cooperate fully at all
times with Landlord, and to abide by all regulations and requirements which
Landlord may prescribe for the proper function and protection of the air
conditioning system. Tenant agrees not to connect any apparatus, device,
conduit, or pipe to the building chilled and hot water air conditioning supply
lines. Tenant further agrees that neither Tenant nor its servants, employees,
agents, visitors, licensees, or contractors shall at any time enter mechanical
installations or facilities of the building or adjust, tamper with, touch or
otherwise in any manner affect said installations or facilities. The cost of
maintenance and service calls to adjust and regulate the air conditioning system
shall be charged to Tenant if the need for maintenance work results from either
Tenant's adjustment of room thermosats or Tenant's failure to comply with its
results from either Tenant's adjustment of room thermostats or Tenant's failure
to comply with its obligations under this section, including keeping window
coverings closed as needed. Such work shall be charged at hourly rates equal to
then current journeymen's wages for air conditioning mechanics.
(c) Landlord shall furnish to the Premises, during the usual business hours
on business days, electric current as required by the Building standard office
lighting and fractional horsepower office business machines in the amount of
approximately two and one-half (2.5) KWH watts per square foot. Tenant agrees,
should its electrical installation or electrical consumption be in excess of the
aforesaid quantity or extend beyond normal business hours, to reimburse Landlord
monthly for the measured consumption at the average cost per kilowatt hour
charged to the building during the period. If a separate meter is not installed
at Tenant's cost, such excess costs will be established by an estimate agreed
upon by Landlord and Tenant, and if the parties fail to agree, as established by
an independent licensed engineer. Said estimates to be reviewed and adjusted
quarterly. Tenant agrees not to use any apparatus or device in, or upon, or
about the Premises which may in any way increase the amount of such services
usually furnished or supplied to said Premises, and Tenant further agrees not to
connect any apparatus or device with wire, conduits, pipes, or other means by
which such services are supplied, for the purpose of using additional or unusual
amounts of such services without written consent of Landlord. Should Tenant use
the same to excess, the refusal on the part of Tenant to pay upon demand of
Landlord the amount eStablished by Landlord for such excess charge shall
constitute a breach of the obligation to pay rent under this Lease and shall
entitle Landlord to the rights therein granted for such breach. At all times
Tenant's use of electric current shall never exceed the capacity of the feeders
to the building or the risers or wiring installation and Tenant shall not
install or use or permit the installation or use of an excessive amount of
computers or electronic data processing equipment in the premises, without the
prior written consent of Landlord.
(d) Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses, or consumes water for any purposes
in addition to ordinary drinking and lavatory purposes of which fact Tenant
constitutes Landlord to be the sole judge, Landlord may install a water meter
and thereby measure Tenant's water consumption for all purposes. Tenant shall
pay Landlord for the cost of the meter and the cost of the installation thereof
and throughout the duration of Tenant's occupancy, Tenant shall keep said meter
and installation equipment in good working order and repair at Tenant's own cost
and expense, in default of which Landlord may cause such meter and equipment
replaced or repaired and collect the cost thereof from Tenant. Tenant agrees to
pay for water consumed, as shown on said meter, as and when bills are rendered,
and on default in making such payment, Landlord may pay such charges and collect
the same from Tenant Any such costs or expenses incurred, or payments made by
Landlord for any of the reasons or purposes hereinabove stated shall be deemed
to be additional rent payable by Tenant and collectible by Landlord as such.
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(e) Provide janitor service to the Premises, provided the same are kept
reasonably in order by Tenant, and if to be kept clean by Tenant, no one other
than persons approved by Landlord shall be permitted to enter the Premises for
such purposes. If the Premises are not used exclusively as offices, they shall
be kept clean and in order by Tenant, at Tenant's expense, and to the
satisfaction of Landlord, and by persons approved by Landlord. Tenant shall pay
to Landlord the cost of removal of any of Tenant's refuse and rubbish, to the
extent that the same exceeds the refuse and rubbish usually attendant upon the
use of the Premises as offices.
Landlord reserves the right to stop service of the elevator, plumbing,
ventilation, air conditioning, and electric systems, when necessary, by reason
of accident or emergency or for repairs, alterations or improvements, in the
judgment of Landlord desirable or necessary to be made, until said repairs,
alterations or improvements shall have been completed, and shall further have no
responsibility or liability for failure to supply elevator facilities, plumbing,
ventilating, air conditioning, or electric service, when prevented from so doing
by strike or accident or by any cause beyond Landlord's reasonable control, or
by laws, rules, orders, ordinances, directions, regulations, or requirements of
any federal, State, county, or municipal authority or failure of gas, oil, or
other suitable fuel supply or inability by exercise of reasonable diligence to
obtain gas, oil, or other suitable fuel. It is expressly understood and agreed
that any covenants on Landlord's part to furnish any service pursuant to any of
the terms, covenants, conditions, provisions, or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, shall not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever beyond Landlord's control.
2
<PAGE>
EXHIBIT D
RULES AND REGULATIONS
1. Except as specifically provided in the Lease to which these rules and
regulations are attached, no sign, placard, picture, advertisement, name,
or notice shall be installed or displayed on any part of the outside or
inside of the building without the prior written consent of Landlord.
Landlord shall have the right to remove, at Tenant's expense and without
notice, any sign installed or displayed in violation of this rule. All
approved signs or lettering on doors and walls shall be printed, painted,
affixed, or inscribed at the expense of Tenant by a person approved by
Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades, screens, or
hanging plants or other similar objects attached to or used in connection
with any window or door of the Premises, or placed on any windowsill, which
is visible from the exterior of the Premises, Tenant shall immediately
discontinue such use. Tenant shall not place anything against or near glass
partitions, doors, or windows which may appear unsightly from outside the
Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits, entrances,
elevators, escalators, or stairways of the building. The halls, passages,
exits, entrances, shopping malls, elevators, and stairways are not open to
the general public, but are open, subject to reasonable regulation, to
Tenant's business invitee. Landlord shall in all cases retain the right to
control and prevent access thereto of all persons whose presence in the
judgment of Landlord would be prejudicial to the safety, character,
reputation, and interest of the building and its tenants; provided that
nothing herein contained shall be construed to prevent such access to
persons with whom any tenant normally deals in the ordinary course of its
business, unless such persons are engaged in illegal or unlawful
activities. No tenant and no employee or invitee of any tenant shall go
upon the roof of the building.
4. The directory of the building will be provided exclusively for the display
of the name and location of tenants only, and Landlord reserves the right
to exclude any other names therefrom.
5. All cleaning and janitorial services for the building and the Premises
shall be provided exclusively through Landlord, and except with the written
consent of Landlord, no person or persons other than those approved by
Landlord shall be employed by Tenant or permitted to enter the building for
the purpose of cleaning the same. Tenant shall not cause any unnecessary
labor by carelessness or indifference to the good order and cleanliness of
the Premises.
6. Landlord will furnish Tenant, free of charge, with two keys to each door
lock in the Premises. Landlord may make a reasonable charge for any
additional keys. Tenant shall not make or have additional keys, and Tenant
shall not alter any lock or install a new additional lock or bolt on any
door of its Premises. Tenant, upon the termination of its tenancy, shall
deliver to Landlord the keys of all doors which have been furnished to
Tenant, and in the event of loss of any keys so furnished, shall pay
Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm, or similar
services, it shall first obtain, and comply with, Landlord's instructions
in their installation.
<PAGE>
8. Tenant shall not place a load upon any floor of the Premises which exceeds
the load per square foot which such floor was designed to carry and which
is allowed by law. Landlord shall have the right to prescribe the weight,
size, and position of all equipment, materials, furniture, or other
property brought into the building. Heavy objects shall, if considered
necessary by Landlord, stand on such platforms as determined by Landlord to
be necessary to properly distribute the weight, which platforms shall be
provided at Tenant's expense. Business machines and mechanical equipment
belonging to Tenant, which cause noise or vibration that may be transmitted
to the structure of the building or to any space therein to such a degree
as to be objectionable to Landlord or to any tenants in the building, shall
be placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to eliminate noise or vibration.
The persons employed to move such equipment in or out of the building must
be acceptable to Landlord. Landlord will not be responsible for loss of, or
damage to, any such equipment or other property from any cause, and all
damage done to the building by
<PAGE>
maintaining or moving such equipment or other property shall be repaired at
the expense of Tenant.
9. Tenant shall not use or keep in the Premises any kerosene, gasoline,
inflammable, or combustible fluid or material other than those limited
quantities necessary for the operation of maintenance of office equipment.
Tenant shall not use or permit to be used in the Premises any foul or
noxious gas or substance, or permit or allow the Premises to be occupied or
used in a manner offensive or objectionable to Landlord or other occupants
of the building by reason of noise, odors, or vibrations, nor shall Tenant
bring into or keep in or about the Premises any birds or animals.
10. Tenant shall not use any method of heating or air conditioning other than
that supplied by Landlord.
11. Tenant shall not waste electricity, water, or air conditioning and agrees
to cooperate fully with Landlord to assure the most effective operation of
the building's heating and air conditioning and to comply with any
governmental energy-saving rules, laws, or regulations of which Tenant has
actual notice.
12. Landlord reserves the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the building.
13. Landlord reserves the right to exclude from the building between the hours
of 6:30 p.m. and 6:30 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal
holidays, any person unless that person is known to the person or employee
in charge of the building and has a pass or is properly identified. Tenant
shall be responsible for all persons for whom it requests passes and shall
be liable to Landlord for all acts of such persons. Landlord shall not be
liable for damages for any error with regard to the admission to or
exclusion from the building of any person.
14. The toilet rooms, toilets, urinals, wash bowls, and other apparatus shall
not be used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever shall be thrown therein.
The expense of any breakage, stoppage, or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees
or invitees, shall have caused it.
15. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets, or any other goods or merchandise
to the general public in or on the Premises. Tenant shall not make any
room-to-room solicitation of business from other tenants in the building.
Tenant shall not use the Premises for any business or activity other than
that specifically provided for in Tenant's Lease.
16. Tenant shall not install any radio or television antenna, loudspeaker, or
other devices on the roof or exterior walls of the building. Tenant shall
not interfere with radio or television broadcasting or reception from or in
the building or elsewhere.
17. Tenant shall not mark, drive nails, screws, or drill into the partitions,
woodwork, or plaster or in any way deface the Premises or any part thereof,
except in accordance with the provisions of the Lease pertaining to
alterations. Landlord reserves the right to direct electricians as to where
and how telephone and telegraph wires are to be introduced to the Premises.
Tenant shall not cut or bore holes for wires. Tenant shall not affix any
floor covering to the floor of the Premises in any manner except as
approved by Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
18. Tenant shall not install, maintain, or operate upon the Premises any
vending machines without the written consent of Landlord.
19. Canvassing, soliciting, and distribution of handbills or any other written
material, and peddling in the building are prohibited and Tenant shall
cooperate to prevent such activities.
20. Landlord reserves the right to exclude or expel from the building any
person who, in Landlord's judgement, is intoxicated or under the influence
of liquor or drugs or who is in violation of any of the Rules or
Regulations of the building.
<PAGE>
21. Tenant shall store all its trash and garbage within its Premises or in
other facilities provided by Landlord. Tenant shall not place in any trash
box or receptacle any material which cannot be disposed of in the ordinary
and customary manner of trash and garbage disposal. AIl garbage and refuse
disposal shall be made in accordance with directions issued from time to
time by Landlord.
22. The Premises shall not be used for the storage of merchandise held for sale
to the general public, or for lodging or for manufacturing of any kind, not
shall the Premises be used for any improper, immoral, or objectionable
purpose. No cooking shall be done or permitted on the Premises without
Landlord's consent, except that the use by Tenant of Underwriter'
Laboratory approved equipment for brewing coffee, tea, hot chocolate, and
similar beverages or use of microwave ovens for employee uses shall be
permitted, provided such equipment and use is in accordance with all
applicable federal, State, county, and city laws, codes, ordinances, rules,
and regulations.
23. Tenant shall not use in any space or in the public halls of the building
any hand truck except those equipped with rubber tires and side guards or
such other material-handling equipment as Landlord may approve. Tenant
shall not bring any other vehicles of any kind into the building.
24. Without the written consent of Landlord, Tenant shall not use the name of
the building in connections with or in promoting or advertising the
business of Tenant except as Tenant's address.
25. Tenant shall comply with all safety, fire protection, and evacuations
procedures and regulations established by Landlord or any governmental
agency.
26. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery, and pilferage, which includes keeping doors locked and
other means of entry to the Premises closed.
27. Tenant's requirements will be attended to only upon appropriate application
to the building management office by an authorized individual. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.
28. Landlord may waive anyone or more of these Rules and Regulations for the
benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant
or any other tenant, nor prevent Landlord from thereafter enforcing any
such Rules and Regulations against any or all of the tenants of the
building.
29. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify or amend, in whole or in part, the terms, covenants,
agreements, and conditions of Tenant's lease of its Premises in the
building.
30. Landlord reserves the right to make such other and reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety
and security, for care and cleanliness of the building and for the
preservation of good order therein. Tenant agrees to abide by all such
Rules and Regulations hereinabove stated and any additional rules and
regulations which are adopted.
31. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees, and
guests.
<PAGE>
EXHIBIT E
PARKING RULES AND REGULATIONS
The following rules and regulations shall govern use of the parking facilities
which are appurtenant to the building.
1. Tenant shall not park or permit the parking of any vehicle under its
control in any parking designated by Landlord as areas for parking by visitors
to the building. Tenant shall not leave vehicles in the parking areas overnight
nor park any vehicles in the parking areas other than automobiles, motorcycles,
motor driven or non-motor driven bicycles or four-wheeled trucks.
2. Parking stickers or any other device or form of identification supplied
by Landlord as a condition of use of the parking facilities shall remain the
property of Landlord. Such parking identification device must be displayed as
requested and may not be mutilated in any manner. The serial number of the
parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.
3. No overnight or extended term storage of vehicles shall be permitted.
4. Vehicles must be parked entirely within the painted stall lines of a
single parking stall.
5. All directional signs and arrows must be observed.
6. The speed limit within all parking areas shall be 5 miles per hour.
7. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posted;
(d) on ramps;
(e) in cross hatched areas; and
(f) in such other areas as may be designated by Landlord.
8. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicle is assumed by the parker.
9. Loss or theft of parking identification devices from automobiles must be
reported immediately, and a lost or stolen report must be filed by the customer
at that time. Landlord has the right to exclude any car from the parking
facilities that does not have an identification device.
10. Any parking identification devices found by the purchaser must be
reported immediately to avoid confusion.
11. Lost or stolen devices found by the purchaser must be reported
immediately to avoid confusion.
12. Washing, waxing, cleaning, or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
13. Landlord reserves the right to modify and/or adopt such other reasonable
and non-discriminatory rules and regulations for the parking facilities as it
deems necessary for the operation of the parking facilities. Landlord may refuse
to permit any person who violates these rules to park in the parking facilities,
and any violation of the rules shall subject the car to removal.
<PAGE>
EXHIBIT 10.14
XACCT XIS END-USER LICENSE AGREEMENT
This is the XIS End-user License Agreement (the "AGREEMENT") between you,
both the individual installing the Product and any legal entity such individual
acts for ("YOU"), and XACCT Technologies Inc. if you are situated in North
America or XACCT Technologies (1997) Ltd. if you are situated outside of North
America ("XACCT"). This Agreement governs all portions of the Product (as
defined below) except as otherwise provided in Section 2.4.
THIS PRODUCT CONTAINS CERTAIN COMPUTER PROGRAMS AND OTHER PROPRIETARY
MATERIAL, THE USE OF WHICH IS SUBJECT TO THIS END USER LICENSE AGREEMENT. BY
CLICKING THE BOX ENTITLED: "YES" OF TYPING "Y" OR "YES" LICENSEE WILL BE
AGREEING TO BE BOUND BY ALL THE TERMS AND RESTRICTIONS OF THIS LICENSE
AGREEMENT. LICENSEE SHOULD CAREFULLY READ THE FOLLOWING TERMS AND CONDITIONS
BEFORE CLICKING THE BOX ENTITLED "YES" OR TYPING "Y" OR "YES". IF THE LICENSEE
DOES NOT AGREE WITH ALL THE TERMS, THE LICENSEE MUST CLICK THE BOX ENTITLED "NO"
OR TYPE "N" OR "NO". TAKING ANY STEP TO SET-UP OR INSTALL THE PRODUCT
CONSTITUTES THE LICENSEE'S ASSENT TO AND ACCEPTANCE OF THIS END USER LICENSE
AGREEMENT. IF THESE TERMS ARE CONSIDERED AN OFFER BY XACCT, ACCEPTANCE IS
EXPRESSLY LIMITED TO THESE TERMS.
1. DEFINITIONS:
1.1. "PRODUCT" means the software programs comprising the XACCT XIS product,
including, INTER ALIA, the server and client portions of the XACCT XIS product
(excluding Schedule B software),original electronic media and all accompanying
manuals and other documentation, together with all enhancements, upgrades, and
extensions thereto that may be provided by XACCT or its licensors to You from
time to time.
1.2. "LICENSED CONFIGURATION" means the choice of products, features, and the
maximum number of instances of application on the approved network architecture
or any other hardware or software specifications, as declared by You in Your
purchase order, or request for License Key, and upon which the licensing fee was
based.
1.3. "LICENSED-SERVER" means the server (defined by the host ID declared by You
to XACCT) which enables the XIS server aspects of the Product to operate in
accordance with the Licensed Configuration.
1.4. "LICENSE KEY" means the code provided to You by XACCT which enables the
Product to operate on the Licensed-server for the specified Licensed
Configuration.
2. LICENSE:
XACCT hereby grants to You and only You a non-exclusive, non-sublicensable,
non-transferable license to use only the object code of the Product subject to
the terms and
<PAGE>
upon the conditions of this Agreement. You have no right to receive, use or
examine any source code or design documentation relating to the Product other
than as specifically stated in the Schedule [B] hereto relating to OmniORB that
may be distributed on the media along with the Product or in addition to the
Product.
2.2. This Agreement permits the use of the Licensed Configuration of the Product
by You. Such authorized use is controlled by the License Key, which enables the
Licensed-server to operate in accordance with the Licensed Configuration. If
your Licensed-server is disabled, XACCT may, at its sole discretion, issue You
another License Key which will enable You to operate this Product on a
substitute Licensed-server. In this event, You agree not to use the original
Licensed-server nor its License Key. You shall have the right to install certain
sections or component parts of the Product, if applicable, provided however,
that such installation does not exceed the authorized number of installations
specified in the applicable Licensed Configuration.
2.3. Except for a reasonable number of back-up copies of the software programs
included in the Product, You may not copy the Product (including without
limitation any associated documentation). All titles, trademarks and copyright
and restricted rights notices shall be reproduced on such back-up copies.
2.4. Software comprised of Category A Software (as described in SCHEDULE A) is
governed by this Agreement and the additional terms set forth in SCHEDULE A,
which, together with any attachments to SCHEDULE A, is incorporated into this
Agreement in its entirety. To the extent any additional terms set forth in
SCHEDULE A conflict with the provisions of the main body of this Agreement, the
terms in SCHEDULE A shall apply with respect to the corresponding Category A
Software. Category B Software includes all portions of software described in
this SCHEDULE B. Category B Software may be dynamically interoperable with the
client portion of the Product and is governed by the additional terms set forth
in this SCHEDULE B.
2.5. This Section 2.5 shall only apply if You are licensing the Product or
components or features of the Product for an initial evaluation period. The
Agreement is valid only for a period of thirty (30) days from the delivery of
the Product or components or features of the Product, and is designed to allow
You to evaluate the Product or components or features of the Product during such
period in order to determine whether or not You wish to enter into a longer-term
license agreement with XACCT. In the event that You determine to enter into a
longer-term license agreement with XACCT, XACCT will assign You a License Key
that will allow utilization of the Product or components or features of the
Product following any such evaluation period, and all of the terms and
conditions of this Agreement will continue to apply throughout the license
period. In the event that You determine not to enter into a licensing
transaction with XACCT by the end of the evaluation period, or that XACCT
advises You that discussions with respect to a licensing transaction have
terminated, Your rights under this Agreement shall terminate, You shall promptly
return the Product or components or features of the Product and all copies to
XACCT, You shall promptly destroy any derivative material relating to the
Product or components or features of the Product, and You shall not retain or
use any such material in any form or for any reason.
3. MAINTENANCE AND SUPPORT:
-2-
<PAGE>
XACCT has no obligation to provide support, maintenance, upgrades,
modifications, or new releases under this Agreement.
4. TITLE, PROTECTION OF INTELLECTUAL PROPERTY, TERMINATION:
4.1. The Product is protected under national and international copyright,
trademark and trade secret and patent laws. All right, title, and interest to
the Product shall remain with XACCT or its licensors. The license granted herein
does not constitute a sale of the Product or any portion or copy of it. A copy
of the Product is provided to You only to allow You to exercise your rights
under the license. The Product is licensed to You for your internal use only,
and the Product or any derivative or by product of the Product may not be
sub-licensed, re-sold, rented, or distributed to or used by (or for the benefit
of) any other party. Except as otherwise provided by law, you agree not to (or
permit others to) (i) decipher, reverse engineer, de-compile, disassemble, or
otherwise attempt to derive the source code of the Product, (ii) create
derivative works based on the Product or any part thereof, (iii) develop methods
to enable unauthorized parties to use the Product, (iv) develop any other
product containing any of the concepts and ideas contained in the Product or (v)
remove any Product identification, copyright or other notices. You may not
assign your rights under this Agreement without the prior written consent of
XACCT.
4.2. You agree that XACCT may terminate this Agreement at any time without prior
notice in the case of your breach of any of the provisions hereof. Upon
termination of this Agreement, You agree to cease all use of the Product and to
destroy the Product and all documentation and related materials in your
possession, and to certify their destruction. Except for the license granted in
Section 2 of this Agreement, the terms of this Agreement shall survive
termination.
XACCT or its licensors shall have the right, but not the obligation, to defend
or settle, at its discretion, any legal action against You arising from a claim
that Your permitted use of the Product under this Agreement infringes any
patent, copyright, or other ownership rights of a third party. You agree to
provide XACCT written notice of any such claim within ten (10) days of Your
notice thereof and provide reasonable assistance in its defense. XACCT or its
licensors have sole discretion and control over such defense and all
negotiations for a settlement or compromise, unless XACCT notifies You that it
does not intend to defend or settle such legal action, in which case You are
free to pursue any alternative You may have. The foregoing obligation, if any,
of XACCT or its licensors does not apply with respect to Product or portions or
components thereof: (i) not supplied by XACCT; (ii) which are modified after
shipment by XACCT, if the alleged infringement relates to such modification;
(iii) combined with other products, processes or materials where the alleged
infringement relates to such combination; (iv) where You continue allegedly
infringing activity after being notified thereof or after being informed of
modification that would have avoided the alleged infringement, or (v) where Your
use of the Product is incident to an infringement not resulting primarily from
the Product or is not strictly in accordance with this Agreement. THE FOREGOING
IS IN LIEU OF ANY WARRANTIES OF NONINFRINGEMENT WHICH ARE HEREBY DISCLAIMED.
4.4. In the event that any or all parts of the Product are held or are believed
by XACCT to infringe, XACCT may, at its sole discretion, (a) modify the Product
to be
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<PAGE>
non-infringing or (b) obtain for You a license to continue using the Product. If
it is not commercially reasonable to perform either of the above options, then
XACCT may, in its sole discretion, terminate this Agreement and refund the
license fees paid for the Product.
5. LIMITED WARRANTY; DISCLAIMER OF WARRANTIES AND LIMITED REMEDY:
XACCT warrants that for a period of ninety (90) days from the date You receive
the original License Key (i) the media on which the Product is furnished will be
free from defects in material and workmanship and (ii) the Product (except for
the portions licensed or provided to XACCT by third parties, including without
limitation Sun Microsystems, Inc. shall substantially conform to XACCT's user
manual, as it exists at the date of delivery. XACCT'S ENTIRE LIABILITY AND YOUR
SOLE AND EXCLUSIVE REMEDY SHALL BE, AT XACCT'S OPTION, EITHER: (I) RETURN OF THE
PRICE PAID FOR THE PRODUCT, RESULTING IN TERMINATION OF THIS AGREEMENT, OR (II)
REPAIR OR REPLACEMENT OF THE PRODUCT OR MEDIA THAT DOES NOT MEET THIS LIMITED
WARRANTY.
5.2. EXCEPT FOR THE LIMITED WARRANTY SET FORTH IN THE PRECEDING PARAGRAPH, THIS
PRODUCT IS PROVIDED TO YOU "AS IS". ALL EXPRESS OR IMPLIED CONDITIONS,
REPRESENTATIONS, AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGMENT ARE DISCLAIMED, EXCEPT TO THE EXTENT THAT SUCH DISCLAIMERS ARE
HELD TO BE LEGALLY INVALID. XACCT DOES NOT WARRANT THAT THE PRODUCT WILL MEET
YOUR REQUIREMENTS OR THAT ITS OPERATION WILL BE UNINTERRUPTED OR ERROR FREE OR
THAT ALL DEFECTS WILL BE CORRECTED.
SOME STATES, PROVINCES OR COUNTRIES DO NOT ALLOW THE EXCLUSION OF IMPLIED
WARRANTIES OR LIMITATIONS ON HOW LONG AN IMPLIED WARRANTY MAY LAST, SO THE ABOVE
LIMITATIONS MAY NOT APPLY TO YOU. THIS WARRANTY GIVES YOU SPECIFIC LEGAL RIGHTS.
YOU MAY HAVE OTHER RIGHTS WHICH VARY FROM STATE TO STATE, COUNTRY TO COUNTRY.
6. LIMITATION OF LIABILITY: TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
XACCT OR ITS SUPPLIERS OR LICENSORS ARE NOT LIABLE TO YOU OR ANY THIRD PARTY
UNDER ANY LEGAL THEORY (INCLUDING, WITHOUT LIMITATION, TORT OR CONTRACT) FOR ANY
DAMAGES ARISING OUT OF THIS AGREEMENT OR THE USE OF OR THE INABILITY TO USE THE
PRODUCT WHETHER ACTUAL, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL,
INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR SAVINGS, LOSS OF DATA, LOSS OF
SYSTEM AVAILABILITY, LOSS OF COMPUTER RUN TIME OR COST OF COVER. THESE
LIMITATIONS SHALL APPLY WHETHER OR NOT XACCT OR ITS LICENSORS HAVE BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL
PURPOSE OR ANY LIMITED REMEDY PROVIDED HEREIN. XACCT'S AND ITS SUPPLIERS' AND
LICENSORS' MAXIMUM AGGREGATE LIABILITY FOR DAMAGES SHALL BE LIMITED TO THE
LICENSE FEES RECEIVED BY XACCT
-4-
<PAGE>
UNDER THIS AGREEMENT FOR THE PARTICULAR PRODUCT WHICH CAUSED THE DAMAGES.
SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF INCIDENTAL
OR CONSEQUENTIAL DAMAGES OR OTHER FORMS OF DAMAGES OR LIABILITY, SO THE ABOVE
LIMITATION OR EXCLUSION MAY NOT APPLY TO YOU.
7. GENERAL:
7.1. The Agreement sets forth the entire understanding and agreement between You
and XACCT and supersedes any other communications or advertising with respect to
the Product. This Agreement may be amended only by a writing signed by both
parties. If any provision of this Agreement is held to be invalid or
unenforceable by a court of competent jurisdiction, that provision of the
Agreement will be enforced to the maximum extent permissible so as to effect the
intent of the Agreement, and the remainder of the provisions of this Agreement
shall remain in full force and effect.
7.2. For users in North America the laws of the State of California shall govern
all issues arising under or relating to this Agreement, without giving effect to
the conflict of laws principles thereof. All disputes arising under or relating
to this Agreement shall be resolved exclusively in the appropriate court in
Santa Clara, California, and it is explicitly agreed that no other court shall
have such jurisdiction. This Agreement will not be governed by the United
Nations Convention on Contracts for the International Sales of Goods, the
application of which is expressly excluded. For users outside North America the
laws of the State of Israel shall govern all issues arising under or relating to
this Agreement, without giving effect to the conflict of laws principles
thereof. All disputes arising under or relating to this Agreement shall be
resolved exclusively in the appropriate court in Tel-Aviv, Israel, and it is
explicitly agreed that no other court shall have such jurisdiction. This
Agreement will not be governed by the United Nations Convention on Contracts for
the International Sales of Goods, the application of which is expressly
excluded.
7.3. This Product is sold solely for use in the NAFTA countries and Europe. The
Product is subject to export control laws of the United States and Israel. By
accepting this Agreement, You are agreeing to the foregoing and warrant that You
are not: (i) located in, are under the control of, or a national or resident of
any country subject to U.S. embargo or (ii) on the U.S. Treasury Department's
list of Specially Designated Nationals or the US Commerce Department's Table of
Deny Orders. You agree that the Product will not be shipped, transferred, or
exported into any country or used in any manner prohibited by the law.
7.4. If You are an agency, department, or other entity of the United States
Government ("GOVERNMENT"), Your use, duplication, reproduction, release,
modification, disclosure or transfer of the Product, or of any related
documentation of any kind, including technical data, is restricted in accordance
with Federal Acquisition Regulation ("FAR") 12.212 for civilian agencies and
Defense Federal Acquisition Regulation Supplement ("DFARS") 227.7202 for
military agencies. The Product is commercial. The use of the Product by any
Government agency, department, or other entity of the Government is further
restricted in accordance with the terms of this Agreement, or any modification
hereto. Contractor/manufacturer in North America is XACCT Technologies Inc.
(under license) 2855 Kifer Road, Suite
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<PAGE>
105, Santa Clara, California 95051 and outside North America : XACCT
Technologies (1997) Ltd., 31 Lechi Street, Bnei-Brak, Israel 51200.
7.5. Should You have any questions concerning this Agreement including issues of
interoperability or questions concerning XACCT's licensors contact XACCT the
appropriate XACCT entity at the address set forth in the preceding paragraph.
7.6. You shall not disclose results of benchmark tests of the Product or any
part therein to any third party without XACCT's prior written consent.
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<PAGE>
SCHEDULE A
Category A Software includes all portions of the Product described in this
SCHEDULE A. Category A Software is governed by the main body of this Agreement
and the additional terms set forth in this SCHEDULE A. To the extent any
additional terms set forth in this SCHEDULE A conflict with the provisions of
the main body of this Agreement, the terms in SCHEDULE A shall apply with
respect to the corresponding Category A Software.
The portion of the Product provided by Sun Microsystems, Inc. ("JAVA
RUNTIME PORTION" as described below) is governed by the main body of this
Agreement and the additional terms set forth in ATTACHMENT 1 to this SCHEDULE A.
For purposes of ATTACHMENT 1 to this SCHEDULE A, "Licensee" means You and
"Software" means the Java Runtime Portion.
Java Runtime Portion:
JAVA(TM) RUNTIME ENVIRONMENT VERSION 1.2.1
<PAGE>
ATTACHMENT 1 TO SCHEDULE A
SPECIFIC TERMS FOR THE BINARY CODE LICENSE TO JAVA
RUNTIME PORTION OF THE PRODUCT
--------------------------------------------------
1. JAVA PLATFORM INTERFACE. Licensee may not modify the Java Platform Interface
("JPI", identified as classes contained within the "java" package or any
subpackages of the "java" package), by creating additional classes within the
JPI or otherwise causing the addition to or modification of the classes in the
JPI, or by creating other interfaces. In the event that Licensee creates any
Java-related API and distributes such API to others for applet or application
development, Licensee must promptly publish broadly, an accurate specification
for such API for free use by all developers of Java-based software.
2. RESTRICTIONS. Software is confidential copyrighted information of Sun and
title to all copies is retained by Sun and/or its licensors. Except as
specifically authorized by Sun, Licensee may not make copies of Software, other
than a single copy of Software for archival purposes. Unless enforcement is
prohibited by applicable law, Licensee shall not modify, decompile, disassemble,
decrypt, extract, or otherwise reverse engineer Software. Software may not be
leased, assigned, or sublicensed, in whole or in part, except as specifically
authorized. Software is not designed or intended for use in on-line control of
aircraft, air traffic, aircraft navigation or aircraft communications; or in the
design, construction, operation or maintenance of any nuclear facility. Licensee
warrants that it will not use or redistribute the Software for such purposes.
Licensee may not publish or provide the results of any benchmark or comparison
tests run on Software to any third party without the prior written consent of
Sun. No right, title or interest in or to any trademark, service mark, logo or
trade name of Sun or its licensors is granted under this Agreement.
3. DISCLAIMER OF WARRANTY. SOFTWARE IS PROVIDED "AS IS," WITHOUT A WARRANTY OF
ANY KIND. ALL EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES, INCLUDING ANY
IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR
NON-INFRINGEMENT, ARE HEREBY EXCLUDED, EXCEPT TO THE EXTENT THAT THESE
DISCLAIMERS ARE HELD TO BE LEGALLY INVALID.
4. LIMITATION OF LIABILITY. SUN AND ITS LICENSORS SHALL NOT BE LIABLE FOR ANY
DAMAGES SUFFERED BY LICENSEE OR ANY THIRD PARTY AS A RESULT OF USING OR
DISTRIBUTING SOFTWARE. IN NO EVENT WILL SUN OR ITS LICENSORS BE LIABLE FOR ANY
LOST REVENUE, PROFIT OR DATA, OR FOR DIRECT, INDIRECT, SPECIAL, CONSEQUENTIAL,
INCIDENTAL OR PUNITIVE DAMAGES, HOWEVER CAUSED AND REGARDLESS OF THE THEORY OF
LIABILITY, ARISING OUT OF THE USE OF OR INABILITY TO USE SOFTWARE, EVEN IF SUN
HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
5. EXPORT REGULATIONS. The Software and technical data delivered to the Licensee
subject to US export control laws and may be subject to export or import
regulations in other countries. The Licensee AGREES to comply strictly with all
such laws and regulations and acknowledges that IT HAS the responsibility to
obtain such licenses to export, re-export, or import as may be required by
applicable law.
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<PAGE>
6. RESTRICTED RIGHTS. Use, duplication or disclosure by the United States
government is subject to the restrictions as set forth in the Rights in
Technical Data and Computer Software Clauses in DFARS 227.7202-1 (a) and
227.7202-3(a) (1995), DFARS 252.227-7013 (c)(1)(ii)(Oct 1988), FAR 12.212 (a)
(1995), FAR 52.227-19 (June 1987), or FAR 52.227-14(ALT III) (June 1987), as
applicable.
7. GOVERNING LAW. Any action related to the license terms relating to the
Software will be governed by California law and controlling U.S. federal law. No
choice of law rules of any jurisdiction will apply.
8. SEVERABILITY. If any provision of these licensing terms is held to be
unenforceable, the other licensing terms and conditions will remain in effect
with the provision omitted, unless omission would frustrate the intent of the
parties, in which case the license to the Software will immediately terminate.
9. INTEGRATION. These license terms are the entire agreement between Licensee,
Sun and XACCT relating to the Software. It supersedes all prior or
contemporaneous oral or written communications, proposals, representations and
warranties and prevails over any conflicting or additional terms of any quote,
order, acknowledgment, or other communication between the parties relating to
its subject matter during the term of this Software license. No modification of
this Software license will be binding, unless in writing and signed by an
authorized representative of each party.
For further inquiries related to the Software please contact either XACCT or Sun
Microsystems, Inc. 901 San Antonio Road, Palo Alto, California 94303.
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<PAGE>
SCHEDULE B
Category B Software includes all portions of software described in this SCHEDULE
B. Category B Software may be dynamically interoperable with the library portion
of the client portion of the Product and has been distributed on the same media
as the Product for your convenience. The installation, use or further
redistribution of OmniOrb is governed by the additional terms set forth in this
SCHEDULE B AND THE GNU LICENSE (AS DEFINED BELOW).
DISCLAIMER OF WARRANTY. CATEGORY B SOFTWARE IS PROVIDED "AS IS," WITHOUT A
WARRANTY OF ANY KIND. ALL EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE OR NON-INFRINGEMENT, ARE HEREBY EXCLUDED.
LIMITATION OF LIABILITY. XACCT SHALL NOT BE LIABLE FOR ANY DAMAGES SUFFERED
BY LICENSEE OR ANY THIRD PARTY AS A RESULT OF USING OR DISTRIBUTING CATEGORY B
SOFTWARE. IN NO EVENT WILL XACCT BE LIABLE FOR ANY LOST REVENUE, PROFIT OR DATA,
OR FOR DIRECT, INDIRECT, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES,
HOWEVER CAUSED AND REGARDLESS OF THE THEORY OF LIABILITY, ARISING OUT OF THE USE
OF OR INABILITY TO USE OF THE CATEGORY B SOFTWARE, EVEN IF XACCT HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ATTACHMENT 1 TO SCHEDULE B
SPECIFIC TERMS FOR OMNIORB SOFTWARE AND RECOMPILED ASPECTS OF THE OMNIORB
SOFTWARE DISTRIBUTED FOR FREE AND MAY BE USED DYNAMICALLY WITH THE CLIENT
PORTION OF THE PRODUCT.
OmniORB and certain recompiled portions of OmniORB are distributed
independently on the same media as the client portion of the Product and the use
or further redistribution of OmniORB is expressly subject to and governed by the
terms of the GNU Library General Public license of the Free Software Foundation
(the "GNU License") as attached in the "Utility Directory" under the
sub-directory OmniORB "License.txt file." Prior to installing OmniORB please
review such license.
The object code to the OmniORB is freely redistributable as per the terms
and subject to the conditions as set forth in the GNU License.
-4-
<PAGE>
EXHIBIT 10.15
XACCT END-USER LICENSE AGREEMENT
This is the End-user License Agreement (the "AGREEMENT") between you,
both the individual installing the Product and any legal entity such individual
acts for (the "LICENSEE"), and XACCT Technologies Inc. if the Licensee is
situated in North America, or XACCT Technologies (1997) Ltd. if the Licensee is
situated outside of North America ("XACCT"). This Agreement governs all portions
of the Product (as defined below) except as otherwise provided in Section 2.4.
THIS PRODUCT CONTAINS CERTAIN COMPUTER PROGRAMS AND OTHER PROPRIETARY
MATERIAL, THE USE OF WHICH IS SUBJECT TO THIS AGREEMENT. BY CLICKING THE BOX
ENTITLED: "YES" OF TYPING "Y" OR "YES" LICENSEE WILL BE AGREEING TO BE BOUND BY
ALL THE TERMS AND RESTRICTIONS OF THIS AGREEMENT. LICENSEE SHOULD CAREFULLY READ
THE FOLLOWING TERMS AND CONDITIONS BEFORE CLICKING THE BOX ENTITLED "YES" OR
TYPING "Y" OR "YES". IF THE LICENSEE DOES NOT AGREE WITH ALL THE TERMS, THE
LICENSEE MUST CLICK THE BOX ENTITLED "NO" OR TYPE "N" OR "NO". TAKING ANY STEP
TO SET-UP OR INSTALL THE PRODUCT CONSTITUTES THE LICENSEE'S ASSENT TO AND
ACCEPTANCE OF THIS AGREEMENT. IF THESE TERMS ARE CONSIDERED AN OFFER BY XACCT,
ACCEPTANCE IS EXPRESSLY LIMITED TO THESE TERMS.
1. DEFINITIONS:
1.1. "PRODUCT" means the software programs, original electronic media and
all accompanying manuals and other documentation, together with all
enhancements, upgrades, and extensions thereto that may be provided by XACCT or
its licensors to the Licensee from time to time.
1.2. "LICENSED CONFIGURATION" means the choice of products, features, and
the maximum number of instances of application on the approved network
architecture or any other hardware or software specifications, as declared by
the Licensee in the Licensee's purchase order, or request for License Key, and
upon which the licensing fee was based.
1.3. "LICENSED-SERVER" means the server (defined by the host ID declared by
the Licensee to XACCT) which enables the Product to operate in accordance with
the Licensed Configuration.
1.4. "LICENSE KEY" means the code provided to the Licensee by XACCT which
enables the Product to operate on the Licensed-server for the specified Licensed
Configuration.
<PAGE>
2. LICENSE:
2.1. XACCT hereby grants to the Licensee and only the Licensee a
non-exclusive, non-sublicensable, non-transferable license to use only the
object code of the Product subject to the terms and upon the conditions of this
Agreement. The Licensee has no right to receive, use or examine any source code
or design documentation relating to the Product.
2.2. This Agreement permits the use of the Licensed Configuration of the
Product by the Licensee. Such authorized use is controlled by the License Key,
which enables the Licensed-server to operate in accordance with the Licensed
Configuration. If the Licensee's Licensed-server is disabled, XACCT may, at its
sole discretion, issue the Licensee another License Key which will enable the
Licensee to operate this Product on a substitute Licensed-server. In this event,
the Licensee agrees not to use the original Licensed-server nor its License Key.
The Licensee shall have the right to install certain sections or component parts
of the Product, if applicable, provided however, that such installation does not
exceed the authorized number of installations specified in the applicable
Licensed Configuration.
2.3. Except for a reasonable number of back-up copies of the software
programs included in the Product, the Licensee may not copy the Product
(including without limitation any associated documentation). All titles,
trademarks and copyright and restricted rights notices shall be reproduced on
such back-up copies.
2.4. Software comprised of Category A Software (as described in SCHEDULE A)
is governed by this Agreement and the additional terms set forth in SCHEDULE A,
which, together with any attachments to SCHEDULE A, is incorporated into this
Agreement in its entirety. To the extent any additional terms set forth in
SCHEDULE A conflict with the provisions of the main body of this Agreement, the
terms in SCHEDULE A shall apply with respect to the corresponding Category A
Software.
2.5. This Section 2.5 shall only apply if the Licensee is licensing the
Product or components or features of the Product for an initial evaluation
period. The Agreement is valid only for a period of thirty (30) days from the
delivery of the Product or components or features of the Product, and is
designed to allow the Licensee to evaluate the Product or components or features
of the Product during such period in order to determine whether or not the
Licensee wishes to enter into a longer-term license agreement with XACCT. In the
event that the Licensee determines to enter into a longer-term license agreement
with XACCT, XACCT will assign the Licensee a License Key that will allow
utilization of the Product or components or features of the Product following
any such evaluation period, and all of the terms and conditions of this
Agreement will continue to apply throughout the license period. In the event
that the Licensee determines not to enter into a licensing transaction with
XACCT by the end of the evaluation period, or that XACCT advises the Licensee
that discussions with respect to a licensing transaction have terminated, the
Licensee's rights under this Agreement shall terminate, the Licensee shall
promptly return the Product or components or
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<PAGE>
features of the Product and all copies to XACCT, the Licensee shall promptly
destroy any derivative material relating to the Product or components or
features of the Product, and the Licensee shall not retain or use any such
material in any form or for any reason.
3. MAINTENANCE AND SUPPORT:
XACCT has no obligation to provide support, maintenance, upgrades,
modifications, or new releases under this Agreement.
4. TITLE, PROTECTION OF INTELLECTUAL PROPERTY, TERMINATION:
4.1. The Product is protected under national and international copyright,
and trade secret and patent laws. All right, title, and interest to the Product
shall remain with XACCT or its licensors. The license granted herein does not
constitute a sale of the Product or any portion or copy of it. A copy of the
Product is provided to the Licensee only to allow the Licensee to exercise the
Licensee's rights under the license. The Product is licensed to the Licensee for
the Licensee's internal use only, and the Product or any derivative or by
product of the Product may not be sub-licensed, re-sold, rented, or distributed
to or used by (or for the benefit of) any other party. Except as otherwise
provided by law, the Licensee agrees not to (or permit others to) (i) decipher,
reverse engineer, de-compile, disassemble, or otherwise attempt to derive the
source code of the Product, (ii) create derivative works based on the Product or
any part thereof, (iii) develop methods to enable unauthorized parties to use
the Product, (iv) develop any other product containing any of the concepts and
ideas contained in the Product or (v) remove any Product identification,
copyright or other notices. The Licensee may not assign the Licensee's rights
under this Agreement without the prior written consent of XACCT.
4.2. The Licensee agrees that XACCT may terminate this Agreement at any time
without prior notice in the case of the Licensee's breach of any of the
provisions hereof. Upon termination of this Agreement, the Licensee agrees to
cease all use of the Product and to destroy the Product and all documentation
and related materials in the Licensee's possession, and to certify their
destruction. Except for the license granted in Section 2 of this Agreement, the
terms of this Agreement shall survive termination.
4.3 XACCT or its licensors shall have the right, but not the obligation,
to defend or settle, at its discretion, any legal action against the Licensee
arising from a claim that the Licensee's permitted use of the Product under this
Agreement infringes any patent, copyright, or other ownership rights of a third
party. The Licensee agrees to provide XACCT written notice of any such claim
within ten (10) days of the Licensee's notice thereof and provide reasonable
assistance in its defense. XACCT or its licensors have sole discretion and
control over such defense and all negotiations for a settlement or compromise,
unless XACCT notifies the Licensee that it does not intend to defend or settle
such legal action, in which case the Licensee is free to pursue any alternative
the Licensee may have. The foregoing obligation, if any, of XACCT or its
licensors does not apply with respect to Product or portions or components
thereof: (i) not supplied by XACCT; (ii) which are modified after shipment by
XACCT, if the alleged infringement
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<PAGE>
relates to such modification; (iii) combined with other products, processes or
materials where the alleged infringement relates to such combination; (iv) where
the Licensee continues allegedly infringing activity after being notified
thereof or after being informed of modification that would have avoided the
alleged infringement, or (v) where the Licensee's use of the Product is incident
to an infringement not resulting primarily from the Product or is not strictly
in accordance with this Agreement. THE FOREGOING IS IN LIEU OF ANY WARRANTIES OF
NONINFRINGEMENT WHICH ARE HEREBY DISCLAIMED.
4.4. In the event that any or all parts of the Product are held or are
believed by XACCT to infringe, XACCT may, at its sole discretion, (a) modify the
Product to be non-infringing or (b) obtain for the Licensee a license to
continue using the Product. If it is not commercially reasonable to perform
either of the above options, then XACCT may, in its sole discretion, terminate
this Agreement and refund the license fees paid for the Product with reasonable
depreciation for the period of actual usage.
5. LIMITED WARRANTY; DISCLAIMER OF WARRANTIES AND LIMITED REMEDY:
5.1. XACCT warrants that for a period of ninety (90) days from the date the
Licensee receives the original License Key (i) the media on which the Product is
furnished will be free from defects in material and workmanship and (ii) the
Product (except for the portions licensed or provided to XACCT by third parties,
including without limitation Sun Microsystems, Inc. or Oracle Software Systems
(Israel) Ltd. shall substantially conform to XACCT's user manual, as it exists
at the date of delivery. XACCT'S ENTIRE LIABILITY AND THE LICENSEE'S SOLE AND
EXCLUSIVE REMEDY SHALL BE, AT XACCT'S OPTION, EITHER: (I) RETURN OF THE PRICE
PAID FOR THE PRODUCT, RESULTING IN TERMINATION OF THIS AGREEMENT, OR (II) REPAIR
OR REPLACEMENT OF THE PRODUCT OR MEDIA THAT DOES NOT MEET THIS LIMITED WARRANTY.
5.2. EXCEPT FOR THE LIMITED WARRANTY SET FORTH IN THE PRECEDING PARAGRAPH,
THIS PRODUCT IS PROVIDED TO THE LICENSEE "AS IS". ALL EXPRESS OR IMPLIED
CONDITIONS, REPRESENTATIONS, AND WARRANTIES, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A PARTICULAR PURPOSE OR
NONINFRINGMENT ARE DISCLAIMED, EXCEPT TO THE EXTENT THAT SUCH DISCLAIMERS ARE
HELD TO BE LEGALLY INVALID. XACCT DOES NOT WARRANT THAT THE PRODUCT WILL MEET
THE LICENSEE'S REQUIREMENTS OR THAT ITS OPERATION WILL BE UNINTERRUPTED OR ERROR
FREE OR THAT ALL DEFECTS WILL BE CORRECTED.
SOME STATES, PROVINCES OR COUNTRIES DO NOT ALLOW THE EXCLUSION OF
IMPLIED WARRANTIES OR LIMITATIONS ON HOW LONG AN IMPLIED WARRANTY MAY LAST, SO
THE ABOVE LIMITATIONS MAY NOT APPLY TO THE LICENSEE. THIS WARRANTY GIVES THE
LICENSEE SPECIFIC LEGAL RIGHTS. THE LICENSEE MAY HAVE OTHER RIGHTS WHICH VARY
FROM STATE TO STATE, COUNTRY TO COUNTRY.
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<PAGE>
6. LIMITATION OF LIABILITY: TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW,
XACCT OR ITS SUPPLIERS OR LICENSORS ARE NOT LIABLE TO THE LICENSEE OR ANY THIRD
PARTY UNDER ANY LEGAL THEORY (INCLUDING, WITHOUT LIMITATION, TORT OR CONTRACT)
FOR ANY DAMAGES ARISING OUT OF THIS AGREEMENT OR THE USE OF OR THE INABILITY TO
USE THE PRODUCT WHETHER ACTUAL, INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL,
INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS OR SAVINGS, LOSS OF DATA, LOSS OF
SYSTEM AVAILABILITY, LOSS OF COMPUTER RUN TIME OR COST OF COVER. THESE
LIMITATIONS SHALL APPLY WHETHER OR NOT XACCT OR ITS LICENSORS HAVE BEEN ADVISED
OF THE POSSIBILITY OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL
PURPOSE OR ANY LIMITED REMEDY PROVIDED HEREIN. XACCT'S AND ITS SUPPLIERS' AND
LICENSORS' MAXIMUM AGGREGATE LIABILITY FOR DAMAGES SHALL BE LIMITED TO THE
LICENSE FEES RECEIVED BY XACCT UNDER THIS AGREEMENT FOR THE PARTICULAR PRODUCT
WHICH CAUSED THE DAMAGES.
SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OR LIMITATION OF
INCIDENTAL OR CONSEQUENTIAL DAMAGES OR OTHER FORMS OF DAMAGES OR LIABILITY, SO
THE ABOVE LIMITATION OR EXCLUSION MAY NOT APPLY TO THE LICENSEE. SHOULD THE
LICENSEE BE IN A EUROPEAN UNION COUNTRY, NOTWITHSTANDING ANYTHING TO THE
CONTRARY HEREIN, XACCT DOES NOT SEEK TO LIMIT ITS LIABILITY IN THE EVENT DEATH
AND PERSONAL INJURY AS A RESULT OF ITS NEGLIGENCE.
7. GENERAL:
7.1. The Agreement sets forth the entire understanding and agreement
between the Licensee and XACCT and supersedes any other communications or
advertising with respect to the Product. This Agreement may be amended only by a
writing signed by both parties. If any provision of this Agreement is held to be
invalid or unenforceable by a court of competent jurisdiction, that provision of
the Agreement will be enforced to the maximum extent permissible so as to effect
the intent of the Agreement, and the remainder of the provisions of this
Agreement shall remain in full force and effect.
7.2. For users in North America the laws of the State of California shall
govern all issues arising under or relating to this Agreement, without giving
effect to the conflict of laws principles thereof. All disputes arising under or
relating to this Agreement shall be resolved exclusively in the appropriate
court in Santa Clara, California, and it is explicitly agreed that no other
court shall have such jurisdiction. This Agreement will not be governed by the
United Nations Convention on Contracts for the International Sales of Goods, the
application of which is expressly excluded. For users outside North America the
laws of the State of Israel shall govern all issues arising under or relating to
this Agreement, without giving effect to the conflict of laws principles
thereof. All disputes
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<PAGE>
arising under or relating to this Agreement shall be resolved exclusively in the
appropriate court in Tel-Aviv, Israel, and it is explicitly agreed that no other
court shall have such jurisdiction. This Agreement will not be governed by the
United Nations Convention on Contracts for the International Sales of Goods, the
application of which is expressly excluded.
7.3. This Product is sold solely for use in the NAFTA countries and Europe.
The Product is subject to export control laws of the United States and Israel.
By accepting this Agreement, the Licensee is agreeing to the foregoing and
warrant that the Licensee is not: (i) located in, are under the control of, or a
national or resident of any country subject to U.S. embargo or (ii) on the U.S.
Treasury Department's list of Specially Designated Nationals or the US Commerce
Department's Table of Deny Orders. The Licensee agrees that the Product will not
be shipped, transferred, or exported into any country or used in any manner
prohibited by the law.
7.4. If the Licensee is an agency, department, or other entity of the United
States Government ("GOVERNMENT"), the Licensee's use, duplication, reproduction,
release, modification, disclosure or transfer of the Product, or of any related
documentation of any kind, including technical data, is restricted in accordance
with Federal Acquisition Regulation ("FAR") 12.212 for civilian agencies and
Defense Federal Acquisition Regulation Supplement ("DFARS") 227.7202 for
military agencies. The Product is commercial. The use of the Product by any
Government agency, department, or other entity of the Government is further
restricted in accordance with the terms of this Agreement, or any modification
hereto. Contractor/manufacturer in North America is XACCT Technologies Inc.
(under license) 2855 Kifer Road, Suite 105, Santa Clara, California 95051 and
outside North America: XACCT Technologies (1997) Ltd., 31 Lechi Street,
Bnei-Brak, Israel 51200.
7.5. Should the Licensee have any questions concerning this Agreement
including issues of interoperability or questions concerning XACCT's licensors
contact XACCT the appropriate XACCT entity at the address set forth in the
preceding paragraph.
7.6. The Licensee shall not disclose results of benchmark tests of the
Product or any part therein to any third party without XACCT's prior written
consent.
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<PAGE>
SCHEDULE A
Category A Software includes all portions of the Product described in
this SCHEDULE A. Category A Software is governed by the main body of this
Agreement and the additional terms set forth in this SCHEDULE A. To the extent
any additional terms set forth in this SCHEDULE A conflict with the provisions
of the main body of this Agreement, the terms in SCHEDULE A shall apply with
respect to the corresponding Category A Software. Reference to Agreement in any
of the Attachments to this Schedule shall refer to the specific software
agreement in that Attachment.
The portion of the Product provided by Sun Microsystems, Inc. ("JAVA
RUNTIME PORTION" as described below) is governed by the main body of this
Agreement and the additional terms set forth in ATTACHMENT 1 to this SCHEDULE A.
Java Runtime Portion:
JAVA((TM)) RUNTIME ENVIRONMENT VERSION 1.2.2 FOR WINDOWS NT((TM))
AND FOR JAVA((TM)) RUNTIME ENVIRONMENT VERSION 1.2.2 FOR
THE SOLARIS OS((TM))
The portion of the Product provided by Sun Microsystems, Inc. ("Java
Hotspot" as described below) is governed by the main body of this Agreement and
the additional terms set forth in ATTACHMENT 2 to this SCHEDULE A. For purposes
of ATTACHMENT 2 to this SCHEDULE A, "Licensee" means You and "Software" means
the Java Hotspot Portion.
Java Hotspot Portion:
JAVA((TM)) HOTSPOT 1.0.1
The portion of the Product provided by Sun Microsystems, Inc. ("JAVA
NAMING PORTION" as described below) is governed by the main body of this
Agreement and the additional terms set forth in ATTACHMENT 3 to this SCHEDULE A.
For purposes of ATTACHMENT 3 to this SCHEDULE A, "Licensee" means You and
"Software" means the Java Naming Portion.
Java Naming Portion:
JAVA((TM)) NAMING AND DIRECTORY INTERFACE((TM)) VERSION 1.1
The portion of the Product provided by WebLogic, Inc. ("WEBLOGIC
PORTION" as described below) is governed by the main body of this Agreement and
the additional terms set forth in ATTACHMENT 4 to this SCHEDULE A. For purposes
of ATTACHMENT 4 to this SCHEDULE A, "Licensee" means You and "Software" means
the Java Naming Portion.
WebLogic Portion:
<PAGE>
FAST FORWARD JDBC DRIVERS - BASE (5 CONNECTIONS) FOR MS MSQL
SERVER, INFORMIX AND SYBASE
The portion of the Product licensed by XACCT through the Netscape
Public License ("PUBLIC PORTION" as described below) is governed by the main
body of this Agreement and the additional terms set forth in ATTACHMENT 5 to
this SCHEDULE A. For purposes of ATTACHMENT 5 to this SCHEDULE A, "Licensee"
means You and "Software" means the Java Naming Portion.
Public Portion:
EXECUTABLE CODE FROM THE MOZILLA SOURCE CODE
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<PAGE>
ATTACHMENT 1 TO SCHEDULE A
SPECIFIC TERMS FOR JAVA RUNTIME PORTION OF THE PRODUCT FOR JAVA((TM))
RUNTIME ENVIRONMENT VERSION 1.2.2 FOR WINDOWS NT AND FOR JAVA((TM))
RUNTIME ENVIRONMENT VERSION 1.2.2 FOR THE SOLARIS OS
1. RESTRICTIONS Software is confidential and copyrighted. Title to Software and
all associated intellectual property rights is retained by Sun and/or its
licensors. Except as specifically authorized in any Supplemental License Terms,
you may not make copies of Software, other than a single copy of Software for
archival purposes. Unless enforcement is prohibited by applicable law, you may
not modify, decompile, reverse engineer Software. You acknowledge that Software
is not designed or licensed for use in on-line control of aircraft, air traffic,
aircraft navigation or aircraft communications; or in the design, construction,
operation or maintenance of any nuclear facility. SUN DISCLAIMS ANY EXPRESS OR
IMPLIED WARRANTY OF FITNESS FOR SUCH USES. You warrant that you will not use
Software for these purposes. You may not publish or provide the results of any
benchmark or comparison tests run on Software to any third party without the
prior written consent of Sun.
No right, title or interest in or to any trademark, service mark, logo or trade
name of Sun or its licensors is granted under this Agreement.
2. LIMITED WARRANTY. Sun warrants to you that for a period of ninety (90) days
from the date of purchase, as evidenced by a copy of the receipt, the media on
which Software is furnished (if any) will be free of defects in materials and
workmanship under normal use. Except for the foregoing, Software is provided "AS
IS". Your exclusive remedy and Sun's entire liability under this limited
warranty will be at Sun's option to replace Software media or refund the fee
paid for Software.
3. DISCLAIMER OF WARRANTY. UNLESS SPECIFIED IN THIS AGREEMENT, ALL EXPRESS OR
IMPLIED CONDITIONS, REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT, ARE DISCLAIMED, EXCEPT TO THE EXTENT THAT THESE DISCLAIMERS
ARE HELD TO BE LEGALLY INVALID.
4. LIMITATION OF LIABILITY. TO THE EXTENT NOT PROHIBITED BY LAW, IN NO EVENT
WILL SUN OR ITS LICENSORS BE LIABLE FOR ANY LOST REVENUE, PROFIT OR DATA, OR FOR
SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES, HOWEVER CAUSED
REGARDLESS OF THE THEORY OF LIABILITY, ARISING OUT OF OR RELATED TO THE USE OF
OR INABILITY TO USE SOFTWARE, EVEN IF SUN HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. In no event will Sun's liability to you, whether in contract, tort
(including negligence), or otherwise, exceed the amount paid by you for Software
under this Agreement. The foregoing limitations will apply even if the above
stated warranty fails of its essential purpose.
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<PAGE>
4. Export Regulations. All Software and technical data delivered under this
Agreement are subject to US export control laws and may be subject to export or
import regulations in other countries. You agree to comply strictly with all
such laws and regulations and acknowledge that you have the responsibility to
obtain such licenses to export, re-export, or import as may be required after
delivery to you.
5(a). U.S. Government Restricted Rights for the Java((TM)) Runtime Environment
Version 1.2.2 For Windows NT. Use, duplication, or disclosure by the U.S.
Government is subject to restrictions set forth in this Agreement and as
provided in DFARS 227.7202-1 (a) and 227.7202-3(a) (1995), DFARS 252.227-7013
(c)(1)(ii)(Oct 1988), FAR 12.212 (a) (1995), FAR 52.227-19 (June 1987), or FAR
52.227-14(ALT III) (June 1987), as applicable.
5(b). U.S. Government Rights for the Solaris OS If Software is being acquired by
or on behalf of the U.S. Government or by a U.S. Government prime contractor or
subcontractor (at any tier), then the Government's rights in Software will be
only as set forth in this Agreement; this is in accordance with 48 CFR 227.7201
through 227.7202-4 (for Department of Defense (DOD) acquisitions) and with 48
CFR 2.101 and 12.212 (for non-DOD acquisitions).
6. Governing Law. Any action related to this Agreement will be governed by
California law and controlling U.S. federal law. No choice of law rules of any
jurisdiction will apply.
7. Integration. The full versions of the Sun end-user license agreements
relating to the Java((TM)) Runtime Environment Version 1.2.2 For Windows
NT((TM)) and to the Java((TM)) Runtime Environment Version 1.2.2 for the Solaris
OS((TM)) are the entire agreements between you and Sun relating to its subject
matter. It supersedes all prior or contemporaneous oral or written
communications, proposals, representations and warranties and prevails over any
conflicting or additional terms of any quote, order, acknowledgment, or other
communication between the parties relating to its subject matter during the term
of this Agreement. No modification of the Sun end-user license agreements will
be binding, unless in writing and signed by an authorized representative of each
party.
This attachment is an abridged version of the full end-user license agreements
for Java((TM)) Runtime Environment Version 1.2.2 for Windows NT((TM)) and for
the Java((TM)) Runtime Environment Version 1.2.2 for the Solaris OS((TM)). For
inquiries relating to the original text of the Sun licenses please contact: Sun
Microsystems, Inc. 901 San Antonio Road, Palo Alto, California 94303. In the
event a dispute between the terms of the official unabridged end-user license
agreements and this abridged version the original text of the unabridged version
shall govern.
-4-
<PAGE>
ATTACHMENT 2 TO SCHEDULE A
SPECIFIC TERMS FOR JAVA HOTSPOT 1.0.1 PORTION OF THE PRODUCT
1. RESTRICTIONS Software is confidential and copyrighted. Title to Software and
all associated intellectual property rights is retained by Sun and/or its
licensors. Except as specifically authorized in any Supplemental License Terms,
you may not make copies of Software, other than a single copy of Software for
archival purposes. Unless enforcement is prohibited by applicable law, you may
not modify, decompile, reverse engineer Software. You acknowledge that Software
is not designed or licensed for use in on-line control of aircraft, air traffic,
aircraft navigation or aircraft communications; or in the design, construction,
operation or maintenance of any nuclear facility. Sun disclaims any express or
implied warranty of fitness for such uses. No right, title or interest in or to
any trademark, service mark, logo or trade name of Sun or its licensors is
granted under this Agreement.
3. LIMITED WARRANTY. Sun warrants to you that for a period of ninety (90) days
from the date of purchase, as evidenced by a copy of the receipt, the media on
which Software is furnished (if any) will be free of defects in materials and
workmanship under normal use. Except for the foregoing, Software is provided "AS
IS". Your exclusive remedy and Sun's entire liability under this limited
warranty will be at Sun's option to replace Software media or refund the fee
paid for Software.
4. DISCLAIMER OF WARRANTY. UNLESS SPECIFIED IN THIS AGREEMENT, ALL EXPRESS OR
IMPLIED CONDITIONS, REPRESENTATIONS AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT, ARE DISCLAIMED, EXCEPT TO THE EXTENT THAT THESE DISCLAIMERS
ARE HELD TO BE LEGALLY INVALID.
5. LIMITATION OF LIABILITY. TO THE EXTENT NOT PROHIBITED BY LAW, IN NO EVENT
WILL SUN OR ITS LICENSORS BE LIABLE FOR ANY LOST REVENUE, PROFIT OR DATA, OR FOR
SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR PUNITIVE DAMAGES, HOWEVER CAUSED
REGARDLESS OF THE THEORY OF LIABILITY, ARISING OUT OF OR RELATED TO THE USE OF
OR INABILITY TO USE SOFTWARE, EVEN IF SUN HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES. In no event will Sun's liability to you, whether in contract, tort
(including negligence), or otherwise, exceed the amount paid by you for Software
under this Agreement. The foregoing limitations will apply even if the above
stated warranty fails of its essential purpose.
7. Export Regulations. All Software and technical data delivered under this
Agreement are subject to US export control laws and may be subject to export or
import regulations in other countries. You agree to comply strictly with all
such laws and regulations and acknowledge that you have the responsibility to
obtain such licenses to export, re-export, or import as may be required after
delivery to you.
-5-
<PAGE>
8. U.S. Government Rights. If Software is being acquired by or on behalf of
the U.S. Government or by a U.S. Government prime contractor or subcontractor
(at any tier), then the Government's rights in Software will be only as set
forth in this Agreement; this is in accordance with 48 CFR 227.7201 through
227.7202-4 (for Department of Defense (DOD) acquisitions) and with 48 CFR 2.101
and 12.212 (for non-DOD acquisitions).
9. Governing Law. Any action related to this Agreement will be governed by
California law and controlling U.S. federal law. No choice of law rules of any
jurisdiction will apply.
10. Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement will remain in effect with the provision omitted,
unless omission would frustrate the intent of the parties, in which case this
Agreement will immediately terminate.
11. Integration. The full version of the Sun end-user license agreement relating
to the Java((TM)) Hotspot 1.0.1 is the entire agreement between you and Sun
relating to its subject matter. It supersedes all prior or contemporaneous oral
or written communications, proposals, representations and warranties and
prevails over any conflicting or additional terms of any quote, order,
acknowledgment, or other communication between the parties relating to its
subject matter during the term of this Agreement. No modification of the Sun
end-user license agreement will be binding, unless in writing and signed by an
authorized representative of each party.
This attachment is an abridged version of the full end-user license agreement
for Java((TM)) Hotspot 1.0.1. For inquiries relating to the original text of the
Sun licenses please contact: Sun Microsystems, Inc. 901 San Antonio Road, Palo
Alto, California 94303. In the event a dispute between the terms of the official
unabridged end-user license agreements and this abridged version the original
text of the unabridged version shall govern.
-6-
<PAGE>
ATTACHMENT 3 TO SCHEDULE A
SPECIFIC TERMS FOR JAVA NAMING PORTION OF THE PRODUCT
1. RESTRICTIONS
(A) JAVA PLATFORM INTERFACE
Licensee may not modify the Java Platform Interface ("JPI", identified
as classes contained within the "java" package or any subpackage of the
"java" package), by creating additional classes within the JPI or
otherwise causing the addition to or modification of the classes in the
JPI. In the event that Licensee creates any Java-related API and
distributes such API to others for applet or application development,
Licensee must promptly publish broadly, an accurate specification for
such API for free use by all developers of Java-based software.
(B) LICENSE RESTRICTIONS
The Software is licensed to Licensee only under the terms of this
Agreement, and Sun reserves all rights not expressly granted to
Licensee. Licensee may not use, copy, modify, or transfer the Software,
or any copy thereof, except as expressly provided for in this
Agreement. Except as otherwise provided by law for purposes of
decompilation of the Software solely for inter-operability, Licensee
may not reverse engineer, disassemble, decompile, or translate the
Software, or otherwise attempt to derive the source code of the
Software. License may not rent, lease, loan, sell, or distribute the
Software, or any part of the Software. No right, title, or interest in
or to any trademarks, service marks, or trade names of Sun or Sun's
licensors is granted hereunder.
2. NO WARRANTY
THE SOFTWARE IS PROVIDED TO LICENSEE "AS IS". ALL EXPRESS OR IMPLIED
CONDITIONS, REPRESENTATIONS, AND WARRANTIES, INCLUDING ANY IMPLIED
WARRANTY OF MERCHANTABILITY, SATISFACTORY QUALITY, FITNESS FOR A
PARTICULAR PURPOSE, OR NON-INFRINGEMENT, ARE DISCLAIMED, EXCEPT TO THE
EXTENT THAT SUCH DISCLAIMERS ARE HELD TO BE LEGALLY INVALID.
3. LIMITATION OF DAMAGES
TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW, SUN'S AGGREGATE
LIABILITY TO LICENSEE OR TO ANY THIRD PARTY FOR CLAIMS RELATING TO THIS
AGREEMENT, WHETHER FOR BREACH OR IN TORT, WILL BE LIMITED TO THE FEES
PAID BY LICENSEE FOR SOFTWARE WHICH IS THE SUBJECT MATTER OF THE
CLAIMS. IN NO EVENT WILL SUN BE LIABLE FOR ANY INDIRECT, PUNITIVE,
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGE IN
-7-
<PAGE>
CONNECTION WITH OR ARISING OUT OF THIS AGREEMENT (INCLUDING LOSS OF
BUSINESS, REVENUE, PROFITS, USE, DATA OR OTHER ECONOMIC ADVANTAGE),
HOWEVER IT ARISES, WHETHER FOR BREACH OR IN TORT, EVEN IF SUN HAS BEEN
PREVIOUSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGE. LIABILITY FOR
DAMAGES WILL BE LIMITED AND EXCLUDED, EVEN IF ANY EXCLUSIVE REMEDY
PROVIDED FOR IN THIS AGREEMENT FAILS OF ITS ESSENTIAL PURPOSE.
4. GOVERNMENT USER
Rights in Data: If procured by, or provided to, the U.S. Government,
use, duplication, or disclosure of technical data is subject to
restrictions as set forth in FAR 52.227-14(g)(2), Rights in
Data-General (June 1987); and for computer software and computer
software documentation, FAR 52-227-19, Commercial Computer Software-
Restricted Rights (June 1987). However, if under DOD, use, duplication,
or disclosure of technical data is subject to DFARS 252.227-7015(b),
Technical Data-Commercial Items (June 1995); and for computer software
and computer software documentation, as specified in the license under
which the computer software was procured pursuant to DFARS
227.7202-3(a). Licensee shall not provide Software nor technical data
to any third party, including the U.S. Government, unless such third
party accepts the same restrictions. Licensee is responsible for
ensuring that proper notice is given to all such third parties and that
the Software and technical data are properly marked.
5. EXPORT LAW
Licensee acknowledges and agrees that this Software and/or technology
is subject to the U.S. Export Administration Laws and Regulations.
Diversion of such Software and/or technology contrary to U.S. law is
prohibited. Licensee agrees that none of this Software and/or
technology, nor any direct product therefrom, is being or will be
acquired for, shipped, transferred, or reexported, directly or
indirectly, to proscribed or embargoed countries or their nationals,
nor be used for nuclear activities, chemical biological weapons, or
missile projects unless authorized by the U.S. Government. Proscribed
countries are set forth in the U.S. Export Administration Regulations.
Countries subject to U.S. embargo are: Cuba, Iran, Iraq, Libya, North
Korea, Syria, and the Sudan. This list is subject to change without
further notice from Sun, and Licensee must comply with the list as it
exists in fact. Licensee certifies that it is not on the U.S.
Department of Commerce's Denied Persons List or affiliated lists or on
the U.S. Department of Treasury's Specially Designated Nationals List.
Licensee agrees to comply strictly with all U.S. export laws and
assumes sole responsibility for obtaining licenses to export or
reexport as may be required.
Licensee is responsible for complying with any applicable local laws
and regulations, including but not limited to, the export and import
laws and regulations of other countries.
-8-
<PAGE>
ATTACHMENT 4 TO SCHEDULE A
SPECIFIC TERMS FOR WEBLOGIC PORTION OF THE PRODUCT
1) The Licensee may not under any circumstances use the WebLogic Portion or
any of its API's in any manner except indirectly in connection with the use of
the XACCT application portion of the Product, and the Licensee may not run any
third party software applications on the WebLogic Portion or any of its API's,
without first purchasing a license for such use from WebLogic, Inc., except only
to the extent that such activity is permitted by applicable law not withstanding
this limitation.
2) The Licensee may not under any circumstances attempt, or knowingly
permit or encourage others to attempt to decompile, decipher, disassemble,
reverse engineer or otherwise decrypt or discover the source code of all or any
portion of the Product, including the WebLogic Portion.
-9-
<PAGE>
ATTACHMENT 5 TO SCHEDULE A
SPECIFIC TERMS FOR PUBLIC PORTION OF THE PRODUCT
The Public Portion is licensed by XACCT through the Netscape Public
License Version 1.1. The Licensee may obtain a machine-readable copy of the
source code for the Public Code under a version of the Netscape Public License
without charge. Please contact XACCT for the URL location such source code and
license is available.
-10-
<PAGE>
EXHIBIT 10.16
DRAFT (Americas) 1/12/00 (Rev 1) SUPPORT AND MAINTENANCE AGREEMENT
This Support and Maintenance Agreement ("Agreement") is entered into and is
effective as of the ____ day of _______________2000 (the "Effective Date") by
and between XACCT Technologies, Inc., a Delaware corporation ("XACCT") with its
principal place of business at 2900 Lakeside Drive, Suite 100, Santa Clara,
California 95054 and ________________________________, a
_______________corporation ("Licensee") with its principal place of business at
_________________________________.
This Agreement sets forth the terms and conditions under which XACCT will
provide Product Maintenance (as defined below) and Support Services (as defined
below) for the Product which is licensed by Licensee pursuant to XACCT's End
User Software License Agreement ("License Agreement"). Except where superseded
by this Agreement, all other terms and conditions of the License Agreement are
incorporated by reference. Capitalized terms that are not defined in Section 1.
below or elsewhere in this Agreement have the same meaning as in the License
Agreement.
1. DEFINITIONS
1.1 "Designated Support Contact " means Licensee's employee who is
authorized to contact the XACCT
support center.
1.2 "Incident" means a single, discrete, malfunction or other problem which
may require more than one (1) response before it is closed.
1.3 "Major Release" means a version of the Product containing significant
changes in functionality which usually will be designated with a whole
number product version change such as 3.x to 4.x.
1.4 "Minor Release" means a version of the Product containing minor
improvements which usually will be designated with a one (1) decimal
version change such as 3.x to 3.x; also sometimes referred to as "dot
releases."
1.5 "Product Maintenance" means the Product updates and revisions that are
available from XACCT and selected by Licensee, as further referenced
herein and the attachments hereto as may be amended from time to time.
1.6 "Support Services" means the software support services that are
available from XACCT and selected by Licensee, as further referenced
herein and the attachments hereto as may be amended from time to time.
2. COVERAGE AND PAYMENT OF FEES
Licensee may purchase the level of Product Maintenance and Support
Services set forth in Attachment 1 to this Agreement. XACCT will
provide the Product Maintenance and Support Services purchased by
Licensee subject to the terms and conditions of this Agreement and the
License Agreement. Fees shall be payable within thirty (30) days of
invoice which shall be exclusive of any applicable local, state,
federal, use, excise, value added, GST or other taxes imposed on the
fees payable for the Product Maintenance and Support Services which
shall be the responsibility of Licensee.
3. SUPPORT SERVICES
3.1 XACCT will provide reasonable commercial efforts to provide the
appropriate solutions for reported Incidents. Initial response times
for reported Incidents are as set forth in Attachment 1.
3.2 In order for Licensee to receive the Support Services referenced above,
Licensee must:
(a) Appoint Designated Support Contact(s), trained and qualified,
who will maintain the integrity of the Product and who will
act as Licensee's liaison for all technical communications
with XACCT. The number of Designated Support Contact(s) will
be determined by the level of Support Services purchased by
Licensee set forth in Attachment 1referenced in Section 2.
Names of Designated Support Contact(s) must be provided to
XACCT prior to initial contact with the XACCT support center.
All technical communications by Licensee to XACCT shall only
be made by the Designated Support Contact(s). All information
and materials provided to Licensee by XACCT pursuant to this
Agreement will be routed to the Designated Support Contact(s).
Licensee may change the Designated Support Contact(s) upon
written notice to XACCT;
<PAGE>
(b) Promptly obtain training on the use of the Product for the
Designated Support Contact(s), and any other employee
substituting or replacing the Designated Support Contact(s);
(c) Subject to Licensee's applicable security requirements,
provide XACCT with access to and use of all information and
system facilities including but not limited to a modem
connection to Licensee's systems determined necessary by XACCT
to provide timely Support Services pursuant to this Agreement;
(d) Follow operating instructions and procedures as specified in,
but not limited to, XACCT's documentation and other
correspondence related to the Product;
(e) Follow procedures and recommendations provided by the XACCT
support center in an effort to correct problems; or
(f) Notify XACCT of a malfunction or other problem in accordance
with XACCT's then current problem reporting procedures and as
provided in Attachment 1. If XACCT determines that a problem
reported by Licensee is not due to an error in the Product,
XACCT will so notify Licensee. XACCT may in its sole
discretion charge additional fees for time and materials for
the resolution of problems that are not attributable to an
error in the Product or which are excluded from XACCT's
support obligations as set forth below.
3.5 XACCT shall have no obligation to support:
(a) altered, damaged or Licensee-modified Product, or any portion
of the Product incorporated with or into other software other
than as contemplated by XACCT's documentation or as otherwise
expressly approved by XACCT in writing;
(b) any version of the Product other than the current version of
the Product, the immediately previous version and the version
preceding the immediately previous version; XACCT's obligation
to support the version prior to the immediately previous
version shall not extend beyond six (6) months after the
release of the current Major Release of the Product;
(c) Product problems caused by Licensee's negligence, abuse or
misapplication, use of Product other than as specified in the
XACCT documentation, or other causes beyond the reasonable
control of XACCT;
(d) Product installed on any hardware, operating system version or
network environment that is not supported by XACCT; or
(e) Incidents if XACCT makes a good faith determination that the
primary cause of the problem results from the failure or
malfunction of any system, equipment, facilities or devices
not furnished by XACCT.
3.6 Any obligation for Support for non-standard versions of the Product or
portions thereof developed for Licensee on a customized basis shall be
only as set forth in an amendment or other supplement to this
Agreement.
4. PRODUCT MAINTENANCE
4.1 XACCT will use reasonable commercial efforts to provide maintenance
releases and Minor Releases to the then-current embodiment of the
Product that it provides to its customers generally. Maintenance
Releases and Minor Releases may also include one copy of revisions to
the documentation applicable to such maintenance releases and Minor
Releases.
<PAGE>
4.2 From time to time XACCT in its sole discretion may develop and provide
Major Releases which will be made available to Licensee with or without
additional fees according to the level of Support Services purchased by
Licensee as set forth in Attachment 1 referenced in Section 2.
4.3 THE TERMS OF THE LICENSE AGREEMENT PERTAINING TO LIMITED WARRANTY,
DISCLAIMERS OF WARRANTY AND LIMITATION OF LIABILITY SHALL APPLY TO THE
MAJOR AND MINOR RELEASES OF PRODUCT DELIVERED ACCORDING TO THIS
AGREEMENT.
5. TERM AND TERMINATION
5.1 The initial term of this Agreement is one (1) year from the date of
delivery of the Product to Licensee unless earlier terminated in
accordance with this Agreement. The Agreement will be automatically
renewed for additional one (1) year terms (subject to applicable fee
adjustments) unless thirty (30) days prior to the anniversary of the
Effective Date Licensee gives written notice to XACCT of its intention
not to renew.
5.2 XACCT may suspend or terminate Product Maintenance and Support Services
if Licensee fails to timely pay Product Maintenance and Support Service
fees as provided in this Agreement. XACCT may also terminate Support
Services if Licensee breaches any provision of this Agreement or the
License Agreement and such breach is not remedied within thirty (30)
days after Licensee receives written notice of the breach. XACCT shall
also have the right not to renew this Agreement with respect to any
Product by providing written notice of such election at least sixty
(60) days prior to the termination of Support Services for such
Product, provided that XACCT no longer generally provides Support
Services for such Product, or no longer provides the specific Support
Services previously offered.
5.3 Product Maintenance and Support Services shall automatically terminate
upon termination of the License Agreement.
6. REINSTATEMENT OR RENEWAL OF PRODUCT MAINTENANCE AND SUPPORT SERVICES
In the event Product Maintenance and Support Services are terminated by
Licensee by notice of non-renewal, Product Maintenance and Support
Services shall be discontinued at the end of the then current term. If
Product Maintenance and Support Services are terminated for any reason,
at XACCT's sole option, Licensee may reinstate or renew Product
Maintenance and Support Services by paying XACCT all applicable Product
Maintenance and Support Services and reinstatement fees.
7. LIMITATION OF LIABILITY
7.1 Direct Damages. XACCT'S SOLE LIABILITY AND LICENSEE'S EXCLUSIVE REMEDY
FOR DAMAGES WITH RESPECT TO THE SUPPORT SERVICES UNDER ANY CONTRACT,
TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHER THEORY, SHALL BE
LIMITED TO THE AMOUNT PAID BY LICENSEE FOR THE SUPPORT SERVICES FOR THE
PRIOR 12 MONTHS. XACCT'S SOLE LIABILITY AND LICENSEE'S EXCLUSIVE REMEDY
FOR DAMAGES WITH RESPECT TO PRODUCT MAINTENANCE SHALL BE AS SET FORTH
IN THE LICENSE AGREEMENT.
7.2 Consequential Damages. UNDER NO CIRCUMSTANCES, INCLUDING NEGLIGENCE,
SHALL XACCT BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS, LOSS
OF DATA, OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES,
ARISING IN ANY WAY OUT OF THIS AGREEMENT OR THE USE OF THE PRODUCT AND
DOCUMENTATION EVEN IF XACCT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES OR LOSSES.
8. GENERAL
This Agreement, the attachments and the License Agreement constitute
the entire agreement between the parties regarding Product Maintenance
and Support Services and supersede all previous agreements or
<PAGE>
representations, oral or written, regarding the subject matter. This
Agreement may not be modified or amended except in a writing signed by
a duly authorized representative of each party. Both parties
acknowledge having read the terms and conditions set forth in this
Agreement and attachments hereto, understand all terms and conditions,
and agree to be bound thereby. The laws of the State of California
shall govern all issues arising under or relating to this Agreement,
without giving effect to the conflict of laws principles thereof. All
disputes arising under or relating to this Agreement shall be resolved
exclusively in the appropriate state court in Santa Clara County,
California or in the federal court in the Northern District of
California, and it is explicitly agreed that no other court shall have
such jurisdiction. This Agreement shall not be governed by the United
Nations Convention on Contracts for the International Sale of Goods
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives:
LICENSEE XACCT TECHNOLOGIES, INC.
By: By:
--------------------------------- -----------------------------------
Name: Name:
------------------------------- ---------------------------------
Title: Title:
------------------------------ --------------------------------
Date: Date:
------------------------------- ---------------------------------
<PAGE>
EXHIBIT 10.17
DRAFT (International) 1/6/00 SUPPORT AGREEMENT
This Support Agreement ("Agreement") is entered into and is effective as of
the ____ day of _______________1999 (the "Effective Date") by and between XACCT
Technologies (1997) Ltd., an Israel corporation with its principal place of
business at 31 Halechi Street, Bnei-Brak 51200 Israel ("XACCT") and
________________________________, a _______________corporation with its
principal place of business at _________________________________("Licensee").
This Agreement sets forth the terms and conditions under which XACCT will
provide Support Services (as defined below) for the Product which is licensed by
Licensee pursuant to XACCT's End User Software License Agreement ("License
Agreement"). Except where superseded by this Agreement, all other terms and
conditions of the License Agreement are incorporated by reference. Capitalized
terms that are not defined in Section 1. below or elsewhere in this Agreement
have the same meaning as in the License Agreement.
1. DEFINITIONS
1.1 "Designated Support Contact " means Licensee's employee who is
authorized to contact the XACCT support center.
1.2 "Incident" means a single, discrete "bug", malfunction or other problem
which may require more than one (1) response before it is closed.
1.3 "Major Release" means a version of the Product containing significant
changes in functionality which usually will be designated with a whole
number product version change such as 3.2 to 4.0.
1.4 "Minor Release" means a version of the Product containing minor
improvements which usually will be designated with a one (1) decimal
version change such as 3.2 to 3.3, also sometimes referred to as "dot
releases."
1.5 "Support Services" means the software maintenance and support services
that are available from XACCT and selected by Licensee, as further
referenced herein and the attachments hereto as may be amended from
time to time.
2. COVERAGE AND PAYMENT OF FEES
Licensee may purchase the level of Support Services set forth in
Attachment 1 to this Agreement. XACCT will provide the Support Services
purchased by Licensee pursuant to the terms and conditions of this
Agreement and the License Agreement. Fees shall be payable within
thirty (30) days of invoice which shall be exclusive of any applicable
local, state, federal, use, excise or other taxes imposed on the fees
payable for the Support Services.
3. SUPPORT SERVICES
3.1 XACCT will provide reasonable commercial efforts to provide the bug
fixes and correction of reported Incidents. Initial response times for
reported Incidents are as set forth in Attachment 1.
3.2 XACCT will use reasonable commercial efforts to provide maintenance
releases and Minor Releases to the then-current embodiment of the
Product that it provides to its customers generally. Maintenance
Releases and Minor Releases may also include one copy of revisions to
the documentation applicable to such maintenance releases and Minor
Releases.
3.3 From time to time XACCT in its sole discretion may develop and provide
Major Releases which will be made available to Licensee with or without
additional fees according to the level of Support Services purchased by
Licensee as set forth in Attachment 1 referenced in Section 2.
3.4 In order for Licensee to receive the Support Services referenced above,
Licensee must:
<PAGE>
(a) Appoint Designated Support Contact(s), trained and qualified,
who will maintain the integrity of the Product and who will
act as Licensee's liaison for all technical communications
with XACCT. The number of Designated Support Contact(s) will
be determined by the level of Support Services purchased by
Licensee set forth in Attachment 1 referenced in Section 2.
Names of Designated Support Contact(s) must be provided to
XACCT prior to initial contact with the XACCT support center.
All technical communications by Licensee to XACCT shall only
be made by the Designated Support Contact(s). All information
and materials provided to Licensee by XACCT pursuant to this
Agreement will be routed to the Designated Support Contact(s).
Licensee may change the Designated Support Contact(s) upon
written notice to XACCT.
(b) Promptly obtain training on the use of the Product for the
Designated Support Contact(s), and any other employee
substituting or replacing the Designated Support Contact(s).
(c) Subject to Licensee's applicable security requirements,
provide XACCT with access to and use of all information and
system facilities including but not limited to a modem
connection to Licensee's systems determined necessary by XACCT
to provide timely Support Services pursuant to this Agreement.
(d) Follow operating instructions and procedures as specified in,
but not limited to, XACCT's documentation and other
correspondence related to the Product.
(e) Follow procedures and recommendations provided by the XACCT
support center in an effort to correct problems.
(f) Notify XACCT of a "bug," malfunction and other problems in
accordance with XACCT's then current problem reporting
procedures and as provided in Attachment 1. If XACCT believes
that a problem reported by Licensee may not be due to an error
in the Product, XACCT will so notify Licensee. In such cases
support additional support fees may be required for support
provided by XACCT.
3.5 XACCT shall have no obligation to support:
(a) altered, damaged or Licensee-modified Product, or any portion
of the Product incorporated with or into other software other
than as contemplated by XACCT's documentation or as otherwise
expressly approved by XACCT in writing;
(b) any version of the Product other than the current version of
the Product, the immediately previous version and the version
preceding the immediately previous version; XACCT's obligation
to support the version prior to the immediately previous
version shall not extend beyond six (6) months after the
release of the current Major Release of the Product.
(c) Product problems caused by Licensee's negligence, abuse or
misapplication, use of Product other than as specified in the
XACCT documentation, or other causes beyond the reasonable
control of XACCT; or
(d) Product installed on any hardware, operating system version or
network environment that is not supported by XACCT.
(e) Incidents if XACCT makes a good faith determination that the
primary cause of the problem results from the failure or
malfunction of any system, equipment, facilities or devices
not furnished by XACCT.
3.6 Support for non-standard versions of the Product or portions thereof
developed for Licensee on a customized basis shall be as set forth in
an amendment or other supplement to this Agreement.
3.7 THE TERMS OF THE LICENSE AGREEMENT PERTAINING TO LIMITED WARRANTY,
DISCLAIMERS OF WARRANTY AND LIMITATION OF LIABILITY SHALL APPLY TO THE
MAJOR AND MINOR RELEASES OF PRODUCT DELIVERED ACCORDING TO THIS
AGREEMENT.
<PAGE>
4. TERM AND TERMINATION
4.1 The initial term of this Agreement is one (1) year from the date of
delivery of the Product to Licensee unless earlier terminated in
accordance with this Agreement. The Agreement will be automatically
renewed for additional one (1) year terms (subject to applicable fee
adjustments) unless thirty (30) days prior to the anniversary of the
Effective Date Licensee gives written notice to XACCT of its intention
not to renew.
4.2 XACCT may suspend or terminate Support Services if Licensee fails to
timely pay Support Service fees as provided in this Agreement. XACCT
may also terminate Support Services if Licensee breaches any provision
of this Agreement or the License Agreement and such breach is not
remedied within thirty (30) days after Licensee receives written notice
of the breach. XACCT shall also have the right not to renew this
Agreement with respect to any Product by providing written notice of
such election at least sixty (60) days prior to the termination of
Support Services for such Product, provided that XACCT no longer
generally provides Support Services for such Product, or no longer
provides the specific Support Services previously offered.
4.3 Support Services shall automatically terminate upon termination of the
License Agreement.
5. REINSTATEMENT OR RENEWAL OF SUPPORT SERVICES
In the event License Support Services are terminated by Licensee by
notice of non-renewal, Support Services shall be discontinued at the
end of the then current term. If Support Services are terminated for
any reason, at XACCT's sole option, Licensee may reinstate or renew
Support Services by paying XACCT all applicable Support Services and
reinstatement fees.
6. LIMITATION OF LIABILITY
6.1 DIRECT DAMAGES. XACCT'S SOLE LIABILITY AND LICENSEE'S EXCLUSIVE REMEDY
FOR DAMAGES WITH RESPECT TO THE SUPPORT SERVICES UNDER ANY CONTRACT,
TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHER THEORY, SHALL BE
LIMITED TO THE AMOUNT PAID BY LICENSEE FOR THE SUPPORT SERVICES.
6.2 Consequential Damages. UNDER NO CIRCUMSTANCES, INCLUDING NEGLIGENCE,
SHALL XACCT BE LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS, LOSS
OF DATA, OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES,
ARISING IN ANY WAY OUT OF THIS AGREEMENT OR THE USE OF THE PRODUCT AND
DOCUMENTATION EVEN IF XACCT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES OR LOSSES.
7. GENERAL
This Agreement, the attachments and the License Agreement constitute
the entire agreement between the parties regarding Support Services and
supersede all previous agreements or representations, oral or written,
regarding the subject matter. This Agreement may not be modified or
amended except in a writing signed by a duly authorized representative
of each party. Both parties acknowledge having read the terms and
conditions set forth in this Agreement and attachments hereto,
understand all terms and conditions, and agree to be bound thereby. The
laws of the State of Israel shall govern all issues arising under or
relating to this Agreement, without giving effect to the conflict of
laws principles thereof. All disputes arising under or relating to this
Agreement shall be resolved exclusively in the appropriate court in
Tel-Aviv, Israel, and it is explicitly agreed that no other court shall
have such jurisdiction. This Agreement shall not be governed by the
United Nations Convention on Contracts for the International Sale of
Goods
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives:
LICENSEE XACCT TECHNOLOGIES (1997) LTD.
<PAGE>
By: By:
--------------------------------- -----------------------------------
Name: Name:
------------------------------- ---------------------------------
Title: Title:
------------------------------ --------------------------------
Date: Date:
------------------------------- ---------------------------------
<PAGE>
EXHIBIT 10.18
[XACCT LOGO]
XACCT TECHNOLOGIES
GLOBAL TEAMING AGREEMENT
THIS TEAMING AGREEMENT (together with all Project Supplements hereto, this
"AGREEMENT") is made and entered into as of by and between, XACCT TECHNOLOGIES,
INC.("XACCT"), a Delaware corporation with offices at 2855 Kifer Road, Suite
105, Santa Clara, California 95051, and ("TEAM MEMBER"), a corporation with
offices at . XACCT and the Team Member are sometimes referred to herein
collectively as the "TEAM MEMBERS" and individually as a "TEAM MEMBER".
WITNESSETH:
WHEREAS, from time to time the Team Members identify or are given
opportunities relating to the performance of services in the field of
communications and network operational support systems, including, without
limitation, receiving requests for proposals issued by, and other inquiries
from, third parties (collectively, the "OPPORTUNITIES");
WHEREAS, the Team Members believe that they offer complementary products
and/or services and that a cooperative effort between them will be mutually
beneficial in responding to or pursuing any Opportunities which the parties
mutually agree to respond to or pursue on a joint basis pursuant the terms of
this Agreement; and
WHEREAS, the Team Members desire to enter into this Agreement to provide
for the joint preparation of proposals or other joint marketing and sales
efforts in response to any business Opportunity that the Team Members elect to
jointly pursue, the allocation of work to be performed under any contract
awarded by a customer for the performance of the projects arising from any
Opportunity, and certain other matters, all as more particularly set forth
below.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the Team Members hereby covenant and agree as follows:
1
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SECTION 1.
OPPORTUNITIES; ALLOCATION OF RESPONSIBILITY
1.1 This Agreement and the obligations of the Team Members hereunder shall
relate only to those requests for proposals issued by, inquiries from, or other
Opportunities with, third parties ("CUSTOMERS") that the Team Members expressly
agree shall become subject to this Agreement (collectively, the "JOINT
OPPORTUNITIES") and the related projects that the Team Members expressly agree
shall also become subject to this Agreement (collectively, the "JOINT PROJECTS")
as set forth below. Opportunities and related projects shall become Joint
Opportunities and Joint Projects subject to this Agreement. Each Project may
also require additional terms and conditions governing the respective rights and
obligations of the Team Members with respect to the Joint Opportunity and
related Joint Project.
1.2 It is understood and agreed that neither Team Member shall have any
obligation to notify the other Team Member of the existence of any Opportunity
or to agree to subject, or offer to subject, any Opportunity or related project
to this Agreement. It is further understood and agreed that each Team Member has
the absolute right to pursue any Opportunity alone or with third parties, unless
the Team Member receiving or identifying the Opportunity elects, in its sole
discretion, to notify the other of the Opportunity, offers to subject the
Opportunity to this Agreement and the parties do so in accordance with Section
1.1 above. Nothing contained herein shall be deemed to restrict either Team
Member from quoting, offering to sell, or selling to others any items or
services that it may regularly offer for sale, even though such items or
services may be included in a proposal in response to any Joint Opportunity.
1.3 Except for any direct damages arising as a consequence of a breach of
this Agreement, any and all cost, expense or liability to either Team Member
arising out of or related to this Agreement shall be paid by the Team Member
incurring such cost, expense or liability, and neither Team Member shall be
liable or obligated to pay any cost, expense or liability paid or incurred by
the other.
1.4 The Team Members concur that joint marketing and sales efforts are
mutually beneficial and contribute to improved sales opportunities. The Team
Members agree therefore to promote each other's brand and technology as part of
their marketing efforts and collateral wherever appropriate in such cases, but
not limited to, those described below:
2
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(i) Sales collateral;
(ii) Press releases;
(iii) Sales training;
(iv) Technical sales training;
(v) Hyperlinks between web sites;
(vi) Trade show participation;
(vii) Speaking engagements;
(viii) Advertising.
1.5 The Team Members acknowledge that their respective reputations in the
professional and business community will be of significant benefit in enabling
the Team Members to attain the objectives and the anticipated benefits under
this Agreement. Accordingly, during the term of this Agreement, neither Team
Member shall disparage, defame, or publicly criticize the other Team Member or
its professional staff or their abilities, nor shall either Team Member
undertake actions designed or intended otherwise to impair the other Team
Member's reputation or credentials.
SECTION 2.
SUBSEQUENT CONTRACTS
2.1 In the event that a Team Member is awarded a prime contract by a
Customer, or the Team Members enter into another arrangement with a Customer,
respecting any Joint Opportunity and related Joint Project (each, a "Customer
Contract"), the Team Members agree to negotiate in good faith the terms and
conditions of a subcontract or other arrangement (each, a "Project Contract")
for the portion of such related Joint Project allocated to the other Team Member
pursuant to the applicable Project Supplement, if necessary.
2.2 Each Project Contract shall be consistent with the terms and conditions
of the Customer Contract to which it relates (including, without limitation, any
Statement of Work) and the applicable Project Supplement.
SECTION 3.
TERMINATION
3.1 Except as expressly provided in Section 3 hereof, all rights and
obligations of the Team Members under this Agreement with respect to any Joint
Opportunity and related Joint Project shall terminate as set forth in the
applicable Project Supplement.
3
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3.2 In the event the rights and obligations of the Team Members under this
Agreement respecting any Joint Opportunity and related Joint Project shall
terminate for any reason other than in the case where the parties enter into a
Project Contract respecting such Joint Project, either Team Member shall have
the right, subject to Section 3 hereof, to pursue business opportunities with
the applicable Customer or any third party contractor awarded a contract by such
Customer or other third parties for work related to such Opportunity; provided
that if such termination or the failure of the Team Members to enter into a
Project Contract with respect to such Joint Opportunity is a result of a breach
of this Agreement by either Team Member, the defaulting Team Member shall not
have the right to pursue such business opportunities.
3.3 Except as expressly provided in Section 3 hereof, all rights and
obligations of the Team Members under this Agreement shall terminate upon the
first to occur of any of the following events:
(a) Expiration of a period of three (3) years following the date
hereof, unless such term is extended by mutual agreement of the parties;
(b) Mutual agreement of the Team Members; or
(c) A material breach by either Team Member of any of the provisions
herein (including in any Project Supplement) and such material breach remains
uncured after a period of thirty (30) days following such Team Member's receipt
of written notice of such material breach from the other Team Member.
In the event the rights and obligations of the Team Members under this Agreement
shall terminate for any reason, the provisions of Section 3.1 above shall apply
to all Joint Projects and Joint Opportunities.
SECTION 4.
CONFIDENTIALITY
4.1 This agreement is contingent upon a duly executed Mutual Non Disclosure
Agreement (NDA), between the Team members.
4
<PAGE>
SECTION 5.
LIMITED WARRANTY AND LIMITATION OF REMEDIES
5.1 Each Team Member warrants that it has the right to enter into this
Agreement and fully perform all obligations applicable to it hereunder.
5.2 EXCEPT AS EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY
WARRANTIES OR CONDITIONS, EXPRESS, STATUTORY, IMPLIED, OR OTHERWISE, WITH
RESPECT TO THIS AGREEMENT OR ANY DATA OR INFORMATION PROVIDED HEREUNDER, AND
BOTH PARTIES HEREBY DISCLAIM THE IMPLIED WARRANTIES AND CONDITIONS OF
NONINFRINGEMENT OF THIRD-PARTY RIGHTS, SATISFACTORY QUALITY, MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT THERETO.
5.3 Each Team Member shall be responsible for any errors or omissions in
the information which it provides.
5.4 IN NO EVENT SHALL EITHER TEAM MEMBER BE LIABLE TO THE OTHER FOR ANY
LOSS OF PROFITS OR OTHER INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, OR
CONSEQUENTIAL DAMAGES, EVEN IF SUCH TEAM MEMBER HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. IN NO EVENT SHALL EITHER TEAM MEMBER BE LIABLE TO
THE OTHER FOR CLAIMS OR DEMANDS BROUGHT AGAINST THE OTHER TEAM MEMBER BY A THIRD
PARTY UNDER THIS AGREEMENT, EVEN IF SUCH TEAM MEMBER HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
SECTION 6.
MISCELLANEOUS
6.1 NOTICES. All notices, consents and other communications required or
which may be given under this Agreement shall be deemed to have been duly given
(i) when delivered by hand, (ii) three (3) days after being mailed by registered
or certified mail, return receipt requested, postage prepaid, or (iii) when
received by the addressee if sent by facsimile transmission or by Express Mail,
Federal Express or other express delivery service (receipt requested), in each
case addressed to a party at its address set forth below (or to such other
address(es) as such party may hereafter designate as to itself by notice to the
other party hereto):
5
<PAGE>
If to XACCT:
XACCT Technologies, Inc.
2855 Kifer Rd., Suite 105
Santa Clara, CA 95051
Attn: Anil Uberoi
Facsimile: 1-408-654-9904
If to :
-----
Attn: -----
Facsimile: -----
6.2 MODIFICATION. This Agreement may not be amended or modified, nor may
any right or remedy of any Team Member be waived, unless the same is in writing
and signed by a duly authorized representative of such Team Member.
6.3 NO IMPLIED LICENSE. Nothing hereunder shall be construed as granting
any licenses, whether explicitly, impliedly or by estoppel, to any intellectual
property rights of any Team Member to the other.
6.4 WAIVER. No failure or delay by either Team Member in exercising any of
its rights or remedies hereunder will operate as a waiver thereof, nor will any
single or partial exercise of any such right or remedy preclude any other or
further exercise thereof or the exercise of any other right or remedy. The
rights and remedies of the Team Members provided in this Agreement are
cumulative and not exclusive of any rights or remedies provided under this
Agreement, by law, in equity or otherwise.
6.5 ASSIGNMENT. Neither Team Member may assign or otherwise transfer any of
its rights, duties or obligations under this Agreement without the prior written
consent of the other party, except either Team Member may, upon prior written
notice to the other Team Member (but without any obligation to obtain the
consent of such other Team Member), assign this Agreement or any of its rights
hereunder to any person or entity who succeeds (by purchase, merger, operation
of law or otherwise) to all or substantially all of the capital stock, assets or
business of such Team Member, provided such person or entity agrees in writing
to assume and be bound by all of the obligations of such Team Member under this
Agreement. Any attempted assignment or transfer in contravention of this
Subsection 6.5 shall be void and of no force and effect. This Agreement shall
6
<PAGE>
be binding upon and inure to the benefit of the Team Members and their
respective legal representatives, successors and permitted assigns.
6.6 INDEPENDENT CONTRACTORS. This Agreement shall not be construed to
establish any form of partnership, agency, or joint venture of any kind between
the Team Members; not to constitute either Team Member as an agent, employee, or
legal representative of the other; and nothing in this Agreement shall create
any relationship between The Team Members other than that of an independent
contractor. Neither Team Member shall have any responsibility or liability for
the actions of the other Team Member, except as specifically provided herein.
Neither Team Member shall have any right or authority to bind or obligate the
other in any manner or make any representation or warranty on behalf of the
other. No profits, losses or costs will be shared under any provision of this
Agreement or as a result of either Team Member's efforts in connection with any
Joint Opportunity and securing an award of any Customer Contract.
6.7 FURTHER ASSURANCES. Without limiting the generality of any provision of
this Agreement, each party agrees that upon request of any other party, it
shall, from time to time, do any and all other acts and things as may reasonably
be required to carry out its obligations hereunder, to consummate the
transactions contemplated hereby, and to effectuate the purposes hereof.
6.8 GOVERNING LAW AND JURISDICTION. This Agreement, including the
performance and enforceability hereof, shall be governed by and construed in
accordance with the laws of the State of California, without reference to the
principles of conflicts of law. Each Team Member hereby submits itself for the
sole purpose of this Agreement and any controversy arising hereunder to the
exclusive jurisdiction of the federal or state courts located in the State of
California, and any courts of appeal therefrom, and waives any objection (on the
grounds of lack of jurisdiction, or forum non conveniens or otherwise) to the
exercise of such jurisdiction over it by any such courts.
6.9 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the Team Members and supersedes all prior proposals, communications,
representations and agreements, whether oral or written, with respect to the
subject matter hereof. The Project Supplements executed in connection herewith
from time to time are incorporated into and made a part of this Agreement to the
same extent as if set forth in full herein; any use of the phrase "this
Agreement" shall include, without limitation, such Project Supplements.
6.10 SEVERABILITY. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions hereof in any other jurisdiction.
7
<PAGE>
6.11 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be deemed an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
6.12 HEADINGS AND INTERPRETATION. The headings used in this Agreement are
for convenience of reference only and shall not affect the meaning or
construction of this Agreement.
6.13 NO SOLICITATION. Neither Team Member shall directly or indirectly
solicit, recruit or accept from third parties services provided by, any employee
of the other that participated in the preparation of any proposal or any other
marketing effort relating to a Joint Opportunity or the performance or
negotiation of this Agreement, any Customer Contract or any Project Contract, as
the case may be, during the term of this Agreement and any resulting Customer
Contract that such employee performed services with respect to (if applicable)
and for a period of one (1) year thereafter.
SECTION 7.
APPLICATION
7.1 PRICING. Each Team Member is solely responsible for establishing the
prices for its own products and services.
7.2 BUSINESS OPPORTUNITY. In the event that the Team Members pursue a
business opportunity under this Agreement and fail to persuade a customer to use
their products and/or services jointly through execution of a customer contract,
either Team Member may independently pursue a business opportunity with that
customer. Notwithstanding the foregoing, a Team Member may not pursue a business
opportunity with a customer, if that Team Member breached this Agreement and
such breach prevented the Team Member from serving that customer a joint project
under this Agreement.
7.3 LOCATION. This Agreement shall be applicable on a global basis,
regardless of the location of the Team Member's subsidiaries, branches and
affiliates.
7.4 TRAINING. Each Team Member agrees to provide a standing invitation to
the other Team Member allowing their direct employees to attend their training
courses on a space available basis at a reduced cost.
8
<PAGE>
IN WITNESS WHEREOF, the Team Members have caused their authorized
representatives to execute this Agreement as of the date first written above.
XACCT TECHNOLOGIES, INC.
2855 Kifer Rd., Suite 105
Santa Clara, CA 95051
By:
----------
Name: ERIC GRIES
----------
Title: President & CEO
By: ----------
Name: ----------
Title: ----------
9
<PAGE>
EXHIBIT 10.19
DRAFT ONLY
VALUE ADDED PARTNER AGREEMENT
BETWEEN
XACCT TECHNOLOGIES (1997) LTD.
AND
---------------------
<PAGE>
VALUE ADDED PARTNER AGREEMENT
BETWEEN
XACCT TECHNOLOGIES (1997) LTD.
AND
SECTION TITLE PAGE
- ------- ----- ----
RECITALS............................................................1
1. DEFINITIONS.........................................................2
2. OWNERSHIP AND ADMINISTRATION OF PRODUCT.............................3
3. LICENSE GRANT.......................................................3
4. PRICING, PAYMENT TERMS AND TAXES....................................4
5. VALUE ADDED PARTNER RESPONSIBILITIES................................5
6. XACCT RESPONSIBILITIES..............................................6
7. ORDERS..............................................................7
8. TERM AND TERMINATION................................................7
9. RELATIONSHIP OF THE PARTIES.........................................8
10. CONFIDENTIAL INFORMATION............................................9
11. TRADEMARKS AND SERVICEMARKS.........................................9
12. WARRANTY, LIABILITY, AND DISCLAIMERS...............................10
13. INDEMNIFICATION....................................................10
14. COMPLIANCE WITH APPLICABLE LAWS....................................10
15. GOVERNMENT MATTERS.................................................11
16. ENFORCEMENT OF AGREEMENT...........................................11
17. NOTICE.............................................................11
18. CONSTRUCTION AND INTERPRETATION....................................12
19. NO OTHER RIGHTS....................................................12
20. ENTIRE AGREEMENT...................................................12
Page i
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This non-exclusive value added partner agreement ("Agreement") with an Effective
Date commencing on the latest date appearing next to the parties' signatures, is
made by and between XACCT Technologies (1997) Ltd., an Israeli corporation
("XACCT") with its principal place of business at 31 Lechi Street, Bnei Brak,
Israel 51200, and , a company existing under the laws of
(the "VAP") with its principal place of business at
, and contains the terms and conditions under
which XACCT and the VAP shall co-operate as detailed herein.
The following Exhibits are included herein by reference and/or attachment as
integral parts of this Agreement:
- - Exhibit A Discounts, Price List, and Payment Terms
- - Exhibit B XACCT Technologies (1997) Ltd. End-user License Agreement
- - Exhibit C XACCT Second-line Support Services, Training and Product Maintenance
Services
- - Exhibit D Certain Terms and Conditions of XACCT Licensors
- - Exhibit E [EXTENDED PRODUCT MAINTENANCE AND SUPPORT PROGRAM]
In consideration of the promises and covenants hereinafter set forth, the
parties agree as follows:
1. Definitions
1.1 CONFIDENTIAL INFORMATION: means: all items identified as being
confidential by the disclosing party, including: (i) any portion of the Product,
in object and source code form, and any related technology, ideas, algorithms or
any trade secrets; (ii) XACCT's business or financial information and plans; and
(iii) the terms of this Agreement. "Confidential Information" will not include
information that the receiving party can show: (a) is or becomes generally known
or publicly available through no fault of the receiving party; (b) is known by
or in the possession of the receiving party prior to its disclosure, as
evidenced by business records, and is not subject to restriction; (c) is
lawfully obtained from a third party who has the right to make such disclosure
(d) is disclosed by the VAP as part of the business plan, monthly reports and
details disclosed to XACCT pursuant to Section 5.3 (End-user Details).
1.2 DOCUMENTATION: means any user documentation, on any media,
provided by XACCT or its licensors for use with the Products.
1.3 CHANNELS: means XACCT approved, agents, vaps, vars or system
integrators acting as integrators of the Product in conformity with the terms
and subject to the conditions of this Agreement.
1.4 END-USER: means the person or entity that agrees to the terms of the
End-user License Agreement and is authorized to access and use the Product.
1.5 END-USER LICENSE AGREEMENT: means the shrink-wrap and electronic
End-user license agreements provided by XACCT and included with each copy of the
Product, current versions of which are attached hereto as Exhibit B.
1.6 FRONT-LINE SUPPORT SERVICES: means the support services provided by
the VAP to its Channels and/or to its End-users, in the configuration,
operation, and diagnosing of reported problems associated with Products.
1.7 LICENSE KEY: means the code provided to the End-user by XACCT or
through the VAP for activation of the Product.
Page 2
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1.8 PRODUCTS: means copies of the XACCT computer software programs which
are licensed in object code form and identified latest available Price List
including any error corrections and updates provided by XACCT or its licensors.
The Price List available at the time of the execution of this Agreement is set
forth in Exhibit A.
[1.9 PRODUCT MAINTENANCE PROGRAM: MEANS THE XACCT SERVICES PROVIDED PURSUANT
TO AN END-USER UPON THE PAYMENT OF THE APPLICABLE ANNUAL FEES DUE TO BECOME A
MEMBER OF THE XACCT EXTENDED PRODUCT MAINTENANCE AND SUPPORT PROGRAM, AS MAY BE
OFFERED FROM TIME TO TIME BY XACCT. THE CURRENT PRODUCT MAINTENANCE SERVICES
BEING OFFERED BY XACCT ARE SET FORTH IN EXHIBIT E AND ARE SUBJECT TO
MODIFICATION FROM TIME TO TIME. TO BE DISCUSSED]
1.10 SECOND-LEVEL SUPPORT SERVICES: means the XACCT second-level support
services for the Products provided to the VAP in accordance with the terms set
forth in Exhibit C.
1.11 TERRITORY: means with respect to a specific Product or category of
Products, the European Union.
2. OWNERSHIP AND ADMINISTRATION OF PRODUCT
2.1 OWNERSHIP AND RETENTION OF RIGHTS. The VAP acknowledges that XACCT, or
its licensors, own and shall retain all right, title and interest in and to: (i)
the Products (including all copies and derivative works thereof, by whomever
produced), and Documentation, including all intellectual property rights
embodied therein (including but not limited to, translations of Documentation or
marketing materials); (ii) all of the service marks, trademarks, trade names or
any other designations, and (iii) all copyrights, patent rights, trade secret
rights, and other proprietary rights in the Products and the VAP shall have no
rights with respect thereto other than the rights expressly set forth in this
Agreement.
2.2 PRODUCT ACTIVATION. XACCT employs a License Key which enables use of the
Products. Products are shipped disabled and require a License Key for
activation. XACCT administers the generation and distribution of License Keys.
The Product packaging may include a code (certificate key) that can be used by
the End-user or THE VAP to obtain a temporary License Key for evaluation
purposes. If the End-user decides to purchase a license to use the Product and
XACCT in its sole discretion accepts the order subject to the terms and upon the
conditions hereof, XACCT then supplies either the End-user directly or through
the VAP, a License Key to allow the End-user to activate the ordered Products.
2.3 ADMINISTRATION OF PRODUCTS. XACCT may include on the media with the
Products additional computer programs which are not currently licensed for use
by either the VAP or End-user and to which the License Key will not permit
access. Inclusion of such additional computer programs in no way implies a
license from XACCT and access or use of such programs is strictly prohibited
unless the License Key provided by XACCT specifically authorizes such access and
use.
3. LICENSE GRANT
3.1 LICENSE TO DISTRIBUTE PRODUCTS. Subject to the terms and conditions of
this Agreement XACCT hereby grants to the VAP:
3.1.1 a revocable, non-exclusive, non-transferable, license, in the Territory
only, to market, distribute (on the basis of the End-user License Agreement),
and install the Products and associated Documentation but only to End-users;
3.1.2 a revocable, non-exclusive, non-transferable, license, in the Territory
only, to market and distribute the shrink wrapped versions of the Products and
associated Documentation, but only to the XACCT approved Channels and XACCT
approved End-users, provided, however, that the VAP enters into a written
agreement with each such Channel which contains provisions on confidentiality
and proprietary rights protections, Product use restrictions, indemnities,
liability limitations and warranty disclaimers which are at least as protective
of XACCT and its licensors
Page 3
<PAGE>
as those provisions contained in this Agreement including the Exhibits hereto as
may be modified from time to time by XACCT or its licensors. Any and all
Channels distributing the Product must be pre-approved by XACCT in writing.
XACCT expressly reserves the right to refuse approval of any Channel or End-user
without providing reasons to the VAP. XACCT expressly reserves the right to
require Channels to pass the XACCT training program prior to approving a
Channel. In each case described in this Section 3.1.2 the ultimate End-user
License Agreements for the Products shall between XACCT and the End-user. Each
copy of the Product that is not directly delivered to the End-user shall be
delivered to the VAP in a package (the "Package" containing the End-user
license(s) and the user manual for such Product(s). The VAP and/or any Channel
thereof shall deliver the whole and unopened Package to the End-user unless
XACCT agrees in writing for the specific integration of the Product(s) by the
VAP and/or its Channels in a mutually agreed upon integration. The VAP shall use
its best efforts to ensure that end-users who have licensed XACCT Products
through the VAP, or through its Channels, comply with the terms and conditions
set forth in the XACCT End-user License Agreements for the XACCT Products, as
may be applicable from time to time.
3.1.3 a revocable, non-exclusive, non-transferable, license, in the Territory
only, to demonstrate to, and to use Products to train and provide Front-line
Support Services to its Channels or End Users in accordance with the policies in
effect from time to time.
3.2 RESTRICTIONS ON USE. The VAP agrees: (i) not to create or attempt to
create by reverse engineering, disassembly, decompilation or otherwise, the
source code, internal structure, or organization of the Products, or any part
thereof, from any object code or information that may be made available to it,
or aid, abet or permit others to do so; (ii) not to remove any Product
identification or notices of any proprietary or copyright restrictions from the
Product or any support material; (iii) except for archival or back-up copies,
not to copy the Product, develop any derivative works thereof or include any
portion of the Product in any other software program; and (iv) not to provide
use of the Products in a computer service business, rental or commercial
timesharing arrangement.
Nothing in this Agreement is intended to grant any rights to the VAP under any
patent or copyright of XACCT. The VAP acknowledges that XACCT, or its licensors,
own and shall retain all right, title and interest in and to: (i) the XACCT
Products (including all copies and derivative works thereof, by whomever
produced), and documentation, including all intellectual property rights
embodied therein (including but not limited to, translations of documentation or
marketing materials); (ii) all of the service marks, trademarks, trade names or
any other designations, and (iii) all copyrights, patent rights, trade secret
rights, and other proprietary rights in the products and the VAP shall have no
rights with respect thereto other than the rights expressly set forth herein.
3.3 DOCUMENTATION LICENSE. XACCT hereby grants the VAP a revocable,
non-exclusive, non-transferable, license to use the Documentation and to make a
reasonable number of copies of the Documentation solely for its own internal
business purposes to support VAP's use of the Product in accordance with Section
3.1.
3.4 PROPRIETARY NOTICES. The VAP must reproduce and include the copyright
notices and any other notices that appear on the original copy of a Product or
Documentation on any copies made by the VAP on any media.
4. PRICING, PAYMENT TERMS AND TAXES
4.1 PRICE. The VAP will pay to XACCT the suggested list price specified in
Exhibit A less the applicable discount specified in Exhibit A for all Products,
Second-Level Support Services and Product Maintenance Services ordered during
the term of this Agreement as may be modified from time to time upon thirty (30)
days notice. All prices are expressed in U.S. dollars.
4.2 PAYMENT TERMS. The VAP shall pay all invoices as per the payment terms as
set forth in Exhibit A.
4.3 RESALE PRICE. The VAP is free to determine its own prices for the
integration of the Products and Front-line Support Services. XACCT's current
price list shows suggested End-user prices only. No employee or
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representative of XACCT has any authority to dictate or in any way inhibit the
VAP's pricing discretion with respect to the Products.
4.4 TAXES. The VAP shall bear and be responsible for:
4.4.1 the payment of all taxes in the Territory associated with the purchase
or license of any Product or Second-Level Support Services or Product
Maintenance Services, fees, duties or other amounts, however designated,
including value added and withholding taxes which are levied or based upon such
charges, or upon this Agreement. Taxes related to Products, Second-Level Support
Services and Product Maintenance Services purchased or licensed pursuant to this
Agreement shall be paid by the VAP or VAP shall present an exemption certificate
acceptable to the taxing authorities, and
4.4.2 keeping all records and/or impounding or paying all taxes (e.g.,
national, local, self employment tax, foreign tax withholding, etc.) and any
other charges required by and imposed by any taxing authority on payments to the
VAP's employees or agents.
5. THE VAP RESPONSIBILITIES
5.1 CREDIT APPLICATION. The VAP shall, as a condition of this Agreement,
supply such credit and other financial details as may be requested by XACCT from
time to time.
5.2 PROMOTION OF PRODUCT. The VAP shall use its best efforts to: (i)
successfully promote, and solicit orders for, the Products, the Front-line
Support Services and the Product Maintenance Services on a continuing basis;
(ii) comply with good business practices and all applicable laws and
regulations; and (iii) diligently perform all other duties as mutually agreed
upon herein.
5.3 END-USER DETAILS. Prior to the acceptance of any order by XACCT, the VAP
shall first disclose sufficient details on the identity of the proposed
End-user, including but not limited to: the name and details of the End-user
organization or entity, name of contact person, address, telephone, fax and
e-mail numbers and such other details as XACCT may reasonably request from time
to time.
5.4 PROVIDING FRONT-LINE SUPPORT SERVICES. As between XACCT and the VAP,
the VAP shall be responsible for the installation of Products, assisting
End-users in reaching optimal performance of and resolving problems with the
Products, and instruction of the VAP's Channels in the use of the Products.
5.4.1 At a minimum, the VAP shall be able to: (i) answer general
pre-licensing and post-licensing questions, including but not limited to
questions, and (ii) perform installation and configuration of the system, and
5.4.2 The VAP and its Channels are solely responsible for any and all
integration services and any third party product(s) integrated or supplied
therewith.
5.5 COMPLIANCE WITH LAWS. The VAP shall be solely responsible for complying
with the laws and regulations applicable in the Territory, or any nation, or
political subdivision thereof, in which it engages in business in performing its
responsibilities hereunder. The VAP will bear all expenses and costs related to
compliance with such laws and regulations.
5.6 END-USER LICENSE. The VAP shall ensure that XACCT's End-user License
Agreement is not tampered with or removed from the Product, and in all cases is
delivered with every Product.
5.7 MAINTENANCE OF QUALIFIED INDIVIDUALS. The VAP shall, at its expense,
retain a minimum of one (1) qualified technical support person at each The VAP
office, who will: (i) maintain the integrity of the Product; and (ii)
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provide Front-line Support Services to the VAP's Channels. The VAP shall also
provide one sales support person who will act as the VAP's liaison for all
technical and other communications with XACCT .
5.8 TRAINING. The VAP shall, at its own cost and expense, register and send
its qualified individuals and other application and/or sales engineers for
training on an as required basis as detailed in Exhibit C. Attendance at the
initial training and any major update, new feature or new Product training shall
be a condition for the continuation of this Agreement. The receipt of training
by the VAP shall not modify or limit any of the VAP's obligations under this
Agreement.
5.9 PROBLEM RESOLUTION. The VAP shall keep XACCT informed on a regular basis
as to any problems encountered with the Products and as to any resolutions
arrived at for those problems. The VAP shall communicate promptly to XACCT any
and all modifications, design changes or improvements to the Products suggested
by any entity or person to the VAP. The VAP further agrees that XACCT shall
acquire any and all right, title and interest in and to such suggested
modification, design changes or improvements of the Products without the payment
of any additional consideration to the VAP, its employees, its agents, or to any
other entity or person.
[5.10 BUSINESS PLAN. WITHIN THIRTY (30) DAYS FOLLOWING THE EFFECTIVE DATE OF
THIS AGREEMENT, THE VAP SHALL PROVIDE XACCT WITH A BUSINESS PLAN, IN FORM AND
CONTENT REASONABLY SATISFACTORY TO XACCT. THE BUSINESS PLAN AT MINIMUM SHALL
INCLUDE AN ANNUAL FORECAST OF SALE OF LICENSES TO THE PRODUCT AND THE STEPS THAT
THE VAP SHALL TAKE TO ACHIEVE THIS FORECAST. THE VAP SHALL USE ITS BEST EFFORTS
TO FOLLOW THE BUSINESS PLAN AND ACHIEVE THE SALES FORECASTS. XACCT MAY REQUEST
MODIFICATIONS TO SUCH BUSINESS PLAN PRIOR TO ACCEPTANCE. THE BUSINESS PLAN, WHEN
ACCEPTED BY XACCT, SHALL BE INCORPORATED INTO AND DEEMED A PART HEREOF. IN THE
EVENT OF ANY FAILURE BY THE VAP TO PROVIDE A SATISFACTORY BUSINESS PLAN IN A
TIMELY MANNER OR TO MEET THE TERMS OF SUCH BUSINESS PLAN, OR IN THE EVENT OF ANY
FAILURE TO PROVIDE FULL AND ACCURATE INFORMATION, XACCT MAY, IN ADDITION TO
OTHER REMEDIES AVAILABLE TO IT, SUSPEND THE RIGHT OF THE VAP TO MARKET XACCT
PRODUCTS AND SERVICES OR TERMINATE THIS AGREEMENT. THE VAP SHALL SUBMIT AN
ANNUAL BUSINESS PLAN THIRTY (30) DAYS PRIOR TO THE ANNUAL TERMINATION DATE OF
THIS AGREEMENT. ]
5.11 MONTHLY REPORTS. The VAP shall provide monthly reports detailing the sale
of licenses, pipe-line (queue) status , and prospect status (including
failures). The failure of the VAP to provide such monthly reports in a timely
manner shall be deemed a material breach of this Agreement. As part of the
monthly reports the VAP shall disclose its relationships or pending
relationships with competitors of XACCT.
5.12 COMPLIANCE. The VAP shall perform such acts and effectuate such documents
as reasonably requested by XACCT or its licensors to ensure compliance by the
VAP with the terms and conditions of this Agreement.
5.13 XACCT LICENSORS. The VAP agrees and undertakes to abide by the terms of
conditions of Exhibit E, which may detail, from time to time, certain terms and
conditions required by XACCT's licensors in relation to this Agreement or the
Products.
6. XACCT RESPONSIBILITIES
6.1 XACCT SECOND-LEVEL SUPPORT. During the term of this Agreement, subject to
XACCT pre-certifying the VAP as a qualified provider of front line support
services, and in consideration of payment for Second-Level Support Services by
the End-user as may be specified in Exhibit A from time to time, XACCT agrees in
such case to use its diligent commercial efforts to provide Second-Level Support
Services to the VAP, as specified in Exhibit C from time to time.
6.2 MARKETING MATERIALS. XACCT will make available to the VAP, at its then
prevailing value added partner rates, such marketing, promotional or other sales
materials as XACCT may create and deem useful to assist the VAP in its marketing
efforts with respect to the Products. The prices for such marketing materials as
are set forth in Exhibit A subject to modification from time to time.
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An initial minimum number of copies of certain marketing materials may be
provided to the VAP at no cost other than reasonable freight, shipping and
insurance upon approval of XACCT's Regional Sales Manager.
6.3 TRAINING. XACCT will use diligent commercial efforts to ensure that
training is available to the VAP in the sales, installation, use, operation and
support of the Products as detailed in Exhibit C hereto as may be modified from
time to time.
7. ORDERS
7.1 PURCHASE ORDERS. All orders are subject to acceptance by XACCT. Nothing
contained in any purchase order, acknowledgment, or invoice shall in any way
modify the terms or add any additional terms or conditions to this Agreement;
provided, however, that such standard variable terms as quantity, delivery date,
shipping instructions and the like, as well as tax exempt status, if applicable,
shall be specified on each purchase order or acknowledgment. Purchase orders may
be placed by fax, with a hard copy follow-up.
7.2 DELIVERY. XACCT shall acknowledge its acceptance of an order along with
an estimation of freight, insurance and other charges to be borne solely by the
VAP. Upon acceptance of an order by XACCT and the satisfaction of all XACCT
prerequisites prior to delivery, XACCT shall arrange delivery to the VAP, by
full or partial shipment, FCA XACCT's dock, the Product, Documentation, or
marketing materials as appropriate. XACCT will make reasonable efforts to meet
the estimated delivery date but shall not be liable for any failure to deliver
for causes beyond its control. The VAP shall be responsible for all shipping,
freight, handling, insurance and other charges, customs and duties. The VAP
agrees to indemnify XACCT for any and all costs, fees and expenses incurred or
accruing upon XACCT in relation to the shipment or delivery of the Products.
Unless given written instruction, XACCT shall select the carrier. Delivery will
be deemed complete and risk of loss or damage to the Products will pass to the
VAP upon delivery to the first carrier. In no event shall XACCT have any
liability in connection with shipment, nor shall the carrier be deemed to be an
agent of XACCT.
7.3 CANCELLATION. In the event the VAP cancels a previously accepted order
within seven (7) days prior to shipment, XACCT reserves the right to assess
cancellation charges. Such cancellation charges shall not be punitive in nature
and shall only cover XACCT's expenses in re-directing such canceled order.
7.4 THE VAP'S ACCEPTANCE OF ORDERS. The VAP shall not accept orders in
XACCT's name nor under terms varying from those established herein.
8. TERM AND TERMINATION
8.1 TERM. Unless earlier terminated this Agreement is for a period of twelve
(12) months commencing on the Effective Date, renewable for additional terms of
twelve months subject in every case to section 8.3 below. This Agreement will
not become effective until such time as the VAP has purchased a Demo Package as
described in Exhibit C hereto.
8.2 TERMINATION FOR CAUSE. Either party has the right to terminate this
Agreement if the other party breaches or is in default of any obligation
hereunder, including the failure to make any payment when due, which default is
incapable of cure or which, being capable of cure, has not been cured within
thirty (30) days after receipt of written notice from the non-defaulting party
or within such additional cure period as the non-defaulting party may authorize
in writing.
8.3 TERMINATION FOR CONVENIENCE. Either party may terminate this Agreement
for convenience by giving a sixty (60) day written notice to the other party.
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8.4 TERMINATION FOR BANKRUPTCY. XACCT may terminate this Agreement upon the
filing by or against the VAP of any action under any applicable bankruptcy or
insolvency law, which is not dismissed or otherwise favorably resolved within
thirty (30) days of such event.
8.5 ADDITIONAL CAUSE FOR TERMINATION. In addition to the aforementioned,
XACCT may terminate this Agreement with immediate effect if the VAP:
8.5.1 fails to secure or renew any license, permit authorization or approval
for the conduct of its business with respect to the Products; or
8.5.2 challenges, assists a third party in challenging, or fails to assist
XACCT in enforcing XACCT's right, title or interest in and to XACCT intellectual
property asserted in this Agreement.
8.6 EFFECTS OF TERMINATION. Upon termination or expiration of this Agreement
for any reason whatsoever, the VAP shall immediately: (i) cease all use of
Products and Documentation; (ii) discontinue any use of the name, logo,
trademarks, servicemarks or slogans of XACCT and the trade names of any
Products; (iii) discontinue all representation or statements from which it might
be inferred that any relationship exists between the VAP and XACCT; (iv) cease
to promote, solicit orders for or procure orders for Products (but will not act
in any way to damage the reputation or goodwill of XACCT or any Product); and
(v) return all Product, Confidential Information and related materials to XACCT.
8.7 CONTINUATION OF SUPPORT UPON TERMINATION. Notwithstanding anything to the
contrary in Section 8.6, and provided that the VAP is not in breach of this
Agreement, XACCT and the VAP will continue their obligations to each other for
the purposes of providing Front-line Support Services to the VAP's Channels for
up to two (2) months after the termination of this Agreement. The VAP may use
the Products and other related materials necessary for such Front-line Support
Services during such two (2) month period. The VAP shall be responsible for
advising its Channels of the upcoming termination of Front-line Support Services
and redirecting them to either XACCT or alternate XACCT service providers as may
be designated from time to time by XACCT. Upon the VAP's fulfillment of its
obligations to its Channels pursuant to this Section 8.7, the VAP shall cease
representing itself as a service provider for Products.
8.8 NO HARM UPON TERMINATION. Except as otherwise expressly provided herein,
upon the expiration or termination of this Agreement the VAP shall not be
entitled to, and to the fullest extent permitted by law waives, any statutorily
prescribed or other compensation, reimbursement or damages for loss of goodwill,
clientele, prospective profits, investments or anticipated sales or commitments
of any kind.
8.9 RESPONSIBILITIES UPON TERMINATION. Nothing in this Agreement will affect:
(i) the rights and liabilities of either party with respect to Products licensed
to End-users prior to termination; (ii) any indebtedness then owing by either
party to the other, or (iii) any liability for damages resulting from an
actionable breach.
8.10 SURVIVAL OF TERMS. The following terms shall survive any expiration or
termination of this Agreement: Sections: 2.1 Ownership and Retention of Rights;
3.2 Restrictions on Use; 4. Pricing and Payment Terms; 8. Term and Termination;
10. Confidential Information; 11.4 Defense of Trademarks; 12. Warranty,
Liability, and Disclaimers; and 13.Indemnification.
9. RELATIONSHIP OF THE PARTIES
9.1 INDEPENDENT CONTRACTORS. The relationship of XACCT and the VAP
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed: (i) to give either party the
power to direct or control the day-to-day activities of the other, or (ii) to
constitute the parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking. XACCT is in no manner
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associated with or otherwise connected with the actual performance of this
Agreement on the part of the VAP, nor with the VAP's employment of other persons
or incurring of other expenses.
9.2 VAP'S EMPLOYEES. It is understood that the VAP is solely responsible for
all of its employees and agents, its labor costs and expenses arising in
connection therewith and for any and all claims, liabilities or damages or debts
of any type whatsoever that may arise on account of the VAP's activities, or
those of its employees or agents in the performance of this Agreement.
9.3 NON-EXCLUSIVE RELATIONSHIP. Nothing in this Agreement shall be construed
as limiting XACCT's marketing or distribution activities or its appointment of
other dealers, agents, value added partners, resellers, licensees or agents of
any kind in any place.
10. CONFIDENTIAL INFORMATION
10.1 PROTECTION OF CONFIDENTIAL INFORMATION. Each party will protect the
other's Confidential Information from unauthorized dissemination and use the
same degree of care that such party uses to protect its own highly confidential
information. Neither party will disclose to third parties the other's
Confidential Information without the prior written consent of the other party.
Neither party will use the other's Confidential Information for purposes other
than those necessary to directly further the purposes of this Agreement.
10.2 NOTIFICATION OF EMPLOYEES. Each employee or agent of the VAP, performing
duties hereunder, shall be made aware of this Agreement and shall be bound, in
writing, to comply with its terms and conditions including confidentiality.
10.3 NO COMPETE. The VAP undertakes that due to its access to confidential
and proprietary information as a result of this Agreement that it will not
develop, either directly or indirectly, a competitive product to that of XACCT's
without first informing XACCT thereof subject further to, and without derogating
from, the terms and conditions of this Agreement.
11. TRADEMARKS AND SERVICEMARKS
11.1 AUTHORIZED USE OF TRADEMARKS. During the term of this Agreement, the VAP
shall market the Products under the trademark or service marks (the "Marks")
placed on the Products or otherwise used with respect to the Products by XACCT.
XACCT reserves the right to change its Marks at any time. All advertising and
other materials in which the Marks are used shall be subject to the prior
written approval of XACCT. The VAP shall not add or attach to the Product or its
packaging any label, marking or information that has not been approved in
advance by XACCT in writing. Whenever the Marks are used, VAP shall indicate
that such Marks are the property of XACCT or its licensors. The VAP shall have
the right to indicate to the public that it is an authorized the VAP of the
Products and use (within the Territory) the Marks to advertise and identify such
XACCT Products. XACCT shall have the right to audit the VAP's use of the Marks
for such purposes and require the VAP to modify such use as may be required by
XACCT.
11.2 VAP MARKS. The VAP shall use no trademarks, trade names, service marks
or other proprietary indicia in association with the Products other than the
Marks, including, without limitation, any trademark or tradename owned by the
VAP.
11.3 RIGHTS IN TRANSLATED MARKETING OR OTHER TRANSLATED MATERIALS. The VAP
shall not allow or permit the translation of XACCT's Documentation or marketing
materials without the prior written consent of XACCT. The use of any and all
translated materials shall be submitted to XACCT for XACCT's written approval
prior to use. In such case as such consent is granted any and all intellectual
property rights in and to such translated materials shall be deemed "works for
hire" on behalf of XACCT with any and all intellectual property rights therein
and thereto passing to solely to XACCT, including but not limited to any claim
of moral or other rights in the
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translations. The VAP agrees that it or its translators shall effectuate any and
all documents required to achieve the intent of this Section 11.3.
11.4 Defense of Trademarks. The VAP will not at any time challenge, or assist
others in challenging, XACCT's Marks or other proprietary rights, or do, cause
to be done, or tolerate any act or thing contesting or in any way impairing or
tending to impair any said right, title, and interest of XACCT.
12. WARRANTY, LIABILITY, AND DISCLAIMERS
12.1 WARRANTY DISCLAIMER. EXCEPT FOR THE WARRANTY MADE DIRECTLY TO END-USERS
IN EXHIBIT B (AS MODIFIED BY THE NEXT SENTENCE) XACCT MAKES NO WARRANTIES WITH
RESPECT TO ANY PRODUCT, LICENSE OR SERVICE AND DISCLAIMS ALL IMPLIED WARRANTIES,
INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE, OR ARISING FROM A COURSE OF DEALING OR USAGE OF TRADE AND
ANY WARRANTIES OF NONINFRINGEMENT. THE VAP WILL HANDLE AND BE RESPONSIBLE FOR
ALL WARRANTY RETURNS FROM ITS CHANNELS AND WILL BE ENTITLED TO (AND ONLY TO)
CREDIT FOR AMOUNTS PAID TO XACCT FOR PROPERLY RETURNED, AS SPECIFIED IN EXHIBIT
C, COPIES OF THE PRODUCTS THAT ARE NOT REPLACED.
12.2 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING ELSE IN THIS AGREEMENT
OR OTHERWISE, XACCT WILL NOT BE LIABLE WITH RESPECT TO ANY SUBJECT MATTER OF
THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL
OR EQUITABLE THEORY FOR: (i) ANY AMOUNTS IN EXCESS OF THE PRICE PAID TO XACCT
WITH RESPECT TO THE PRODUCT THAT IS THE SUBJECT OF THE CLAIM DURING THE TWELVE
MONTH PERIOD PRIOR TO THE DATE THE CAUSE OF ACTION AROSE; OR (ii) ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES, HOWEVER CAUSED; OR (iii) DAMAGES FOR LOST
PROFITS OR LOST DATA; OR (iv) COST OF PROCUREMENT OF SUBSTITUTE GOODS,
TECHNOLOGY OR SERVICES. Notwithstanding anything to the contrary herein, XACCT
does not seek to limit its liability in the event death and personal injury as a
result of its negligence.
12.3 DISCLAIMER OF OTHER REPRESENTATIONS. All representations made or
agreements executed by the VAP pursuant to this Agreement shall be the VAP's
sole responsibility. Furthermore, each such agreement shall contain an
acknowledgment by any third party that it is not relying on any representations
or warranties made by XACCT except for those warranties expressly made in
XACCT's End-user License Agreement.
13. INDEMNIFICATION
13.1 INDEMNIFICATION BY THE VAP. The VAP and each of its Channels shall, in
each case, jointly and severally indemnify and hold XACCT and its licensors
harmless from and against any and all claims, liabilities, losses, damages or
judgments, including all legal fees and expenses related thereto: (i) that arise
from or are connected with the VAP's or any of its Channels' modification, use
or distribution of the Products not in strict accordance with this Agreement;
(ii) any misrepresentation or any breach of any warranty, covenant or agreement
on the part of the VAP or any of its Channels; or (iii) from any third party
claim or action against XACCT for injuries or damage to persons or property
caused or claimed to have been caused by the negligent acts or omissions of the
personnel of the VAP or any of its Channels while in the course of performing
work under this Agreement.
14. COMPLIANCE WITH APPLICABLE LAWS
14.1 EXPORT AND IMPORT CONTROLS. The VAP acknowledges that the Products and
the technical data received from XACCT in accordance with the terms hereunder
may be subject to Israeli, or Territory export and import controls, and in the
performance of its obligations the VAP shall at all times strictly comply with
all laws,
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regulations and orders, and agrees to commit no act which, directly or
indirectly, would violate any Israeli or Territory law, regulations or orders.
14.2 AUTHORIZATIONS. The VAP shall, at its own expense, make, obtain, and
maintain in force at all times during the term of this Agreement, all filings,
registrations, reports, licenses, permits and authorizations (collectively
"Authorizations") required under applicable law, regulation or order required
for VAP to perform its obligations under this Agreement.
15. GOVERNMENT MATTERS
15.1 GOVERNMENT USE. The VAP represents that it is not a government agency nor
is it obtaining any XACCT material under this Agreement pursuant to or for the
benefit of a government contract or with government funds. If the VAP is using
or distributing any XACCT material or Product to or on behalf of any unit or
agency of any government, then the VAP will ensure that such government's use of
those items is governed by the End-user limitations and restrictions set forth
in the End-user License Agreement.
16. ENFORCEMENT OF AGREEMENT
16.1 GOVERNING LAW. This Agreement shall be exclusively governed by the laws
of the State of Israel, as applied to agreements entered into and to be
performed entirely within Israel between Israeli residents, without regard to
the principles of conflict of laws or the United Nations Convention on Contracts
for the International Sale of Goods.
16.2 JURISDICTION. Any action arising under or relating to this Agreement
shall be brought solely in the appropriate court of Tel-Aviv, Israel. The
parties hereto consent to the exclusive jurisdiction of the courts specified
above, and expressly waive any objection to the jurisdiction or convenience of
such courts.
16.3 ASSIGNMENT. This Agreement may not be assigned by the VAP without the
prior written consent of XACCT. Assignment includes any direct or indirect
change in the ownership or control of the VAP. XACCT may transfer its rights or
perform its obligations hereunder without the VAP's approval.
16.4 WAIVER. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or any other
provision.
16.5 INJUNCTIVE RELIEF. The parties agree that a breach of this Agreement
adversely affecting XACCT's intellectual property rights in the Products or
Documentation would cause irreparable injury to XACCT for which monetary damages
would not be an adequate remedy and XACCT shall be entitled to equitable relief
in addition to any remedies it may have hereunder or at law.
16.6 SEVERABILITY. If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or portion thereof, to be unenforceable, that
provision of the Agreement will be enforced to the maximum extent permissible so
as to effect the intent of the parties, and the remainder of this Agreement will
continue in full force and effect.
16.7 FORCE MAJEURE. Except for the obligation to make payments, nonperformance
of either party shall be excused to the extent performance is rendered
impossible due to causes beyond such party's reasonable control.
17. NOTICE
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17.1 NOTICES. Any notice, report, approval or consent required or permitted
hereunder shall be in writing and will be deemed to have been given if: (i)
delivered personally; (ii) mailed by registered air mail postage prepaid; or
(iii) sent by facsimile followed by a hard-copy confirmation, to the respective
addresses of the parties set forth below or as may be otherwise designated by
like notice from time to time.
IF TO XACCT: XACCT TECHNOLOGIES (1997) LTD.
Lechi Street
Bnei-Brak, Israel
Attention: VP International Marketing and Sales
Telephone: 972 3-_6180040___-_____
Facsimile 972-3- 5799798____-______
IF TO VAP:
- ---------------
- ---------------
Attention:
Telephone:
Facsimile:
18. CONSTRUCTION AND INTERPRETATION
18.1 COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
18.2 SECTION HEADINGS. The section headings contained herein are for
convenience of reference only and shall not be considered as substantive parts
of this Agreement. The use of the singular or plural form shall include the
other form and the use of the masculine, feminine or neuter gender shall include
the other genders.
18.3 INTERPRETATION. In construing or interpreting this Agreement, the word
"or" shall not be construed as exclusive, and the word "including" shall not be
limiting.
18.4 INTERPRETATION OF AGREEMENT. The parties agree that this Agreement shall
be fairly interpreted in accordance with its terms without any strict
construction in favor of or against either party and that ambiguities shall not
be interpreted against the drafting party.
19. NO OTHER RIGHTS
19.1 Nothing contained in this Agreement shall be construed as conferring by
implication, estoppel or otherwise upon either party hereunder any license or
other right except the licenses, rights and uses expressly granted hereunder to
a party hereto.
20. ENTIRE AGREEMENT.
20.1 ENTIRE AGREEMENT. The provisions of this Agreement, including any
Exhibits, constitutes the entire agreement between the parties with respect to
the subject matter hereof, and this Agreement supersedes all prior agreements or
representations, oral or written, regarding such subject matter. This Agreement
may not be modified or amended except in a writing signed by a duly authorized
representative of each party, except such sections as expressly stated may be
modified from time to time by XACCT or by its licensors.
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IN WITNESS WHEREOF, THE PARTIES HAVE CAUSED THIS AGREEMENT TO BE EXECUTED BY
THEIR DULY AUTHORIZED REPRESENTATIVES
XACCT TECHNOLOGIES (1997) LTD. THE VALUE ADDED PARTNER
-------------------------------
- ------------------------------ -------------------------------
(BY)ERIC GRIES (BY)
PRESIDENT AND CEO
(Title) -------------------------------
(Title)
- ------------------------------
(Date) -------------------------------
(Date)
XACCT TECHNOLOGIES (1997)LTD.
- ------------------------------
(BY)DROR SOFER
VP INTERNATIONAL MARKETING AND SALES
(Title)
- ------------------------------
(Date)
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EXHIBIT A DISCOUNT, PRICE LIST, PAYMENT TERMS AND QUOTA
PAYMENT
1. Payment terms shall be net thirty (30) days from date of invoice. All
payments shall be made in US dollars by wire transfer (Swift). XACCT retains the
right to change payment terms upon prior notice to the VAP.
2. In order to ensure that XACCT is paid for the Products licensed through
the VAP, XACCT shall retain any and all title and interest in the Products until
paid for in full by the VAP or by the End-user (whichever may be applicable).
XACCT authorises the VAP to arrange for licensing transactions in accordance and
subject to the XACCT End-user License Agreement relating to the Products in the
ordinary course of its business, subject to acceptance of any and all orders by
XACCT and provided that in such case, the VAP hereby assigns in advance to XACCT
any proceeds from the licensing of such Products.
3. The VAP shall not be permitted to offset any credits or amounts owed to
it against amounts owed to XACCT, without prior written authorization by XACCT.
4. Subject to the pre-certification of the VAP as a qualified provider of
front-line support, any payments for the XACCT Product Maintenance Programme
will be billed annually in advance and are payable within thirty (30) days of
receipt of XACCT's invoice at such rate as may be agreed by the parties from
time to time.
5. XACCT may require satisfactory security as a condition to any
alternative payment terms and XACCT shall have the right to require payment in
advance if it believes, in its sole discretion, that payment of any amount due
hereunder is or may become insecure.
6. In the event that any invoice is not paid when due, the VAP shall be
subject to a late fee at the rate of 1.5% per month on the outstanding amount or
the maximum rate permitted by law, whichever is less.
7. Should the VAP be in arrears in any payment of monies due to XACCT,
XACCT may, in its sole discretion, withhold the acceptance of orders through the
VAP and in such case arrange payment or the delivery of an order directly with
and to End-users.
8. The VAP is entitled to a 35% VAP discount off of XACCT's VAP price list
that may be in effect from time to time. The VAP's target quota for direct sales
of XACCT Products or jointly developed or jointly bundled products related to
fraud management (if any) and/or agreed upon services the first year of this
Agreement is US$700,000 to be measured in terms of revenue to XACCT.
9. Upon execution of this Agreement the VAP will purchase the XACCT Start-up
Kit (the "Start-up Kit") for $20,000 (plus any applicable value-added taxes or
duties) as more fully described hereunder. The Start-up Kit shall include a
non-exclusive revocable demonstration license (unlimited number of ISMs) for the
XACCTUSAGE product, to be installed at the VAP's network in ;
installation services and training to assist in the installation of the
demonstration system; sales and pre-sales training at a scheduled training XACCT
course; and preliminary sales and marketing support from XACCT. XACCT will
provide up to three (3) days of on-site training to up to four members of the
VAP's technical support staff as part of the Start-up Kit purchased by the VAP.
The VAP shall promptly reimburse XACCT for any and all out-of-pocket expenses
incurred as a result of providing such training outside of Israel (including,
INTER ALIA: flights, accommodation and daily per diem). XACCT will, from time to
time, schedule and conduct training sessions, at its offices in Israel to which
it will invite qualified value added resellers, integrators, and distributors to
improve their sales and technical knowledge of XACCT products. The VAP will make
best efforts to send the appropriate persons to attend such training sessions.
There is no charge for the training session, however the VAP will bear all its
own costs and expenses related thereto.
Page 14
<PAGE>
EXHIBIT B XACCT TECHNOLOGIES (1997) LTD. END-USER
LICENSE AGREEMENTS (SUBJECT TO CHANGE FROM TIME TO TIME)
[XIS- END-USER LICENSE]
[XACCTUSAGE] VERSION 3.__END-USER LICENSE]
Page 15
<PAGE>
EXHIBIT C XACCT SECOND-LEVEL SUPPORT SERVICES, TRAINING AND PRODUCT SUPPORT
SERVICE
1. Except as set forth in this Agreement, and expressly subject to the VAP
being pre-certified as a qualified provider of front line support services, the
VAP will be solely responsible for training and support of End-users who have
obtained licenses to use the Product in accordance with the terms and upon the
conditions of this Agreement including, inter alia, the End-user License
Agreement.
2. The VAP agrees that such training and support shall conform to
the instructions and procedures as may be dictated by XACCT from time to time.
3. XACCT MANDATORY VAP TRAINING. XACCT will provide the VAP (including at
least one technical sales person, and one technical support person) from each
VAP with a minimum of 2 days of training and education at XACCT's facility in
Israel or such other location as XACCT may designate, at a mutually agreed upon
time, within 8 weeks from the Effective Date of this Agreement, or as may be
agreed between XACCT and the VAP. The purpose of the initial training is to
educate the VAP in the sales process, licensing, use and support of the Product.
The VAP shall be responsible for any and all the transportation and lodging
expenses incurred by its staff during the training course in Israel or at such
other location as XACCT may designate. XACCT will provide the initial training
to the VAP in Israel without charge as part of the start-up kit (the "Demo
Package") to be purchased by the VAP. The VAP may request that XACCT conduct a
training course at its site, and should XACCT agree to such request in its sole
discretion, the VAP shall bear any and all traveling, lodging, meals, shipment
and other reasonable expenses incurred by XACCT or its staff in connection with
such training. The satisfactory completion of the XACCT training course is a
mandatory pre-condition to the distribution of the Products pursuant to the
Agreement. The failure of the VAP to pass the training course as set forth above
shall be deemed a material breach of this Agreement. The VAP after completing
and passing the XACCT training course will be responsible for training its
Channels. XACCT retains the right to require Channels to be trained directly by
XACCT.
4. NEW RELEASES: ADDITIONAL TRAINING. In the event XACCT issues a new major
release of the Product, XACCT agrees to provide the VAP's personnel with
additional training at the location and upon the terms and time schedule as
specified in the Section 3 of this Exhibit C above, and after such training
XACCT will permit the VAP's personnel to license and support the new version of
the Product subject to the terms and conditions of this Agreement.
5. ADDITIONAL TRAINING, SUPPORT AND OTHER ASSISTANCE BY XACCT. The VAP may
request additional technical and sales training, educational or other
assistance, on a time and materials basis, at mutually agreed time and
locations. XACCT may provide such services on such terms and subject to such
conditions as it may deem appropriate, subject to the agreement of the VAP in
advance of such terms and conditions. The VAP undertakes to promptly reimburse
XACCT for all out of pocket expenses, including travel lodging and meals,
incurred in connection with the additional training of the VAP personnel.
6. XACCT SECOND LEVEL SUPPORT SERVICES.
6.1 GENERAL. XACCT will provide certain Second-Level Support Services to the
VAP as may be necessary from time to time as further detailed herein. XACCT
shall attempt to respond to inquiries from the VAP's personnel (but not directly
from the End Users or the Channels) as set forth herein, and in such case as the
required assistance is reasonably deemed an issue of Front-line Support Services
XACCT may charge for such assistance on a time and materials basis.
6.2 COVERAGE. Subject to the terms and conditions hereof, XACCT will provide
certain Second-Level Support Services to the VAP for the Product.
6.3 SECOND-LEVEL SUPPORT SERVICES. Second-Level Support Services consist of
(a) Error Correction and Telephone Support provided to the technical support
contact concerning the installation and use of the then current release of
Product and the Previous Sequential Release and (b) Product updates that XACCT
in its discretion makes
Page 16
<PAGE>
generally available. Product updates consist of one copy of published revisions
to the printed documentation and one copy of revisions to the machine readable
Product which are not designated by XACCT as products for which it charges a
separate fee.
6.4 TERM AND TERMINATION. Second-Level Support Services shall be provided on
a unit by unit basis for one year from the termination date of the 90 day
warranty provided under the applicable End-User License Agreement. Second-Level
Support Services shall be extended for so long as the End-User pays the annual
fees for extended Product Maintenance and Support and is expressly subject to
earlier termination as set forth in this Agreement.
Either party may terminate Second-Level Support Services at the end of
the original term or at the end of any renewal term by giving written notice to
the other party at least forty-five (45) days prior to the end of such term. The
foregoing shall in no way, form or manner diminish or derogate XACCT's right to
terminate the Agreement as set forth in the Agreement.
XACCT may suspend or cancel Second-Level Support Services if the VAP
fails to make payment in accordance with this Agreement or breaches the
Second-Level Support Services provisions and such breach is not remedied within
thirty (30) days (10 days in the case of non-payment) after the VAP receives
notice of the breach.
6.5 ERROR PRIORITY LEVELS. Subject to the payment of the Extended Product
Maintenance and Support Fees for the applicable period by the End-user
experiencing an Error, XACCT shall exercise commercially reasonable efforts to
correct any Error reported by the VAP in the current unmodified release of
Product in accordance with the priority level reasonably assigned to such Error
by XACCT.
a) Priority A Errors -
XACCT shall promptly commence the following procedures:
1. assign XACCT engineers to correct the Error;
2. provide the VAP with periodic reports on the status
of the corrections; and
3. initiate work to provide the VAP with a Workaround or
Fix.
b) Priority B Errors -
XACCT shall exercise commercially reasonable efforts
to include the Fix for the Error in the next regular
Product maintenance release.
c) Priority C Errors -
XACCT may include the Fix for the Error in the next major
release of the Product.
If XACCT believes that a problem reported by the VAP may not be due to
an Error in the Product, XACCT will so notify the VAP. At that time, the VAP may
(1) instruct XACCT to proceed with problem determination at its possible expense
as set forth below or (2) instruct XACCT that the VAP does not wish the problem
pursued at its possible expense. If the VAP requests that XACCT proceed with
problem determination at its possible expense and XACCT determines that the
error was not due to an Error in the Product, the VAP shall pay XACCT, at
XACCT's then-current and standard consulting rates, for all work performed in
connection with such determination, plus reasonable related expenses incurred
therewith. The VAP shall not be liable for (i) problem determination or repair
to the extent problems are due to Errors in the Product or (ii) work performed
under this paragraph in excess of its instructions or (iii) work performed after
the VAP has notified XACCT that it no longer wishes work on the problem
determination to be continued at its possible expense (such notice shall be
deemed given when actually received by XACCT). If the VAP instructs XACCT that
it does not wish the problem pursued at its possible expense or if such
Page 17
<PAGE>
determination requires effort in excess of VAP's instructions, XACCT may, at its
sole discretion, elect not to investigate the error with no liability therefor.
6.6 EXCLUSIONS.
XACCT shall have no obligation to support:
1) altered, damaged or modified Product or any portion of the
Product incorporated with or into other software;
2) Product that is not the then current release or immediately
Previous Sequential Release;
3) Product problems caused by the VAP's or the End-User's
negligence, abuse or misapplication, use of Product other than
as specified in the XACCT's user manual or other causes beyond
the control of XACCT; or
4) Product is installed or used in conjunction with a Network
Architecture other than the Licensed Configuration (as defined
in the End-User License Agreement) as had been disclosed to
XACCT at the time of entering into the End-User License
Agreement by the End-User.
XACCT shall have no liability for any changes in End-User's Network Architecture
or components thereof which may be necessary to use Product due to a Workaround
or maintenance release.
6.7 LIMITATION OF LIABILITY. XACCT's liability for damages from any cause of
action whatsoever relating to XACCT's agreement to provide support services
shall be limited to the amount paid by the VAP for the Second-Level Support
Services for the applicable year. XACCT's liability shall be further limited as
provided in the Distribution Agreement.
6.8 DEFINITIONS. Unless defined otherwise herein, capitalized terms used in
this Section 6 of Exhibit C shall have the same meaning as set forth in the
Distribution Agreement or in the End-User License Agreement as the case may be
appropriate.
"Error" means an error in Product to comply with the Product's
specifications published by XACCT at the time of the first execution of the
End-user License.
"Error Correction" means the use of reasonable commercial efforts to
fix bugs or provide work arounds in accordance with the Error Priority Levels.
"Fix" means the repair or replacement of object or executable code
versions of Product to remedy an Error.
"Previous Sequential Release" means the release of Product which has
been replaced by a subsequent release of the same Product. Notwithstanding
anything else, a Previous Sequential Release will be supported by XACCT only for
a period of six (6) months after release of the subsequent release.
"Priority A Error" means an Error which renders Product inoperative.
"Priority B Error" means an Error which substantially degrades the
performance of Product or materially restricts the VAP's use of the Product.
"Priority C Error" means an Error which causes only a minor impact on
the End-User's use of Product.
"Second-Level Support Services" means XACCT second-level support
services as described in Section 6.3 of this Exhibit C.
Page 18
<PAGE>
"Telephone Support" means technical support telephone assistance
provided by XACCT to the technical support contact during normal business hours
in Israel concerning the installation and use of the then current release of
Product and the Previous Sequential Release.
"Workaround" means a change in the procedures followed or data supplied
by XACCT to avoid an Error without substantially impairing End-User's use of
Product.
6.9 THESE TERMS AND CONDITIONS CONSTITUTE A SERVICE CONTRACT AND NOT A
PRODUCT WARRANTY. THE PRODUCT AND ALL MATERIALS RELATED TO THE PRODUCT ARE
SUBJECT EXCLUSIVELY TO THE WARRANTIES SET FORTH IN THE END-USER LICENSE
AGREEMENT. THIS ATTACHMENT IS AN ADDITIONAL PART OF THE AGREEMENT AND DOES NOT
CHANGE OR SUPERSEDE ANY TERM OF THE AGREEMENT EXCEPT TO THE EXTENT UNAMBIGUOUSLY
CONTRARY THERETO.
6.10 DIRECT END-USER OR CHANNEL SUPPORT BY XACCT. XACCT may from time to time,
in its sole discretion, decide to offer Front-Line Support Services directly to
End-users or to the Channels without derogation of the VAP's obligations and
duties herein.
6.11 XACCT EXTENDED PRODUCT MAINTENANCE AND SUPPORT PROGRAM. The XACCT
Extended Product Maintenance and Support Program are described in Exhibit E and
subject to the Price List as set forth in Exhibit A.
Page 19
<PAGE>
EXHIBIT D CERTAIN TERMS AND CONDITIONS OF XACCT LICENSORS
[MAY BE AMENDED FROM TIME TO TIME]
Page 20
<PAGE>
EXHIBIT E EXTENDED PRODUCT MAINTENANCE AND SUPPORT PROGRAM
Page 21
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF REGISTRANT
XACCT Technologies, Inc., a Delaware corporation, located in California, USA.
XACCT Technologies (UK) Limited, an English private company
XACCT Technologies (Germany) Gmbh
XACCT Technologies (Sweden) AB
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts", and to the
use of our report dated March 2, 2000 (except for Note 10, as to which the date
is March 28, 2000) in the Registration Statement (Form S-1) and related
Prospectus of XACCT Technologies (1997) Ltd. for the registration of its
ordinary shares.
Tel-Aviv, Israel
March 28, 2000
/s/ Kost, Forer and Gabbay
KOST, FORER AND GABBAY
A member of Ernst & Young international
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