<PAGE>
As filed with the Securities and Exchange Commission on July 13, 1999
Registration No. 333-78195
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
---------------
Amendment No. 5
to
FORM S-1
REGISTRATION STATEMENT
Under the Securities Act of 1933
---------------
TIBCO SOFTWARE INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 7372 77-0449727
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I. R. S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
---------------
TIBCO Software Inc.
3165 Porter Drive
Palo Alto, CA 94304
(650) 846-5000
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
VIVEK RANADIVE
President and Chief Executive Officer
TIBCO Software Inc.
3165 Porter Drive
Palo Alto, CA 94304
(650) 846-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<S> <C> <C>
LARRY W. SONSINI, Esq. ALISON S. RESSLER, Esq. WILLIAM H. HINMAN, Jr., Esq.
BRIAN C. ERB, Esq. Sullivan & Cromwell Shearman & Sterling
Wilson Sonsini Goodrich & Rosati 1888 Century Park East 1550 El Camino Real
Professional Corporation Los Angeles, CA 90067 Menlo Park, CA 94025
650 Page Mill Road (310) 712-6600 (650) 330-2200
Palo Alto, CA 94304
(650) 493-9300
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum
Title of Each Class of Aggregate Offering Price Amount of
Securities to be Registered (2) Registration Fee (3)
- ------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $0.001 par
value(1).................... $137,425,000 $38,204
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(1)The shares of common stock are not being registered for the purpose of
sales outside the United States.
(2)Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act.
(3)$28,313 of the registration fee was paid in connection with the initial
filing.
---------------
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>
EXPLANATORY NOTE
This registration statement contains two forms of prospectus: (1) one
prospectus to be used in connection with our underwritten offering and (2) one
prospectus to be used in connection with our non-underwritten offering of
common stock to Yahoo! Inc. and Sun Microsystems, Inc. The non-underwritten
prospectus is identical to the underwritten prospectus in all respects except
for the front cover page, the back cover page and page U-1, each of which is
included herein after the last page of the underwritten prospectus and is
labeled "Alternate Page for the Concurrent Offering Prospectus", and the
removal of page U-2. Final forms of each prospectus will be filed with the
Commission pursuant to Rule 424(b) under the Securities Act of 1933.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained 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 jurisdiction where the offer or sale +
+is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion. Dated July 13, 1999.
7,300,000 Shares
[LOGO OF TIBCO]
TIBCO Software Inc.
Common Stock
-----------
This is an initial public offering of shares of common stock of TIBCO
Software. All of the 7,300,000 shares of common stock are being sold by TIBCO
Software in an underwritten public offering. Concurrently with the sale of the
shares in the underwritten offering, TIBCO Software is offering directly to
Yahoo! Inc. shares of common stock with an aggregate purchase price of $4.0
million and offering directly to Sun Microsystems, Inc. 500,000 shares of
common stock. The sale of shares to Yahoo! and Sun Microsystems would be made
at the initial public offering price in non-underwritten transactions.
Prior to this offering, there has been no public market for the common stock.
It is currently estimated that the initial public offering price per share will
be between $14.00 and $15.00. The common stock has been approved for quotation
on the Nasdaq National Market under the symbol "TIBX".
See "Risk Factors" beginning on page 7 to read about factors you should
consider before buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Initial public offering price............................... $ $
Underwriting discount....................................... $ $
Proceeds, before expenses, to TIBCO Software................ $ $
</TABLE>
To the extent that the underwriters sell more than 7,300,000 shares of common
stock, the underwriters have the option to purchase up to an additional
1,095,000 shares from us at the initial public offering price less the
underwriting discount.
-----------
The underwriters expect to deliver the shares on , 1999.
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Deutsche Banc Alex. Brown
-----------
Prospectus dated , 1999.
<PAGE>
The TIB(R)/ActiveEnterprise Solution(TM)
[TIB/AE MODEL GRAPHIC]
[Set forth on this page is a visual representation of the functionality
of the registrant's TIB/ActiveEnterprise software suite of information
integration products and the words:
The TIB/ActiveEnterprise is a suite of products that provides a software
platform for the real-time integration of business processes and distribution
of information within and beyond the enterprise. These products enable
businesses to link internal operations, business partners and customer channels
in real-time. Each TIB/ActiveEnterprise product fulfills an important need in
an enterprise's technology infrastructure as follows:
. Connectivity - integrates various legacy and third party applications
(Standard TIB/Adapters, TIB/Adapter SDK).
. Messaging - enables the movement of information between applications
(TIB/Rendezvous, TIB/Enterprise Transaction Express, TIB/ObjectBus).
. Information Transformation and Flow Management - manages the conversion
and translation of data and controls the flow of information and the
interaction of business processes throughout the enterprise
(TIB/MessageBroker,TIB/IntegrationManager).
. Monitoring and Management - administers the applications environment and
ensures reliable operations (TIB/Hawk).
. Content Display - provides the display console through which users are
notified of business event information
(TIB/ContentBroker,TIB/EventConsole).]
<PAGE>
Becoming a Real-Time Enterprise
[GRAPHIC]
TIB(R)/ActiveEnterprise(TM) Product Suite
[Set forth on this page is a visual representation of the registrant's
TIB/ActiveEnterprise software suite of information integration
solutions and the words:
.Allows multiple distinct applications, web sites, databases and other
content sources to be integrated and managed in real-time.
.Facilitates the distribution of information and integration of
business processes by connecting each application through patented
technology called The Information Bus or the TIB.
.Enables enterprises to extend their information infrastructures across
the Internet.]
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock being sold in the
offerings and our financial statements and notes to those statements appearing
elsewhere in this prospectus. Except as set forth in the financial statements
or as otherwise specified, all information in this prospectus: (1) does not
take into account the possible issuance of up to 1,095,000 additional shares of
common stock in the underwritten offering upon the exercise of the
underwriters' right to purchase such shares; (2) reflects the conversion of all
of our outstanding preferred stock into 27,226,316 shares of common stock upon
the closing of the offerings; (3) reflects the amendment to our charter to
provide for the authorization of 300,000,000 shares of common stock and
25,000,000 shares of preferred stock upon closing of the offerings;
(4) reflects a 1-for-2 reverse split of our outstanding capital stock which
will be effected prior to the offerings; and (5) reflects the sale of a total
of 775,862 shares of common stock to Yahoo! and Sun Microsystems in a
concurrent offering at an assumed offering price of $14.50 per share.
Our Business
We are a leading provider of software solutions that enable businesses to
integrate internal operations, business partners and customer channels in real-
time. Through our products and services, we enable computer applications and
systems to communicate efficiently across local or wide area networks,
including the Internet.
Our TIB/ActiveEnterprise product suite facilitates the distribution of
information and integration of business processes by connecting applications to
a network through a technology called The Information Bus or the TIB. This
technology uses a publish/subscribe model, in which a user specifies once the
type of information desired, and the specified information is then delivered to
the user automatically each time it becomes available. The TIB technology
allows multiple distinct applications, web sites, databases and other content
sources to be integrated and managed in real-time within a common framework.
TIB/ActiveEnterprise also enables enterprises to extend their information
infrastructures across the Internet. Our product suite is employed in high-
performance environments and provides enterprises with a comprehensive and
scalable method of distributing relevant, timely information across and beyond
the enterprise.
Our products are currently in use by over 300 companies in diverse markets
such as telecommunications, high-tech manufacturing, energy, financial services
and e-business. Current users of our TIB/ActiveEnterprise products include
3Com, Bechtel, Cedel Global Services, Chevron, Compaq, Dalkia, Ericsson,
Fidelity, First National Bank of South Africa, Goldman Sachs, Hyundai, Intel,
Intuit, Lucent Technologies, Mobil, Motorola, The Nasdaq Stock Market, National
Westminster Bank, NEC Electronics, Pacific Power, PageNet, Philips Medical,
Telia, Taiwan Semiconductor Manufacturing Company, United Microelectronics
Corp., Unibank and Yahoo!. Each of these companies, other than financial
services companies, accounted for at least $500,000 of our revenue over the
period from January 1997 through May 1999. Each of the financial services
companies accounted for at least $200,000 of our revenue during that period.
In fiscal 1997 and 1998 and the first half of fiscal 1999, we had revenue of
$35.3 million, $52.8 million and $39.1 million. During those periods we
incurred net losses of $4.7 million, $13.0 million and $9.0 million. As of May
31, 1999, we had an accumulated deficit of approximately $26.6 million.
Our Market Opportunity
As the range of computing environments and software applications used across
the typical business enterprise grows, creating a real-time enterprise through
technology is becoming vastly more complex. In today's increasingly global and
competitive environment, applications must be tightly integrated in order to
effectively manage, grow and extend the business. Enabling the real-time
exchange of information among suppliers, customers and partners can enhance
3
<PAGE>
management and employee productivity, create manufacturing efficiencies and
improve customer service. We believe that many traditional application
integration solutions have failed to address all of today's information
integration needs because they lack comprehensiveness or flexibility, or use
network resources inefficiently.
Our Strategy
Our objective is to establish the TIB/ActiveEnterprise product suite as the
leading software solution for linking enterprises' internal operations,
business partners and customer channels. The core elements of our strategy
include:
. Promote the widespread adoption of our technology. We seek to establish
our technology and product suite as the industry standard by embedding
our technology in leading vendors' products and further extending the
functionality of our solution.
. Enhance our position as a provider of Internet infrastructure. We plan to
leverage our technology to expand the solutions we offer to companies
involved in electronic commerce.
. Focus on licensing our products. We plan to focus on licensing our
products. To support this strategy, we plan to expand our relationships
with systems integrators and professional services firms.
. Leverage our expertise in specific markets. We plan to expand our
presence in markets such as telecommunications, high-tech manufacturing
and energy and capitalize on the presence of Reuters in the financial
services sector.
. Expand our international market presence. We intend to continue building
the strength of our international presence in regions such as Europe and
Asia.
Concurrent Offering
Concurrently with our underwritten public offering, in furtherance of our
strategic relationship with Yahoo!, Inc., we are offering directly to Yahoo!,
at the initial public offering price, shares of our common stock with an
aggregate purchase price of $4.0 million. In addition, in furtherance of a
strategic relationship with Sun Microsystems, Inc., we are offering to Sun
Microsystems, at the initial public offering price, 500,000 shares of our
common stock. Although both Yahoo! and Sun Microsystems have indicated an
intention to purchase the shares in the concurrent offering, neither is
obligated to do so. Neither the sale of shares to Yahoo! or to Sun Microsystems
in the concurrent offering is dependent on the sale of shares to the other, and
we might not sell any shares in the concurrent offering. If Yahoo! and Sun
Microsystems do not purchase their full allotment of shares in the concurrent
offering, we will not sell any of the remainder of those allotted shares. Any
shares purchased by Yahoo! or Sun Microsystems in the concurrent offering will
be subject to a 180-day lock-up agreement with our underwriters. In this
prospectus, we refer to the offering of the 7,300,000 shares hereby as the
"underwritten offering", to the offering of shares of common stock to Yahoo!
and Sun Microsystems as the "concurrent offering" and to the underwritten
offering and the concurrent offering together as the "offerings".
Company Background
We are the successor to a portion of the business of Teknekron Software
Systems, Inc., a leading innovator in the development of software
infrastructure for the integration and delivery of market data, such as stock
quotes, news and other financial information, in trading rooms of large banks
and financial services institutions. Teknekron was acquired by Reuters, the
global news and information group, in March 1994. In January 1997, we were
established as a separate entity to focus on creating and marketing software
solutions for use in the integration of business
4
<PAGE>
information, processes and applications in diverse industries outside the
financial services market.
Following the offerings, Reuters will continue to hold a majority equity
interest in our company, but has agreed to limit its voting rights.
Nevertheless, Reuters will continue to have significant influence over our
company. See "Relationship with Reuters and Certain Transactions--Stockholders
Agreement" beginning on page 57 for a description of arrangements that will
enable Reuters to exercise influence over our company. We license the
technology underlying some of our TIB/ActiveEnterprise products from Reuters,
and Reuters is our preferred distributor in the financial services market. When
we refer to Reuters in this prospectus, we include Reuters Group PLC and its
consolidated subsidiaries, including TIBCO Finance Technology, Inc. ("TFT"),
but excluding our company, TIBCO Software Inc.
The Offerings
<TABLE>
<C> <S>
Common stock offered in the underwritten
offering.................................. 7,300,000 shares
Common stock offered in the concurrent
offering.................................. 775,862 shares
Common stock to be outstanding after the
offerings................................. 58,757,714 shares
Use of proceeds............................ For general corporate purposes,
including working capital and
capital expenditures, and for
potential investments in and
acquisitions of complementary
technologies. See "Use of
Proceeds" on page 14 for a more
detailed description of our
intended use of the proceeds from
the offerings.
Proposed Nasdaq National Market Symbol..... TIBX
</TABLE>
The table above is based on shares outstanding as of May 31, 1999. The number
of shares of common stock to be outstanding after the offerings includes
2,142,500 shares subject to repurchase by us under our stock option plan and
excludes 10,268,218 shares of common stock issuable upon exercise of
outstanding options at a weighted average exercise price of $2.22 per share and
1,322,564 shares reserved for future grants under our 1996 Stock Option Plan
and our 1998 Director Option Plan. The number of shares of common stock offered
in the concurrent offering and the number of shares of common stock to be
outstanding after the offerings are based on an assumed initial public offering
price of $14.50 per share.
5
<PAGE>
Summary Financial Information
(in thousands, except per share data)
Prior to 1997, we were part of a subsidiary of Reuters that included the
operations of TFT. Our statement of operations data for fiscal 1996 was
prepared on a carved-out basis from the financial statements of that
subsidiary. Our pro forma net loss per share reflects the automatic conversion
of all of our outstanding preferred stock into common stock upon the closing of
the offerings. The "As Adjusted" column under Balance Sheet Data gives effect
to the sale of shares of common stock we are offering in the underwritten
offering and the application of the net proceeds we will receive from such sale
at an assumed initial public offering price of $14.50 per share. The "As
Further Adjusted" column gives effect to the underwritten offering and to our
sale of an additional 775,862 shares in the concurrent offering at an assumed
initial public offering price of $14.50 per share and the application of the
net proceeds we will receive from such sale.
<TABLE>
<CAPTION>
Six Months
Eleven Ended
Year Ended Months Ended Year Ended May 31,
December 31, November 30, November 30, ----------------
1996 1997 1998 1998 1999
------------ ------------ ------------ ------- -------
Statement of Operations
Data: (unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
License................ $ 6,066 $ 6,219 $ 17,495 $ 7,854 $22,059
Service and
maintenance........... 24,249 29,055 35,262 17,000 17,013
------- ------- -------- ------- -------
Total revenue......... 30,315 35,274 52,757 24,854 39,072
Gross profit............ 10,709 19,427 25,075 11,549 22,832
Loss from operations.... (3,089) (5,203) (14,043) (4,511) (8,952)
Net loss................ (4,640) (4,663) (12,951) (3,941) (8,959)
Net loss per share:
Basic and diluted..... $ (0.24) $ (0.65) $ (0.20) $ (0.43)
======= ======== ======= =======
Weighted average
shares............... 19,202 20,011 19,720 20,840
======= ======== ======= =======
Pro forma net loss per
share:
Basic and diluted
(unaudited).......... $ (0.28) $ (0.19)
======== =======
Weighted average
shares
(unaudited).......... 47,002 48,066
======== =======
</TABLE>
<TABLE>
<CAPTION>
November 30, May 31, 1999
----------------- --------------------------------
As Further
1997 1998 Actual As Adjusted Adjusted
------- -------- -------- ----------- ----------
Balance Sheet Data: (unaudited)
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and
deposits held by
Reuters.................. $18,318 $ 15,970 $ 5,754 $100,044 $111,294
Working capital........... 15,168 18,301 13,695 107,985 119,235
Total assets.............. 31,046 36,289 33,878 128,168 139,418
Accumulated deficit....... (4,663) (17,614) (26,573) (26,573) (26,573)
Stockholders' equity...... 17,167 21,704 17,640 111,930 123,180
</TABLE>
6
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. If any of the events described below actually occur, our
business, financial condition or results of operations could be harmed. In such
case, the trading price of our common stock could decline, and you could lose
all or part of your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in the forward-looking statements as a result of certain factors,
including the risks described below and elsewhere in this prospectus.
Risks Related to Our Business
Because we have a limited operating history as an independent entity, it may be
difficult for prospective investors to evaluate our business and prospects
When making an investment decision, you should consider the risks, expenses
and difficulties that we may encounter as a newly-independent company
implementing a new business strategy. We have operated as a stand-alone company
only since January 1997. Prior to January 1997, our business was conducted by a
subsidiary of Reuters that focused on providing market data, custom messaging
and integration solutions to companies in the financial services, high-tech
manufacturing and energy markets. At the time we were formed as a separate
entity, we implemented an expanded business strategy focused on deriving
license revenue from direct licensing of our TIB/ActiveEnterprise product suite
to a diverse group of customers outside the financial services market. We began
shipments of TIB/ActiveEnterprise products in the second half of fiscal 1998.
These changes have required us to adjust our business processes and hire
additional employees. We cannot be certain that our new business strategy will
be successful or that we can successfully operate as an independent entity.
Reuters has historically provided us with shared functions and services such
as accounting, legal and insurance. Although we will continue to be majority-
owned by Reuters immediately following the offerings, Reuters has no obligation
to assist us except as described in "Relationship with Reuters and Certain
Transactions--Intercompany Agreements--Intercompany Services" on page 58. If we
fail to implement the financial, operational, administrative and other systems
and infrastructure necessary to support our business as a stand-alone company,
the growth of our business could be hindered.
We have a history of losses, and we expect future losses, and if we do not
achieve and sustain profitability our business will suffer and our stock price
may decline
Although our revenue has increased in recent quarters, we may not be able to
sustain our growth or obtain sufficient revenue to achieve and sustain
profitability. We incurred net losses of approximately $4.7 million, $13.0
million and $8.2 million in fiscal 1997 and 1998 and in the first half of
fiscal 1999. As of May 31, 1999, we had an accumulated deficit of approximately
$25.8 million.
Since the beginning of fiscal 1998, we have invested significantly in our
technology research and development and in building our sales and marketing
organization. We expect to continue to spend substantial financial and other
resources on developing and introducing enhancements to our existing products
and new software products and on expanding our direct sales and marketing
activities. As a result, we need to generate significant revenue to achieve and
maintain profitability. We expect that our research and development expenses
and our sales and marketing expenses will continue to increase in absolute
dollars and may increase as percentages of revenue for the forseeable future.
7
<PAGE>
Our future revenue is unpredictable, and we expect our quarterly operating
results to fluctuate, which may cause our stock price to decline
Period-to-period comparisons of our operating results may not be a good
indication of our future performance. Moreover, our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that event, our stock price would likely decline. As a result of our limited
operating history, our new business strategy and the evolving nature of the
markets in which we compete, we may have difficulty accurately forecasting our
revenue in any given period. In addition to the factors discussed elsewhere in
this section, a number of factors may cause our revenue to fall short of our
expectations or cause fluctuations in our operating results, including:
. the announcement or introduction of new or enhanced products or services
by our competitors;
. the amount and timing of operating costs and capital expenditures
relating to the expansion of our operations; and
. the capital and expense budgeting decisions of our customers.
In addition, our quarterly operating results have historically been subject
to variations throughout the year due to a general slow-down in our sales in
the summer months, particularly in Europe and, to a lesser extent, in the
United States. Specifically, we generally experience relatively lower revenue
in our third and, to a lesser extent, our first fiscal quarters. These seasonal
variations in our operating results may lead to fluctuations in our results of
operations from quarter to quarter throughout the year.
Variations in the time it takes us to sell our products may cause fluctuations
in our operating results
Variations in the length of our sales cycles could cause our revenue to
fluctuate widely from period to period. Because our operating expenses are
relatively fixed over the short term, these fluctuations could cause our
operating results to suffer in some future periods. Our customers generally
take a long time to evaluate our products, and many individuals may be involved
in the evaluation process. Because of the number of factors influencing the
sales process, the period between our initial contact with a new customer and
the time when we recognize revenue from that customer varies widely in length.
Our sales cycles typically range from three to six months. For larger
opportunities with new customers, however, these cycles can be much longer.
Our dependence on a limited number of customers for a substantial amount of our
sales could lead to fluctuations in our operating results
Our business depends on sales of our products to a limited number of
customers, which may cause fluctuations in our operating results. We do not
have long-term contracts with any of our customers. There can be no assurance
that any of our customers will continue to purchase our products in the future.
As a result, a customer that generates substantial revenue for us in one period
may not be a source of revenue in subsequent periods.
Our licensing and distribution relationship with Reuters places limitations on
our ability to conduct our business
After the offerings, we will continue to be substantially dependent on our
licensing and distribution relationship with Reuters and its wholly-owned
subsidiary, TFT. Our relationship with Reuters and TFT involves limitations and
restrictions on our business, as well as other risks, described below. See
"Relationship with Reuters and Certain Transactions--Intercompany Agreements--
License, Maintenance and Distribution Agreement with Reuters" beginning on page
54 for a detailed description of the agreement that governs our licensing and
distribution relationship with Reuters.
Reuters has access to the intellectual property used in our products, and
could use the intellectual property to compete with
8
<PAGE>
us. We license the underlying TIB messaging technology incorporated into some
of our important TIB/ActiveEnterprise products from Reuters. We do not own this
technology. Reuters is not restricted from using the TIB technology to produce
products that compete with our products, and it can grant limited licenses to
the TIB technology to others who may compete with us. In addition, we must
license all the intellectual property and products we create through December
2011 to Reuters. This will place Reuters in a position to more easily develop
products that compete with our product offerings.
We must rely on Reuters and other distributors to sell our products in the
financial services market, and they may not be successful in doing so. Under
our agreements with Reuters, we are restricted from selling our products and
providing consulting services directly to companies in the financial services
market and major competitors of Reuters, and from using the TIB technology we
license from Reuters to develop products specifically for use by these
companies. Accordingly, we must rely on Reuters and other third-party resellers
and distributors to sell our products to these companies.
In fiscal 1997 and 1998, substantially all of our revenue from sales in the
financial services market, excluding sales to Cedel Global Services, consisted
of product fees paid to us by Reuters. Although Reuters is the preferred
distributor of our products in the financial services market and is required to
pay us guaranteed minimum product fee payments until the end of 2001, Reuters
has no contractual obligation to distribute our products to financial services
customers. Reuters and other distributors may not be successful in selling our
products into the financial services market, or they may elect to sell
competitive third-party products into that market, either of which may
adversely affect our revenue in that market.
Our relationship with Reuters restricts our ability to earn revenue from
sales in the financial services market. Under the license agreement, Reuters is
required to pay us product fees based on a percentage of its revenue from sales
of our products in the financial services market, excluding products that are
embedded in any TFT or Reuters products. These product fees may be materially
less than the product fees we could obtain from other distributors or resellers
in the financial services market. In addition, when we sell our products into
the financial services market through third-party distributors other than
Reuters, Reuters receives a share of our license revenue.
Our license agreement with Reuters imposes practical restrictions on our
ability to acquire other companies. The license agreement places no specific
restrictions on our ability to acquire companies with all or part of their
business in the financial services market. However, under the terms of the
license agreement, we are prohibited from bundling or combining our products
that are based on licensed technology with an acquired company's products and
services and then selling the bundled or combined products directly to
financial services companies. This prohibition could prevent us from realizing
potential synergies with companies we acquire.
If we do not retain our key management personnel and attract and retain other
highly skilled employees our business will suffer
If we fail to retain and recruit the necessary personnel, our business and
our ability to obtain new customers, develop new products and provide
acceptable levels of customer service could suffer. The success of our business
is heavily dependent on the leadership of our key management personnel,
including Vivek Ranadive, our President and Chief Executive Officer. All our
executive officers and key personnel are employees at-will. If any of these
persons were to leave our company it would be difficult to replace them, and
our business would be harmed.
Our success also depends on our ability to recruit, retain and motivate
highly skilled sales, marketing and engineering personnel. Competition for
these persons in the software industry is intense, and we may not be able to
successfully recruit, train or retain qualified personnel.
9
<PAGE>
We must expand our sales force and our network of distribution partners in
order to successfully sell our products
In connection with our establishment as a separate entity in January 1997, we
implemented a direct sales model under which we sell our products outside the
financial services market principally through our direct sales force and, to a
lesser extent, through indirect sales channels such as systems integrators,
resellers and distributors. We have only recently begun to hire and train
direct sales personnel. We are currently investing, and plan to continue
investing, significant resources to expand our direct sales force and to
develop relationships with systems integrators, resellers and distributors. We
may not be successful in expanding our direct sales force or other distribution
channels, and even if we are, such expansion might not result in an increase in
our revenues. If we fail to maintain our existing relationships with indirect
sales channel partners or fail to establish new ones, or if our revenue does
not increase correspondingly with the expenses we incur in pursuing such
relationships, our business may suffer.
Our software products may have unknown defects which could harm our reputation
or decrease market acceptance of our products
Because our customers depend on our software for their critical systems and
business functions, any interruptions caused by unknown defects in our products
could damage our reputation, cause our customers to initiate product liability
suits against us, increase our product development costs, divert our product
development resources, cause us to lose revenue or delay market acceptance of
our products, any of which could cause our business to suffer. Our product
offerings consist of complex software, both internally developed and licensed
from third parties. Complex software may contain errors or defects,
particularly when first introduced or when new versions or enhancements are
released. Although we conduct extensive testing, we may not discover software
defects that affect our current or new products or enhancements until after
they are sold. Although we have not experienced any material software defects
to date, such defects could cause our customers to experience severe system
failures.
The rapid growth of our operations could strain our resources and cause our
business to suffer
Our ability to successfully offer products and services and implement our
business plan in a rapidly evolving market requires an effective planning and
management process. We are increasing the scope of our operations and the size
of our direct sales force domestically and internationally, and we have
recently increased our headcount substantially. Between December 1, 1997 and
May 31, 1999, our total number of employees increased from 145 to 342.
Moreover, our revenue increased from $35.3 million in fiscal 1997 to $52.8
million in fiscal 1998, and was $39.1 million in the first half of fiscal 1999.
This growth has placed and will continue to place a significant strain on our
management systems, infrastructure and resources. We expect that we will need
to continue to improve our financial and managerial controls, reporting systems
and procedures. We will also need to expand, train and manage our workforce
worldwide. Furthermore, we expect that we will be required to manage an
increasing number of relationships with various customers and other third
parties. Failure to expand any of the foregoing areas efficiently and
effectively could interfere with the growth of our business as a whole.
Our substantial and expanding international operations are subject to
uncertainties which could affect our operating results
If our revenue from international operations does not exceed the expense of
maintaining these operations, our business, financial condition and operating
results will suffer. Revenue from the sale of our products and services outside
the United States accounted for $6.3 million and $20.1 million, or 18% and 38%,
of our total revenue for fiscal 1997 and 1998. We believe that revenue from
sales outside the United States will continue to account for a material portion
of our total revenue for the foreseeable future. We are
10
<PAGE>
exposed to several risks inherent in conducting business internationally, such
as:
. fluctuations in currency exchange rates;
. unexpected changes in regulatory requirements, including imposition of
currency exchange controls, applicable to our business or to the
Internet;
. difficulties and costs of staffing and managing international operations;
. political and economic instability; and
. reduced protection for intellectual property rights in certain countries.
Any of these factors could adversely affect our international operations and,
consequently, our operating results.
Our products may infringe the intellectual property rights of others, which may
cause us to incur unexpected costs or prevent us from selling our products
We cannot be certain that our products do not infringe issued patents or
other intellectual property rights of others. Because patent applications in
the United States are not publicly disclosed until the patent is issued,
applications of which we are not aware may have been filed which relate to our
software products. We may be subject to legal proceedings and claims from time
to time in the ordinary course of our business, including claims of alleged
infringement of the patents, trademarks and other intellectual property rights
of third parties by us or our licensees in connection with their use of our
products. Intellectual property litigation is expensive and time-consuming, and
could divert our management's attention away from running our business. If we
were to discover that our products violated the intellectual property rights of
others, we would have to obtain licenses from these parties in order to
continue marketing our products without substantial reengineering. We might not
be able to obtain the necessary licenses on acceptable terms or at all, and if
we could not obtain such licenses, we might not be able to reengineer our
products successfully or in a timely fashion. If we fail to address any
infringement issues successfully, we will be forced to incur significant costs
and could be prevented from selling our products.
Problems related to the "Year 2000 Issue" could adversely affect our business
We are exposed to various risks arising out of the change of millennium which
could adversely affect our business and operating results. Risks are posed if,
despite our investigation and remediation efforts, one or more of the following
occurs:
. our own software products contain undetected errors or defects associated
with the Year 2000 problem;
. third party hardware and software used with our software experiences
problems which are wrongly attributed to us;
. our suppliers, internal information technology systems or non-information
technology systems, including telecommunications systems and utilities,
experience problems; and
. our customers, business partners or distributors experience Year 2000
problems.
The occurrence of any of the foregoing could result in delays or losses of
revenue, diversions of our development resources, damage to our reputation,
increased service and warranty costs and litigation costs. In addition,
regardless of whether we experience Year 2000 problems, enterprises may reduce
their spending on software and systems during the latter part of 1999 and into
2000 in connection with the potential effects of the Year 2000 or to
concentrate their resources on remediation.
Risks Related to Our Industry
The market for enterprise infrastructure software may not grow as quickly as we
anticipate, which would cause our revenues to fall below expectations
The market for enterprise infrastructure software is relatively new and
evolving. We earn a substantial portion of our revenue from sales
11
<PAGE>
of our enterprise infrastructure software, including application integration
software, and related services. We expect to earn substantially all of our
revenue in the foreseeable future from sales of these products and services.
Our future financial performance will depend on continued growth in the number
of organizations demanding software and services for application integration,
e-business and information delivery, and seeking outside vendors to develop,
manage and maintain this software for their critical applications. Many of our
potential customers have made significant investments in internally developed
systems and would incur significant costs in switching to third-party products,
which may substantially inhibit the growth of the market for enterprise
infrastructure software. If this market fails to grow, or grows more slowly
than we expect, our sales will be adversely affected.
We must keep pace with rapidly changing technologies and customer demands in
order to remain competitive
If we fail to develop and introduce new products or enhancements of existing
products in a timely manner in response to technological and customer demands,
our business will suffer. The markets in which we compete are characterized by
rapid technological changes, frequent new product introductions and
enhancements and changing customer demands and industry standards. The
introduction of products incorporating new technologies and the emergence of
shifting customer requirements and changing industry standards could render our
existing products obsolete. The technological life cycles of our products are
difficult to estimate and may vary across customer market segments.
Our business depends on continued growth in use of the Internet for
communications and commerce
If use of the Internet for communications and commerce does not grow as
quickly as we expect, revenue from our Internet product and service offerings
would be adversely affected. Our strategy includes expanding our business in
the Internet infrastructure and e-business markets, as well as incorporating
the Internet as part of the solutions we offer to our customers in other
markets. Accordingly, our future success depends in part on the continued
growth in the use of the Internet for communications and commerce. The
infrastructure, products or services necessary to maintain this growth may not
be developed.
Risks Relating to the Offerings
After the offerings, Reuters will have significant influence over matters
affecting us, and the interests of Reuters may conflict with those of our
public stockholders
After this offering, Reuters will be in a position to significantly influence
the outcome of corporate actions that could conflict with the interests of our
public stockholders, such as:
. amending our corporate documents;
. determining the amount and timing of dividends paid to itself and to
other holders of common stock;
. changing the size and composition of our board of directors and
committees of our board of directors; and
. otherwise controlling management and operations and the outcome of most
matters submitted for a stockholder vote.
Immediately after the offerings, Reuters will own 64.6% of our common stock,
and the investors in the offerings will own only 13.8% of our common stock.
Reuters has agreed that following the offerings it will limit its right to vote
its shares of our stock so that the votes cast by Reuters will not represent
more than 49% of the total votes eligible to be cast.
In addition, pursuant to a stockholders agreement, Reuters will have the
right to nominate three of the nine representatives on our board of directors
and one member of the audit and compensation committees of our board of
directors, and stockholders that will hold a majority of our stock following
the offerings have agreed to vote for the Reuters nominees. Reuters also has
the right under the stockholders agreement to approve fundamental decisions
relating to sales of our
12
<PAGE>
company and stock issuances and acquisitions in excess of specified thresholds.
Our stock price may be volatile, which could cause investors to lose all or
part of their investments in our stock
The stock market in general, and the stock prices of technology companies in
particular, have recently experienced volatility which has often been unrelated
to the operating performance of any particular company or companies. If market
or industry-based fluctuations continue, our stock price could decline
regardless of our actual operating performance and investors could lose all or
part of their investments.
Future dispositions of our common stock by Reuters could adversely affect the
market price of our common stock
Any sale or distribution by Reuters of a substantial amount of common stock
in the public market or to its stockholders, or the perception that such a sale
or distribution could occur, could have an adverse effect on the market price
of our common stock. Following the offerings, Reuters will own approximately
64.6% of our outstanding common stock. Reuters is not obligated to retain these
shares, except that subject to limited exceptions, it has agreed not to sell or
otherwise dispose of any shares of common stock for 180 days after the
completion of the offerings without the consent of our underwriters. Although
Reuters has informed us that it has no present plans to sell any of its shares
other than limited amounts pursuant to arrangements with TFT employees and
consultants, after the expiration of this 180-day period, Reuters could dispose
of its shares of our common stock through a public offering, spin-off or other
transaction. Reuters has the right, under certain circumstances, to require us
to register its shares of common stock for public resale.
13
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by us from the sale of common stock in the
offerings, after deducting estimated expenses of $4.2 million and underwriting
discounts and commissions, all of which are payable by us, are estimated to be
approximately $105.5 million, or approximately $120.3 million if the
underwriters exercise their option to purchase additional shares in full,
assuming an initial public offering price of $14.50 per share. If the
concurrent offering is not consummated, the aggregate net proceeds from our
sale of common stock in the underwritten offering will be approximately $94.3
million, or approximately $109.1 million if the underwriters exercise their
option to purchase additional shares in full. The principal purposes of the
offerings are to obtain additional capital, to create a public market for our
common stock and to facilitate our future access to public securities markets.
We currently expect to use the net proceeds from the offerings for general
corporate purposes, including working capital and capital expenditures. In this
regard, we currently expect that we will use approximately $5.0 million of the
net proceeds in connection with the purchase of leasehold improvements at our
headquarters in Palo Alto, California. In addition, we intend to use
approximately $2.0 million of the net proceeds during the remainder of fiscal
1999 for the purchase of computer equipment. We may also use a portion of the
net proceeds to acquire or invest in complementary services, products or
technologies. We do not currently have any agreements or commitments with
respect to any such transactions. Pending use of the net proceeds for the above
purposes, we intend to invest such funds in short-term, interest-bearing
obligations.
DIVIDEND POLICY
We have never paid dividends on our common stock or other securities. We
anticipate that we will retain any future earnings for use in the expansion and
operation of our business and we do not anticipate paying any dividends in the
foreseeable future.
14
<PAGE>
CAPITALIZATION
The following table sets forth:
. our actual capitalization as of May 31, 1999;
. our pro forma as adjusted capitalization reflecting the conversion of all
outstanding preferred stock into common stock and the sale by us of the
7,300,000 shares of common stock offered in the underwritten offering,
assuming an initial public offering price of $14.50 per share, and the
receipt of the estimated net proceeds therefrom, after deducting
underwriting discounts and commissions and estimated offering expenses;
and
. our pro forma as adjusted capitalization, as further adjusted to reflect
the sale by us of 775,862 shares in the concurrent offering assuming an
initial public offering price of $14.50 per share.
<TABLE>
<CAPTION>
May 31, 1999
--------------------------------
Pro Forma
Pro Forma As Further
Actual As Adjusted Adjusted
-------- ----------- ----------
(in thousands, except share
data)
<S> <C> <C> <C>
Stockholders' equity:
Convertible Preferred Stock, $0.001 par value
per share;
actual--75,000,000 shares authorized,
27,226,000 issued and outstanding; pro forma
as adjusted--25,000,000 shares authorized, no
shares issued or outstanding................. $ 27 $ -- --
Common Stock, $0.001 par value per share;
actual--
100,000,000 shares authorized, 23,456,000
shares issued and outstanding; pro forma as
adjusted for the underwritten offering--
300,000,000 shares authorized, 57,982,000
shares issued and outstanding; pro forma as
further adjusted for the concurrent
offering--300,000,000 shares authorized,
58,758,000 shares issued and outstanding..... 23 58 58
Additional paid-in capital.................... 53,277 147,559 158,809
Unearned compensation......................... (9,114) (9,114) (9,114)
Accumulated deficit........................... (26,573) (26,573) (26,573)
-------- -------- --------
Total capitalization.......................... $ 17,640 $111,930 $123,180
======== ======== ========
</TABLE>
The table above excludes 10,268,218 shares of common stock issuable upon
exercise of outstanding options at a weighted average exercise price of $2.22
per share and 1,322,564 shares reserved for future grants under our 1996 Stock
Option Plan and our 1998 Director Option Plan. See "Management--Stock Plans"
beginning on page 51 for a description of these plans, and "Description of
Capital Stock" beginning on page 63 and Note 8 of Notes to Financial
Statements beginning on page F-18 for a description of our capital stock.
15
<PAGE>
DILUTION
Our pro forma net tangible book value as of May 31, 1999 was approximately
$17.6 million or $0.35 per share of common stock. Net tangible book value per
share is determined by dividing our net tangible book value, which is our total
tangible assets less our total liabilities, by the number of shares of common
stock outstanding at that date, assuming the conversion of all the outstanding
shares of our preferred stock into common stock on a one-for-one basis. After
giving effect to the sale of the 7,300,000 shares of common stock in the
underwritten offering and the sale of 775,862 shares in the concurrent
offering, at an assumed initial public offering price of $14.50 per share and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses, our adjusted pro forma net tangible book value as of May 31,
1999 would have been approximately $123.2 million or $2.10 per share. This
represents an immediate increase in pro forma net tangible book value to
existing stockholders of $1.75 per share and an immediate dilution to new
investors of $12.40 per share. Accordingly, after the offerings the excess of
our tangible assets over our liabilities calculated on a per share basis will
be less than the purchase price paid for those shares by investors in the
offerings. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of common
stock.......................................................... $ 14.50
Pro forma net tangible book value per share of common stock as
of May 31, 1999................................................ $0.35
Increase in net tangible book value per share of common stock
attributable to new investors.................................. 1.75
----- -------
Pro forma net tangible book value per share of common stock
after the offerings............................................ 2.10
-------
Dilution per share of common stock to new investors (including
the investors in the concurrent offering)...................... $ 12.40
=======
</TABLE>
Investors in the offerings should consider that their investment will increase
our asset base, thereby increasing our net tangible book value to existing
stockholders. However, because our net tangible book value before the offering
is less than the assumed initial public offering price, our net tangible book
value after the offering will be less than the assumed initial offering price.
Accordingly, our tangible assets less our liabilities available to stockholders
after the offering if we were to be liquidated would be less than what new
investors paid for their shares.
The following table sets forth on a pro forma basis as of May 31, 1999 the
difference between the number of shares of common stock purchased from us, the
total consideration paid, and the average price per share paid by existing
stockholders and by the new investors (including the investors in the
concurrent offering) assuming an initial public offering price of $14.50 per
share and before deducting estimated underwriting discounts and commissions and
estimated offering expenses (in thousands, except per share data):
<TABLE>
<CAPTION>
Shares Total
Purchased Consideration Average
-------------- ---------------- Price
Number Percent Amount Percent Per Share
------ ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 50,682 86.2% $ 44,213 27.4% $ 0.87
New investors (including the
investors in the concurrent
offering).......................... 8,076 13.8 117,100 72.6 14.50
------ ---- -------- ----
Total............................. 58,758 100% $161,313 100%
====== ==== ======== ====
</TABLE>
The foregoing table assumes the conversion of all the outstanding shares of
our preferred stock into common stock on a one-for-one basis and no exercise of
any outstanding stock options after May 31, 1999. As of May 31, 1999, there
were outstanding options to purchase an aggregate of 10.3 million shares of
common stock at a weighted average exercise price of $2.22 per share. If such
options are exercised, new investors will incur additional dilution from the
amount shown in the table above. See "Management--Stock Plans" beginning on
page 51 for a description of the plan under which these options were granted.
16
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with, and
are qualified by reference to, our financial statements and notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this prospectus. The statement of income
data for the year ended December 31, 1996, the eleven months ended November 30,
1997 and the year ended November 30, 1998, and the balance sheet data at
November 30, 1997 and 1998 are derived from, and are qualified by reference to,
our audited financial statements included elsewhere in this prospectus. The
statement of income data for the six months ended May 31, 1998 and 1999 and the
balance sheet data at May 31, 1999 have been derived from our unaudited
financial statements included elsewhere in this prospectus. The unaudited
financial statements have been prepared on substantially the same basis as the
audited financial statements and include all adjustments, consisting only of
normal recurring adjustments, that we consider necessary for a fair
presentation of the financial position and results of operations for the
period. Operating results for the six months ended May 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
November 30, 1999.
Our financial statements discussed herein, and the following selected
financial data, reflect our historical results of operations, financial
position and cash flows. The financial statements from 1994 through 1996
contained herein and discussed below have been carved out from the financial
statements of a subsidiary of Reuters using the historical results of
operations and the historical bases of the assets and liabilities of the non-
financial business of such subsidiary. We believe that the assumptions
underlying our financial statements are reasonable. However, the financial
information included herein, particularly for periods prior to fiscal 1997, may
not necessarily reflect our future results of operations, financial position
and cash flows or the financial results we would have achieved if we had been a
separate stand-alone entity during these periods.
<TABLE>
<CAPTION>
Six Months
Eleven Months Ended
Year Ended Year Ended Year Ended Ended Year Ended May 31,
December 31, December 31, December 31, November 30, November 30, -----------------
1994 1995 1996 1997 1998 1998 1999
------------ ------------ ------------ ------------- ------------ ------- --------
(unaudited) (unaudited)
Statement of
Operations Data: (in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
License................ $ 1,044 $ 4,487 $ 6,066 $ 6,219 $ 17,495 $ 7,854 $ 22,059
Service and
maintenance........... 6,945 21,507 24,249 29,055 35,262 17,000 17,013
------- -------- ------- ------- -------- ------- --------
Total revenue.......... 7,989 25,994 30,315 35,274 52,757 24,854 39,072
Cost of revenue......... 7,621 14,658 19,606 15,847 27,682 13,305 16,240
------- -------- ------- ------- -------- ------- --------
Gross profit............ 368 11,336 10,709 19,427 25,075 11,549 22,832
------- -------- ------- ------- -------- ------- --------
Operating expenses:
Research and
development........... 1,152 3,592 6,576 9,385 14,787 5,934 11,911
Sales and marketing.... 924 1,838 2,949 7,008 15,242 6,422 12,929
General and
administrative........ 1,146 1,483 2,077 3,565 4,025 1,634 3,536
Stock and other
compensation.......... 1,122 20,684 2,196 4,672 5,064 2,070 3,408
------- -------- ------- ------- -------- ------- --------
Total operating
expenses.............. 4,344 27,597 13,798 24,630 39,118 16,060 31,784
------- -------- ------- ------- -------- ------- --------
Loss from operations.... (3,976) (16,261) (3,089) (5,203) (14,043) (4,511) (8,952)
Other income (expense),
net.................... (133) (468) (1,551) 540 1,092 570 (7)
------- -------- ------- ------- -------- ------- --------
Net loss................ $(4,109) $(16,729) $(4,640) $(4,663) $(12,951) $(3,941) $ (8,959)
======= ======== ======= ======= ======== ======= ========
Net loss per share--
basic and diluted...... $ (0.24) $ (0.65) $ (0.20) $ (0.43)
======= ======== ======= ========
Weighted average
shares--basic and
diluted................ 19,202 20,011 19,720 20,840
======= ======== ======= ========
</TABLE>
17
<PAGE>
In the fiscal years ended December 31, 1994 through 1996, our stock and other
compensation expense consisted of contingent compensation earned by employees
in connection with the acquisition of Teknekron by Reuters.
<TABLE>
<CAPTION>
December 31, November 30,
-------------------------- --------------- May 31,
1994 1995 1996 1997 1998 1999
------- -------- ------- ------- ------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data: (in thousands)
Cash, cash equivalents
and deposits held by
Reuters................ $ -- $ -- $ -- $18,318 $15,970 $ 5,754
Working capital......... (2,430) (22,155) (2,167) 15,168 18,301 13,695
Total assets............ 4,352 9,539 10,996 31,046 36,289 33,878
Owner's net investment
(liability)............ 913 (19,574) 451 -- -- --
Stockholders' equity ... -- -- -- 17,167 21,704 17,640
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis together with "Selected
Financial Data" and our financial statements and the notes to those statements
included elsewhere in this prospectus. This discussion contains forward-looking
statements based on our current expectations, assumptions, estimates and
projections about us and our industry. These forward-looking statements involve
risks and uncertainties. Our actual results could differ materially from those
indicated in these forward-looking statements as a result of certain factors,
including those more fully described in the "Risk Factors" section and
elsewhere in this prospectus. We undertake no obligation to update publicly any
forward-looking statements for any reason, even if new information becomes
available or other events occur in the future.
Overview
We develop and market a suite of software products that enables businesses to
link internal operations, business partners and customer channels in real-time.
We are the successor to a portion of the business of Teknekron Software
Systems, Inc. Teknekron developed software for the integration and delivery of
market data, such as stock quotes, news and other financial information, in
trading rooms of large banks and financial services institutions. In 1992,
Teknekron expanded its development efforts to include solutions designed to
enable complex and disparate manufacturing equipment and software
applications--primarily in the semiconductor fabrication market--to communicate
within the factory environment. Teknekron was acquired by Reuters, the global
news and information group, in 1994. Following the acquisition, continued
development of the TIB technology was undertaken to expand its use in the
financial services markets. In January 1997, our company, TIBCO Software, was
established as an entity separate from Teknekron.
We were formed to create and market software solutions for use in the
integration of business information, processes and applications in diverse
markets and industries outside the financial services sector. In connection
with our establishment as a separate entity, Reuters transferred to us certain
assets and liabilities related to our business and granted to us a royalty-free
license to the intellectual property incorporated into some of our current
software products. See "Relationship with Reuters and Certain Transactions"
beginning on page 54 for a description of our current license to this
technology. Reuters also assigned to us at that time license and service
contracts primarily within the high-tech manufacturing and energy markets,
including contracts with Intel, NEC, Motorola, Mobil and Chevron.
During fiscal 1997, our operating activities related primarily to the
development of our TIB/ActiveEnterprise suite of products, supporting the
installed base of financial services companies using TIB-based solutions sold
through Reuters and expanding our presence in the high-tech manufacturing and
energy markets. During fiscal 1998, we expanded our product development
activities and continued to invest in creating a product marketing
organization, engaging in advertising programs to build our corporate brand
identity, building our domestic and international direct sales force and
creating a general and administrative infrastructure. During the second half of
fiscal 1998, we began initial shipments of our TIB/ActiveEnterprise products,
including to companies such as PageNet, Philips Medical, Compaq and 3Com. We
also formally introduced our TIBCO.net product and service offering for
creating and managing e-business activities, and generated revenue from Yahoo!
and Netscape for enabling their stock quotation services. We intend to continue
to fund the development of additional TIB/ActiveEnterprise products and to
increase our sales and marketing activities at least through the end of fiscal
1999.
Prior to fiscal 1998, our revenue consisted primarily of license and
maintenance fees from the contracts assigned to us by Reuters in connection
with our formation, fees from
19
<PAGE>
providing integration services to customers transferred to us by Reuters and
development and maintenance fees paid to us by Reuters. Our revenue today
consists primarily of license and product fees from our customers and
distributors, including from Reuters pursuant to our license agreement with
them, both of which are primarily attributable to sales of our
TIB/ActiveEnterprise product suite. In addition, we receive fees from our
customers for providing project integration services. We also receive revenue
from our TIBCO.net customers. Revenue from these customers is a combination of
fixed service charges, a percentage of the advertising fees generated from
their TIBCO.net-enabled web pages and a charge for each user visit to these web
pages. We also receive a limited amount of revenues from our strategic
relationships with hardware vendors and systems integrators. To date, these
revenues have not been material.
We recognize revenue from software license fees upon delivery of our software
products to our customers as long as we have no significant obligations
remaining and we believe that collection of the resulting receivable is
probable. Software royalties and product fees earned through our distribution
and reseller partners are generally recognized when the partner sells the
software through to its customer. We recognize guaranteed minimum payments from
our license agreements ratably over the term of the contracts. We recognize
service revenue from the integration of our software using the percentage-of-
completion method or on a time and materials basis as services are provided. We
defer recognition of maintenance revenue, paid primarily for support and
upgrades, upon signing the maintenance contract and recognize the related
revenue ratably over the term of the contract, which is typically twelve
months. These payments are generally made in advance and are nonrefundable.
Our distributors generally pay us negotiated royalties on their sales of our
products. Reuters distributes our products to customers in the financial
services market segment. Through December 2001, Reuters must pay us product
fees based on a percentage of the revenue it derives from the sale of licenses
and maintenance for our products. Under our amended license agreement with
Reuters, this includes minimum guaranteed product fees of $16 million payable
in the remainder of calendar 1999, $18 million payable in calendar 2000 and
$20 million payable in calendar 2001. We will recognize revenue in the amount
of these guaranteed product fees ratably over the contractual period. In any
period where actual product fees exceed the minimum guaranteed product fees,
the difference between the actual product fees and cumulative minimum product
fees recognized to date will be recognized as revenue currently. See
"Relationship with Reuters and Certain Transactions--License, Maintenance and
Distribution Agreement with Reuters" beginning on page 54 for a more detailed
description of our distribution relationship with Reuters, including the
minimum guaranteed product fee payments.
In 1997, we changed our fiscal year from the twelve months ending December
31st to the twelve months ending November 30th. Accordingly, our financial
results for 1997 reflect our operations for the eleven months ended November
30, 1997 and are not comparable to our results for fiscal 1998 or for any prior
period. See Note 2 of Notes to Financial Statements. Our fiscal year ends on
November 30th and our fiscal quarters end on the last Fridays of February, May
and August and November 30th of each year. For ease of readership throughout
this prospectus, we have indicated our interim fiscal periods as having ended
on the last day of the month in which such period actually ended.
20
<PAGE>
Results of Operations
The following table sets forth our results of operations expressed as
percentages of revenue:
<TABLE>
<CAPTION>
Six Months
Eleven Ended
Year Ended Months Ended Year Ended May 31,
December 31, November 30, November 30, --------------
1996 1997 1998 1998 1999
------------ ------------ ------------ ----- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
License............... 20 % 18 % 33 % 32 % 56 %
Service and
maintenance.......... 80 82 67 68 44
--- --- --- ----- -----
Total revenue....... 100 100 100 100 100
Cost of revenue......... 65 45 52 54 42
--- --- --- ----- -----
Gross profit............ 35 55 48 46 58
--- --- --- ----- -----
Operating expenses:
Research and
development.......... 21 27 28 24 30
Sales and marketing... 10 20 29 26 33
General and
administrative....... 7 10 8 6 9
Stock and other
compensation......... 7 13 10 8 9
--- --- --- ----- -----
Total operating
expenses........... 45 70 75 64 81
--- --- --- ----- -----
Loss from operations.... (10) (15) (27) (18) (23)
Other income (expense),
net.................... (5) 2 2 2 --
--- --- --- ----- -----
Net loss................ (15)% (13)% (25)% (16)% (23)%
=== === === ===== =====
</TABLE>
Six Months Ended May 31, 1999 Compared to Six Months Ended May 31, 1998
Total Revenue
Total revenue increased by $14.2 million, or 57%, from $24.9 million in the
first six months of fiscal 1998 to $39.1 million in the first six months of
fiscal 1999. In the first six months of fiscal 1998, NEC Electronics and Cedel
Global Services accounted for 15% and 17% of total revenue, while in the
corresponding period of 1999 Cedel Global Services accounted for 10% of total
revenue. In the first six months of fiscal 1998, revenue from Reuters accounted
for 15% of our total revenue, while in the corresponding period of fiscal 1999,
revenue from Reuters accounted for 18% of our total revenue. In fiscal 1998,
revenue from Reuters consisted primarily of maintenance and consulting fees for
services we performed for Reuters, while in fiscal 1999, revenue from Reuters
consisted primarily of product fees from Reuters on its sales of our products.
Beginning in April 1999, under our amended license agreement with Reuters,
minimum guaranteed product fees from Reuters will be approximately $1.8 million
per month for the remainder of calendar 1999. See "Relationship with Reuters
and Certain Transactions--License, Maintenance and Distribution Agreement with
Reuters" beginning on page 54 for a more detailed description of the provisions
of our license agreement with Reuters establishing these minimum guaranteed
product fees.
License Revenue
License revenue increased by $14.2 million, or 181%, from $7.9 million or 32%
of total revenue in the first six months of fiscal 1998 to $22.1 million or 56%
of total revenue in the first six months of fiscal 1999. This increase was due
primarily to increased sales of our TIB/ActiveEnterprise products, which were
introduced during the second half of fiscal 1998. The growth in license revenue
as a percentage of total revenue reflects our strategy of pursuing a license-
driven business model. We believe that license revenue will continue to grow
moderately as a percentage of total revenue for the remainder of fiscal year
1999.
21
<PAGE>
Service and Maintenance Revenue
Service and maintenance revenue remained unchanged at $17.0 million for the
first six months of fiscal 1999.
Cost of Revenue
Cost of revenue consists primarily of salaries and third-party contractor and
associated expenses primarily related to providing project implementation
services and, to a lesser extent, the cost of providing maintenance and
customer support services. The majority of our cost of revenue is directly
related to our service revenue. Cost of revenue increased by $2.9 million, or
22%, from $13.3 million or 54% of total revenue in the first six months of
fiscal 1998 to $16.2 million or 42% of total revenue in the first six months of
fiscal 1999, primarily as a result of using third-party contractors to support
our contract with Cedel Global Services and hiring additional technical staff
to support our growing installed base of customers. The decrease in cost of
revenue as a percentage of total revenue was due primarily to the increase in
license revenue as a percentage of total revenue.
Research and Development Expenses
Research and development expenses consist primarily of personnel and related
costs associated with the development of our TIB/ActiveEnterprise product
suite. Research and development expenses increased by $6.0 million, or 101%,
from $5.9 million or 24% of total revenue in the first six months of fiscal
1998 to $11.9 million or 30% of total revenue in the first six months of fiscal
1999. This increase was due primarily to increases in our development staff as
we continued to expand the TIB/ActiveEnterprise product suite as well as
upgrading the performance of existing products. We believe that continued
investment in research and development is critical to attaining our strategic
objectives and, as a result, expect that spending on research and development
will continue to increase moderately in absolute dollars but remain relatively
stable as a percentage of total revenue for the remainder of fiscal 1999.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of personnel and related costs
of our direct sales force and marketing staff and marketing programs, including
advertising, trade shows, promotional materials and customer conferences. Sales
and marketing expenses increased by $6.5 million, or 101%, from $6.4 million or
26% of total revenue in the first six months of fiscal 1998 to $12.9 million or
33% of total revenue in the first six months of fiscal 1999. This increase
resulted primarily from the expansion of our domestic and international direct
sales force devoted to selling our expanding suite of TIB/ActiveEnterprise
products initially released in the second half of fiscal 1998. We intend to
continue to increase staff in our direct sales organization and develop product
marketing and branding campaigns and, accordingly, expect that sales and
marketing expenditures will continue to increase substantially in absolute
dollars and will increase moderately as a percentage of total revenue over the
remainder of fiscal 1999.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel and
related costs for general corporate functions, including executive, finance,
accounting, human resources and information systems. General and administrative
expenses increased by $1.9 million, or 116%, from $1.6 million in the first six
months of fiscal 1998 to $3.5 million in the first six months of fiscal 1999,
primarily as a result of increased staffing and associated operational costs
related to building our general and administrative infrastructure. We believe
that general and administrative expenses will increase moderately in absolute
dollars and increase slightly as a percentage of total revenue for the
remainder of fiscal 1999 as we expand our infrastructure to support a larger,
more global organization and continue our transition to operating as a stand-
alone entity.
Stock and Other Compensation
In connection with the grant of stock options to employees and non-employee
22
<PAGE>
directors during fiscal 1997 and 1998 and the first half of fiscal 1999, we
recorded unearned compensation expense of $21.4 million, representing the
difference between the deemed fair value of our common stock at the date of
grant and the exercise price of such options. Such an amount, net of
amortization, is presented as a reduction of stockholders' equity and amortized
over the vesting period of the applicable option. As a result, we expect to
amortize $2.4 million, $3.3 million, $1.9 million, $1.0 million, $0.4 million
and $0.1 million of deferred compensation in the remainder of fiscal 1999 and
in 2000, 2001, 2002, 2003 and 2004. Stock and other compensation increased from
$2.1 million in the first half of fiscal 1998 to $3.4 million in the first half
of fiscal 1999 due primarily to the grant of stock options to new employees.
Other Income (Expense), Net
Other income (expense), net includes interest and other miscellaneous income
and expense items. Other income (expense), net decreased from income of
$570,000 in the first half of fiscal 1998 to an expense of $7,000 in the first
half of fiscal 1999. This decrease was due primarily to a lower average
investment balance, a loss on the disposal of fixed assets and a foreign
currency translation loss related to our foreign sales offices.
Year Ended November 30, 1998 Compared to Eleven Months Ended November 30, 1997
Total Revenue
Total revenue increased by $17.5 million, or 50%, from $35.3 million in
fiscal 1997 to $52.8 million in fiscal 1998. In fiscal 1997, revenue from
Reuters represented 27% of total revenue compared to 15% of total revenue in
fiscal 1998. Revenue from Reuters in fiscal 1997 consisted almost entirely of
revenue from consulting and maintenance services we performed for Reuters, and
in fiscal 1998 consisted of revenue from such services as well as product fees.
License Revenue
License revenue increased by $11.3 million, or 181%, from $6.2 million or 18%
of total revenue in fiscal 1997 to $17.5 million or 33% of total revenue in
fiscal 1998. This increase was due primarily to license fees earned from
initial shipments of our TIB/ActiveEnterprise products, which began during the
second half of fiscal 1998. The growth rate for license revenue both in
absolute dollars and as a percentage of total revenue reflects our transition
to a license-driven business strategy.
Service and Maintenance Revenue
Service and maintenance revenue increased by $6.2 million, or 21%, from
$29.1 million in fiscal 1997 to $35.3 million in fiscal 1998. Service and
maintenance revenue as a percentage of total revenue decreased from 82% in
fiscal 1997 to 67% in fiscal 1998. The increase in service and maintenance
revenue in absolute dollars in fiscal 1998 was primarily attributable to our
assumption from Reuters of the Cedel Global Services contract, which provided
$7.6 million in service and maintenance revenue in 1998 and no revenue in
fiscal 1997. The purchase of maintenance agreements by our larger installed
base of licensees resulted in a further $1.7 million increase in revenue. These
increases were partially offset by a $4.7 million decline in revenue from
services provided to Reuters as a result of the completion of several
development projects in 1997.
Cost of Revenue
Cost of revenue increased by $11.8 million, or 75%, from $15.8 million or 45%
of total revenue in fiscal 1997 to $27.7 million or 52% of total revenue in
fiscal 1998. This increase was primarily due to an increase in salary and
third-party contractor costs of approximately $5.0 million related to providing
services to Cedel Global Services, and to a lesser extent, to increased travel
expenses of approximately $1.0 million and salary expenses of approximately
$3.0 million for additional technical support and services staff to service our
growing, geographically-dispersed customer base.
Research and Development Expenses
Research and development expenses increased by $5.4 million, or 58%, from
23
<PAGE>
$9.4 million or 27% of total revenue in fiscal 1997 to $14.8 million or 28% of
total revenue in fiscal 1998. The increase in fiscal 1998 resulted primarily
from increases in engineering salary expense of approximately $2.6 million and
related operational costs as we continued to invest in the development of our
TIB/ActiveEnterprise product suite.
Sales and Marketing Expenses
Sales and marketing expenses increased by $8.2 million, or 117%, from $7.0
million or 20% of total revenue in fiscal 1997 to $15.2 million or 29% of total
revenue in fiscal 1998. This increase resulted primarily from a significant
expansion of our domestic and international direct sales force from 7 to 49 and
related increases in salary expense of approximately $2.0 million, and
operational costs corresponding to the release of our initial
TIB/ActiveEnterprise products. We also increased our advertising and marketing
expenses approximately by $2.2 million to promote our corporate brand identity.
General and Administrative Expenses
General and administrative expenses increased by $0.5 million, or 13%, from
$3.6 million in fiscal 1997 to $4.0 million in fiscal 1998. This increase was
due primarily to an increase in salary expense of approximately $0.8 million
related to developing our general and administrative infrastructure, partially
offset by a decline in legal expenses of approximately $0.7 million as a result
of the completion of our formation in 1997.
Stock and Other Compensation
Stock amortization expenses increased from $4.7 million in fiscal 1997 to
$5.1 million in fiscal 1998. This increase resulted primarily from the grant of
stock options to newly hired employees.
Other Income (Expense), Net
Other income (expense), net increased from $0.5 million in fiscal 1997 to
$1.1 million in fiscal 1998. This increase was due primarily to a larger
average investment balance as a result of the receipt of proceeds from our
issuance of preferred stock in May and December 1997.
Eleven Months Ended November 30, 1997 Compared to Year Ended December 31, 1996
Total Revenue
Total revenue increased by $5.0 million, or 16%, from $30.3 million in fiscal
1996 to $35.3 million in fiscal 1997. In fiscal 1996, revenue from Reuters
accounted for 36% of total revenue, while in fiscal 1997, revenue from Reuters
accounted for 27% of total revenue. In fiscal 1996 and 1997, revenue from
Reuters consisted almost exclusively of revenue from consulting and maintenance
services we provided to Reuters.
License Revenue
License revenue remained relatively constant at $6.1 million or 20% of total
revenue in fiscal year 1996, compared to $6.2 million or 18% of total revenue
in fiscal 1997.
Service and Maintenance Revenue
Service and maintenance revenue increased by $4.8 million, or 20%, from
$24.2 million or 80% of total revenue in fiscal 1996 to $29.1 million or 82% of
total revenue in fiscal 1997. This increase primarily reflects additional
project implementation activities in the high-tech manufacturing and energy
markets. This increase was partially offset by a decline in revenue of
approximately $1.4 million from services provided to Reuters for projects
related to the financial services market.
Cost of Revenue
Cost of revenue decreased by $3.8 million, or 19%, from $19.6 million or 65%
of total revenue in fiscal 1996 to $15.8 million or 45% of total revenue in
fiscal 1997. Cost of revenue for fiscal 1996 includes $5.5 million of license
fees paid to Reuters based on a percentage of our revenue derived from sales of
products incorporating the TIB technology. These payments ceased in January
1997 when Reuters granted to us a royalty-free license to
24
<PAGE>
the TIB technology in return for a one-time payment. Excluding such fees to
Reuters in fiscal 1996, cost of revenue in fiscal 1997 would have increased by
$1.6 million over fiscal 1996. This increase was primarily due to additional
consulting costs associated with the growth in project development activities.
Research and Development Expenses
Research and development expenses increased by $2.8 million, or 43%, from
$6.6 million or 21% of total revenue in fiscal 1996 to $9.4 million or 27% of
total revenue in fiscal 1997. This increase resulted primarily from an
approximate $1.6 million increase in salary expense as we invested in the
development of our TIB/ActiveEnterprise product suite.
Sales and Marketing Expenses
Sales and marketing expenses increased by $4.1 million, or 138%, from $2.9
million or 10% of total revenue in fiscal 1996 to $7.0 million or 20% of total
revenue in fiscal 1997. This increase resulted primarily from an approximate
$1.9 million increase in salary expense related to establishing our product
marketing organization, as well as an approximate $0.6 million increase in
expenses incurred in connection with advertising and promotional programs to
strengthen our corporate brand identity.
General and Administrative Expenses
General and administrative expenses increased by $1.5 million, or 72%, from
$2.1 million in fiscal 1996 to $3.6 million in fiscal 1997. The increase
resulted primarily from legal expenses of approximately $0.8 million incurred
in the formation of our company.
Stock and Other Compensation
Prior to fiscal 1997, stock and other compensation expenses consisted of
contingent compensation earned by employees in connection with the acquisition
of Teknekron by Reuters in 1994. Such contingent compensation ended in 1996.
Stock and other compensation expenses increased from $2.2 million in fiscal
1996 to $4.7 million in fiscal 1997. The increase resulted primarily from the
granting of stock options to newly hired employees.
Other Income (Expense), Net
Other expense, net was $1.6 million in fiscal 1996, compared to other income,
net of $0.5 million in fiscal 1997. The interest paid in 1996 is primarily due
to the interest cost of borrowing funds from Reuters to support working capital
requirements and operational activities. Net interest income in fiscal 1997 was
due primarily to the investment of proceeds from our issuance of preferred
stock in May 1997.
25
<PAGE>
Quarterly Results of Operations
The following table sets forth data from our statement of income and such
data as a percentage of total revenue. The statement of income data has been
derived from our unaudited financial statements, which have been prepared on
substantially the same basis as our audited financial statements and include
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation of the financial information for the periods presented. You
should read this information in conjunction with our financial statements and
the notes thereto included elsewhere in this prospectus. Our operating results
in any quarter are not necessarily indicative of the results that may be
expected for any future period.
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------------------
Aug. 31, Nov. 30, Feb. 28, May 31, Aug. 31, Nov. 30, Feb. 28, May 31,
1997 1997 1998 1998 1998 1998 1999 1999
-------- -------- -------- ------- -------- -------- -------- -------
(unaudited, dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
License................ $ 2,900 $ 1,329 $ 4,977 $ 2,877 $ 3,346 $ 6,295 $ 9,719 $12,340
Service and
maintenance........... 7,618 8,491 6,995 10,005 7,526 10,736 8,303 8,710
------- ------- ------- ------- ------- ------- ------- -------
Total revenue........ 10,518 9,820 11,972 12,882 10,872 17,031 18,022 21,050
Cost of revenue......... 4,304 5,034 6,734 6,571 6,592 7,785 7,513 8,727
------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 6,214 4,786 5,238 6,311 4,280 9,246 10,509 12,323
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 2,342 2,685 2,838 3,096 3,995 4,858 5,646 6,265
Sales and marketing.... 1,765 1,972 2,978 3,444 3,994 4,826 5,416 7,513
General and
administrative........ 775 717 736 898 958 1,433 1,532 2,004
Stock and other
compensation.......... 1,336 1,401 1,102 968 1,465 1,529 1,587 1,821
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 6,218 6,775 7,654 8,406 10,412 12,646 14,181 17,603
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (4) (1,989) (2,416) (2,095) (6,132) (3,400) (3,672) (5,280)
Other income (expense),
net.................... 225 311 281 289 315 207 (274) 267
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... $ 221 $(1,678) $(2,135) $(1,806) $(5,817) $(3,193) $(3,946) $(5,013)
======= ======= ======= ======= ======= ======= ======= =======
As a Percentage of Total
Revenue:
Revenue:
License................ 28 % 14 % 42 % 22 % 31 % 37 % 54 % 59 %
Service and
maintenance........... 72 86 58 78 69 63 46 41
------- ------- ------- ------- ------- ------- ------- -------
Total revenue........ 100 100 100 100 100 100 100 100
Cost of revenue......... 41 51 56 51 61 46 42 41
------- ------- ------- ------- ------- ------- ------- -------
Gross profit............ 59 49 44 49 39 54 58 59
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 22 28 24 24 37 29 31 30
Sales and marketing.... 17 20 25 26 37 28 30 36
General and
administrative........ 7 7 6 7 9 8 8 9
Stock and other
compensation.......... 13 14 9 8 13 9 9 9
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 59 69 64 65 96 74 78 84
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... -- (20) (20) (16) (57) (20) (20) (25)
Other income (expense),
net.................... 2 3 2 2 3 1 (2) 1
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... 2 % (17)% (18)% (14)% (54)% (19)% (22)% (24)%
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
26
<PAGE>
Our revenue has fluctuated from quarter to quarter due to many factors,
including new product introductions, seasonality in our third fiscal quarter
when our revenue has been negatively impacted by the summer holiday season in
Europe, and the signing of significant license agreements. The introduction of
our TIB/ActiveEnterprise product suite in the second half of fiscal 1998
contributed to the quarterly sequential growth in revenue beginning in the
fourth quarter of fiscal 1998. The decrease in revenue in the quarter ended
August 31, 1998 reflects a combination of seasonality and the absence of
revenue from several significant TIB/ActiveEnterprise implementations that were
completed in the previous quarter.
Our cost of revenue has fluctuated in both absolute dollars and as a
percentage of revenue, primarily as a result of changes in the level of
quarterly service revenue as the majority of our cost of revenue is directly
related to our service revenue. In addition, cost structures of service
projects vary due to such factors as complexity and the use of third-party
contractors. Throughout fiscal 1998, cost of revenue increased primarily as a
result of our assumption of the Cedel Global Services contract and our
extensive use of third-party contractors related to this contract.
Operating expenses have increased each quarter beginning with the fourth
quarter of fiscal 1997. These increases primarily reflect the addition,
beginning in the quarter ended February 28, 1998, of sales staff as we expanded
our domestic and international direct sales force and advertising, as well as
the expansion beginning in the same quarter of marketing programs to promote
our corporate brand. Beginning in the quarter ended August 31, 1998, our
addition of engineering staff to support the development of our
TIB/ActiveEnterprise product suite, particularly new connectivity products, as
well as general and administrative staff to support a larger, more global
organization, also contributed to the increase in our operating expenses.
Sales and marketing expenses increased from 30% to 36% of total revenue in
the quarter ended May 31, 1999, partially as a result of a one-time promotional
expenditure of approximately $600,000 related to a customer conference. We
expect that our sales and marketing expenses will increase substantially in
absolute dollars and moderately as a percentage of total revenue over the
remaining quarters of fiscal 1999 as we continue to increase staff in our
direct sales organization and develop product marketing and branding campaigns.
Our operating results may fluctuate significantly in the future as a result
of a variety of factors, many of which are outside of our control. These
factors include the timing of significant orders and the length of our sales
cycle, technical difficulties in our software, the growth rate of the
enterprise infrastructure software market, our ability to continue to attract
and retain customers in international markets, and the success of Reuters and
other distributors in selling our products in the financial services market.
Due to the emerging nature of the markets in which we compete, it may be
difficult to forecast our revenue accurately. Our expense levels are based in
part on our expectations with regard to future revenue. We may be unable to
adjust spending in a timely manner to compensate for any unexpected revenue
shortfall. Any of these factors may have a material adverse effect on our
business, results of operations and financial condition. See "Risk Factors"
beginning on page 7 for a further description of these and other factors that
could adversely affect our business, results of operations and financial
condition.
Liquidity and Capital Resources
Since inception, we have funded our operations primarily through the sale of
our capital stock. We have raised an aggregate of $26.7 million from the sale
of preferred stock to Cisco Systems and Mayfield venture capital funds. See
"Principal Stockholders" beginning on page 61 for more detail on Cisco's and
Mayfield's equity holdings.
Net cash provided by operating activities in fiscal 1997 was $2.4 million,
resulting primarily
27
<PAGE>
from increases in accrued liabilities and receipt of prepayments on contracts.
Net cash used for operating activities in fiscal 1998 was $11.8 million,
resulting primarily from our net loss. Net cash used for operating activities
in the six months ended May 31, 1999 was $10.2 million, primarily reflecting
the net loss reported for the period as well as an increase in accounts
receivable.
Net cash used in investing activities in fiscal 1997 and 1998 was $11.1
million and $8.2 million. Net cash used in investing activities in these
periods was related primarily to the purchase of property and equipment,
principally desktop and network hardware and software, and the investment of
surplus funds received from the issuance of our preferred stock. Net cash
provided by investing activities for the six months ended May 31, 1999 was
$11.5 million, primarily related to the return of cash deposits by Reuters.
We currently invest our surplus funds through Reuters. After this offering,
we intend to establish fiduciary arrangements with investment management firms
to manage the proceeds from the offering and our other cash balances.
Net cash provided by financing activities for fiscal 1997 and 1998 and the
six months ended May 31, 1999 was $16.7 million, $12.4 million and $1.5
million, respectively. Cash provided by financing activities was the result of
net proceeds from the sale of our preferred stock and, to a lesser extent, our
common stock.
As of May 31, 1999, we had approximately $5.8 million in cash, cash
equivalents and deposits held by Reuters. During the remainder of fiscal 1999,
we anticipate capital expenditures of approximately $7.0 million. Our capital
expenditures may increase in the future consistent with our anticipated growth
in operations, infrastructure and personnel.
We anticipate continued growth in our operating expenses for the foreseeable
future, particularly in sales and marketing expenses and, to a lesser extent,
research and development and general and administrative expenses. As a result,
we expect our operating expenses and capital expenditures to constitute the
primary use of our cash resources. In addition, we may require cash resources
to fund acquisitions or investments in complementary businesses, technologies
or product lines. We do not intend to rely on Reuters for any of our financing
requirements after the offering. We believe that the net proceeds from the
offering, together with our current cash and cash equivalents, will be
sufficient to meet our anticipated cash requirements for working capital and
capital expenditures for at least the next twelve months.
Year 2000 Readiness Disclosure
Year 2000 Program
We established a Year 2000 program to address the issues arising from the
change of millennium. Many computer systems, as well as equipment that uses
embedded chips, store and process date information using only the last two
digits of the year. From January 1, 2000, these systems may be unable to
distinguish between 1900 and 2000. This is complicated by the fact that the
year 2000 is also a leap year. If not overcome, these problems could cause
system failures and disrupt the normal business operations of companies,
including ours.
We have addressed and are continuing to address the Year 2000 issue through
the following means:
. Awareness--making our customers, suppliers and employees aware of the
problem.
. Inventory--identifying and recording date sensitive information
technology systems and non-information technology systems.
. Development--assessment of date sensitivity and modification or
replacement of date sensitive products.
. Testing--verification of our development efforts.
. Implementation--installation of tested products and systems.
28
<PAGE>
. Contingency Planning--creating and/or evaluating the needs for
contingency plans to address potential worst-case scenarios.
Our state of readiness and business risks
We have completed an assessment of both our information technology systems
and our non-information technology systems. Based upon our examination, we
believe that our non-information technology systems do not contain any elements
that are susceptible to Year 2000 problems. However, we will modify or replace
some portions of our internal information technology systems as Year 2000-
compliant versions of these systems are released by outside vendors (e.g.
Microsoft releases of Windows NT). If, in the worst case scenario, such
replacement is not made, or is not completed on a timely basis, our operations
could be materially affected.
As part of our Year 2000 program, we have assessed, remediated and certified
all of the standard products we currently market. We are also working with our
customers to ensure that they are aware of our Year 2000 program and have
provided them with information on which current and past products are covered
by our standard Year 2000 product warranty. Despite investigation and testing
by us, there can be no assurances that software products we developed will not
contain undetected errors or defects associated with Year 2000 date functions.
If, in the worst case scenario, our products are affected by date-related
issues, our customers may file claims against us or require us to repair any
damage to their systems caused by our products. In addition, our revenues may
be adversely affected, our maintenance, technical support and management costs
could increase and our reputation could be damaged.
Our operations also rely on third party suppliers of data,
telecommunications, utilities and building services. We have completed
contacting our critical suppliers about the nature and progress of their Year
2000 compliance to determine the extent to which their failure to remedy their
own Year 2000 problems could materially affect us. Our critical information
technology suppliers have generally provided assurances as to their Year 2000
readiness, but it has been difficult to obtain full assurances of Year 2000
compliance from telecommunications infrastructure and utility suppliers which
generally do not provide such assurances. We intend to consider use of
alternative telecommunications and utility suppliers if reasonable assurances
are not provided. Any Year 2000-related failure of any of our critical
suppliers could cause a significant disruption of our business.
Costs
To date, we have spent approximately $200,000 on Year 2000 assessment,
remediation and communication with customers, vendors and partners. This cost
does not include product development expenses, which inherently include costs
related to addressing date sensitivities in our products. Based on our
experience to date and our internal assessment, we do not anticipate that
additional costs associated with remedying our internal systems will be
material.
Contingency plans
We are in the process of creating contingency plans to deal with potential
worst-case scenarios and intend to complete such plans before the fourth
quarter of fiscal 1999. We already have in place as part of our day-to-day
operations plans that can be executed in the event of certain service failures.
These operational plans will form the basis of any Year 2000 contingency plan
after being checked for applicability and enhanced as appropriate.
Recent Accounting Pronouncements
In October 1997, March 1998 and December 1998, the American Institute of
Certified Public Accountants, also known as the AICPA, issued Statements of
Position commonly called SOPs, 97-2, "Software Revenue Recognition", SOP 98-4,
"Deferral of the Effective Date of a Provision of SOP 97-2, "Software Revenue
Recognition''' and 98-9, "Modification of SOP 97-2, "Software Revenue
29
<PAGE>
Recognition' with Respect to Certain Transactions" (collectively, "SOP 97-2").
We are required to adopt the provisions of SOP 97-2 for transactions entered
into in the fiscal year beginning December 1, 1998. SOP 97-2 provides guidance
on recognizing revenue on software transactions and superseded SOP 91-1. We
believe that the adoption of SOP 97-2 will not have a significant impact on our
current licensing or revenue recognition practices. However, should we adopt
new or change our existing licensing practices, our revenue recognition
practices may be subject to change to comply with the accounting guidance
provided in SOP 97-2.
In March 1998, the AICPA issued SOP 98-1, "Software for Internal Use", which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. We do not expect that the
adoption of SOP 98-1 will have a material impact on our financial statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard, or SFAS, No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 is effective for fiscal years
beginning after June 15, 1999 and establishes methods of accounting for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities. We do not expect that the
adoption of SFAS No. 133 will have a material impact on our financial
statements.
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BUSINESS
We develop and market a suite of software products that enables businesses to
link internal operations, business partners and customer channels in real-time.
Our product suite, TIB/ActiveEnterprise, allows multiple distinct applications,
web sites, databases and other content sources to be integrated and managed
within a common framework. Our products also enable enterprises to extend their
information infrastructures across the Internet to integrate their business
processes and information with customers, suppliers and partners.
TIB/ActiveEnterprise's core technology, known as The Information Bus or the
TIB, is an integration platform that enables enterprises and users to
automatically transmit, receive, filter and personalize digital information in
real-time. The Information Bus also facilitates real-time, two-way
communications between distributed computer networks and mobile information
devices such as hand-held computers, pagers and digital cellular phones. Our
products are currently in use by over 300 companies in diverse markets such as
telecommunications, high-tech manufacturing, energy, financial services and e-
business.
Industry Background
Driven by accelerating competition and the increasing demands of customers,
many enterprises today are seeking to expand and improve the scope, speed and
efficiency of their business processes. Just as markets are becoming
increasingly global and corporate relationships become increasingly complex,
the business environment today demands a more tightly integrated network of
supplier, customer and partner relationships. Emerging challenges and
opportunities are forcing businesses to become more efficient, in many cases by
adjusting their operations and strategies in real-time. The timely exchange of
information across and beyond the enterprise provides opportunities to leverage
management resources, create manufacturing efficiencies and improve customer
service. For example, real-time information exchange with suppliers and
customers expedites order fulfillment, decreases inventory carrying costs,
provides enhanced sales opportunities through direct customer interaction and
facilitates e-business.
Enabling a real-time enterprise through technology is a complex undertaking.
The range of computing environments and software applications utilized across
the typical business organization is vast and growing, involving both mainframe
and minicomputer legacy systems and more recently introduced client/server
environments. Many organizations are incorporating powerful new software
applications that operate on an enterprise-wide basis and serve as interfaces
to customers and suppliers. At the same time, enterprises are seeking to better
exploit their existing information systems and take advantage of their prior
technology investments by integrating previously independent legacy
applications and databases. In addition to purchasing applications from
independent software vendors, many organizations continue to run customized,
internally developed solutions for specific applications. Moreover, many
organizations have in recent years extended operations overseas and acquired
new businesses. In the process, they have adopted applications that address the
specific needs of local markets and have inherited applications from acquired
businesses. All of these applications must be integrated in order to manage and
grow the extended enterprise, with its network of customer and business partner
relationships.
The emergence of Internet-based business models has also increased the
importance of an enterprise's ability to integrate existing applications and
business processes and to conduct business in real-time. The core product of
many emerging Internet businesses is information itself, which increases in
value with timeliness and comprehensiveness. Many businesses are expanding
their use of portals--Internet-based platforms for providing access to services
and content--to include the dissemination of internal corporate information to
employees and business partners. Internet technology has facilitated the real-
time
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transaction of business, but enterprises will be required to effectively
integrate back office systems and combine multiple sources of information to
capitalize on the promise of the Internet.
As the complexity of business operations has increased and enterprises have
sought to tighten linkages with partners and customers and capitalize on the
growth of e-business, enterprises have perceived the need to create a fully-
integrated business environment. The integration of business information and
processes requires technology that can coordinate multiple distinct computer
applications and platforms and distribute information about business events to
where the information is needed--both within and outside of the organization--
as the events occur.
We believe that many traditional application integration solutions have
failed to address all of the information integration needs of enterprises in
today's real-time, Internet-driven business environment due to one or more of
the following factors:
. Lack of Comprehensiveness. Existing middleware and integration software
products generally provide only a portion of the overall solution. This
forces companies to integrate multiple, incompatible technologies to
address the total business problem, creating an environment that is
difficult and costly to maintain.
. Lack of Modularity. Existing solutions generally are not modular and do
not provide enterprises with flexibility in meeting business needs. As a
result, enterprises are required to use all or none of a technology.
. Passive Model of Information Distribution. Existing solutions generally
employ a request/reply model of information dissemination that requires
specific requests to be made before information can be distributed. This
means an application must know that information exists before it can ask
for it. The intervals between successive requests to and replies from the
database for information represent unnecessary, and potentially costly,
delays in the business processes of the enterprise.
. Lack of Scalability. Existing solutions generally do not scale either in
terms of transaction volumes or geographically, often because they are
based on an oversimplified "hub and spoke" model that forces all
transactions through one central server or software component.
. Excessive Use of Network Capacity. The request/reply model requires that
multiple users often make multiple requests for the same information,
crowding the network with inquiries that convey no new information. As a
result, solutions employing the request/reply model use network capacity
unnecessarily.
The Yankee Group, an international strategic planning, technology
forecasting and market research firm established in 1970, has estimated in an
independent, publicly-available report that annual revenues worldwide from
application and data integration software--a subset of the enterprise
infrastructure software market--will reach $5.0 billion by the end of 2001,
compared to $1.6 billion in 1997. This represents a compound annual growth
rate of approximately 45%. The market for the next wave of enterprise
infrastructure technology extends beyond the conventional application
integration or middleware market to target a number of additional technology
areas including e-business and systems management.
The TIBCO Software Solution
Our solution allows multiple computer applications and platforms to
communicate in real-time across local or wide area networks, including the
Internet. The TIB technology facilitates the distribution of information and
the integration of business processes by connecting each application to the
network through a single interface, instead of linking each application
directly to all others. The benefits of the TIB technology are implemented
through TIB/ActiveEnterprise, an integrated suite of
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products that provides a software platform for the real-time distribution of
information. The primary benefits of TIB/ActiveEnterprise are set forth below:
Comprehensive Solution
Our TIB/ActiveEnterprise product suite provides a comprehensive solution for
the integration and management of information and business processes.
TIB/ActiveEnterprise permits the integration of diverse applications, databases
and content sources to allow both internal system linkages and external
linkages with partners, suppliers and customers. By establishing these
linkages, TIB/ActiveEnterprise facilitates the real-time flow of information
within and beyond the boundaries of the enterprise and enables the integration
of business processes, regardless of the location or compatibility of the
enterprise's diverse applications and platforms. Finally, TIB/ActiveEnterprise
provides the means to monitor and administer applications within an
enterprise's overall computing environment, facilitating continuous and
reliable operation.
Real-time Information Distribution
The TIB/ActiveEnterprise product suite is based on a real-time communications
and information distribution model using our publish/subscribe communications
technology. This technology delivers information to users automatically as it
becomes available, based on a user's specification of the type of information
desired. With TIB/ActiveEnterprise, a business can create a real-time
information technology environment that eliminates the delay inherent in most
business activities as information is requested, located and delivered. In
addition, TIB/ActiveEnterprise can support more traditional point-to-point
transactional systems, and can also store information for later delivery.
Personalized Information Delivery
Our technology enables each user, or subscriber, to identify and receive only
the information they desire or need. The technology allows users to "tune in"
to information on a given subject in much the same way that users of broadcast
media like television or radio are able to selectively receive information
being distributed to a diverse audience. As new information meeting the user's
criteria is distributed, or published, across the network, the subscriber
automatically receives it as soon as it becomes available. In this way, our
technology minimizes the need for recipients to sift through routine
information to access desired content, thereby permitting more efficient
business processes.
Modular and Flexible
Our TIB/ActiveEnterprise software products can be used together, deployed as
independent components or integrated with an enterprise's existing middleware
components. The modularity of TIB/ActiveEnterprise enables enterprises to
leverage their existing technology investments or to start with a limited TIB
implementation that the enterprise can expand as its information distribution
and integration needs grow.
Efficient Use of Network Capacity
The TIB technology is designed to make efficient use of an enterprise's
available network bandwidth while scaling with the capabilities of the network.
With TIB/ActiveEnterprise, information destined for multiple users is sent only
once, rather than as separate messages for each user. In this way, several
subscribers can receive the content they need simultaneously with one message,
reducing the complexity and cost of information distribution within the
enterprise. In addition, because TIB/ActiveEnterprise utilizes the same
fundamental networking standard that underlies the Internet, we can efficiently
incorporate the Internet as part of our solution.
Employed in Demanding, High-Performance Environments
The original TIB technology was developed more than a decade ago for use in
financial trading operations. The technology has also been deployed in other
demanding, high-performance environments including multi-billion dollar
semiconductor fabrication plants,
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telecommunications and energy companies and e-businesses. We have updated and
expanded the TIB technology to incorporate the knowledge gained from operating
in these environments.
Strategy
Our objective is to establish TIB/ActiveEnterprise as the leading software
solution for linking enterprises' internal operations, business partners and
customer channels. The core elements of our strategy include:
Promote the Widespread Adoption of Our Technology
Because the market for enterprise infrastructure software is relatively new
and evolving, we believe that an opportunity exists to establish the TIB
technology as a widely-accepted standard in the field. To this end, we seek to
strengthen and expand our strategic relationships with key technology vendors
in an effort to embed our software into their networking equipment and database
offerings. For example, Cisco embeds our technology in its Internetworking
Operating System, facilitating our sale of TIB/ActiveEnterprise solutions to
enterprises that use Cisco's Internet routers. Cisco has also made a
substantial equity investment in our company and will own approximately 7.4% of
our common stock after the offerings. We also have strategic relationships with
3Com, i2 Technologies and Sybase that provide for the resale of our products or
the embedding of our technology into products offered by these companies.
Enhance Our Position as a Provider of Internet Infrastructure
We are expanding our presence in the e-business and Internet portal markets
through a targeted product and service offering we call TIBCO.net. TIBCO.net
facilitates the automated presentation and flow of Internet-based data and the
integration of this data with diverse applications within the enterprise.
TIBCO.net tailors our TIB/ActiveEnterprise offering for the specific needs of
e-business in much the same way that our other vertical market offerings shape
our products for use in specific industries. In addition to our software
solution, we provide Internet-hosting solutions for Internet portals. TIBCO.net
currently provides the infrastructure through which Internet portals such as
Yahoo! and Netscape deliver financial and other information to their users. We
are also developing relationships to expand our access to sources of
information on finance, travel, sports and weather.
Pursue a License-Driven Business Strategy
Our business strategy focuses on licensing products rather than on providing
integration and support services. To support this strategy, we are augmenting
our direct sales force and our professional services group by establishing
reseller and joint marketing relationships with systems integrators and
professional services firms such as Deloitte Consulting, EDS and Ernst & Young.
We believe that these partners provide us with broad technical knowledge as
well as domain expertise in vertical markets.
Leverage Vertical Market Expertise
Our sales strategy is to leverage our expertise in vertical markets in an
attempt to shorten our sales and implementation cycles in those markets. As we
gain experience in a vertical market, we create an industry-specific template
for our technology. These templates modify the TIB/ActiveEnterprise suite to
capitalize on its core, cross-industry benefits while tailoring solutions to
meet the specific needs of companies in particular industries. This template
approach allows us to reduce our implementation times and rapidly expand our
initial points of success in a given vertical market. We have created
customized TIB/ActiveEnterprise templates in the telecommunications, high-tech
manufacturing and energy industries, and we seek to extend this expertise into
new markets as appropriate.
Capitalize on the Presence of Reuters in the Financial Services Industry
We have a close relationship with Reuters, our major stockholder and a
leading global news and information group. We sell our
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products in the financial services industry primarily through Reuters. We
believe that the established presence and expertise of Reuters in the financial
services industry will provide us with sales and marketing advantages in that
market. Through Reuters, we can also assist our customers in securing access to
a wealth of real-time information, including news and financial data, in
conjunction with our TIBCO.net Internet product and service offerings.
Expand International Market Presence
We are currently expanding our sales and marketing capabilities to accelerate
our penetration of the worldwide market for our products. We are expanding our
presence in Europe through our vertical market focus in the communications and
energy sectors. We have also developed a strong presence in Taiwan through our
solutions for the high-tech manufacturing market and in Australia through our
solutions for the electric utility market. For fiscal 1998, revenue from sales
of our products and services outside the United States accounted for 38% of our
total revenue. We intend to continue increasing our global sales coverage by
adding direct sales staff and sales offices internationally, as well as by
expanding our relationships with resellers and systems integrators outside the
United States.
Continue to Enhance Our Technology and Products
We plan to continue to extend the functionality and enhance the capabilities
of our TIB/ActiveEnterprise product suite, as well as increase the number of
leading enterprise applications we support by developing standard adapters to
connect them to the TIB. We have established relationships with enterprise
application vendors, including SAP, Siebel Systems, i2 Technologies and
PeopleSoft, that provide for the marketing of our products and the promotion of
the interoperability of our software. We continue to develop new
TIB/ActiveEnterprise components and to upgrade our existing products to
incorporate new technological advances. For example, in late fiscal 1999, we
plan to introduce a new component of our TIB/Active Enterprise product suite
designed to manage e-business and other transactional activities.
Products
TIB/ActiveEnterprise Product Suite
TIB/ActiveEnterprise is a suite of products that can be deployed individually
or function as an integrated solution. Our TIB/ActiveEnterprise products
provide the following key functions of the enterprise information
infrastructure:
. Messaging--enables the movement of information between applications.
. Connectivity--integrates various legacy and third party applications by
connecting them to a common infrastructure.
. Information Transformation and Flow Management --manages the conversion
and translation of data and controls the flow of information and the
interaction of business processes throughout the enterprise.
. Monitoring and Management--provides the means for the enterprise to
administer its applications environment and ensure reliable operations.
. Content Display--provides the display console through which users are
notified of and view business event information.
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TIB/ActiveEnterprise Model
Our TIB/ActiveEnterprise suite of products provides enterprise users with the
functionality depicted in the following diagram:
[Set forth is a visual representation of the functionality provided by our
TIB/Active Enterprise product suite]
Messaging (Events, Data & Transactions)
Our messaging products are the foundation of our TIB/ActiveEnterprise product
suite. These products simplify the problem of integrating diverse computer
applications by connecting each application to the network with a single
interface, instead of linking each application directly to all others. Our
products support a wide range of communication models used in the enterprise.
Our three complementary messaging products are described below:
. TIB/Rendezvous is our flagship messaging product. TIB/Rendezvous supports
publish/subscribe as well as request/reply messaging, and facilitates
personalized information delivery. TIB/Rendezvous leverages the
networking protocols of the Internet to offer a range of service levels
in the delivery of information. TIB/Rendezvous provides efficient,
reliable information delivery and high scalability, and can be embedded
in an enterprise's existing information system.
. TIB/ETX is a transaction-based messaging system designed for use in
environments that require a greater degree of transaction management and
control than is provided by a standard messaging solution. TIB/ETX
provides a transactional form of publish/subscribe messaging similar to
traditional computer transaction models.
. TIB/ObjectBus is our object request broker, or ORB, product. ORBs enable
computer systems to operate more efficiently by employing reusable, self-
contained pieces of software code known as objects. TIB/ObjectBus allows
TIB/ActiveEnterprise to integrate with CORBA 2.0, a major programming
standard for object-oriented applications. TIB/ObjectBus can be fully
integrated with our messaging software, combining the efficiency of an
object oriented computing model with the scalability, performance and
ease of use benefits of TIB/Rendezvous.
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Connectivity
TIB/Adapters are our software components that link applications to the TIB
environment, thus enabling these applications to communicate with each other.
We take an innovative approach to application integration by using a
TIB/Adapter as the single point of integration for the application. Our
TIB/Adapter products are as follows:
. Standard TIB/Adapters connect several leading enterprise applications and
complementary middleware products to the TIB environment. We offer a
series of standard TIB/Adapters designed to link applications and other
software by SAP, Siebel Systems, PeopleSoft, IBM and Oracle, among
others, to the TIB.
. TIB/Adapter SDK is our software toolkit that allows our customers and
systems integrators to build custom TIB/Adapters to link applications to
the TIB environment. This product provides a common framework for the
rapid development of new TIB/Adapters.
Information Transformation and Flow Management
In order to facilitate the efficient movement of information across
enterprise applications, a solution must have the ability to translate content
from one format to another and to effectively govern the manner in which
information flows between applications. Our transformation and flow management
products translate data from each application into a format that is understood
by other applications throughout the enterprise as described below:
. TIB/MessageBroker is our scalable message routing and transformation
system. TIB/MessageBroker combines and transforms data from applications
into formats that can be understood by other applications, and routes
data according to rules or criteria defined by the enterprise.
TIB/MessageBroker also allows an enterprise to conduct transactions and
exchange information with customers and business partners. Unlike many
competing technologies, TIB/MessageBroker requires no independent
database or third-party messaging system.
. TIB/IntegrationManager controls the flow of information among components
in the TIB/ActiveEnterprise environment. TIB/IntegrationManager allows
the enterprise to define business rules that govern where information
should go and under what conditions. TIB/IntegrationManager coordinates
the message transport and transformation functions of
TIB/ActiveEnterprise.
Content Display
To conduct business in real-time, an enterprise must have the ability to
provide a simple display tool for users to access and view business event
information. Our products in this area are designed to combine information from
the TIB/ActiveEnterprise environment with content from external sources, such
as web pages, to create an integrated display that can be personalized to the
specific needs of the end-user. Our content display products are described
below:
. TIB/ContentBroker aggregates information from enterprise applications,
corporate web sites and other content sources based on an enterprise's
preferences, and delivers the requested information directly to users'
desktops as soon as it becomes available. TIB/ContentBroker reduces the
need for enterprises to support multiple end -user interfaces that allow
users to request information from various sources.
. TIB/EventConsole is a display for users to view the content aggregated by
TIB/ContentBroker. TIB/EventConsole provides personalized notifications
from enterprise information sources, including databases, document
servers, web servers, enterprise resource planning systems and legacy
systems, directly to the desktop computers of the
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appropriate users. TIB/EventConsole also enables users to receive up-to-
date information remotely.
Monitoring and Management
TIB/Hawk is our product for monitoring and managing applications. Through an
intuitive graphical user interface, TIB/Hawk can be configured to monitor
systems and applications in a local or wide area network and act autonomously
when pre-defined conditions occur. For example, upon the occurrence of a
particular event, TIB/Hawk can send an alarm to the TIB/Hawk display or through
e-mail or a pager, and can run preset responses. System events are viewed
through a display application that, through the use of publish/subscribe
messaging, can operate anywhere on the network and in multiple locations
simultaneously without any change in system configuration. TIB/Hawk uses
network resources only when responding to the occurrence of pre-defined events,
significantly reducing management and monitoring overhead.
TIB/ActiveEnterprise Product Suite
Our TIB/ActiveEnterprise products are depicted in the following diagram:
[Set forth here is a visual representation of our TIB/ActiveEnterprise
products]
. Allows multiple distinct applications, web sites, databases and other
content sources to be integrated and managed in real-time.
. Facilitates the distribution of information and integration of
business processes by connecting each application through patented
technology called The Information Bus or the TIB.
. Enables enterprises to extend their information infrastructures across
the Internet.]
TIBCO.net
As part of our strategy to extend the reach of TIB/ActiveEnterprise,
TIBCO.net provides a solution for the creation, monitoring and administration
of demanding, high-performance platforms for e-business services, such as
Internet or enterprise portals or corporate web sites. Using
TIB/ActiveEnterprise, we can create real-time, scalable information systems for
our customers, such as the financial information system we created for Yahoo!.
TIBCO.net allows our customers to combine internal business systems with
external content, such as news or market pricing data. Our customers in turn
can bundle this information for real-time delivery to their customers,
suppliers, partners and employees. In addition, TIBCO.net provides our
customers with the ability to integrate and deliver business information in
real-time across the Internet through our reliable multicast technology.
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TIBCO.net represents a further evolution of TIB/ActiveEnterprise for use in
Internet-enabled businesses. TIBCO.net is offered to our customers either as a
TIBCO-hosted service, providing time-to-market advantages, or as a package of
products and services for implementation at the customer's site.
TIBCO.net, through its implementation of TIB/ActiveEnterprise, supports a
broad range of communications methods and protocols enabling the delivery of
information through a wide range of devices and presentation technologies,
including Internet browsers, pagers, hand-held computers and digital cellular
phones.
By applying our experience in supplying real-time information, we have
developed several services and products that enterprises can use to create
comprehensive content distribution systems. We can offer companies the ability
to provide their users with access to information from a variety of web pages
that can be accessed using TIB/ContentBroker. In addition, we can assist our
customers in securing access to popular news and information services from
Reuters and other information providers.
We are currently developing TIB/Adapters in order to provide access to
several additional information sources, pertaining to finance, travel, sports,
weather and healthcare.
Services
Professional Services
Our professional services offerings include a wide range of consulting
services such as systems planning, architecture and design, custom development
and systems integration for the rapid deployment of our TIB/ActiveEnterprise
products. We offer professional services with the initial deployment of our
products, as well as on an ongoing basis to address the continuing needs of our
customers. Our professional services staff is located in Palo Alto, Virginia,
London and Sydney, enabling us to perform installations and respond to customer
demands rapidly across the Americas, Europe and Asia. As of February 28, 1999,
our professional services group consisted of 104 employees, including
individuals with domain expertise in the telecommunications, energy and other
industries. Many of our professional services employees have advanced degrees
and/or substantial industry expertise in systems architecture and design. We
expect that the number of service professionals and the scope of the services
offered will increase as we continue to address the expanding enterprise
infrastructure needs of large organizations.
We have established reseller and joint marketing relationships with
professional service organizations and system integrators, including Deloitte
Consulting, EDS, Ernst & Young, Compaq Services and Sapient, to cooperate in
the deployment of our products to clients. These relationships help promote our
TIB/ActiveEnterprise product suite and provide additional technical expertise
to enable us to provide the full range and volume of professional services our
customers require to deploy TIB/ActiveEnterprise.
Maintenance and Support
We offer an array of software maintenance and support services to our
customers. Our support organization provides services seven days a week,
twenty-four hours a day. We have a worldwide support organization with key
operations centers in Palo Alto, London and Sydney to ensure global coverage
for our customers. These centers provide the infrastructure for our around-the-
clock call centers and hotline support.
We offer a range of support packages that allow our customers to choose the
level of support that fits the needs and budgets of their organizations.
Customers also have access to on-site support which is charged on a time and
materials basis.
Training
We provide training for customer personnel at our main office as well as at
customer locations. We also provide training for our professional services
partners to enhance their
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effectiveness in integrating our products. In addition, we develop custom
education programs to address the specific needs of individual customers and
partners.
Users of TIBCO Software Products
TIBCO Software's customer base includes businesses from many industries,
including telecommunications, high-tech manufacturing and energy, as well as
pharmaceuticals, retail, general manufacturing and the Internet. The following
is a partial list of current users of our TIB/Active Enterprise products. Each
of these companies, other than the financial services companies, accounted for
at least $500,000 of our revenue during the period from January 1997 through
May 1999. Each of the financial services companies accounted for at least
$200,000 of our revenue during that period. We believe that the amount and type
of products purchased by these customers is representative of our client
relationships generally.
Telecom Energy Financial Services
Ericsson Chevron Cedel Global Services
PageNet Marubeni Fidelity
Telia Mobil First National Bank
Pacific Power of South Africa
High-Tech Manufacturing Goldman Sachs
Internet and Other The Nasdaq Stock
3Com Market
Compaq Bechtel National Westminster
Hyundai Intuit Bank
Intel Yahoo! Unibank
Lucent Technologies
Motorola
NEC Electronics
Philips Medical
Taiwan Semiconductor Manufacturing Company
United Microelectronics Corp.
Under the terms of our license agreement with Reuters, we are generally
required to sell our products to companies in the financial services market
through third-party distributors and systems integrators. Reuters is the
preferred distributor of our products in that market. Reuters pays us a product
fee when it sells our products to financial services companies, but this
product fee is lower than the amount of revenue we would recognize if we sold
our products directly to these companies. See "Relationship with Reuters and
Certain Transactions--Intercompany Agreements-- License, Maintenance and
Distribution Agreement with Reuters" beginning on page 54 for a detailed
description of our distribution relationship with Reuters. All financial
services companies listed in the above table other than Cedel Global Services
purchased our products through Reuters.
Our contract with Cedel Global Services, a company that provides services to
the finance industry, was assigned to us by Reuters effective January 1, 1998
in consideration for our assumption of the obligations of TFT under the
agreement, and we sell our products and consulting services directly to Cedel
Global Services pursuant to an exception in our license agreement with Reuters.
In fiscal 1998 and in the first half of fiscal 1999, Cedel Global Services
accounted for 17% and 10% of our revenue. Our contract with Cedel Global
Services expires in December 2000. In addition, in fiscal 1997, NEC Electronics
accounted for 17% of our revenue. No other trade customer accounted for more
than 10% of our revenue in the first half of 1999 or in either of fiscal 1998
or fiscal 1997.
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Sales and Marketing
Sales
We currently market our software and services primarily through a direct
sales organization, complemented by indirect sales channels. As of May 31,
1999, our direct sales force included 25 commissioned sales representatives
located in 7 U.S. cities and in 8 locations internationally across North
America, Europe and Asia. We have established distribution and licensing
relationships with several strategic hardware vendors, database providers,
software and toolset developers, systems integrators and implementation
consultants. We have also developed alliances with key solution providers to
target vertical industry sectors, including health care, telecommunications,
and manufacturing.
Under the terms of our license agreement with Reuters, we generally cannot
sell our products directly into the financial services market. Accordingly, we
generally sell our products to companies in the financial services industry
through third-party distributors and systems integrators. Reuters is the
preferred distributor of our products in that market. See "Relationship with
Reuters and Certain Transactions--Intercompany Agreements--License, Maintenance
and Distribution Agreement with Reuters" beginning on page 54 for a detailed
description of our distribution relationship with Reuters. We believe that our
distribution relationship with Reuters, a global news and information group,
has strengthened the penetration of our products in the financial services
industry. Product fees from Reuters on its sales of our products in the
financial services industry accounted for 14% of our revenue in the first half
of fiscal 1999, 6% of our revenue in fiscal 1998 and less than 1% of our
revenue in fiscal 1997.
Marketing
We utilize a wide variety of marketing programs which are intended to attract
potential customers and to promote TIBCO Software and its brand names. We use a
mix of market research, analyst updates, seminars, direct mail, print
advertising, trade shows, speaking engagements, public relations, customer
newsletters, and web site marketing in order to achieve these goals. Our
marketing department also produces collateral material for distribution to
potential customers including presentation materials, white papers, brochures,
and fact sheets. We also host annual user conferences for our customers and
provide support to our channel partners with a variety of programs and training
and product marketing support materials.
Information Technology Advisory Council
We have assembled an Information Technology Advisory Council composed
primarily of chief information officers from leading Fortune 500 manufacturing
and financial companies. The Information Technology Advisory Council meets at
least semiannually to review our design plans and products and to provide us
with specific feedback on our technology applications and market focus.
Product Development
We have been granted a perpetual, royalty-free license to the underlying TIB
messaging technology as it existed on December 31, 1996. See "Relationship with
Reuters and Certain Transactions--Intercompany Agreements--License, Maintenance
and Distribution Agreement with Reuters" beginning on page 54 for a more
detailed description of this license. We have concentrated our product
development efforts since then both on enhancing this licensed technology and
on developing new products. We expect that most of our enhancements to existing
products and new products will be developed internally. However, we will
evaluate on an ongoing basis the acquisition of externally developed
technologies for integration into our product lines.
We expect that a substantial majority of our research and development
activities will be related to developing enhancements and extensions to our
TIB/ActiveEnterprise product lines. Historically, our product development
efforts were focused on creating the TIB/ActiveEnterprise solution. Our
development focus has now shifted to expanding the number of available
TIB/Adapters and developing
41
<PAGE>
additional pre-packaged integration solutions for specific markets.
As of May 31, 1999, there were 106 employees in our research and development
organization. We expect that we will continue to commit significant resources
to product development in the future. To date, all product development costs
have been expensed as incurred.
Competition
The market for our products and services is extremely competitive and subject
to rapid change. In addition, we compete with various providers of single
components of application integration solutions, including IBM, New Era of
Networks, Iona and BEA with respect to messaging components and Vitria,
CrossWorlds, STC and Active Software with respect to other components. We
believe that of these companies, IBM has the potential to offer the most
complete set of products for application integration. We also face competition
for certain aspects of our product and service offerings from major systems
integrators. We expect additional competition from other established and
emerging companies. In addition, we may face pricing pressures from our current
competitors and new market entrants in the future. We believe that the
competitive factors affecting the market for our products and services include
product functionality and features; quality of professional services offerings;
product quality, performance and price; ease of product implementation; quality
of customer support services; customer training and documentation; and vendor
and product reputation. The relative importance of each of these factors
depends upon the specific customer environment. Although we believe that our
products and services currently compete favorably with respect to such factors,
we may not be able to maintain our competitive position against current and
potential competitors.
Many of our current and potential competitors have longer operating
histories, significantly greater financial, technical, product development and
marketing resources, greater name recognition and larger customer bases than we
do. Our present or future competitors may be able to develop products
comparable or superior to those we offer, adapt more quickly than we do to new
technologies, evolving industry trends or customer requirements, or devote
greater resources to the development, promotion and sale of their products than
we do. Accordingly, we may not be able to compete effectively in our markets,
competition may intensify and that future competition may harm our business and
operating results. If we are not successful in developing enhancements to
existing products and new products in a timely manner, achieving customer
acceptance or generating higher average selling prices, our gross margins may
decline, and our business and operating results may suffer.
Our license agreement with Reuters does not prohibit Reuters from providing
enterprise infrastructure software products and services in competition with
us. Reuters currently sells our products to financial services companies and
creates products based on the TIB technology specifically for financial
services companies. In addition, pursuant to the license agreement, Reuters has
access to the source code for our products. Although Reuters currently does not
create TIB-based products designed for general use in all markets, if Reuters
were to decide to begin providing information integration products and services
in our markets, we would face additional competition for such customers.
Proprietary Technology
Our success is dependent upon our proprietary software technology. We license
the patents for the TIB technology underlying some of our TIB/ActiveEnterprise
products, including TIB/Rendezvous and TIB/ETX, from Reuters. Consequently, we
can assert infringement of these products only through Reuters or with the
consent of Reuters. While we have pending patent applications, we do not
currently have any issued patents and rely principally on trade secret,
copyright and trademark laws, nondisclosure and other contractual agreements to
protect our technology. We also believe that factors such as the technological
and creative skills of our personnel, product enhancements and new product
developments are essential to establishing and maintaining a
42
<PAGE>
technology leadership position. We enter into confidentiality and/or license
agreements with our employees, distributors and customers, and limit access to
and distribution of our software, documentation and other proprietary
information. Nevertheless, the steps we have taken may fail to prevent
misappropriation of our technology, and the protections we have may not prevent
our competitors from developing products with functionality or features similar
to our products. Furthermore, third parties might independently develop
competing technologies that are substantially equivalent or superior to our
technologies. In addition, effective copyright and trade secret protection may
be unavailable or limited in certain foreign countries. If we fail to protect
our proprietary technology, our business could be seriously harmed.
Although we do not believe our products infringe the proprietary rights of
any third parties, third parties may nevertheless assert infringement claims
against us or our customers in the future. Furthermore, we may initiate claims
or litigation against third parties for infringement of our proprietary rights
or to establish the validity of our proprietary rights. Litigation, whether
resolved in our favor or not, would cause us to incur substantial costs and
divert our management resources from productive tasks, which could harm our
business. Parties making claims against us could secure substantial damages, as
well as injunctive or other equitable relief which could effectively block our
ability to license our products in the United States or abroad. Such a judgment
could seriously harm our business. If it appears necessary or desirable, we may
seek licenses to intellectual property if we believe that our technology
potentially infringes on such technology. We may not, however, be able to
obtain such licenses on commercially reasonable terms or at all, and the terms
of any offered licenses might not be acceptable to us. The failure to obtain
necessary licenses or other rights could seriously harm our business. As the
number of software products in our industry increases and the functionality of
those products further overlaps, we believe that software developers may become
increasingly subject to infringement claims. Any such claims, with or without
merit, would probably be time consuming and expensive to defend, and could
seriously harm our business. We are not aware of any currently pending claims
that our products, trademarks or other proprietary rights infringe upon the
proprietary rights of third parties.
"TIBCO", "The Information Bus", "TIB" and the names of our products are our
trademarks or tradenames.
Employees
As of May 31, 1999, we employed 342 persons, including 69 in sales and
marketing, 106 in research and development, 40 in finance and administration
and 127 in client services and technical support. Of our 342 employees, 45 were
located in Europe, and 24 in Australia and Asia. We believe that our
relationship with our employees is good.
Legal Proceedings
From time to time we have been subject to legal proceedings and claims in the
ordinary course of business. We are not now involved in any material legal
proceedings.
Executive Offices and Web Site
Our principal executive office is located at 3165 Porter Drive, Palo Alto,
California 94304, and our telephone number at that address is (650) 846-5000.
We maintain a web site at www.tibco.com. Information contained on our site is
not part of this prospectus.
Facilities
We lease approximately 93,000 square feet in a single office building located
in Palo Alto, California. We also lease office space in Virginia and Australia
and in various cities in the United States and internationally to support our
sales and marketing personnel worldwide. We believe that our existing
facilities are adequate to meet our current and foreseeable requirements, or
that suitable additional space will be available on commercially reasonable
terms.
43
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information with respect to our
executive officers and directors as of the date of this prospectus.
Executive Officers and Directors
<TABLE>
<CAPTION>
Name Age Position(s)
------------------------- --- -----------------------------------------------
<C> <C> <S>
Vivek Y. Ranadive 41 President, Chief Executive Officer and Chairman
of the Board
Paul G. Hansen 49 Executive Vice President, Finance and Chief
Financial Officer
Rajesh U. Mashruwala 47 Executive Vice President, Sales and Marketing
Executive Vice President, General Counsel and
Robert P. Stefanski 37 Secretary
Executive Vice President, Engineering and
Richard M. Tavan 50 Operations
Christopher G. O'Meara 41 Vice President, Finance
Douglas M. Atkin 36 Director
Yogen K. Dalal 49 Director
Edward R. Kozel 43 Director
Donald J. Listwin 40 Director
Larry W. Sonsini 58 Director
John G. Taysom 45 Director
Phillip E. White 56 Director
Philip Wood 44 Director
</TABLE>
Vivek Y. Ranadive has served as President, Chief Executive Officer and
Chairman of the Board of TIBCO Software since its inception in January 1997.
From 1985 to 1997, Mr. Ranadive served as the Chairman and CEO of Teknekron. In
addition, Mr. Ranadive served as President, Chief Executive Officer and
Chairman of the Board of TFT from its inception until December 1998.
Mr. Ranadive received his B.S. in electrical engineering and computer science
and his M.S. in engineering from the Massachusetts Institute of Technology and
his M.B.A. from Harvard University.
Paul G. Hansen has served as Executive Vice President and Chief Financial
Officer of TIBCO Software since July 1998. From 1984 to July 1998, Mr. Hansen
held various positions at Adaptec, Inc., a publicly-traded supplier of
bandwidth management solutions, including Vice President, Finance, Chief
Financial Officer and Assistant Secretary from 1988 to July 1998. Mr. Hansen
received his B.S. in business from the State University of New York.
Rajesh U. Mashruwala has served as Executive Vice President, Sales and
Marketing of TIBCO Software since March 1997. From February 1995 to March 1997,
Mr. Mashruwala held various positions at TIBCO Software and TIBCO Inc.,
including Vice President, Enterprise Business Applications of TIBCO Software.
From October 1993 to February 1995, Mr. Mashruwala was President of Media
Computer Technology, Inc., a provider of magnetic and optical media products.
Mr. Mashruwala received his degree in engineering from the Indian Institute of
Technology, Bombay and his M.S. in engineering from the University of
California, Berkeley.
Robert P. Stefanski has served as Executive Vice President, General Counsel
of TIBCO Software since May 1998 and as Secretary of TIBCO Software since May
1997. From November 1996 to March 1998, Mr. Stefanski was the Director of
Intellectual Property for Reuters America, Inc., an affiliate of ours. From
September 1989 to November 1996, Mr. Stefanski was an associate with the law
firm of Weil, Gotshal & Manges. Mr. Stefanski received his B.S. in mathematics
from Northern Michigan University and his M.S. in engineering and his J.D. from
the University of Michigan.
Richard M. Tavan has served as Executive Vice President, Engineering and
Operations of TIBCO Software since January 1997. From November 1986 to January
1997,
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<PAGE>
Mr. Tavan held various positions at TIBCO Inc., including Vice President,
Engineering. From June 1983 to November 1986, Mr. Tavan was Director of
Engineering for 3Com Corporation. Mr. Tavan received his B.S. in electrical
engineering and computer science from the Massachusetts Institute of
Technology.
Christopher G. O'Meara has served as Vice President, Finance, of TIBCO
Software since August 1998. From June 1992 to July 1998, Mr. O'Meara was
Corporate Vice President and Treasurer at Adaptec. Mr. O'Meara received his
B.A. in economics from Stanford University and his M.B.A. from Northwestern
University.
Douglas M. Atkin was appointed a director of TIBCO Software in July 1999.
Since 1998, Mr. Atkin has been Chief Executive Officer of Instinet Corporation,
a subsidiary of Reuters. From 1992 to 1998, Mr. Atkin was CEO of Instinet
International, a subsidiary of Reuters. Mr. Atkin received his B.A. in
economics from Tufts University.
Yogen K. Dalal has been a director of TIBCO Software since December 1997.
Since September 1991, Mr. Dalal has been a Partner of Mayfield Fund, a venture
capital firm. Mr. Dalal is a director of BroadVision, Inc., a supplier of
Internet business applications, and several privately-held companies. Mr. Dalal
received his B.S. in electrical engineering from the Indian Institute of
Technology, Bombay and his M.S. and Ph.D. in electrical engineering from
Stanford University.
Edward R. Kozel has been a director of TIBCO Software since May 1997. Mr.
Kozel is a director of Cisco Systems, and served in various capacities at Cisco
from 1989 through April 1998, most recently as Chief Technology Officer and
Senior Vice President Business Development.
Donald J. Listwin has been a director of TIBCO Software since October 1998.
Since February 1990, Mr. Listwin has been with Cisco Systems, Inc., where he
has held a variety of positions and is currently an Executive Vice President.
Mr. Listwin also serves on the board of directors of Software.com and E-Tek
Dynamics. Mr. Listwin received his B.S. in electrical engineering from the
University of Saskatchewan, Canada.
Larry W. Sonsini has been a director of TIBCO Software since May 1997. Mr.
Sonsini has been an attorney with the law firm of Wilson Sonsini Goodrich &
Rosati since 1966 and currently serves as the Chairman of the firm's Executive
Committee. Mr. Sonsini also serves as a director of Lattice Semiconductor
Corporation, Novell, Inc. and Pixar. Mr. Sonsini received A.B. and L.L.B.
degrees from the University of California, Berkeley.
John G. Taysom was appointed a director of TIBCO Software in July 1999. Since
1982, Mr. Taysom has been employed by Reuters and is currently the Managing
Director of Reuters Greenhouse Fund, a venture capital fund. Mr. Taysom is
currently a director of Digimarc Corporation, a maker of electronic anti-
counterfeiting products, and several other privately held companies. Mr. Taysom
received his B.Sc. in economics from Bath University.
Phillip E. White has been a director of TIBCO Software since May 1997. Since
August 1997, Mr. White has been President of Marketing Consultants. From
January 1989 to July 1997, Mr. White was the Chief Executive Officer of
Informix Software, Inc., a provider of innovative database products. Mr. White
currently serves on the board of directors of Legato Systems, a storage
management software provider, Adaptec and several privately held companies. Mr.
White received his B.A. in business from Illinois Wesleyan University and his
M.B.A. from Illinois State University.
Philip K. Wood has been a director of TIBCO Software since our inception.
Since September 1990, Mr. Wood has been employed by Reuters and currently
serves as Deputy Finance Director. Prior to joining Reuters in September 1990,
Mr. Wood was a partner at Price Waterhouse. Mr. Wood is currently a director of
TFT, Instinet Corporation and several other subsidiaries of Reuters. Mr. Wood
received his M.A. in physics from Balliol College, Oxford University.
45
<PAGE>
Pursuant to a stockholders' agreement among us, Reuters and certain of our
other stockholders, Messrs. Atkin, Taysom and Wood were selected to serve on
our board of directors by Reuters; Messrs. Kozel and Listwin were selected by
Cisco; and Messrs. Dalal, Sonsini and White were selected by Mr. Ranadive.
The service of some of our directors as directors, officers or employees of
Reuters could create or appear to create potential conflicts of interest when
these directors are faced with decisions that could have different implications
for us and Reuters. Such decisions may be required in connection with potential
acquisitions or financing transactions or other corporate opportunities that
may be suitable for both us and Reuters or TFT. None of our significant
corporate stockholders, including Reuters, is prohibited from competing with
us. See "Risk Factors -- Our licensing and distribution relationship with
Reuters places limitations on our ability to conduct our business" beginning on
page 8 for more information on the potential for competition between us and
Reuters. Directors of a corporation owe fiduciary duties to all of the
stockholders of that corporation, and Delaware law governs situations where a
potential or actual conflict of interest may arise.
Following the offerings, Reuters will have the right under a stockholders
agreement to nominate three of our nine directors so long as it holds 40% or
more of our outstanding shares of voting stock. If Reuters holds less than 40%
but at least 25% of our voting shares, Reuters will have the right to nominate
two directors. If Reuters holds less than 25% but at least 10% of the issues
and outstanding voting shares, Reuters will have the right to nominate one
director. If the total number of our directors is increased, Reuters will have
the right to nominate the lowest number of directors such that Reuters-
nominated directors constitute at least that portion of our board of directors
that Reuters could have nominated under the foregoing rights if our board
consisted of nine directors. See "Relationship of Reuters and Certain
Transactions--Stockholders Agreement" beginning on page 57 for a more detailed
description of these arrangements.
Each officer serves at the discretion of our board of directors. There are no
family relationships among any of our directors or officers.
Director Compensation
Our Director Stock Option Plan provides for automatic grants of options to
purchase common stock to our directors who are not also our employees. See "--
Stock Plans--1998 Director Option Plan" beginning on page 52 for a more
detailed description of this plan. Directors do not receive any cash
compensation for serving on our board of directors.
Committees of the Board of Directors
Our board of directors has had standing audit and compensation committees,
which assist the board of directors in the discharge of its responsibilities.
The audit committee reports to our board of directors regarding the
appointment of our independent public accountants, the scope and fees of
prospective annual audits and the results thereof, compliance with our
accounting and financial policies and management's procedures and policies
relative to the adequacy of our internal accounting controls. Members of the
audit committee are elected by the board and serve for one-year terms. The
audit committee currently consists of Messrs. Dalal, Wood and Sonsini.
The compensation committee reviews and approves the annual salary and bonus
for each executive officer consistent with the terms of any applicable
employment agreement, reviews, approves and recommends terms and conditions for
all employee benefit plans, and administers our stock option plan. Stock option
grants are approved by the stock option sub-committee of the compensation
committee. Pursuant to the stockholders agreement, Reuters has the right to
nominate one member of our compensation committee. Members of our compensation
committee other than the Reuters representative are appointed by the board of
directors and serve one-year terms. The compensation committee currently
consists of Messrs. Listwin, Wood and Dalal. The stock option subcommittee
currently consists of Messrs. Listwin and Dalal.
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<PAGE>
Compensation Committee Interlocks and Insider Participation
During fiscal 1998, our compensation committee consisted of Messrs. Listwin
and White and Simon Yencken, one of our former directors. Neither Mr. Listwin
nor Mr. Yencken were our employees or employees of our subsidiaries during
fiscal 1998 or at any time prior to fiscal 1998. Since August 1997, Mr. White
has provided consulting services to us. In connection with these consulting
services, we paid $314,000 to Mr. White and granted him options to purchase
150,000 shares of our common stock in fiscal 1998. In fiscal 1998, we also
granted to Mr. White options to purchase 50,000 shares of common stock for
serving as a director. In fiscal 1997, we paid $79,000 to Mr. White and granted
him options to purchase 200,000 shares of our common stock for consulting
services rendered.
Mr. Listwin is Executive Vice President of Cisco Systems, Inc. Another of our
directors, Mr. Kozel, was an executive officer at Cisco during part of fiscal
1998 and is currently a member of Cisco's board of directors. In March 1999, we
granted Cisco a license to embed our TIB/Rendezvous product and multicasting
technology in its Internetworking Operating System and Cisco Networking
Services for Active Directory, or CNS/AD, products in exchange for a license
fee of $1.5 million. The terms of this transaction were the result of arm's-
length negotiations between Cisco and us and were approved by a majority of our
board of directors, including a majority of our independent and disinterested
directors. We believe that the terms of the technology licensing agreement with
Cisco are no less favorable to us than we could have negotiated with an
unaffiliated third party.
During fiscal 1998, Mr. Ranadive, our President, Chief Executive Officer and
Chairman, served as President, Chief Executive Officer and Chairman of TFT.
Limitation of Liability and Indemnification Matters
Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a
corporation's certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director for monetary damages for
breach of his or her fiduciary duties as a director, except for liability for:
. any breach of the duty of loyalty to the corporation or its stockholders;
. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General Corporate
Law; or
. any transaction from which the director derived an improper personal
benefit. See "Description of Capital Stock--Limitation of Liability;
Indemnification" beginning on page 65 for a more detailed description of
our obligation to indemnify our directors.
Our bylaws provide that we must indemnify our directors and officers and may
indemnify our employees and agents to the fullest extent permitted by Delaware
law.
We have entered into agreements to indemnify our directors and officers in
addition to the indemnification provided for in our certificate of
incorporation and bylaws. Under these agreements, we are obligated, among other
things, to indemnify our directors and officers for attorneys' fees, other
expenses, judgments, fines and settlement amounts incurred by any such person
in any action or proceeding, including any action by or in the right of us,
arising out of such person's services as our director or officer, any
subsidiaries or any other company or enterprise to which the person provides
services at our request. We believe that these provisions and agreements are
necessary to attract and retain qualified individuals to serve as directors and
officers.
At present, there is no pending litigation or proceeding involving any of our
directors, officers, employees or agents where indemnification will be required
or permitted. We are not aware of any threatened litigation or proceeding that
might result in a claim for such indemnification.
47
<PAGE>
Executive Compensation and Employment Agreements
The following table sets forth information concerning the compensation
received for services rendered to us during fiscal 1998 by our current Chief
Executive Officer and our four other most highly compensated executive officers
during the year ended November 30, 1998 whose salary and bonus for fiscal 1998
equaled or exceeded $100,000, whom we refer to as the named executive officers.
Amounts under the "Bonus" column include bonuses earned in fiscal 1998, but
deferred until a later year. In determining the amount of bonuses paid to our
named executive officers, the compensation committee considered the financial
performance of our company and the performance of the executives as compared to
the performance of comparable companies and compensation data from such
companies.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
-------------------- ------------
Securities
Underlying All Other
Name and Principal Positions Salary Bonus Options Compensation
---------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Vivek Y. Ranadive.............. $455,000(1) $200,000 232,500 --
President, Chief Executive
Officer and Director
Paul G. Hansen................. 88,141(2) 40,000 450,000 --
Executive Vice President and
Chief Financial Officer
Rajesh U. Mashruwala........... 213,333 85,000 62,500 --
Executive Vice President,
Sales and Marketing
Robert P. Stefanski............ 159,375(3) 75,000 18,000 41,430(4)
Executive Vice President,
General Counsel and Secretary
Richard M. Tavan............... 234,000 66,000 36,000 --
Executive Vice President,
Engineering and Operations
</TABLE>
- --------
(1) We were reimbursed $226,450 of this amount by Reuters for time Mr. Ranadive
spent working on matters for TFT.
(2) Mr. Hansen began his employment with us as Executive Vice President and
Chief Financial Officer in July 1998. His current salary is $260,000 per
year.
(3) Mr. Stefanski began his employment with us as Executive Vice President and
General Counsel in March 1998. His current salary is $245,000 per year.
(4) Represents amount reimbursed for relocation expenses.
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<PAGE>
The following table sets forth information as to stock options granted to all
named executive officers during the fiscal year ended November 30, 1998. These
options were granted under our 1996 Stock Option Plan and, unless otherwise
indicated, provide for vesting as to 20% of the underlying common stock one
year after the date of grant, then ratably over a period of 48 months
thereafter. Options were granted at an exercise price equal to 100% of the fair
market value of our common stock on the date of grant, as determined by our
board of directors. The amounts under "Potential Realizable Value at Assumed
Annual Rate of Stock Appreciation for Option Term" represent the hypothetical
gains of the options granted based on assumed annual compound stock
appreciation rates of 5% and 10% over the assumed initial public offering price
per share of $14.50 for the full ten-year term of the options. The assumed
rates of appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent our estimate or projection of future common
stock prices.
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Percent Value at Assumed
Number of Total Annual Rate
Securities Options of Stock Appreciation
Underlying Granted to Exercise for Option Term
Options Employees Price Per Expiration ---------------------
Name Granted(#) in Fiscal Year Share Date 5% 10%
---- ---------- -------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Vivek Y. Ranadive....... 232,500 5.3% $1.00 4/01/08 $5,258,911 $8,511,654
Paul G. Hansen.......... 450,000(1) 10.3 2.60 7/27/08 9,458,537 15,754,170
Rajesh U. Mashruwala.... 62,500 1.4 1.00 4/01/08 1,413,686 2,288,079
Robert P. Stefanski..... 18,000(2) 0.4 1.00 4/01/08 407,141 658,967
Richard M. Tavan........ 36,000 0.8 1.00 4/01/08 814,283 1,317,934
</TABLE>
- --------
(1) These options vested as to 37,500 of the underlying shares on the date of
grant with the remainder vesting as to 20% of the underlying shares one
year after the date of grant then ratably over 48 months thereafter.
(2) Mr. Stefanski also has the right to purchase 80,000 shares of our common
stock at a weighted average price per share of $0.72 pursuant to
Reuters/TFT Employee Stock Purchase Arrangements described under
"Relationship with Reuters and Certain Transactions--Reuters/TFT Employee
Stock Purchase Arrangements" on page 59.
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<PAGE>
The following table sets forth information with respect to unexercised
options held by the named executive officers as of November 30, 1998. Amounts
under "Unexercisable" in the table below include unvested options
notwithstanding the fact that they are immediately exercisable upon grant
because unvested shares are subject to repurchase by us at the original
exercise price upon the employee's cessation of service. The amounts under
"Value of Unexercised In-the-Money Options" were calculated by determining the
difference between the exercise price and the assumed initial public offering
price of $14.50 per share.
Aggregate Stock Option Exercises In Fiscal 1998 and Fiscal Year-End Values
<TABLE>
<CAPTION>
Number of Securities
Underlying
Shares Unexercised Options Value of Unexercised
Acquired at November 30, 1998 In-the-Money Options
on Exercise Value ------------------------- -------------------------
Name (#) Shares Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Vivek Y. Ranadive....... -- $ -- 2,944,444 871,389 $40,927,773 $12,019,307
Paul G. Hansen.......... 38,461 284,611 -- 411,538 -- 4,897,302
Rajesh U. Mashruwala.... -- -- 48,333 189,167 671,829 2,604,421
Robert P. Stefanski..... 40,000 376,000 5,000 123,000 69,500 1,846,500
Richard M. Tavan........ -- -- -- 36,000 -- 486,000
</TABLE>
All of our executive officers are employed at-will. However, Mr. Ranadive's
employment may only be terminated upon 120 days written notice and Mr.
Stefanski's employment may only be terminated upon six months written notice
pursuant to agreements entered into with us. All other employees may be
terminated without cause upon two weeks written notice or with cause at any
time.
Each of our executive officers is a party to our standard non-disclosure
agreement. Under the non-disclosure agreements, for one year following their
termination, our employees agree not to solicit any other employee to leave the
company. The employees also agree not to disclose any confidential information
that they obtained during their employment to any third parties at any time
during or subsequent to their employment. In addition, any inventions,
discoveries or improvements created by the employees during their employment
belong to us.
50
<PAGE>
Stock Plans
1996 Stock Option Plan
Our 1996 Stock Option Plan, as amended and restated, provides for the grant
to employees of incentive stock options within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended, for the grant to employees,
officers, directors and consultants of nonstatutory stock options and provides
eligible employees with the right to participate in a salary deferral employee
stock purchase program, or "ESPP", intended to qualify under Section 423 of the
Internal Revenue Code. The amended and restated 1996 plan will be approved by
our board of directors and our stockholders prior to the offerings. Unless
terminated sooner, the 1996 plan will terminate automatically in May of 2009. A
total of 15,225,818 shares of common stock has been reserved for issuance
pursuant to the 1996 plan, plus annual increases equal to the lesser of
(1) 5,000,000 shares, or (2) 3.5% of the outstanding shares on the first day of
each fiscal year. An individual may be granted options to purchase a maximum of
750,000 shares of common stock each year, in addition to an option to purchase
up to 750,000 shares in connection with that individual's commencement of
service. As of May 31, 1999, there were options to purchase 10,008,218 shares
of common stock outstanding under the 1996 plan, all of which are exercisable,
but 5,612,387 of which would be subject to repurchase by us if exercised on
that date. The outstanding options have exercise prices ranging from $0.60 per
share to $6.00 per share, and a weighted average exercise price of $2.22 per
share.
The 1996 plan will be administered by the compensation committee of our board
of directors, which committee shall, in the case of options intended to qualify
as "performance-based compensation" within the meaning of Section 162(m) of the
Internal Revenue Code, consist of two or more "outside directors" within the
meaning of Section 162(m) of the Internal Revenue Code. The committee has the
power to determine the terms of the options granted, including, but not limited
to, the participants who will be granted options, the exercise price, the
number of shares subject to each option, the exercisability thereof and the
form of consideration payable upon such exercise. The board has the authority
to amend, suspend or terminate the 1996 plan, subject to shareholder approval
when required by applicable law, provided that no such action may adversely
affect any share of common stock previously issued and sold or any option
previously granted under the 1996 plan.
Options granted under the 1996 plan are not generally transferable by the
optionee, and each option is exercisable during the lifetime of the optionee
only by such optionee. Options granted under the 1996 plan must generally be
exercised within three months of the Optionee's separation of service from us,
or within twelve months if such optionee's termination is due to the optionee's
death or disability, but in no event later than the expiration of the option's
ten year term. The exercise price of all incentive stock options granted under
the 1996 plan must be at least equal to the fair market value of our common
stock on the date of grant. The exercise price of nonstatutory stock options
granted under the 1996 plan will be determined by the committee, but with
respect to nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue
Code, the exercise price must at least be equal to the fair market value of the
common stock on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting power of all classes of our
outstanding capital stock, the exercise price of any incentive stock option
granted must equal at least 110% of the fair market value of the common stock
on the date of grant and the term of any incentive stock option must not exceed
five years. The term of all other options granted under the 1996 plan may not
exceed ten years.
The 1996 plan provides that in the event of our merger with or into another
corporation or a sale of substantially all of our assets, each outstanding
option shall be assumed or an equivalent option substituted by the successor
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corporation. If an option is not assumed or substituted as described in the
preceding sentence, each such option shall become fully vested and exercisable,
including shares that would not otherwise be vested or exercisable, for a
period of 15 days from the date of such notice, and the option will terminate
upon the expiration of such period.
The ESPP permits participants to purchase common stock through payroll
deductions of up to 10% of the participant's "compensation". The maximum number
of shares a participant may purchase during a single purchase period is 1,000
shares.
Employees are eligible to participate in the ESPP if they are customarily
employed by the Company or any participating subsidiary for at least 20 hours
per week and more than five months in any calendar year. However, any employee
who
. immediately after grant owns stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock, or
. whose rights to purchase stock under all employee stock purchase plans of
the Company accrues at a rate which exceeds $25,000 worth of stock for
each calendar year
may not be granted a right to purchase stock under the ESPP.
The ESPP provides for consecutive, overlapping, twenty-four month offering
periods. The offering periods generally start on the first trading day on or
after January 1 and July 1 of each year, except for the first such offering
period which commences on the first trading day on or after the effective date
of the underwritten offering and ends on the last trading day on or before June
30, 2001. Each offering period includes four six-month purchase periods.
Amounts deducted and accumulated by participants are used to purchase shares
of common stock at the end of each purchase period. The price of stock
purchased under the ESPP is generally 85% of the lower of the fair market value
of our common stock (1) at the beginning of the offering period or (2) at the
end of the purchase period. In the event 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, the participants will be withdrawn from the current offering
period following exercise and automatically re-enrolled in a new offering
period. The new offering period will use the lower fair market value as of the
first date of the new offering period to determine the purchase price for
future purchase periods.
Participants may end their participation in the ESPP at any time during an
offering period, at which time they will be refunded their payroll deductions
to date. Participation ends automatically upon termination of employment with
us.
Rights granted pursuant to the ESPP are not transferable by a participant
other than by will, or the laws of descent and distribution. The ESPP provides
that, in the event of our merger with or into another corporation or a sale of
substantially all of our assets, each outstanding right may be assumed or
substituted for by the successor corporation. If the successor corporation
refuses to assume or substitute for the outstanding rights, the offering period
then in progress will be shortened and a new exercise date will be set.
The board has the authority to amend or terminate the ESPP, except that no
such action may adversely affect any outstanding rights to purchase stock under
the ESPP. Notwithstanding the previous sentence, the board may terminate an
offering period on any exercise date if the board determines that the
termination of the offering period is in our best interests and those of our
stockholders. Notwithstanding anything to the contrary, the board may in its
sole discretion amend the ESPP to the extent necessary and desirable to avoid
unfavorable financial accounting consequences by altering the purchase price
for any offering period, shortening any offering period or allocating remaining
shares among the participants.
1998 Director Option Plan
The 1998 Director Option Plan, as amended and restated, provides that each
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director is eligible to participate in the director plan. The director plan was
adopted by our board of directors and stockholders in May 1999. The director
plan has a term of ten years from May 1999, but may be terminated sooner by the
board. A total of 825,000 shares of our common stock have been reserved for
issuance under the director plan. As of May 31, 1999, there were options to
purchase 260,000 shares of common stock outstanding under the director plan,
83,334 of which are exercisable. These outstanding options have exercise prices
ranging from $1.00 to $6.00 per share and a weighted average exercise price of
$2.64 per share.
The director plan provides for discretionary grant of options to employee
directors and for non-discretionary grants of options to each non-employee
director. Beginning on or about October 1, 1999, on January 1, April 1, July 1
and October 1 of each year, each non-employee director will receive automatic
option grants of 5,000 shares of common stock. In addition, in June 1999,
Reuters was granted an option to purchase 150,000 shares of common stock.
Each option will be fully vested on the date of grant and have a term of 10
years. The exercise price of all options shall be 100% of the fair market value
per share of our common stock on the date of grant, generally determined with
reference to the closing price of the common stock as reported on the Nasdaq
National Market.
Options granted under the director plan are not generally transferable by the
director. However, the option to purchase 150,000 shares held by Reuters may be
transferred by Reuters to the Reuters-nominated directors. Options granted
under the director plan must generally be exercised within three months of the
date that director ceases to be a director or within twelve months if such
termination is due to the optionee's death or disability. The option to
purchase 150,000 shares of our common stock granted to Reuters under the
director plan is not affected by the termination, death or disability of any of
the Reuters-nominated directors.
If it is determined that automatic annual option grants to non-employee
directors that are subject to vesting will not result in unfavorable accounting
consequences to us, then the director plan will be amended to change the
quarterly automatic options grants that are fully vested to automatic annual
option grants that are subject to vesting.
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RELATIONSHIP WITH REUTERS AND CERTAIN TRANSACTIONS
Relationship with Reuters
We are the successor to a portion of the business of Teknekron Software
Systems, Inc., which was acquired by Reuters in 1994. Teknekron subsequently
changed its name to TIBCO Inc., and in January 1997, we were established as an
entity separate from TIBCO Inc. In connection with our formation as a separate
entity, we issued and sold 19,000,000 shares of our common stock and 20,000,000
shares of our Series A preferred stock to an affiliate of Reuters for $10.0
million plus the net book value of the assets transferred to us. We were formed
to create and market software solutions for use in the integration of business
information, processes and applications in all industries outside of the
financial services market.
TIBCO Inc. subsequently changed its name to TIBCO Finance Technology, Inc.
and focuses its business on providing TIB-based software and custom solutions
to the financial services and insurance industries. Under our license agreement
with Reuters, Reuters, through TFT, is the exclusive distributor of our
products in the financial services market for a term of five years, subject to
the limited exceptions described below.
Following the offerings, Reuters will own approximately 64.6% of our
outstanding shares of common stock, or approximately 65.5% if the concurrent
offering is not consummated, but has agreed to limit its voting rights. See "--
Stockholders Agreement" beginning on page 57 for a description of this voting
limitation.
Intercompany Agreements
License, Maintenance and Distribution Agreement with Reuters
On December 31,1996, we entered into a license, maintenance and distribution
agreement with Reuters and its wholly-owned subsidiary, TFT. The agreement was
amended in May 1999. The license agreement provides for the license of
technology and proprietary rights from Reuters to us, the license of technology
from us to Reuters, the maintenance of the licensed technology, the right of
Reuters to distribute our products and the related distribution fees and
limitations on our business in the financial services industry, all as further
described below. Reuters may exercise its rights under the license agreement
through its affiliates. Revenue from Reuters and TFT under the license,
maintenance and distribution agreement, consisting primarily of product fees on
sales by TFT of our products to financial services companies, was $0.8 million
in fiscal 1997, $3.7 million in fiscal 1998 and $7.3 million in the first six
months of fiscal 1999.
Ownership of Intellectual Property Used in Our Products. Reuters owns the
underlying TIB intellectual property and technology, including the basic
publish/subscribe technology, that was in existence on December 31, 1996 and
that is incorporated into some of our TIB/ActiveEnterprise products including
TIB/Rendezvous, TIB/Hawk and TIB/ETX. We own all technology and related
intellectual property rights, including patents, copyrights, trade secrets,
trademarks and other similar rights, independently developed by us since our
formation on January 1, 1997. This includes both enhancements and improvements
to the licensed TIB technology and new technology unrelated to the licensed TIB
technology. We also own our trademarks and tradenames, including TIBCO, TIB,
The Information Bus and the names of our products. We license these marks back
to Reuters royalty-free for use in TFT's trade name and in connection with the
sale and marketing of our products and services and those of Reuters.
Reuters License of the TIB Technology to Us. Under the terms of the license
agreement, Reuters granted us a perpetual, royalty-free license to the
underlying TIB messaging technology in existence on December 31, 1996 in
exchange for a one-time license fee of $10.0 million. The license includes
rights to use the TIB technology to develop and maintain products, to provide
services to customers relating to the licensed technology, and to sell,
sublicense and distribute products utilizing the licensed technology both
directly and indirectly.
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The license may not be unilaterally terminated, and Reuters may not grant to
any non-affiliated third party a license to the TIB technology of substantially
the same or broader scope than that granted to us. We may not assign or
transfer our rights under the license without the consent of Reuters.
License of Our Technology to Reuters. Since the effectiveness of the license
agreement, we have substantially enhanced and further developed the licensed
TIB technology and products. We have also created several new products and new
technologies. The license agreement provides Reuters with a perpetual, royalty-
free license to use and exploit the technology developed by us through December
2011 internally for the purpose of developing, providing, maintaining and
enhancing any Reuters' products or services and through embedding the
technology or any technology derived therefrom in Reuters', or any of its
affiliates', products or services. Although TFT is not authorized under the
license agreement to sell our products to non-financial services customers
unless they are embedded into TFT's financial products, Reuters and its other
affiliates are authorized to do so.
Limitations on Our Use of the Licensed Technology in the Financial Services
Market. The license agreement prohibits us from using the technology we license
from Reuters to create products which contain functionality or features
specifically designed for use by financial services companies, or to assist
third parties in doing so. Financial services companies include entities
engaged in commercial banking, investment banking, insurance and other
financial services. Further, subject to the exceptions described below, the
license agreement prevents us from selling products and services based on the
technology we license from Reuters directly to financial services companies and
major competitors of Reuters, and from providing consulting or other services
related to such products directly to such companies.
Exclusive Right of Reuters to Distribute Our Products in the Financial
Services Market. Reuters is the preferred distributor of our products in the
financial services market, and we have agreed not to appoint any other third
party reseller to sell our products principally in this market. In addition,
for a term of five years, Reuters has the exclusive right to distribute our
products to customers in the financial services market segment, subject to the
exceptions described below. During this exclusivity period, and subject to the
exceptions described below, we are prevented from providing any products or
consulting services to financial services companies, including products and
services unrelated to or not incorporating the licensed TIB technology. When
Reuters sells licenses to and maintenance contracts for our products, it must
pay us 40% of its revenue from such sales, except with respect to products
embedded in Reuters or TFT products. However, if Reuters sells licenses to and
maintenance contracts for our products through an unaffiliated third-party,
then Reuters must pay us 50% of its revenue from such sales. We believe that
the product fees paid by Reuters to us reflects commercially reasonable terms.
Reuters Minimum Guaranteed Product Fees. Reuters must pay us minimum
guaranteed product fees of $16 million payable in calendar 1999, $18 million
payable in calendar 2000 and $20 million payable in calendar 2001. On an annual
basis beginning in 2002, Reuters may elect to extend the payment of minimum
guarantees on an annual basis with minimum guarantees of at least $20 million
in each of 2002 and 2003 and at least 110% of the prior year's minimum
guaranteed product fees in each year thereafter. If Reuters does not extend the
payment of minimum guarantees, the restrictions against our direct sales to
financial services customers will be removed with respect to our non-financial
software products that are sold as an off-the-shelf, stand-alone product
pursuant to an industry standard shrink wrap or click wrap license and that are
intended by us to be used by the end-user without the requirement for
additional customization, or consulting services, which we call commodity
products, and the product fee rate Reuters must pay will decrease to 35%. We
believe that the product fee rate paid by Reuters to us reflects commercially
reasonable terms.
Adjustment of Reuters Products Fees. If the license agreement is materially
breached by us, or if the financial services market
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restrictions or exclusive distribution terms are determined to be invalid by a
court, or if after the expiration of our exclusive distribution relationship
with Reuters we sell products or provide services directly to companies in the
financial services market, Reuters may elect to cease paying minimum guaranteed
product fees and the product fee rates paid to us by Reuters will decrease to
30%. In addition, in the event we materially breach the license agreement, we
thereafter will be prohibited from selling or distributing to financial
services companies commodity products, or, after the expiration of the five-
year exclusive distribution relationship with Reuters, Commodity Products that
are based on the technology we license from Reuters, even though Reuters no
longer pays us minimum guaranteed product fees.
Exceptions Permitting Us to Sell Directly to Financial Services Companies. We
are permitted under the license agreement to license our TIBCO.net
Internet/Intranet hosting services directly to all customers, including
financial services market customers. We must pay Reuters a fee equal to 10% of
our revenue from the sale of TIBCO.net services to financial services market
customers. We have agreed in the license agreement that we will not include as
part of the TIBCO.net Internet/Intranet hosting services any products
specifically designed for use by financial services companies or services that
use such products, except that we may include software for hosting stock quotes
and other financial market data in the hosting services.
In addition, we have an agreement with Cedel Global Services providing for an
enterprise license to all of our products and for consulting and development
services. Cedel provides settlement and clearing technology and services to
banks in Europe and other countries. The Cedel agreement was assigned to us by
TFT in consideration for our assumption of the obligations of TFT under the
agreement. The Cedel agreement is deemed to be an exception from the
restrictions on the sale of our products and services to financial services
market customers.
Finally, if we acquire a company that sells products or services to financial
services companies, we can continue to provide such products and services to
such companies after the acquisition. We are prohibited, however, from
providing the acquired company's products or services to financial services
companies with any of our products that are based on the licensed TIB
technology.
Exceptions Permitting Us to Use Third Party Distributors in the Financial
Services Market. Although Reuters is our exclusive distributor in the financial
services market, we are permitted under the license agreement to use other
distributors and resellers to distribute and sell our products to financial
services market customers, provided that we do not appoint these distributors
to sell primarily into the financial services market. When we realize revenue
from sales by our third-party distributors of our products to financial
services companies, we must pay Reuters 50% of such revenue. Our third party
distributors may also provide substantial consulting services in connection
with the sale of our products. We have agreed to assist Reuters in establishing
distribution relationships directly with any of our third-party distributors
that sell our products in the financial services market. We are not required to
pay any product fees to Reuters on sales of our products in the financial
services market by original equipment manufacturers who have embedded or
bundled our products with their own.
Our Obligation to Provide Maintenance Services for Reuters and its Customers.
We have agreed to provide maintenance and support to Reuters for its customers
that acquire our products and have purchased maintenance. Reuters must pay us a
fee for maintenance of our products at the same rate it pays on sales of our
products. So long as Reuters is required to pay us a minimum guarantee, we must
maintain, at no charge to Reuters, at least ten full-time employees for
maintenance, marketing and technical support for our products sold by Reuters.
The terms of the License Agreement were the result of negotiations between
Reuters, TFT and us and were approved by a majority of our board of directors,
including a majority of our independent and disinterested directors.
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Stockholders Agreement
We will enter into an amended and restated stockholders agreement with
Reuters, Cisco Systems, Mayfield and Vivek Ranadive.
Reuters Voting Limitations. Under the stockholders agreement, Reuters has
agreed to limit its right to vote its shares of our stock such that the votes
cast by Reuters will not represent more than 49% of the total votes eligible
to be cast in any matter submitted to a vote of our stockholders. In
accordance with the terms of the stockholders agreement, any shares held by
Reuters that exceed 49% of our outstanding stock will be voted by us in the
same proportion as all shares held by stockholders other than Reuters.
Reuters Right to Nominate Directors. Reuters has the right under the
stockholders agreement to nominate three of our nine directors so long as it
holds 40% or more of our outstanding shares of voting stock. If Reuters holds
less than 40% but at least 25% of our voting shares, Reuters will have the
right to nominate two directors. If Reuters holds less than 25% but at least
10% of our issued and outstanding voting shares, Reuters will have the right
to nominate one director. If the total number of our directors is increased,
Reuters will have the right to nominate the lowest number of directors such
that Reuters-nominated directors constitute at least that portion of our board
of directors that Reuters could have nominated under the foregoing rights if
our board consisted of nine directors. So long as Reuters has the right to
nominate at least one director, we have agreed that Reuters will also have the
right to nominate one member of our compensation committee.
Reuters Right to Approve Fundamental Decisions. In addition, under the
stockholders agreement, so long as Reuters owns 30% or more of our voting
shares, we will be required to obtain the consent of Reuters in order to
consummate any of the following transactions:
. The issuance of our equity securities or securities convertible into,
exchangeable for, or options or rights to acquire our equity securities
in any calendar year in excess of 5% of our outstanding capital stock on
December 31 of the prior year, or in any three-year period in excess of
10% of our outstanding capital stock at the beginning of the period. This
limitation will not apply to securities issued under our equity
compensation plans or securities issued in acquisitions permitted under
the stockholders agreement without the consent of Reuters.
. Any merger, consolidation, share exchange, any sale, lease, exchange or
other dissolution of all or any substantial part of our assets.
. Any acquisition by us, whether by merger, stock purchase, asset purchase
or otherwise, of any business or entity where the value of the
acquisition is in excess of either 15% of our market capitalization or
15% of our total revenues in the last four, full fiscal quarters,
provided that in each case such amount exceeds $75 million.
Registration Rights. Under the stockholders agreement, the holders of
45,710,152 shares of common stock as of May 31, 1999 or their permitted
transferees are entitled to rights with respect to registration of all of
their shares under the Securities Act. Because these shares can be registered
under the stockholders agreement, we call them registrable securities. Under
these registration rights, beginning nine months following the closing of the
offerings, certain holders of a majority of the then outstanding registrable
securities may require that we register their shares for public resale,
provided that the anticipated aggregate offering price of the securities to be
registered is at least $10 million (a "demand registration"). We are not
obligated to register these shares after we have effected two such demand
registrations. However, Reuters is entitled to six additional demand
registrations for its shares of our common stock beginning six months after
the offerings, provided that the anticipated aggregate offering price of the
securities to be registered is at least $25 million and provided further that
we are not required to effect more than one such registration during each six-
month period.
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Additionally, holders of a majority of the then outstanding registrable
securities may require us to register their shares for public resale on Form S-
3 or similar short-form registration statement, provided that we are not
obligated to effect more than one such registration in any twelve month period
and provided further that the anticipated aggregate offering price of the
securities to be registered is at least $5.0 million. We will be responsible
for all expenses in connection with the first two demand registrations, the
first four additional demand registrations of Reuters and the first two
registrations on Form S-3 or similar short form registration statement (other
than underwriting discounts and commissions).
Furthermore, in the event we elect to register any of our shares of common
stock for purposes of effecting any public offering for cash for our own
account or for the account of Reuters, the holders of registrable securities
are entitled to include their shares of common stock in such registration,
subject to the right of the managing underwriter to reduce the number of shares
proposed to be registered in view of market conditions. We will be responsible
for all expenses, other than underwriting discounts and commissions, in
connection with any such registration. All registration rights provided to
holders of registrable securities will terminate upon the date ten years after
the consummation of the offerings, or at such time holder is entitled to sell
all of its shares in any three months period under Rule 144 under the
Securities Act.
We have also agreed to cooperate in effecting the registration on an
appropriate form of shares of our common stock sold by Reuters to TFT employees
and consultants upon the exercise by such employees and consultants of purchase
rights granted to them by Reuters. We have agreed to pay all expenses, other
than any underwriting discounts and commissions, in connection with any such
registration. See "--Reuters /TFT Employee Stock Purchase Agreements" on page
59 for a description of these rights.
Reuters Information Rights. We are required under the stockholders agreement
to deliver monthly, quarterly and annual financial statements and quarterly and
annual operating budgets and projections to Reuters so long as Reuters holds
20% or more of our voting shares. We are also required to use our best efforts
to allow the independent accountants of Reuters to have access to our audit
work papers and to assist in any review undertaken by our independent
accountants, and if such access is denied, we are required to reimburse Reuters
for the costs of any extra audit work undertaken by Reuters.
Amendment and Termination of Reuters Voting Limitations, Reuters Right to
Approve Certain Fundamental Decisions and Reuters Right to Nominate Directors.
The provisions of the stockholders agreement relating to the agreement of
Reuters to limit its right to vote our shares may not be amended by any party
and will automatically terminate once Reuters beneficially owns less than a 49%
of our outstanding common stock. The provisions of the stockholders agreement
relating to the right of Reuters to approve major issuances of equity
securities, mergers and acquisitions can only be amended with the consent of
Reuters so long as Reuters holds at least 30% of our outstanding common stock.
Additionally, the provisions relating to the right of Reuters to nominate
directors can only be amended with the consent of Reuters so long as Reuters
holds at least 10% of our common stock.
The terms of the stockholders agreement were the result of negotiations
between the parties thereto and were approved by a majority of our board of
directors, including a majority of our independent and disinterested directors.
Intercompany Services
We have agreed with TFT that TFT will provide us with operating and
administrative services for a transition period after the offerings. These
services include network and information technology infrastructure support,
facilities support and human resources support. These services are generally
those that TFT had been providing before TFT moved into its new corporate
headquarters at 3375 Hillview Avenue, Palo Alto. Our agreement with TFT
includes
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service levels based on our past practice with TFT. We have a right to request
that TFT continue to provide these services through the first quarter of 2000,
but would anticipate that the need for many of such services will diminish
during calendar year 1999. We recorded expenses of $1.9 million in fiscal 1997
and $2.9 million in fiscal 1998 for administrative and various other services
provided to us by TFT. In addition, we incurred rent expense of $1.4 million in
fiscal 1997 and $1.6 million in fiscal 1998 relating to our sub-lease of office
space from TFT and our rental of certain furniture and fixtures from TFT.
We and TFT have also agreed to participate with each other in disaster
recovery and Year 2000 contingency planning and to cooperate in other efforts
intended to assure an orderly transition. In the event that we and TFT have
inadvertently failed to specify a service that was being previously performed
by TFT for us, we have preserved the ability to include that additional service
in our agreement. We believe that total fees payable by us through the end of
calendar 1999 under our agreement with TFT will be less than $1.0 million.
We believe that the terms of the intercompany services provided by TFT are on
terms no less favorable to us than we could have negotiated with an
unaffiliated third party.
Reuters/TFT Employee Stock Purchase Arrangements
Reuters has established a stock purchase arrangement under which it may
provide to employees and consultants of TFT rights to purchase from Reuters an
aggregate of up to 6,750,000 shares of TIBCO Software common stock held by
Reuters. Rights to purchase 5,583,813 shares of our common stock from Reuters
remained outstanding as of May 31, 1999. Upon exercise of one of these rights,
Reuters is required to transfer shares of our common stock owned by it to the
employee or consultant, thereby reducing Reuters' ownership of our common
stock. We are not required to issue any shares of our common stock and do not
receive any proceeds when one of these rights is exercised. If rights to
purchase 5,583,813 shares of our common stock were exercised, Reuters'
percentage ownership of our common stock immediately following the offerings
would decrease from 64.6% to 55.1%, or to 55.9% if the concurrent offering is
not consummated.
Transactions with Cisco Systems
In March 1999, we granted Cisco a three-year license to embed our
TIB/Rendezvous product and multicasting technology in its Internetworking
Operating System and Cisco Networking Services for Active Directory, or CNS/AD,
products in exchange for a license fee of $1.5 million. The terms of this
transaction were the result of arm's-length negotiations between Cisco and us
and were approved by a majority of our board of directors, including a majority
of our independent and disinterested directors. We believe that the terms of
the technology licensing agreement with Cisco are no less favorable to us than
we could have negotiated with an unaffiliated third party.
Other Transactions
Since August 1997, Mr. White, one of our directors, has provided consulting
services to us. In connection with these consulting services, we paid $314,000
to Mr. White and granted him options to purchase 150,000 shares of our common
stock in fiscal 1998. In addition, we granted to Mr. White options to purchase
50,000 shares of common stock for serving as a director. In fiscal 1997, we
paid $79,000 to Mr. White and granted him options to purchase 200,000 shares of
our common stock for consulting services rendered. The compensation expense
related to these consulting services is based upon the fair value of the
underlying common shares at the end of each financial reporting period.
We have agreed to reimburse Reuters for $2.1 million of expenses incurred by
them in connection with the offerings.
Since our formation, we have from time to time entered into arrangements with
TFT regarding the sharing of employees on various customer projects. For
services we provided to TFT under these arrangements, we recognized
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revenue of approximately $4.0 million in fiscal 1997 and $2.2 million in fiscal
1998. For services TFT provided to us under these arrangements, we recorded
expenses of approximately $1.6 million in fiscal 1997 and $5.8 million in
fiscal 1998.
We have engaged the law firm of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, to handle legal matters. Larry W. Sonsini, one of our
directors, is a member of Wilson Sonsini. Our payments to Wilson Sonsini did
not exceed five percent of Wilson Sonsini's gross revenues in its last fiscal
year.
All future transactions, including loans, between us and our officers,
directors and principal stockholders and their affiliates will be approved by a
majority of our Board of Directors, including a majority of the independent and
disinterested directors, and these transactions will be on terms no less
favorable to us than we could have obtained from unaffiliated third parties.
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PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of May 31, 1999 and as adjusted to
reflect the sale of the 8,075,862 shares of our common stock to be sold in the
offerings,
. each person or entity who is known by us to beneficially own five percent
or more of the outstanding shares of our common stock,
. each director,
. each executive officer, and
. all of our directors and executive officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Commission. In computing the number of shares beneficially owned by a person
and the percentage ownership of that person, shares of common stock subject to
options held by that person that are currently exercisable or exercisable
within 60 days of May 31, 1999 are deemed outstanding.
Such shares, however, are not deemed outstanding for the purpose of computing
the percentage ownership of any other person. In computing the number of shares
beneficially owned by a person, shares of common stock that are subject to our
right of repurchase at the original exercise price paid per share, or such
shares that are subject to exercisable but unvested options, are not included.
Unvested options are immediately exercisable upon grant, provided that upon the
optionee's cessation of service, any unvested shares are subject to repurchase
by us at the original exercise price paid per share.
The address of each individual listed in the table is TIBCO Software Inc.,
3165 Porter Drive, Palo Alto, CA 94304. As of May 31, 1999, we had 607
stockholders of record and 50,681,852 shares of our common stock and preferred
stock convertible into common stock outstanding. Except as indicated in the
footnotes to this table and pursuant to applicable community property laws,
each stockholder named in the table has had sole voting and investment power
with respect to the shares set forth opposite such stockholder's name.
<TABLE>
<CAPTION>
Percent of Ownership
Shares -------------------------
Beneficially Before After
Name Owned Offerings Offerings
---- ------------ ---------- ----------
<S> <C> <C> <C>
Reuters Group PLC and related
entities (1)
85 Fleet Street
London, EC4P 4AJ................... 37,976,096 74.9% 64.6%
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134................. 4,365,000 8.6 7.4
Mayfield Fund (2)
2800 Sand Hill Road
Menlo Park, CA 94025............... 2,861,316 5.6 4.9
Vivek Y. Ranadive (3)............... 4,058,125 7.5 6.5
Paul G. Hansen (4).................. 120,000 * *
Robert P. Stefanski (5)............. 86,721 * *
Richard M. Tavan (6)................ 158,999 * *
Rajesh U. Mashruwala (7)............ 115,624 * *
Christopher G. O'Meara (8).......... 46,625 * *
Douglas M. Atkin.................... -- -- --
Yogen K. Dalal (9).................. 2,877,983 5.7 4.9
Edward Kozel (10)................... 4,398,333 8.7 7.5
Donald J. Listwin (11).............. 4,365,000 8.6 7.4
Larry W. Sonsini (12)............... 33,333 * *
John G. Taysom...................... -- -- --
Phillip E. White (13)............... 135,832 * *
Philip K. Wood ..................... -- -- --
All directors and executive officers
as a group (14 persons) (14)....... 16,396,525 30.0 26.2
</TABLE>
61
<PAGE>
- --------
*Less than one percent.
(1) Represents shares held by Reuters Nederland B.V. Includes 5,726,096 shares
reserved for sale to employees and consultants of TFT pursuant to the
exercise by such employees and consultants of purchase rights granted or
to be granted to them by Reuters. Subsequent to May 31, 1999, we granted
Reuters an option to purchase 150,000 shares of our common stock under our
director stock option plan. Reuters has agreed to limit its voting power
such that the votes cast by Reuters will not represent more than 49% of
the total votes eligible to be cast in any matter submitted to a vote of
our stockholders.
(2) Includes 2,718,250 shares held by Mayfield IX and 143,066 shares held by
Mayfield Associates Fund III.
(3) Includes 3,641,458 shares subject to options exercisable within 60 days of
May 31, 1999. Excludes 75,000 shares subject to our right of repurchase
and 99,375 shares that are subject to options that are unvested but
exercisable within 60 days of May 31, 1999.
(4) Includes 82,307 shares subject to options exercisable within 60 days of
May 31, 1999. Excludes 769 shares subject to our right of repurchase and
366,731 shares that are subject to options that are unvested but
exercisable within 60 days of May 31, 1999.
(5) Includes 21,721 shares subject to options exercisable within 60 days of
March 31, 1999. Excludes 5,000 shares subject to our right of repurchase
and 157,945 shares that are subject to options that are unvested but
exercisable within 60 days of May 31, 1999.
(6) Includes 9,000 shares subject to options exercisable within 60 days of May
31, 1999. Excludes 141,000 shares subject to our right of repurchase and
41,000 shares that are subject to options that are unvested but
exercisable within 60 days of May 31, 1999.
(7) Excludes 196,875 shares subject to our right of repurchase exercisable
within 60 days of May 31, 1999.
(8) Consists of 46,625 shares subject to options exercisable within 60 days of
May 31, 1999. Excludes 140,875 shares subject to options that are unvested
but exercisable with 60 days of May 31, 1999.
(9) Includes 16,667 shares subject to options exercisable within 60 days of
May 31, 1999. Also includes 2,718,250 shares held by Mayfield IX and
143,066 shares held by Mayfield Associates Fund III. Mr. Dalal disclaims
beneficial ownership of all shares except to the extent of his pecuniary
interest in the partnerships.
(10) Consists of 33,333 shares subject to options exercisable within 60 days of
May 31, 1999. Also includes 4,365,000 shares held by Cisco Systems, Inc.
Mr. Kozel, one of our directors, is a member of the board of directors of
Cisco Systems and disclaims beneficial ownership of all shares held by
Cisco Systems.
(11) Includes 4,365,000 shares held by Cisco Systems, Inc. Mr. Listwin, one of
our directors, is an executive officer of Cisco Systems and disclaims
beneficial ownership of all shares held by Cisco Systems.
(12) Includes 33,333 shares subject to options exercisable within 60 days of
May 31, 1999.
(13) Includes 48,279 shares subject to options exercisable within 60 days of
May 31, 1999. Excludes 117,575 shares subject to our right of repurchase
and 146,592 shares subject to options that are unvested but exercisable
with 60 days of May 31, 1999.
(14) Includes 3,932,723 shares subject to options exercisable within 60 days of
May 31, 1999. Excludes 418,644 shares subject to our right of repurchase
and 952,518 options that are unvested but exercisable within 60 days of
May 31, 1999.
62
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Pursuant to our Certificate of Incorporation to be effective upon
consummation of the offerings, we have authority to issue 300,000,000 shares of
common stock, and 25,000,000 shares of preferred stock, par value $0.001 per
share.
Set forth below is a description of our common stock and the preferred stock
that may be issued under our Certificate of Incorporation.
Common Stock
The holders of our common stock other than Reuters are entitled to one vote
per share on all matters to be voted upon by the stockholders. Reuters has
agreed that following the offerings it will limit its right to vote its shares
of our common stock so that the votes cast by Reuters will not represent more
than 49% of the total votes eligible to be cast in any matter submitted to a
vote of our stockholders. The holders of common stock are entitled to receive
ratably those dividends, if any, as may be declared from time to time by the
board of directors out of funds legally available for dividends. We have never
declared dividends in the past and do not intend to do so in the foreseeable
future. In the event of our liquidation, dissolution or winding-up, the holders
of common stock are entitled to share ratably in all assets remaining after
payment of liabilities, subject to prior distribution rights of preferred stock
then outstanding, if any. Our common stock has no preemptive or conversion
rights or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are fully paid and nonassessable, and the shares of common stock to be
outstanding upon completion of the offerings will be fully paid and
nonassessable.
Preferred Stock
Upon consummation of the offerings, 20,000,000 shares of our Series A
preferred stock, 4,365,000 shares of our Series B preferred stock and 2,861,316
shares of our Series C preferred will be automatically converted into common
stock on a one-for-one basis. Immediately following the offering, 25,000,000
shares of undesignated preferred stock will be authorized, and no shares will
be outstanding. Our board of directors has the authority to issue preferred
stock in one or more series and to establish the rights, preferences,
privileges and restrictions granted to or imposed on any unissued shares of
preferred stock and to fix the number of shares constituting any series and the
designations of such series, without any further vote or action by the
stockholders. Our board of directors will have the authority, without approval
of the stockholders other than Reuters as provided in the stockholders
agreement, to issue preferred stock that has voting and conversion rights
superior to the common stock which may affect the voting power of the holders
of common stock and could have the effect of delaying, deferring or preventing
a change in control. We have no plans to issue any shares of preferred stock.
Delaware Anti-Takeover Law and Certain Charter and Bylaw Provisions
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, an anti-takeover law. In general, the statute prohibits a
publicly-held Delaware corporation from engaging in a business combination with
an "interested stockholder" for a period of three years after the date of the
transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. A "business
combination" includes a merger, asset sale or other transaction resulting in a
financial benefit to the stockholder. For purposes of Section 203, an
"interested stockholder" is defined to include any person that is
. the owner of 15% or more of the outstanding voting stock of the
corporation,
. an affiliate or associate of that corporation and was the owner of 15%
63
<PAGE>
or more of the voting stock outstanding of the corporation, at any time
within three years immediately prior to the relevant date, and
. an affiliate or associate of the persons described above.
Section 203 of the Delaware General Corporation Law may make it more difficult
for an "interested stockholder" to effect various business combinations with a
corporation for a three-year period, although the stockholders may, by adopting
an amendment to the corporation's certificate of incorporation or bylaws, elect
for the corporation not to be governed by Section 203, effective 12 months
after adoption. Neither our Certificate of Incorporation nor our Bylaws exempt
us from the restrictions imposed under Section 203. We anticipate that the
provisions of Section 203 may encourage companies interested in acquiring us to
negotiate in advance with our board of directors because the stockholder
approval requirement would be avoided if a majority of the directors then in
office approve either the business combination or the transaction that results
in the stockholder becoming an interested stockholder.
So long as Reuters owns at least 30% of our outstanding voting shares, we
will be required to obtain their consent in order to consummate certain
significant corporate transactions, including equity issuances, mergers,
consolidations, sales of assets or certain acquisitions. See "Relationship with
Reuters and Certain Transactions--Intercompany Agreements--Stockholders
Agreement" beginning on page 57.
Annual meetings of stockholders shall be held to elect our board of directors
and transact such other business as may be properly brought before the meeting.
Special meetings of stockholders may be called by the Chairman, the President,
any vice president or any one member of the board of directors. Our Certificate
of Incorporation and Bylaws provide that any action required or permitted to be
taken by our stockholders may be effected at a duly called annual or special
meeting of the stockholders. In addition, our Certificate of Incorporation and
Bylaws provide for an advance notice procedure for nomination by stockholders
of candidates for election of directors as well as other stockholder proposals
to be considered at annual stockholders' meetings.
Our Certificate of Incorporation may be amended with the approval of a
majority of the board of directors and the holders of a majority of our
outstanding voting securities.
The number of directors shall be fixed by resolution of the board of
directors. The size of the board of directors is currently fixed at nine
members. Following the offerings, Reuters will have the right under a
stockholders agreement to nominate three of our nine directors so long as it
holds 40% or more of our outstanding shares of voting stock. If Reuters holds
less than 40% but at least 25% of our voting shares, Reuters will have the
right to nominate two directors. If Reuters holds less than 25% but at least
10% of the issued and outstanding voting shares, Reuters will have the right to
nominate one director. If the total number of our directors is increased,
pursuant to the stockholders agreement, Reuters will have the right to nominate
the lowest number of directors such that Reuters-nominated directors constitute
at least that portion of our board of directors that Reuters could have
nominated under the foregoing rights if our board consisted of nine directors.
Our directors shall be elected at the annual meeting of the stockholders,
except for filling vacancies. Directors may be removed with the approval of the
holders of a majority of the voting power present and entitled to vote at a
meeting of stockholders. Vacancies and newly-created directorships resulting
from any increase in the number of directors may, subject to the right of
Reuters to nominate directors as described above, be filled by a majority of
the directors then in office (although less than a quorum of the full board), a
sole remaining director, or the holders of a majority of the voting power
present and entitled to vote at a meeting of stockholders.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be
64
<PAGE>
cast by the stockholders entitled to vote generally shall constitute a quorum
for stockholder action at any meeting.
Limitation of Liability; Indemnification
Our Certificate of Incorporation contains provisions permitted under Delaware
law relating to the liability of directors. These provisions eliminate a
director's personal liability for monetary damages resulting from a breach of
fiduciary duty, except in certain circumstances involving certain wrongful
acts, including
. for any breach of the director's duty of loyalty to us or our
stockholders,
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
. under Section 174 of the Delaware General Corporation Law, or
. for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or any stockholder rights
to seek non-monetary relief, such as an injunction or rescission, in the event
of a breach of a director's fiduciary duty. These provisions will not alter a
director's liability under federal securities laws. Our Bylaws also contain
provisions indemnifying our directors and officers to the fullest extent
permitted by Delaware law. We believe that these provisions are necessary to
attract and retain qualified individuals to serve as directors and officers.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the common stock is BankBoston, N.A.
65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the offerings, there has been no public market for our common stock.
We cannot predict the effect, if any, that sales of shares of the common stock
to the public or the availability of shares for sale to the public will have on
the market price of the common stock prevailing from time to time.
Nevertheless, sales of a significant number of shares of common stock in the
public market, or the perception that such sales may occur, could adversely
affect the prevailing market price of our common stock.
Upon consummation of the offerings, we will have 58,757,714 shares of common
stock outstanding, or 59,852,714 shares if the underwriters' exercise their
option to purchase additional shares in full. Of the shares outstanding after
the offerings, the 7,300,000 shares of common stock to be sold in the
underwritten offering and, subject to the lock-up agreements described below,
the 775,862 shares of common stock to be sold in the concurrent offering, will
be freely tradeable without restriction under the Securities Act, except for
shares purchased by our "affiliates", as that term is defined in Rule 144 under
the Securities Act. The remaining 50,681,852 shares of common stock held by
existing stockholders are "restricted shares," as that term is defined in Rule
144, of which 2,142,500 were issued upon the exercise of options and remain
subject to our right of repurchase at the original purchase price upon the
employee's cessation of service. Of these restricted shares, approximately
1,905,631 shares will become eligible for sale in the public market at various
times during the 180 days following the date of this prospectus and
approximately 48,776,221 shares will become eligible for sale at various times
after 180 days from the date of this prospectus. The holders of 45,710,152 of
these are entitled to rights with respect to registration of these shares as
more fully described on pages 57 and 58 under "Relationship with Reuters and
Certain Transactions".
In general, under Rule 144 as currently in effect, holders of restricted
securities who have beneficially owned these securities for at least one year
will be entitled to sell a number of shares of common stock within any three-
month period equal to the greater of (1) 1% of the then outstanding shares of
the common stock, which will be approximately 590,000 shares immediately after
the offerings, or (2) the average weekly reported volume of trading of the
common stock on The Nasdaq National Market during the four calendar weeks
preceding such sale. Additionally, these "sales" are subject to manner of sale
and notice requirements and requirements as to the availability of current
public information concerning the company.
Immediately after the offerings, there will be vested options to purchase
approximately 6,718,336 shares of common stock outstanding. In addition,
immediately after the offerings, TFT employees and consultants will hold vested
rights to purchase approximately 3,733,758 shares of our common stock from
Reuters, and will own 2,387,348 shares of our common stock which have been
purchased from Reuters upon the exercise of such rights. No sooner than 90 days
after the date of this prospectus, we intend to file a registration statement
on Form S-8 covering all options granted under the 1996 Stock Option Plan.
Shortly after these offerings, we also intend to file a registration statement,
which may be on Form S-1, covering re-sales of all of the shares of our common
stock underlying the purchase rights granted by Reuters to TFT employees and
consultants. Shares of common stock registered under such registration
statements will, subject to rule 144 volume limitations applicable to
affiliates, be available for sale in the open market, unless such shares are
subject to vesting restrictions with us or the lock-up agreements described
below. See "Management--Stock Plans--1996 Stock Option Plan" beginning on page
51 for a description of this plan and its vesting restrictions.
In connection with the offerings, each of TIBCO Software, Cisco, Mayfield,
Reuters and its affiliates, Yahoo!, Sun Microsystems, executive officers and
directors of our company and employees of our company and of TFT that own
15,000 or more shares of our common stock, has agreed that, without the prior
written consent of the representatives of the underwriters, during
66
<PAGE>
the period ending 180 days after the date of this prospectus, it will not
directly or indirectly offer, sell, contract to sell or otherwise dispose of,
any shares of common stock or any securities substantially similar to our
common stock, including but not limited to any securities convertible into or
exchangeable for, or that represent the right to receive, common stock or any
such substantially similar securities. In addition, employees of TFT that own
less than 15,000 shares of our common stock have agreed to a similar lock-up
for a 90-day period.
The above restrictions do not apply to the following:
. the sale to the underwriters of the shares of common stock under the
underwriting agreement;
. the issuance by us of options to purchase common stock pursuant to our
existing stock option plan, or the issuance by us of shares of common
stock upon the exercise of any option granted under our existing stock
option plan;
. the provision by Reuters of rights to purchase its shares of our common
stock to employees and consultants of TFT pursuant to a pre-existing
arrangement to provide such rights, and the sale by Reuters of its shares
of common stock pursuant to the exercise of such rights;
. transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after
completion of the offering of the shares of common stock; and
. with respect to individuals, transfers by gift, will or intestate
succession; with respect to partnerships, transfers to partners; with
respect to trusts, transfers to beneficiaries; and with respect to
corporations, transfers to stockholders and majority-owned subsidiaries;
provided that in each case the transferee agrees to be bound by the
agreement imposing a similar lock-up restriction.
67
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered hereby
will be passed upon for us by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Larry W. Sonsini, a member of Wilson
Sonsini, is one of our directors. As of May 31, 1999, Mr. Sonsini beneficially
owned 33,333 shares of our common stock. Certain legal matters in connection
with the underwritten offering will be passed upon for the underwriters by
Shearman & Sterling, Menlo Park, California.
EXPERTS
The financial statements as of November 30, 1997 and 1998 and for year ended
December 31, 1996, the eleven months ended November 30, 1997 and the year ended
November 30, 1998 included in this Prospectus have been so included in reliance
on the report of PricewaterhouseCoopers LLP, independent accountants, given on
the authority of said firm as experts in auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Commission a Registration Statement on Form S-1 under
the Securities Act of 1933 with respect to the shares of common stock offered
hereby. This prospectus does not contain all of the information set forth in
the registration statement and the exhibits and schedules thereto. For further
information with respect to us and the common stock offered hereby, reference
is made to the registration statement and the exhibits and schedules filed
therewith. All contracts that are material to the registrant, and all the
material terms of these contracts, have been disclosed in this prospectus.
However, statements contained in this prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and,
in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the registration statement. A copy of the
registration statement, and the exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N. W., Washington, D.C. 20549, and
at the Commission's regional offices located at the Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the Registration Statement may be obtained from such offices upon the payment
of the fees prescribed by the Commission. The public may obtain information on
the operations of the public reference facilities in Washington, D.C. by
calling the SEC at 1-800-SEC-0330. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the site is http://www.sec.gov.
68
<PAGE>
TIBCO SOFTWARE INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................................... F-2
Balance Sheet............................................................... F-3
Statement of Operations..................................................... F-4
Statement of Stockholders' Equity/Owner's Net Investment (Liability)........ F-5
Statement of Cash Flows..................................................... F-6
Notes to Financial Statements............................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of TIBCO Software Inc.
The reverse stock split described in Note 10 to the financial statements has
not been consummated at July 12, 1999. When it has been consummated, we will be
in a position to furnish the following report:
"In our opinion, the accompanying balance sheet and the related
statements of operations, of stockholders' equity/owner's net
investment (liability) and of cash flows present fairly, in all
material respects, the financial position of TIBCO Software Inc. (See
Note 1) at November 30, 1997 and 1998, and the results of its
operations and its cash flows for the year ended December 31, 1996,
eleven months ended November 30, 1997, and the year ended November 30,
1998, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above."
/s/ PricewaterhouseCoopers LLP
San Jose, California
April 23, 1999
F-2
<PAGE>
TIBCO SOFTWARE INC.
BALANCE SHEET
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
November 30, Stockholders'
----------------- May 31, Equity at
1997 1998 1999 May 31, 1999
------- -------- --------- -------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......... $ 8,059 $ 547 $ 3,285
Deposits held by Reuters........... 10,259 15,423 2,469
Accounts receivable, net of
allowances $2,668, $1,694, and
$1,608, respectively.............. 7,238 13,234 20,426
Due from related parties........... 3,192 1,829 957
Other current assets............... 299 1,853 2,796
------- -------- ---------
Total current assets.............. 29,047 32,886 29,933
------- -------- ---------
Property and equipment, net......... 1,254 3,171 3,825
Other assets........................ 745 232 120
------- -------- ---------
$31,046 $ 36,289 $ 33,878
======= ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................... $ 950 $ 3,190 $ 4,202
Accrued liabilities................ 6,216 7,834 8,375
Deferred revenue................... 6,713 3,561 3,661
------- -------- ---------
Total current liabilities......... 13,879 14,585 16,238
------- -------- ---------
Commitments (Note 7)
Stockholders' equity:
Convertible Preferred Stock, $0.001
par value; actual--75,000 shares
authorized; 24,365, 27,226 and
27,226 shares issued and
outstanding in 1997, 1998 and
1999; aggregate liquidation
preference of $35,714 in 1997 and
$46,759 in 1998 and 1999; pro
forma--25,000 shares authorized;
no shares issued and outstanding.. 24 27 27 $ --
Common Stock, $0.001 par value;
actual--100,000 shares authorized;
20,668, 22,377 and 23,456 shares
issued and outstanding in 1997,
1998 and 1999; pro forma--300,000
shares authorized; 50,682 shares
issued and outstanding............ 21 22 23 51
Additional paid in capital......... 26,552 46,499 53,277 53,276
Unearned compensation.............. (4,767) (7,230) (9,114) (9,114)
Accumulated deficit................ (4,663) (17,614) (26,573) (26,573)
------- -------- --------- --------
Total stockholders' equity........ 17,167 21,704 17,640 $ 17,640
------- -------- --------- ========
$31,046 $ 36,289 $ 33,878
======= ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
TIBCO SOFTWARE INC.
STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Eleven Six Months
Year Ended Months Ended Year Ended Ended May 31,
December 31, November 30, November 30, ----------------
1996 1997 1998 1998 1999
------------ ------------ ------------ ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
License revenue:
Non-related parties.... $ 6,066 $ 6,062 $ 14,511 $ 6,635 $15,124
Related parties........ -- 157 2,984 1,219 6,935
------- ------- -------- ------- -------
Total license
revenue.............. 6,066 6,219 17,495 7,854 22,059
------- ------- -------- ------- -------
Service and maintenance
revenue:
Non-related parties.... 13,417 19,648 30,577 14,439 15,329
Related parties........ 10,832 9,407 4,685 2,561 1,684
------- ------- -------- ------- -------
Total service and
maintenance revenue.. 24,249 29,055 35,262 17,000 17,013
------- ------- -------- ------- -------
Total revenue........ 30,315 35,274 52,757 24,854 39,072
------- ------- -------- ------- -------
Cost of revenue:
Cost of license
revenue............... 3,668 366 984 487 1,180
Cost of service and
maintenance revenue... 15,938 15,481 26,698 12,818 15,060
------- ------- -------- ------- -------
Total cost of revenue... 19,606 15,847 27,682 13,305 16,240
------- ------- -------- ------- -------
Gross profit............ 10,709 19,427 25,075 11,549 22,832
------- ------- -------- ------- -------
Operating expenses:
Research and
development........... 6,576 9,385 14,787 5,934 11,911
Sales and marketing.... 2,949 7,008 15,242 6,422 12,929
General and
administrative........ 2,077 3,565 4,025 1,634 3,536
Stock and other
compensation.......... 2,196 4,672 5,064 2,070 3,408
------- ------- -------- ------- -------
Total operating
expenses............. 13,798 24,630 39,118 16,060 31,784
------- ------- -------- ------- -------
Loss from operations.... (3,089) (5,203) (14,043) (4,511) (8,952)
------- ------- -------- ------- -------
Other income (expense),
net:
Interest income
(expense), net........ (1,518) 527 1,394 713 350
Other income (expense),
net................... (33) 13 (302) (143) (357)
------- ------- -------- ------- -------
Total other income
(expense), net....... (1,551) 540 1,092 570 (7)
------- ------- -------- ------- -------
Net loss................ $(4,640) $(4,663) $(12,951) $(3,941) $(8,959)
======= ======= ======== ======= =======
Net loss per share:
Basic and diluted..... $ (0.24) $ (0.65) $ (0.20) $ (0.43)
======= ======== ======= =======
Weighted average
shares............... 19,202 20,011 19,720 20,840
======= ======== ======= =======
Pro forma net loss per
share:
Basic and diluted
(unaudited).......... $ (0.28) $ (0.19)
======== =======
Weighted average
shares (unaudited)... 47,002 48,066
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
TIBCO SOFTWARE INC.
STATEMENT OF STOCKHOLDERS' EQUITY/OWNER'S NET INVESTMENT (LIABILITY)
(in thousands)
<TABLE>
<CAPTION>
Convertible
Preferred
Owner's Net Stock Common Stock Additional Total
Investment ------------- ------------- Paid-In Unearned Accumulated Stockholders'
(Liability) Shares Amount Shares Amount Capital Compensation Deficit Equity
----------- ------ ------ ------ ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1995.................... $(19,574) -- $-- -- $-- $ -- $ -- $ -- $ --
Net loss................ (4,640) -- -- -- -- -- -- -- --
Net cash contribution
from Owner.............. 24,665 -- -- -- -- -- -- -- --
-------- ------ ---- ------ ---- -------- ------- -------- --------
Balance at December 31,
1996.................... 451 -- -- -- -- -- -- -- --
Capitalization from
Owner................... (451) -- -- -- -- 451 -- -- 451
Issuance of Series A
Preferred Stock to
Reuters................. -- 20,000 20 -- -- 9,961 -- -- 9,981
Issuance of Common Stock
to Reuters.............. -- -- -- 19,000 19 -- -- -- 19
Return of capital to
Reuters................. -- -- -- -- -- (10,000) -- -- (10,000)
Issuance of Series B
Preferred Stock, net.... -- 4,365 4 -- -- 15,702 -- -- 15,706
Exercise of Common Stock
options................. -- -- -- 1,668 2 999 -- -- 1,001
Unearned compensation,
net..................... -- -- -- -- -- 9,439 (4,767) -- 4,672
Net loss................ -- -- -- -- -- -- -- (4,663) (4,663)
-------- ------ ---- ------ ---- -------- ------- -------- --------
Balance at November 30,
1997.................... -- 24,365 24 20,668 21 26,552 (4,767) (4,663) 17,167
Issuance of Series C
Preferred Stock, net.... -- 2,861 3 -- -- 10,995 -- -- 10,998
Exercise of Common Stock
options, net............ -- -- -- 1,709 1 1,425 -- -- 1,426
Unearned compensation,
net..................... -- -- -- -- -- 7,527 (2,463) -- 5,064
Net loss................ -- -- -- -- -- -- -- (12,951) (12,951)
-------- ------ ---- ------ ---- -------- ------- -------- --------
Balance at November 30,
1998.................... -- 27,226 27 22,377 22 46,499 (7,230) (17,614) 21,704
Exercise of Common Stock
options, net
(unaudited)............. -- -- -- 1,079 1 1,486 -- -- 1,487
Unearned compensation,
net (unaudited)......... -- -- -- -- -- 5,292 (1,884) -- 3,408
Net loss (unaudited).... -- -- -- -- -- -- -- (8,959) (8,959)
-------- ------ ---- ------ ---- -------- ------- -------- --------
Balance at May 31, 1999
(unaudited)............. $ -- 27,226 $ 27 23,456 $ 23 $ 53,277 $(9,114) $(26,573) $ 17,640
======== ====== ==== ====== ==== ======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
TIBCO SOFTWARE INC.
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Eleven Months Six Months Ended
Year Ended Ended Year Ended May 31,
December 31, November 30, November 30, ------------------
1996 1997 1998 1998 1999
------------ ------------- ------------ -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $ (4,640) $ (4,663) $(12,951) $ (3,941) $ (8,959)
Adjustments to
reconcile net loss to
net cash provided by
(used for) operating
activities:
Depreciation and
amortization.......... 370 924 1,073 418 850
Amortization of
unearned
compensation.......... -- 4,672 5,064 2,070 3,408
Changes in assets and
liabilities:
Accounts receivable... (1,363) 1,083 (5,996) (215) (7,192)
Due from related
parties.............. -- (3,192) 1,339 1,564 872
Other assets.......... 819 253 (1,017) (1,695) (831)
Accounts payable...... 291 659 2,240 1,047 1,012
Accrued liabilities... (21,367) 1,342 1,618 2,508 541
Deferred revenue...... 2,908 1,333 (3,152) (1,140) 100
-------- -------- -------- -------- --------
Net cash provided by
(used for) operating
activities.......... (22,982) 2,411 (11,782) 616 (10,199)
-------- -------- -------- -------- --------
Cash flows from
investing activities:
Deposits held by
Reuters............... -- (10,259) (5,164) (15,536) 12,954
Purchases of property
and equipment, net.... (1,283) (800) (2,990) (1,337) (1,504)
-------- -------- -------- -------- --------
Net cash provided by
(used for) investing
activities.......... (1,283) (11,059) (8,154) (16,873) 11,450
-------- -------- -------- -------- --------
Cash flows from
financing activities:
Net investment from
Owner................. 24,265 -- -- -- --
Proceeds from issuance
of Preferred Stock.... -- 25,668 10,998 -- --
Return of capital...... -- (10,000) -- -- --
Borrowings from
Reuters............... -- 3,000 -- -- --
Repayment of borrowings
from Reuters.......... -- (3,000) -- -- --
Proceeds from issuance
of Common Stock....... -- 1,039 1,426 11,595 1,487
-------- -------- -------- -------- --------
Net cash provided by
financing
activities.......... 24,265 16,707 12,424 11,595 1,487
-------- -------- -------- -------- --------
Net change in cash and
cash equivalents....... -- 8,059 (7,512) (4,662) 2,738
Cash and cash
equivalents at
beginning of period.... -- -- 8,059 8,059 547
-------- -------- -------- -------- --------
Cash and cash
equivalents at end of
period................. $ -- $ 8,059 $ 547 $ 3,397 $ 3,285
======== ======== ======== ======== ========
Supplemental cash flow
disclosure:
Cash paid for
interest.............. $ 1,518 $ -- $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS
November 30, 1998
1. THE COMPANY
TIBCO Software Inc. ("TIBCO Software" or the "Company") is the successor to a
portion of the business of Teknekron Software Systems, Inc. ("Teknekron").
Teknekron was founded in 1985 and pioneered the development of "publish and
subscribe" computing by creating the software infrastructure for the
integration and delivery of market data (e.g., stock quotes, news and other
financial information) in the trading rooms of large banks and financial
institutions. This publish and subscribe technology, know as The Information
Bus or "TIB," permitted the integration of disparate information from various
data sources and its distribution across a variety of networks and platforms
within these banks and financial institutions and in the world's largest stock
exchanges.
Teknekron was acquired by a subsidiary of Reuters Group PLC ("Reuters"), the
global news and information group, in 1994 and the underlying technology rights
owned by Teknekron were assigned to Reuters. In 1996, Teknekron changed its
name to TIBCO Inc. In November 1996, TIBCO Software was incorporated in
Delaware as a separate entity from TIBCO Inc., which subsequently changed its
name to TIBCO Finance Technology, Inc. ("TFT"). TIBCO Software was formed to
create and market software solutions for use in the integration of business
information, processes and applications in diverse industries outside the
financial services market. Through a license and distribution agreement,
Reuters is the exclusive distributor of TIBCO Software products in the
financial services market, subject to limited exceptions.
Effective as of January 1, 1997, the Company's capital structure was
established, and the transfer to TIBCO Software of certain assets, liabilities
and customer contracts previously owned by Reuters was substantially completed.
Prior to January 1, 1997, operations were conducted by Reuters and its
subsidiaries. The financial statements for these periods are presented on a
carve-out basis prepared from historical accounting records of Reuters and
include the historical operations transferred to TIBCO Software by Reuters. In
this context, no direct ownership relationship existed in the operations
comprising TIBCO Software. Accordingly, Reuters and its subsidiaries' net
investment in TIBCO Software ("Owner's Net Investment") is shown in lieu of
Stockholders' Equity in the accompanying Financial Statements for this period.
Net Cash Contributions from Owner prior to January 1, 1997 include funds
transferred between Reuters and TIBCO Software for operating needs.
The Statement of Operations includes all revenue and expenses directly
attributable to TIBCO Software, costs for facilities, functions and services
used by TIBCO Software at shared sites and costs for certain functions and
services performed by centralized Reuters organizations. Such shared costs are
directly charged to TIBCO Software based on usage. In addition, services
performed by TIBCO Software on behalf of Reuters are directly charged to
Reuters.
Prior to January 1, 1997, all charges and allocations of cost for facilities,
functions and services performed by Reuters and its subsidiaries for TIBCO
Software have been deemed to have been paid by TIBCO Software to Reuters, in
the period in which the expense was recorded in the Financial Statements.
Allocations during this period were based on level of effort, revenue, or
usage, depending on the nature of the cost. Subsequent to January 1, 1997, such
costs are billed directly under transitional service agreements or by mutual
agreement in advance; and income taxes are paid directly to the taxing
authorities as appropriate.
All of the allocations and estimates in the Financial Statements are based on
assumptions that management believes are reasonable under the circumstances and
would not have been materially different from the costs and expenses that would
have resulted if TIBCO Software had been operated as a separate entity for
periods prior to January 1, 1997.
F-7
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Change in Year End
Effective January 1, 1997, the Company changed its fiscal quarter ends to the
last Friday in February, May and August and November 30th and its fiscal year
end to November 30th. For purposes of presentation, the Company has indicated
its interim fiscal periods as having ended on the last day of the month in
which such period actually ended.
Unaudited Interim Results
The accompanying interim financial statements as of May 31, 1999, and for the
six months ended May 31, 1998 and 1999, are unaudited. The unaudited interim
financial statements have been prepared on the same basis as the annual
financial statements and, in the opinion of management, reflect all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position, results of operations and cash
flows as of May 31, 1999 and for the six months ended May 31, 1998 and 1999.
The financial data and other information disclosed in these notes to financial
statements related to these periods are unaudited. The results for the six
months ended May 31, 1999 are not necessarily indicative of the results to be
expected for the year ending November 30, 1999.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Cash Equivalents and Deposits Held by Reuters
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. At November
30, 1997 and 1998, cash consisted primarily of deposits with large financial
institutions. The Company also has deposited cash with Reuters. The deposits
held by Reuters earn a market rate of interest and are due upon written notice.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration
of credit risk consist of cash, cash equivalents, deposits held by Reuters and
accounts receivable. Cash, cash equivalents and deposits held by Reuters are
deposited with financial institutions that management believes are
creditworthy. The Company's accounts receivable is derived from revenue earned
from customers located primarily in the United States, Australia, Europe and
Taiwan. The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, requires no collateral from its customers.
The Company maintains an allowance for doubtful accounts receivable
F-8
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES--(Continued)
based upon the expected collectibility of accounts receivable. The following
table summarizes the revenue from customers in excess of 10% of the total
revenue:
<TABLE>
<CAPTION>
Six Months
Eleven Months Ended May
Year Ended Ended Year Ended 31,
December 31, November 30, November 30, ------------
1996 1997 1998 1998 1999
------------ ------------- ------------ ----- -----
(unaudited)
<S> <C> <C> <C> <C> <C>
Reuters.................... 36% 27% 15% 15% 18%
Cedel Global Services...... N/A N/A 17% 17% 10%
NEC Electronics, Inc....... N/A 17% N/A 15% N/A
Litlenet, Inc.............. 11% N/A N/A N/A N/A
</TABLE>
Capitalized Software Development Costs
The Company has not capitalized any software development costs to date and is
in compliance with Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed." Capitalization of software development costs begins upon the
establishment of technological feasibility of the product. After technological
feasibility is established, material software development costs are
capitalized. The capitalized cost is then amortized on a straight-line basis
over the estimated product life, or on the ratio of current revenues to total
projected product revenues, whichever is greater. To date, the period between
achieving technological feasibility, which the Company has defined as the
establishment of a working model which typically occurs when beta testing
commences, and the general availability of such software has been short, and
software development costs qualifying for capitalization have been
insignificant.
Property and Equipment
Property and equipment are stated at cost. Depreciation is generally computed
using the straight-line method over the estimated useful lives of the assets as
follows:
<TABLE>
<S> <C>
Furniture and
fixtures..... 5-10 years
Equipment..... 3-5 years
Leasehold
improvements.. Shorter of the lease term or the estimated useful life
</TABLE>
Long-Lived Assets
The Company evaluates the recoverability of its long-lived assets in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." SFAS No. 121 requires
recognition of impairment of long-lived assets in the event the net book value
of such assets exceeds the future undiscounted cash flows attributable to such
assets.
Revenue Recognition
License revenue consists principally of revenue earned under software license
agreements and is generally recognized when the software has been shipped,
there are no significant obligations
F-9
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES--(Continued)
remaining, and collection is probable. When contracts contain multiple elements
wherein vendor specific objective evidence exists for all undelivered elements,
the Company accounts for the delivered elements in accordance with the
"Residual Method" prescribed by Statement of Position ("SOP") 98-9. Any
maintenance included in these arrangements is recognized ratably over the term
of the arrangement. Revenue from subscription license agreements, which include
software, rights to future software and maintenance, is deferred and recognized
ratably over the term of the subscription period.
Service revenue consists primarily of revenue received for performing product
development, implementation of system solutions, on-site support, consulting
and training. Service revenue is generally recognized as the services are
performed or on the percentage-of-completion method of accounting, depending on
the nature of the project. Under the percentage-of-completion method, revenue
recognized is that portion of the total contract price equal to the ratio of
costs expended to date to the anticipated final total costs, based on current
estimates of the costs to complete the project. To the extent that these
arrangements include license fees, such fees are recorded as license revenue
based on the percentage-of-completion ratio. If the total estimated costs to
complete a project exceed the total contract amount, indicating a loss, the
entire anticipated loss would be recognized currently.
Maintenance revenue consists of fees for providing software updates and
technical support for software products (post-contract support or "PCS").
Maintenance revenue is recognized ratably over the term of the agreement.
Payments received in advance of services performed are recorded as deferred
revenue. Allowances for estimated future returns and discounts are provided for
upon recognition of revenue.
Advertising Expense
Advertising costs are expensed as incurred and totaled approximately $0.1
million, less than $0.1 million, and $1.6 million for the year ended December
31, 1996, the eleven months ended November 30, 1997 and the year ended November
30, 1998, respectively.
Stock-Based Compensation
The Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," ("APB No. 25") and complies with
the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation."
Net Loss per Share
Net loss per share is calculated in accordance with SFAS No. 128, "Earnings
per Share" and SEC Staff Accounting Bulletin No. 98 ("SAB 98"). Under the
provisions of SFAS No. 128 and SAB 98, basic net loss per share is computed by
dividing the net loss available to common stockholders for the period by the
weighted average number of common shares outstanding during the period. Diluted
net loss per share is computed by dividing the net loss for the period by the
weight average number of common and potential common shares outstanding during
the period if their effect is dilutive. Potential common shares comprise of
Common Stock subject to repurchase and incremental shares of Common Stock
issuable upon the exercise of stock options and upon the conversion of
Convertible Preferred Stock ("Preferred Stock").
F-10
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES--(Continued)
The following table sets forth the computation of basic and dilutive net loss
per share for the periods indicated (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Six Months
Eleven Months Ended
Ended Year Ended May 31,
November 30, November 30, ----------------
1997 1998 1998 1999
------------- ------------ ------- -------
(unaudited)
<S> <C> <C> <C> <C>
Net loss......................... $(4,663) $(12,951) $(3,941) $(8,959)
======= ======== ======= =======
Basic and diluted:
Weighted average shares
outstanding................... 19,484 21,725 21,262 22,925
Weighted average shares subject
to repurchase................. (282) (1,714) (1,542) (2,085)
------- -------- ------- -------
Weighted average shares used to
compute basic and diluted net
loss per share.................. 19,202 20,011 19,720 20,840
======= ======== ======= =======
Net loss per share--basic and
diluted......................... $ (0.24) $ (0.65) $ (0.20) $ (0.43)
======= ======== ======= =======
</TABLE>
The following table sets forth potential common shares that are not included
in the diluted net loss per share calculation above because to do so would be
anti-dilutive for the periods indicated (in thousands):
<TABLE>
<CAPTION>
Eleven Months Six Months
Ended Year Ended Ended May 31,
November 30, November 30, -------------
1997 1998 1998 1999
------------- ------------ ------ ------
(unaudited)
<S> <C> <C> <C> <C>
Weighted average effect of potential
common shares:
Series A Preferred Stock........... 20,000 20,000 20,000 20,000
Series B Preferred Stock........... 2,692 4,365 4,365 4,365
Series C Preferred Stock........... -- 2,626 2,390 2,861
Common Stock subject to
repurchase........................ 282 1,714 1,542 2,085
Stock options...................... 240 3,713 1,569 6,600
------ ------ ------ ------
23,214 32,418 29,866 35,911
====== ====== ====== ======
</TABLE>
Pro Forma Net Loss per Share (Unaudited)
Pro forma net loss per share for the year ended November 30, 1998 and the six
months ended May 31, 1999, is computed using the weighted average number of
common shares outstanding, including the pro forma effects of the automatic
conversion of the Company's Preferred Stock into shares of Common Stock
effective upon the closing of the offering, as if such conversion occurred on
December 1, 1997 or at the date of original issuance, if later. The resulting
pro forma adjustment includes an increase in the weighted average shares used
to compute basic and diluted net loss per share of 26,991 and 27,226 for the
year ended November 30, 1998 and the six months ended May 31, 1999,
respectively. The pro forma effects of these transactions are unaudited and
have been reflected in the accompanying pro forma Statement of Operations.
F-11
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES--(Continued)
Pro Forma Stockholders' Equity (Unaudited)
Immediately prior to the effective date of the offering, all of the
Convertible Preferred Stock outstanding will automatically convert into Common
Stock at a one-to-one ratio. The pro forma effects of these transactions are
unaudited and have been reflected in the accompanying Pro Forma Stockholders'
Equity as of May 31, 1999.
Derivative Financial Instruments
The Company enters into foreign currency forward exchange contracts ("forward
contracts") to manage exposure related to certain foreign currency
transactions. The Company does not enter into derivative financial instruments
for trading purposes. All outstanding forward contracts at the end of the
period are marked-to-market, with unrealized gains and losses included in net
income as a component of other income (expense), net. As of November 30, 1998,
the Company had outstanding forward contracts with notional amounts totaling
approximately $1.6 million. These contracts, which mature at various dates
through July 1999, are hedges of certain foreign currency transaction exposures
in the Australian dollar and French franc. The estimated fair value at November
30, 1998 was negligible.
Income Taxes
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year
and deferred tax assets and liabilities for the future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. The measurement of current and deferred tax assets and liabilities is
based on provisions of the enacted tax law; the effects of future changes in
tax laws or rates are not anticipated. The measurement of deferred tax assets
is reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.
Comprehensive Income
Effective December 1, 1997, the Company adopted the provisions of SFAS No.
130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards for
reporting comprehensive income and its components in financial statements.
Comprehensive income, as defined, includes all changes in equity (net assets)
during a period from non-owner sources. To date, the Company has not had any
transactions that are required to be reported in comprehensive income other
than its net loss.
Recent Accounting Pronouncements
In October 1997, March 1998 and December 1998, the American Institute of
Certified Public Accountants ("AICPA") issued SOP 97-2, "Software Revenue
Recognition," SOP 98-4, "Deferral of the Effective Date of a Provision of SOP
97-2, "Software Revenue Recognition"' and SOP 98-9, "Modification of SOP 97-2,
"Software Revenue Recognition' with Respect to Certain Transactions"
(collectively, "SOP 97-2"). The Company is required to adopt the provisions of
SOP 97-2 for transactions entered into in the fiscal year beginning December 1,
1998. SOP 97-2 provides guidance on recognizing revenue on software
transactions and superseded SOP 91-1. The Company believes that the adoption of
SOP 97-2 will not have a significant impact on its current licensing or revenue
recognition practices. However, should the Company adopt new or change its
existing licensing practices, the Company's revenue recognition practices may
be subject to change to comply with the accounting guidance provided in SOP 97-
2.
F-12
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES--(Continued)
In March 1998, the AICPA issued SOP 98-1, "Software for Internal Use," which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does not expect
that the adoption of SOP 98-1 will have a material impact on its financial
statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is
effective for fiscal years beginning after June 15, 1999 and establishes
methods of accounting for derivative financial instruments and hedging
activities related to those instruments as well as other hedging activities.
The Company does not expect that the adoption of SFAS No. 133 will have a
material impact on its financial statements.
3. BALANCE SHEET COMPONENTS
(in thousands)
<TABLE>
<CAPTION>
November 30, November 30, May 31,
1997 1998 1999
------------ ------------ -----------
(unaudited)
<S> <C> <C> <C>
Accounts receivable, net:
Accounts receivable.................... $ 9,241 $11,024 $17,099
Unbilled fees and services............. 665 3,904 4,935
------- ------- -------
9,906 14,928 22,034
Less: Allowance for doubtful accounts
and returns........................... (2,668) (1,694) (1,608)
------- ------- -------
$ 7,238 $13,234 $20,426
======= ======= =======
Property and equipment, net:
Equipment.............................. $ 2,178 $ 4,973 $ 5,031
Furniture and fixtures................. -- 146 146
Leasehold improvements................. -- 49 49
------- ------- -------
2,178 5,168 5,226
Less: Accumulated depreciation and
amortization.......................... (924) (1,997) (1,401)
------- ------- -------
$ 1,254 $ 3,171 $ 3,825
======= ======= =======
Accrued liabilities:
Compensation and employee related...... $ 4,040 $ 5,810 $ 5,025
Expenses............................... 2,176 2,024 3,350
------- ------- -------
$ 6,216 $ 7,834 $ 8,375
======= ======= =======
</TABLE>
F-13
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
4.ALLOWANCE FOR DOUBTFUL ACCOUNTS AND SALES DISCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Additions
----------------
Balance Charged Balance
at Charged to Costs at End
Beginning against and of
of Period Revenue Expenses Deductions Period
--------- ------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996.... $ 249 $1,279 $ 20 $ -- $1,548
Eleven months ended November 30,
1997........................... 1,548 1,576 16 (472) 2,668
Year ended November 30, 1998.... 2,668 1,133 194 (2,301) 1,694
Six months ended May 31, 1999
(unaudited).................... 1,694 400 437 (923) 1,608
</TABLE>
5. RELATED PARTY TRANSACTIONS
Reuters
The Company has significant transactions with Reuters and TFT, including
licensing arrangements, development contracts and shared functions and
services. The following is a summary of the transactions for the periods
indicated (in thousands):
Revenue and cost of revenue
<TABLE>
<CAPTION>
Eleven Months Six Months
Year Ended Ended Year Ended Ended May 31,
December 31, November 30, November 30, -------------
Description 1996 1997 1998 1998 1999
- ----------- ------------ ------------- ------------ ------ ------
(unaudited)
<S> <C> <C> <C> <C> <C>
License fees............. $ -- $ 157 $2,984 $1,219 $6,935
------- ------ ------ ------ ------
Service and maintenance
revenue:
Subscription
agreement............. -- 3,896 354 354 --
Maintenance agreement.. -- 688 750 375 375
Services contracts..... 5,802 796 485 240 637
Shared personnel....... -- 4,027 2,202 1,592 307
Development
reimbursement......... 5,030 -- 894 -- 365
------- ------ ------ ------ ------
Total service and
maintenance......... 10,832 9,407 4,685 2,561 1,684
------- ------ ------ ------ ------
$10,832 $9,564 $7,669 $3,780 $8,619
======= ====== ====== ====== ======
</TABLE>
In 1994, Reuters entered into an arrangement with Teknekron whereby Teknekron
was granted a non-exclusive license to certain software and the right to
sublicense the software to its customers. In exchange for this right, Teknekron
was obligated to pay Reuters a product fee. TIBCO Software's portion of the fee
due to Reuters totaled approximately $5.5 million for the year ended
December 31, 1996 and was included in cost of revenue in the accompanying
Statement of Operations. These product fee obligations ceased with the
formation of TIBCO Software in January 1997.
In 1995, Reuters and Teknekron entered into a Research & Development and
Consulting Services Agreement (the "Services Agreement"). Under the Services
Agreement, Reuters agreed to reimburse Teknekron 110% of reasonable research
and development costs to maintain and enhance
F-14
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. RELATED PARTY TRANSACTIONS--(Continued)
the underlying technology. Any software developed became the property of
Reuters. The Services Agreement also provided for maintenance, support, and
consulting. Service revenue recognized from Reuters associated with the
Services Agreement totaled approximately $10.8 million for the year ended
December 31, 1996.
With the formation of TIBCO Software in January 1997, the Company entered
into a license, maintenance and distribution agreement (the "License
Agreement") with Reuters and TFT. Under the terms of the License Agreement, the
Company was granted a perpetual, royalty-free license to the underlying TIB
messaging technology in existence on December 31, 1996. The licensed TIB
technology includes technology underlying some of the Company's current
products. The license includes rights to use the TIB technology to develop and
maintain products, to provide services to customers relating to the licensed
technology, and to sell, sublicense and distribute products utilizing the
licensed technology both directly and through third party distributors,
resellers and original equipment manufacturers. In consideration of the License
Agreement, the Company paid to Reuters $10.0 million, which was accounted for
as a return of capital (Note 8).
Reuters is the preferred distributor of the Company's TIB/ActiveEnterprise
products to customers in the financial services market segment. As such, the
Company receives a product fee from Reuters, which is computed as a percentage
of sales of product licenses and maintenance, which has been recorded as
license revenue in the accompanying Financial Statements. For the nine months
ending December 31, 1999 and the years ending December 31, 2000 and 2001,
Reuters has guaranteed minimum product fees of $16.0 million, $18.0 million and
$20.0 million, respectively. These amounts will be recognized ratably over the
corresponding period. In any period where actual product fees earned exceed the
minimum guaranteed product fees, the difference between the actual product fees
and cumulative minimum product fees recognized to date will be recognized as
revenue currently.
For calendar 1997, Reuters paid the Company a one-time fee of approximately
$4.3 million for the purposes of developing middleware infrastructure software
and products. As Reuters and TFT were entitled to receive unspecified future
enhancements, if and when available, the fee was accounted for as a
subscription and taken to service revenue ratably over the period (see
"subscription agreement" in the preceding table). Beginning in January 1997,
the Company received an annual maintenance fee of approximately $0.7 million,
which is accounted for ratably over the year. Beginning in 1999, this
maintenance fee will be included in the minimum guarantee. There were various
miscellaneous consulting projects throughout fiscal 1997 and 1998 in which the
Company recognized approximately $0.8 million and $0.5 million, respectively.
Since its formation in January 1997, TFT and TIBCO Software agreed to certain
intercompany rates for the sharing of employees on various customer projects.
For the services provided by TIBCO Software personnel to TFT, TIBCO Software
recognized service revenue of approximately $4.0 million and $2.2 million in
the eleven months ended November 30, 1997 and the year ended November 30, 1998,
respectively. For the services received by TIBCO Software from TFT personnel,
TIBCO Software recorded, in cost of revenue, expenses of approximately $1.2
million and $5.8 million in the eleven months ended November 30, 1997 and the
year ended November 30, 1998, respectively, and, in research and development,
expenses of approximately $0.4 million in the eleven months ended November 30,
1997.
In 1998, TIBCO Software was reimbursed for approximately $0.9 million for the
development of certain enhancements for Reuters.
F-15
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. RELATED PARTY TRANSACTIONS--(Continued)
Intercompany Services
Since its formation in January 1997, Reuters and TFT have provided TIBCO
Software with shared functions and services such as cash management,
accounting, legal and insurance. The cost of these functions and services has
been directly charged and/or allocated to the Company using methods that the
Company management believes are reasonable. Such charges and allocations are
not necessarily indicative of the costs that would have been incurred if the
Company had been a separate entity. Neither party has a financial obligation to
the other in relation to any shared costs except as may be agreed in writing in
advance.
Administrative Services. TFT provides limited administrative services to the
Company, including certain facilities, human resources, information technology
and finance functions. The expenses related to these functions have been
charged to the Company based on actual costs incurred. Management believes that
such costs are reasonable. Such charges for these services amounted to
approximately $1.6 million and $2.7 million in the eleven months ended
November 30, 1997 and the year ended November 30, 1998, respectively and are
included in cost of sales, research and development, sales and marketing,
general and administrative expenses in the accompanying Statement of
Operations, allocated based on respective salaries.
Operating Leases and Furniture & Fixtures Rental. The Company shares its
corporate headquarters in Palo Alto, California, and certain foreign offices
with TFT (Note 7). In addition, the Company rents certain furniture and
fixtures from TFT, primarily related to its corporate headquarters. The Company
incurred rent expense of $1.4 million and $1.6 million in the eleven months
ended November 30, 1997 and the year ended November 30, 1998, respectively.
Insurance and Legal. The Company participates in an insurance purchasing
agreement with Reuters. Under the terms of this arrangement, Reuters purchases
insurance on behalf of the Company and charges the Company for this insurance
on an annual basis. Additionally, a portion of the Company's legal services was
provided to the Company until March 1998. Amounts incurred for legal and
insurance expenses were approximately $0.2 million and $0.1 million in the
eleven months ended November 30, 1997 and the year ended November 30, 1998,
respectively, and are included in general and administrative expenses in the
accompanying Statement of Operations.
Employee Benefit Programs. The Company participates in various employee
benefit programs with TFT. These programs include medical, dental, life
insurance and pension plans. The Company paid the service providers directly
for these services rendered from January 1997. The Company reimbursed TFT for
its proportionate cost of certain other benefits provided to TIBCO Software
employees during 1997 and 1998. The reimbursement was based on historical
experience and relative headcount. The Company recorded expenses related to the
reimbursement of these costs of approximately $0.1 million in the eleven months
ended November 30, 1997 and the year ended November 30, 1998. The Company
believes the allocation by TFT of the proportionate cost is reasonable and
consistent with costs that would have been incurred had the company maintained
its own benefit plans. These charges are included in cost of sales, research
and development, sales and marketing and general and administrative expenses in
the Statement of Operations, allocated based on respective salaries.
F-16
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. RELATED PARTY TRANSACTIONS--(Continued)
Intercompany Deposits. From July 1997, the Company participated in Reuters
cash management program, investing surplus funds with Reuters Group Treasury
Department. These deposits earn interest at one-month dollar London inter bank
offered rate ("LIBOR"). The Company recorded interest income on these deposits
of approximately $0.3 million and $1.1 million in the eleven months ended
November 30, 1997 and the year ended November 30, 1998, respectively.
Line of Credit. In January 1997, TIBCO Software entered into a credit
facility with Reuters. Under the line of credit, the Company may borrow up to
$10 million. The line of credit expired on December 31, 1998 and was secured by
Company assets. Interest accrued at a rate of prime plus 1% per annum. As of
November 30, 1998, the Company had no principal amounts outstanding.
6. INCOME TAXES
No provision for income taxes was recorded due to the net losses incurred to
date. The provision for income taxes was at rates other than the U.S. Federal
statutory tax rate for the following reasons:
<TABLE>
<CAPTION>
1996 1997 1998
------- ------- -------
<S> <C> <C> <C>
U.S. Federal statutory rate.......................... (34.0)% (34.0)% (34.0)%
State taxes.......................................... (5.6) (5.9) (5.4)
R&D credits.......................................... (3.4) (5.8) (3.9)
Change in valuation allowance........................ 41.7 48.1 44.1
Other................................................ 1.3 (2.4) (0.8)
------- ------- -------
Income tax provision................................. 0.0 % 0.0 % 0.0 %
======= ======= =======
</TABLE>
The components of the Company's net deferred tax assets are as follows (in
thousands):
<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Net operating loss carryforward........................... $ -- $ 3,430
Stock option compensation................................. 2,338 4,424
Reserves and accruals..................................... 1,827 1,445
Credit carryforwards...................................... 168 759
Depreciation and amortization............................. 545 694
Other..................................................... 203 (9)
------- --------
5,081 10,743
Valuation allowance....................................... (5,081) (10,743)
------- --------
Net deferred tax assets................................... $ -- $ --
======= ========
</TABLE>
Management believes that, based on a number of factors, it is more likely
than not that the deferred tax assets will not be utilized; and accordingly, a
full valuation allowance has been recorded.
At November 30, 1998, the Company had the following carryforwards available
to reduce future taxable income and income taxes (in thousands):
<TABLE>
<CAPTION>
Federal State
------- ------
<S> <C> <C>
Net operating loss carryforwards............................. $8,766 $9,279
Credit carryforwards......................................... 481 278
</TABLE>
F-17
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
6. INCOME TAXES--(Continued)
The federal and state net operating loss carryforwards are available through
2018 and 2005, respectively, and the research and development credits are
available through 2013. For federal and state tax purposes, the Company's net
operating loss and research and development credit carryforwards could be
subject to certain limitations on annual utilization if certain changes in
ownership were to occur, as defined by federal and state tax laws.
7. COMMITMENTS
The Company leases office space and equipment under non-cancelable operating
leases with various expiration dates through August 2003. The Company also
rents certain furniture and fixtures and sub-leases office space from TFT at
various locations including its corporate headquarters in Palo Alto, California
(Note 5). Rental expense was approximately $1.2 million, $1.7 million and $2.2
million for the year ended December 31, 1996, the eleven months ended November
30, 1997 and the year ended November 30, 1998, respectively. Future minimum
lease payments under non-cancelable operating leases, including lease
commitments entered into subsequent to November 30, 1998, are as follows (in
thousands):
<TABLE>
<CAPTION>
Year ending November 30,
------------------------
<S> <C>
1999................................................................ $ 407
2000................................................................ 272
2001................................................................ 203
2002................................................................ 193
2003................................................................ 83
Thereafter.......................................................... --
------
$1,158
======
</TABLE>
TIBCO Software expects TFT to vacate its portion of the shared corporate
headquarters in May 1999. In such an event, TIBCO Software intends to assume
the lease agreement, which expires in June of 2006. This assumption would
result in additional aggregate lease commitments of approximately $10.0
million.
8. STOCKHOLDERS' EQUITY
As of November 30, 1998, the Company's Articles of Incorporation authorized
the Company to issue 75.0 million shares of Preferred Stock at $0.001 par value
and 100.0 million shares of Common Stock at $0.001 par value. From said
authorization of Preferred Stock, 20.0 million, 5.5 million and 3.0 million
shares were designated as Series A, Series B and Series C Preferred Stock,
respectively, at $0.001 par value.
Preferred Stock
Effective as of January 1, 1997, the Company's initial capital structure was
established by issuing 20.0 million shares of Series A Convertible Preferred
Stock ("Series A") and 19.0 million shares of Common Stock to Reuters in
exchange for $10.0 million and the transfer of certain assets and liabilities
assumed. In connection with its formation, the Company signed a perpetual, non-
exclusive license agreement for certain technology with Reuters and paid $10.0
million as consideration (Note 5). This payment was treated as a return of
capital in the accompanying Statement of Stockholders' Equity.
F-18
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. STOCKHOLDERS' EQUITY--(Continued)
In May 1997, the Company issued approximately 4.4 million shares of Series B
Convertible Preferred Stock ("Series B") at $3.60 per share for net proceeds of
approximately $15.7 million. In December 1997, the Company issued approximately
2.9 million shares of Series C Convertible Preferred Stock ("Series C") at
$3.86 per share for net proceeds of approximately $11.0 million.
The holders of the outstanding Preferred Stock have various rights and
preferences as follows:
Voting
Each share of Preferred Stock has voting rights equal to the number of shares
of Common Stock into which it is convertible and votes together as one class
with the Common Stock.
Dividends
The holders of Series A, Series B and Series C are entitled to receive non-
cumulative dividends at the per share annual rate of $0.048, $0.216 and $0.236,
respectively, when and as declared by the board of directors. The holders of
Preferred Stock will also be entitled to participate in dividends on Common
Stock, when and if declared by the board of directors, based on the number of
shares of Common Stock held on an as converted basis. No dividends on Preferred
Stock or Common Stock have been declared by the board from inception through
November 30, 1998.
Liquidation
In the event of any liquidation, dissolution or winding up of the Company,
including a merger, acquisition or sale of assets where the beneficial owners
of the Company's Common Stock and Preferred Stock own less than 50% of the
resulting voting power of the surviving entity, the holders of Series A, Series
B and Series C are entitled to receive an amount of $1.00, $3.60 and $3.86 per
share, respectively, plus any declared but unpaid dividends prior to and in
preference to any distribution to the holders of Common Stock. If the Company's
legally available assets are insufficient to satisfy the liquidation
preferences, then the funds will be distributed ratably among the holders of
Preferred Stock.
Conversion
Each share of Preferred Stock is convertible, at the option of the holder,
according to a conversion ratio, subject to adjustment for dilution. Each share
of Preferred Stock automatically converts into the number of shares of Common
Stock into which such shares are convertible at the then effective conversion
ratio upon: (1) the closing of a public offering of Common Stock at a per share
price of at least $4.00 per share, (2) at least 15% of the capital stock of the
Company (on a fully diluted as converted to common stock post-offering basis)
is issued and/or sold in the offering, (3) a merger, sale of substantially all
of the assets or other transactions which result in a change in control or (4)
the consent of the majority of Preferred Stock holders.
Covenants
As long as at least 21.38 million shares of Preferred Stock remain
outstanding, the Company must obtain approval from a majority of the holders of
Preferred Stock in order to alter the articles of incorporation as related to
Preferred Stock, change the authorized number of shares of Preferred
F-19
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. STOCKHOLDERS' EQUITY--(Continued)
Stock, repurchase any shares of Common Stock other than shares subject to the
right of repurchase by the Company, change the authorized number of Directors,
authorize a dividend for any class or series other than Preferred Stock, create
a new class of stock or effect a merger, consolidation or sale of assets where
the existing shareholders retain less than 50% of the voting stock of the
surviving entity.
Common Stock
The Company's Articles of Incorporation, as amended, authorize the Company to
issue 300.0 million shares of $0.001 par value Common Stock. A portion of the
shares issued are subject to a right of repurchase by the Company subject to
vesting, which is generally over a five year period from the grant date or
employee hire date, as applicable, until vesting is complete. Shares are
subject to repurchase at the original exercise price. At November 30, 1998,
there were approximately 1.8 million shares of Common Stock subject to
repurchase.
Stock Option Plans
In 1996, the Company adopted the 1996 Stock Option Plan (the "1996 Plan").
The 1996 Plan provides for the granting of stock options to employees and
consultants of the Company. Options granted under the 1996 Plan may be either
incentive stock options or nonqualified stock options. Incentive stock options
may be granted only to Company employees (including officers and directors who
are also employees). Nonqualified stock options may be granted to Company
employees and consultants. The Company has reserved 12.7 million shares of
Common Stock for issuance under the 1996 Plan. In July 1998, the stockholders
of the Company amended the 1996 Plan, to permit an annual replenishment of the
Company's Common Stock reserved for grant under the 1996 Plan equal to 5% of
the Company's outstanding capital stock. Options under the 1996 Plan may be
granted for terms not to exceed ten years and at strike prices no less than the
fair value of Common Stock on the date of grant as determined by the Board of
Directors. Options are exercisable immediately upon grant and generally vest
over five years. Shares of Common Stock issued upon the exercise of options are
subject to repurchase until vested.
In February 1998, the Company adopted the 1998 Director Option Plan (the
"Director Plan") and reserved 0.5 million shares of Common Stock for issuance
under the Director Plan. The Director Plan provides for an automatic initial
grant of 50,000 shares to members of the Board who are not employees of the
Company or Reuters ("External Directors"). Any External Director with over one
year of consecutive service prior to the effective date of the Director Plan
received an initial grant of 70,000 shares. At any subsequent annual re-
election, each External Director shall be granted an option to purchase 20,000
additional shares. Options are granted at an exercise price not less than the
fair market value of the stock on the date of grant, have a term not to exceed
ten years and become exercisable over a three year period with a third of the
shares vesting annually.
In October 1998, the Company adopted the 1998 Advisory Council Option Sub-
plan (the "Advisory Plan") as a sub-plan to the 1996 Plan for the purpose of
attracting and retaining the best available personnel for service on an
information technology advisory council. The Advisory Plan provides for an
initial grant of 5,000 shares to each advisory council member (10,000 shares to
the chairman). Options are granted at an exercise price not less than fair
market value of the Common Stock on the date of grant, have a term not to
exceed ten years and become exercisable over a two year period with half of the
shares vesting annually.
F-20
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. STOCKHOLDERS' EQUITY--(Continued)
For grants under the Advisory Plan and other options granted to consultants,
the Company estimates the initial fair value of the options on the date of
grant using the Black-Scholes option pricing model. The resulting compensation
expense is amortized using the multiple option method over the vesting period.
The value of the options will be remeasured at each subsequent reporting date
until each option has vested. In the event such remeasurement results in
increases or decreases in fair value, such increases or decreases will be
recognized over the remaining term.
The activity under the 1996 Plan, the Director Plan and Advisory Plan is
summarized as follows (in thousands, except per share data):
<TABLE>
<CAPTION>
Eleven Months
Ended Year Ended Six Months
November 30, November 30, Ended
1997 1998 May 31, 1999
----------------- ----------------- -----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- -------- ------- -------- ------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $ -- 6,892 $0.60 9,086 $1.18
Granted................. 8,772 0.60 4,374 1.92 2,527 5.66
Exercised............... (1,669) 0.60 (1,833) 0.82 (1,177) 1.38
Canceled................ (211) 0.60 (347) 0.82 (168) 3.30
------ ------ ------
Outstanding at end of
period................. 6,892 0.60 9,086 1.18 10,268 2.22
====== ====== ======
Options vested at end of
period................. 1,028 3,560 4,396
====== ====== ======
</TABLE>
The following table summarizes information about stock options outstanding at
November 30, 1998 (in thousands, except per share data):
<TABLE>
<CAPTION>
Options Outstanding and
Exercisable
--------------------------------
Weighted
Average Weighted
Number of Remaining Average
Options Contractual Exercise
Range of exercise prices Outstanding Life Price
------------------------ ----------- ----------- --------
<S> <C> <C> <C>
$0.60..................................... 5,381 8.1 years $0.60
1.00..................................... 1,606 9.4 years 1.00
2.60..................................... 1,615 9.6 years 2.60
3.50..................................... 484 9.7 years 3.50
----- --------- -----
$0.60-$3.50............................... 9,086 8.7 years 1.18
===== ========= =====
</TABLE>
Unearned stock-based compensation
In connection with certain stock option grants to employees and External
Directors, the Company recognized approximately $9.4 million, $7.2 million and
$4.8 million (unaudited) of unearned stock compensation for the excess of the
deemed fair market value over the exercise price at the date of grant for the
eleven months ended November 30, 1997, for the year ended November 30, 1998 and
for the six months ended May 31, 1999, respectively. The compensation expense
is being recognized, using the multiple option method, over the option vesting
period of generally five years.
F-21
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
8. STOCKHOLDERS' EQUITY--(Continued)
Reserved for Future Issuance
At November 30, 1998, the Company had reserved the following shares of
authorized but unissued Common Stock for future issuance (in thousands):
<TABLE>
<S> <C>
Preferred Stock...................................................... 27,226
1996 and Advisory Plans.............................................. 9,249
Director Plan........................................................ 500
------
36,975
======
</TABLE>
Pro Forma Information
This information is required to illustrate the financial results of
operations as if the Company accounted for its grants of employee stock options
under the fair value method of SFAS No. 123. The fair value of the Company's
options granted was estimated at the date of grant using a Black-Scholes option
pricing model. The Company calculated the minimum value of each option grant on
the date of grant with the following assumptions:
<TABLE>
<CAPTION>
Eleven Months Six Months Ended
Ended Year Ended May 31,
November 30, November 30, -----------------
1997 1998 1998 1999
------------- ------------ -------- --------
(unaudited)
<S> <C> <C> <C> <C>
Risk free interest rates....... 4.7% 4.7% 4.7% 4.7%
Expected lives (in years)...... 3.0 3.0 3.0 3.0
Dividend yield................. 0.0% 0.0% 0.0% 0.0%
Expected volatility............ 0.0% 0.0% 0.0% 0.0%
</TABLE>
For purposes of pro forma disclosures, the estimated minimum value of the
options is amortized over the options' vesting period. The compensation cost
associated with the Company's stock-based compensation plans, determined using
the minimum value method prescribed by SFAS No. 123, did not result in a
material difference for the reported net loss for all periods presented.
9. OPERATIONS BY GEOGRAPHIC AREA
The Company operates primarily in one industry segment: the development and
marketing of a suite of software products that enables businesses to link
internal operations, business partners and customer channels through the real-
time distribution of information. Revenue by geographic area is as follows (in
thousands):
<TABLE>
<CAPTION>
Eleven Months
Year Ended Ended Year Ended
December 31, November 30, November 30,
1996 1997 1998
------------ ------------- ------------
<S> <C> <C> <C>
Domestic................................ $25,027 $28,949 $32,698
Export Revenue:
Europe................................ 3,472 4,558 13,885
Pacific Rim........................... 1,816 1,767 6,174
------- ------- -------
Total revenue....................... $30,315 $35,274 $52,757
======= ======= =======
</TABLE>
F-22
<PAGE>
TIBCO SOFTWARE INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
10. SUBSEQUENT EVENTS
Reverse Stock Split
In June 1999, the Company's Board of Directors approved a one for two reverse
stock split of Company's outstanding shares which will become effective
immediately prior to the Company's initial public offering. All share and per
share information included in these consolidated financial statements have been
retroactively adjusted to reflect this reverse stock split.
Amendment to Stock Plans
In May 1999, the 1996 Plan was amended to increase the authorization for
issuance of the Company's Common Stock by approximately 2.5 million shares and
to increase the shares of Common Stock reserved for issuance (to be added on
the first day of each fiscal year beginning in 2000) equal to the lessor of (i)
5 million shares, (ii) 3.5% of the outstanding common shares of the Company
common stock, or (iii) a lesser amount determined by the Board of Directors.
In addition, the Board of Directors authorized the addition of an employee
stock purchase plan (the "ESP Plan") as a sub-plan to the 1996 Plan. The ESP
Plan permits eligible employees to purchase shares of the Company's Common
Stock through payroll deductions at 85% of the fair market value, as defined in
the ESP Plan.
The 1998 Plan was amended to increase the authorization for issuance of the
Company's Common Stock by 325,000 shares.
F-23
<PAGE>
UNDERWRITING
TIBCO Software and the underwriters named below have entered into an
underwriting agreement with respect to the shares being offered in the
underwritten offering. Each underwriter has severally agreed to purchase the
number of shares indicated in the following table. Goldman, Sachs & Co., Bear,
Stearns & Co. Inc. and Deutsche Bank Securities Inc. are the representatives of
the underwriters.
<TABLE>
<CAPTION>
Number of
Underwriters Shares
------------ ---------
<S> <C>
Goldman, Sachs & Co. ..............................................
Bear, Stearns & Co. Inc............................................
Deutsche Bank Securities Inc. .....................................
---------
Total............................................................ 7,300,000
=========
</TABLE>
----------------
If the underwriters sell more shares than the total number set forth in the
table above, the underwriters have an option to buy up to an additional
1,095,000 shares from TIBCO Software to cover such sales. They may exercise
that option for 30 days. If any shares are purchased pursuant to this option,
the underwriters will severally purchase shares in approximately the same
proportion as set forth in the table above.
The following tables show the per share and total underwriting discounts and
commissions to be paid to the underwriters by TIBCO Software. Such amounts are
shown assuming both no exercise and full exercise of the underwriters' option
to purchase 1,095,000 additional shares.
<TABLE>
<S> <C> <C>
No Exercise Full Exercise
Per Share............................................. $ $
Total................................................. $ $
</TABLE>
Shares sold by the underwriters to the public will initially be offered at
the initial public offering price set forth on the cover of this prospectus.
Any shares sold by the underwriters to securities dealers may be sold at a
discount of up to $ per share from the initial public offering price. Any
such securities dealers may resell any shares purchased from the underwriters
to certain other brokers or dealers at a discount of up to $ per share
from the initial public offering price. If all the shares are not sold at the
initial offering price, the representatives may change the offering price and
the other selling terms.
Each of TIBCO Software, Cisco, Mayfield, Reuters and its affiliates, Yahoo!,
Sun Microsystems, the executive officers and directors of TIBCO Software and
employees of both TIBCO Software and of TFT that own 15,000 or more shares of
common stock, has agreed that, without the prior written consent of the
representatives of the underwriters, during the period ending 180 days after
the date of this prospectus, it will not directly or indirectly offer, sell,
contract to sell or otherwise dispose of, any shares of common stock any
securities convertible into or exchangeable for, or that represent the right to
receive, common stock or any such substantially similar securities. Employees
of TFT that own less than 15,000 shares of common stock have agreed to a
similar lock-up for a period of 90 days. This agreement does not apply to
certain transfers of securities as described under "Shares Eligible for Future
Sale" beginning on page 66.
Prior to the offerings, there has been no public market for the shares. The
initial public offering price will be negotiated between TIBCO Software and the
representatives. Among the factors to be considered in determining the initial
public offering price of the shares, in addition to prevailing market
conditions, will be TIBCO Software's historical performance, estimates of the
business potential and earnings prospects of TIBCO Software, an assessment of
TIBCO Software's management and the consideration of the above factors in
relation to market valuation of companies in related businesses.
U-1
<PAGE>
The common stock is expected to be quoted on the Nasdaq National Market under
the symbol "TIBX".
In connection with the underwritten offering, the underwriters may purchase
and sell shares of common stock in the open market. These transactions may
include short sales, stabilizing transactions and purchases to cover positions
created by short sales. Short sales involve the sale by the underwriters of a
greater number of shares then they are required to purchase in the underwritten
offering. Stabilizing transactions consist of certain bids or purchases made
for the purpose of preventing or retarding a decline in the market price of the
common stock while the offering is in progress.
The underwriters also may impose a penalty bid. This occurs when a particular
underwriter repays to the underwriters a portion of the underwriting discount
received by it because the representatives have repurchased shares sold by or
for the account of such underwriter in stabilizing or short covering
transactions.
These activities by the underwriters may stabilize, maintain or otherwise
affect the market price of the common stock. As a result, the price of the
common stock may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
underwriters at any time. These transactions may be effected on the Nasdaq
National Market, in the over-the-counter market or otherwise.
Sales of shares of common stock made outside of the United States will be
effected through selling agents of the underwriters. No shares of common stock
offered hereby have been registered for the purpose of sales outside the United
States, as any such sales will be made in reliance on Regulation S under the
Securities Act of 1933.
Each underwriter has also agreed that: (i) it has not offered or sold and
prior to the date six months after the date of issue of the shares of common
stock will not offer or sell any shares of common stock to persons in the
United Kingdom except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as principal or
agent) for the purposes of their businesses or otherwise in circumstances which
have not resulted and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities Regulations 1995;
(ii) it has complied, and will comply, with all applicable provisions of the
Financial Services Act 1986 of Great Britain with respect to anything done by
it in relation to the shares of common stock in, from or otherwise involving
the United Kingdom; and (iii) it has only issued or passed on and will only
issue or pass on in the United Kingdom any document received by it in
connection with the issuance of the shares of common stock to a person who is
of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 of Great Britain or is a
person to whom the document may otherwise lawfully be issued or passed on.
Buyers of shares of common stock offered hereby may be required to pay stamp
taxes and other charges in accordance with the laws and practices of the
country of purchase in addition to the initial public offering price.
At TIBCO Software's request, the underwriters have reserved up to five
percent of the shares of common stock being offered hereby for sale, at the
initial public offering price, to its directors, officers, employees and
friends through a directed share program. The number of shares of common stock
available for sale to the general public in the public offering will be reduced
to the extent these persons purchase these reserved shares.
The underwriters do not expect sales to discretionary accounts to exceed five
percent of the total number of shares offered.
TIBCO Software estimates that the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $4.2 million.
TIBCO Software has agreed to indemnify the several underwriters against
liabilities related to the offerings, including liabilities under the
Securities Act.
Concurrently with the underwritten offering, TIBCO Software is offering
275,862 shares of its common stock directly to Yahoo!, assuming an initial
public offering price of $14.50 per share, and 500,000 shares directly to Sun
Microsystems, in a non-underwritten offering at the initial public offering
price.
U-2
<PAGE>
[Set forth on this page is the registrant's logo, an introductory paragraph
and the names of several users of the registrant's products, as follows:
[Logo of Tibco Software Inc.]
TIBCO Software is a leading provider of software solutions that enable
businesses to integrate internal operations, business partners and customer
channels in real-time. Our products are currently in use by over 300 companies
in such industries as telecommunications, high-tech manufacturing, energy,
financial services, the Internet and certain other industries. The following is
a partial list of current users of our TIB/Active Enterprise products. Each of
these companies, other than financial services companies, accounted for an
aggregate of at least $500,000 of our revenue during the period from January
1997 through May 1999. Each of the financial services companies accounted for
at least $200,000 of our revenue during that period.
3Com Motorola
Bechtel The Nasdaq Stock Market
Cedel Global Services National Westminster Bank
Chevron NEC Electronics
Compaq Pacific Power
Ericsson PageNet
Fidelity Philips Medical
First National Bank of South Africa Telia
Goldman Sachs Taiwan Semiconductor Manufacturing
Hyundai Company
Intel United Microelectronics Corp.
Intuit Unibank
Lucent Technologies Yahoo!]
Marubeni
Mobil
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or any other person is authorized to give any
information or represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, and only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Financial Data.................................................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 31
Management............................................................... 44
Relationship with Reuters and Certain Transactions....................... 54
Principal Stockholders................................................... 61
Description of Capital Stock............................................. 63
Shares Eligible for Future Sale.......................................... 66
Legal Matters............................................................ 68
Experts.................................................................. 68
Additional Information................................................... 68
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>
---------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in the underwritten offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
7,300,000 Shares
TIBCO Software Inc.
Common Stock
---------------
[LOGO OF TIBCO SOFTWARE INC. APPEARS HERE]
---------------
Goldman, Sachs & Co.
Bear, Stearns & Co. Inc.
Deutsche Banc Alex. Brown
Representatives of the Underwriters
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information contained 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 jurisdiction where the offer or sale +
+is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[ALTERNATE PAGE FOR CONCURRENT OFFERING PROSPECTUS]
Subject to Completion. Dated July 13, 1999.
775,862 Shares
[LOGO OF TIBCO]
TIBCO Software Inc.
Common Stock
-----------
This prospectus relates to the offering of 500,000 shares of common stock
directly to Sun Microsystems, Inc. and shares of common stock with an aggregate
purchase price of $4.0 million directly to Yahoo! Inc. Assuming an initial
public offering price of $14.50 per share, we are offering a total of 775,862
shares of common stock to Sun Microsystems and Yahoo!. Concurrently with this
offering, we are offering 7,300,000 shares of common stock in an underwritten
public offering.
Prior to this offering, there has been no public market for the common stock.
The price per share of the common stock offered hereby will be the same as the
price per share of the shares offered in the underwritten public offering. It
is currently estimated that the initial public offering price per share will be
between $14.00 and $15.00. The common stock has been approved for quotation on
the Nasdaq National Market under the symbol "TIBX".
See "Risk Factors" beginning on page 7 to read about factors you should
consider before buying shares of the common stock.
-----------
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the accuracy or
adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
Prospectus dated , 1999.
<PAGE>
[ALTERNATE PAGE FOR CONCURRENT OFFERING PROSPECTUS]
PLAN OF DISTRIBUTION
This prospectus relates to an aggregate of 775,862 shares of common stock,
275,862 of which are being offered to Yahoo! Inc., assuming an initial public
offering price of $14.50 per share, and 500,000 of which are being offered to
Sun Microsystems, Inc. Concurrently with this offering, we are offering
7,300,000 shares of common stock to the public in an underwritten offering. The
price at which the shares are being offered to Yahoo! and Sun Microsystems will
be the same as the price per share in the underwritten offering. Prior to this
offering, there has been no public market for our common stock. The initial
public offering price will be determined by negotiations between us and
Goldman, Sachs & Co., Bear, Stearns & Co., Inc. and Deutsche Bank Securities
Inc., the representatives of the underwriters of the underwritten offering.
Among the factors to be considered in determining the initial public offering
price of the shares, in addition to prevailing market conditions, will be our
historical performance, estimates of our business potential and earnings
prospects, our assessment of our management and the consideration of the above
factors in relation to market valuation of companies in related businesses. Any
shares sold to Yahoo! or Sun Microsystems will be subject to a 180-day lock-up
agreement with the underwriters of the underwritten offering.
U-1
<PAGE>
[ALTERNATE PAGE FOR CONCURRENT OFFERING PROSPECTUS]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
No dealer, salesperson or any other person is authorized to give any
information or represent anything not contained in this prospectus. You must
not rely on any unauthorized information or representations. This prospectus is
an offer to sell only the shares offered hereby, and only under circumstances
and in jurisdictions where it is lawful to do so. The information contained in
this prospectus is current only as of its date.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Financial Data.................................................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 31
Management............................................................... 44
Relationship with Reuters and Certain Transactions....................... 54
Principal Stockholders................................................... 61
Description of Capital Stock............................................. 63
Shares Eligible for Future Sale.......................................... 66
Legal Matters............................................................ 68
Experts.................................................................. 68
Additional Information................................................... 68
Index to Financial Statements............................................ F-1
Plan of Distribution..................................................... U-1
</TABLE>
---------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in the underwritten offering, may be required to deliver a
prospectus. This is in addition to a dealer's obligation to deliver a
prospectus when acting as an underwriter and with respect to an unsold
allotment or subscription.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
775,862 Shares
TIBCO Software Inc.
Common Stock
---------------
[LOGO OF TIBCO SOFTWARE INC. APPEARS HERE]
---------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by the registrant in
connection with the sale of common stock being registered. All amounts are
estimates except the SEC registration fee, the NASD filing fee and the Nasdaq
National Market listing fee.
<TABLE>
<CAPTION>
Amount To
Be Paid
----------
<S> <C>
SEC registration fee............................................. $ 38,204
NASD filing fee.................................................. 14,243
Nasdaq National Market listing fee............................... 95,000
Printing and engraving expenses.................................. 300,000
Legal fees and expenses.......................................... 500,000
Accounting fees and expenses..................................... 1,000,000
Blue Sky qualification fees and expenses......................... 50,000
Transfer agent and registrar fees................................ 20,000
Legal and financial advisor fees of Reuters...................... 2,100,000
Miscellaneous fees............................................... 35,553
----------
Total.......................................................... $4,150,000
==========
</TABLE>
Item 14. Indemnification of Directors and Officers
Article Nine of the registrant's Certificate of Incorporation (Exhibit 3.1
hereto) and Article VI of the Registrant's Bylaws (Exhibit 3.2 hereto) provide
for mandatory indemnification of its directors and officers, and permissible
indemnification of employees and other agents, to the maximum extent permitted
by the Delaware General Corporation Law. In addition, the registrant has
entered into Indemnification Agreements (Exhibit 10.1 hereto) with its
officers and directors. Reference is also made to Section 8 of the
Underwriting Agreement contained in Exhibit 1.1 hereto, which provides for the
indemnification of officers and directors of the registrant against
liabilities related to the underwritten offering.
Item 15. Recent Sales of Unregistered Securities
From the registrant's inception through March 31, 1999, the registrant has
had issued and sold the following securities:
(a) On December 31, 1996, we issued and sold 19,000,000 shares of our
common stock and 20,000,000 shares of our Series A preferred stock to
Reuters Nederland B.V. in connection with the establishment by Reuters
of TIBCO Software Inc. as a separate entity from TIBCO Inc. The
consideration for the issuance of the shares consisted of $10,000,000
plus the book value of the assets transferred to us less the book value
of the assumed liabilities.
(b) On May 9, 1997, we issued and sold 4,365,000 shares of our Series B
preferred stock to Cisco Systems, Inc. for a purchase price of
approximately $15,714,000.
(c) On December 31, 1997, we issued and sold 2,861,316 shares of Series C
preferred stock to entities affiliated with Mayfield Fund LLP for a
purchase price of approximately $11,045,000.
(d) As of March 31, 1999, an aggregate of 4,016,191 shares of common stock
had been issued upon exercise of options under our Stock Option Plan.
II-1
<PAGE>
The issuances of the securities described in (a), (b) and (c) above were
deemed to be exempt from registration under the Securities Act of 1933, as
amended, in reliance on Section 4(2) of the Securities Act as transactions by
an issuer not involving any public offering. The issuances of the securities
described in (d) above were deemed to be exempt from registration under the
Securities Act in reliance on Rule 701 under the Securities Act as
transactions by an issuer in compensatory circumstances. All of the securities
were acquired by the recipients for investment and with no view toward the
resale or distribution thereof. In each instance, the recipients were
sophisticated investors or employees of ours, the offer and sales were made
without any public solicitation and the stock certificates bear restrictive
legends. No underwriter was involved in the transactions and no commissions
were paid. All recipients had adequate access, through their relationships
with the registrant, to information about the registrant.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1(a)** Certificate of Incorporation of Registrant.
3.1(b)** Form of Certificate of Incorporation of Registrant filed with the
Secretary of State of Delaware on July 13, 1999.
3.1(c)** Form of Certificate of Incorporation of Registrant to be effective
after the offering.
3.2(a)** Bylaws of Registrant.
3.2(b)** Form of Bylaws of Registrant to be effective after the offering.
4.1** Form of Registrant's Common Stock certificate.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, regarding legality of the securities being issued.
10.1** Form of Indemnification Agreement.
10.2+ First Amended and Restated License, Maintenance and Distribution
Agreement dated May 28, 1999, among Reuters Limited, TIBCO Finance
Technology, Inc. and Registrant.
10.3** Draft Form of Third Amended and Restated Stockholders Agreement,
among Reuters Nederland B.V., Reuters Limited, Cisco Systems, Inc.,
Mayfield IX, Mayfield Associates Fund III, Vivek Ranadive and
Registrant.
10.4** 1996 Stock Option Plan.
10.5** 1998 Director Option Plan.
10.6 Form of Assignment and Assumption of Lease Agreement, between TIBCO
Finance Technology, Inc. and Registrant.
10.7** Form of Employment Agreement between Registrant and Vivek Y.
Ranadive.
10.8** Form of Employment Agreement between Registrant and Robert P.
Stefanski.
10.9** Form of Employment Agreement between Registrant and Paul G. Hansen.
10.10** Form of Employment Agreement between Registrant and Richard M.
Tavan.
10.11 Form of Master Services Agreement among Registrant, TIBCO Finance
Technology, Inc. and Reuters.
10.12+ Software License and Development Agreement dated May 11, 1999
between Cedel Global Services, societe anonyme and Registrant.
10.13 Industrial Lease Agreement dated December 14, 1995 between Porter
Drive Associates LLC and TIBCO Finance Technology, Inc. (formerly
known as Teknekron Software Systems (Delaware), Inc.)
21.1** List of subsidiaries.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants
(included on page II-5).
24.1** Power of Attorney.
24.2 Power of Attorney executed by recently appointed directors.
27.1** Financial Data Schedule
</TABLE>
- --------
** Previously filed
+ Confidential treatment granted with respect to portions of this exhibit.
II-2
<PAGE>
(b) Financial Statement Schedules
Included in Notes to Financial Statements.
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, as amended, may be permitted to directors, officers and controlling
persons of the registrant, the registrant has had 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 hereunder, the registrant will, unless in the opinion of its
counsel the matter has had 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,
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, 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-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has had duly caused this Amended Registration Statement on Form S-1 to be
signed on its behalf by the undersigned, thereunto duly authorized, in Palo
Alto, California on this 12th day of July, 1999.
TIBCO SOFTWARE INC.
/s/ Paul G. Hansen
By: _________________________________
Paul G. Hansen
Executive Vice President, Finance
and Chief Financial Officer
(Principal Financial Officer)
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>
* President, Chief Executive July 12, 1999
____________________________________ Officer and Chairman of the
Vivek Y. Ranadive Board (Principal Executive
Officer)
/s/ Paul G. Hansen Executive Vice President, July 12, 1999
____________________________________ Finance and Chief Financial
Paul G. Hansen Officer (Principal
Financial Officer)
* Corporate Controller and July 12, 1999
____________________________________ Chief Accounting Officer
Ginger M. Kelly (Principal Accounting
Officer)
* Director July 12, 1999
____________________________________
Douglas M. Atkin
* Director July 12, 1999
____________________________________
Yogen K. Dalal
* Director July 12, 1999
____________________________________
Edward R. Kozel
* Director July 12, 1999
____________________________________
Donald J. Listwin
* Director July 12, 1999
____________________________________
Larry W. Sonsini
* Director July 12, 1999
____________________________________
John G. Taysom
* Director July 12, 1999
____________________________________
Philip K. Wood
</TABLE>
/s/ Paul G. Hansen
*By: __________________________
Paul G. Hansen
Attorney-in-fact
II-4
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 23, 1999,
relating to the financial statements of TIBCO Software Inc., which appears in
such Prospectus. We also consent to the references to us under the heading
"Experts" in such Prospectus.
/s/ PricewaterhouseCoopers LLP
San Jose, California
July 12, 1999
II-5
<PAGE>
EXHIBITS INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1** Form of Underwriting Agreement.
3.1(a)** Certificate of Incorporation of Registrant.
3.1(b)** Form of Certificate of Incorporation of Registrant filed with the
Secretary of the State of Delaware on July 13, 1999.
3.1(c)** Form of Certificate of Incorporation of Registrant to be effective
after the offering.
3.2(a)** Bylaws of Registrant.
3.2(b)** Form of Bylaws of Registrant to be effective after the offering.
4.1** Form of Registrant's Common Stock certificate.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, regarding legality of the securities being issued.
10.1** Form of Indemnification Agreement.
10.2+ First Amended and Restated License, Maintenance and Distribution
Agreement dated May 28, 1999, among Reuters Limited, TIBCO Finance
Technology, Inc. and Registrant.
10.3** Draft Form of Third Amended and Restated Stockholders Agreement,
among Reuters Nederland B.V., Reuters Limited, Cisco Systems, Inc.,
Mayfield IX, Mayfield Associates Fund III, Vivek Ranadive and
Registrant.
10.4** 1996 Stock Option Plan.
10.5** 1998 Director Option Plan.
10.6 Form of Assignment and Assumption of Lease Agreement, between TIBCO
Finance Technology, Inc. and Registrant.
10.7** Form of Employment Agreement between Registrant and Vivek Y.
Ranadive.
10.8** Form of Employment Agreement between Registrant and Robert P.
Stefanski.
10.9** Form of Employment Agreement between Registrant and Paul G. Hansen.
10.10** Form of Employment Agreement between Registrant and Richard M.
Tavan.
10.11 Form of Master Services Agreement among Registrant, TIBCO Finance
Technology, Inc. and Reuters.
10.12+ Software License and Development Agreement dated May 11, 1999
between Cedel Global Services, societe anonyme and Registrant.
10.13 Industrial Lease Agreement dated December 14, 1995 between Porter
Drive Associates LLC and TIBCO Finance Technology, Inc. (formerly
known as Teknekron Software Systems (Delaware), Inc.)
21.1** List of subsidiaries.
23.1 Consent of Wilson Sonsini Goodrich & Rosati, Professional
Corporation (included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants
(included on page II-5).
24.1** Power of Attorney.
24.2 Power of Attorney executed by recently appointed directors.
27.1** Financial Data Schedule
</TABLE>
- --------
**Previously filed
+Confidential treatment granted with respect to portions of this exhibit
<PAGE>
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE 650-493-9300 FACSIMILE 650-493-6811
WWW.WSGR.COM
PALO ALTO, CALIFORNIA JOHN ARNOT WILSON
KIRKLAND, WASHINGTON RETIRED
AUSTIN, TEXAS
EXHIBIT 5.1
-----------
July 12, 1999
TIBCO Software Inc.
3165 Porter Drive
Palo Alto, CA 94304
RE: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed by you with
the Securities and Exchange Commission on May 11, 1999 (Registration No. 333-
78195), including all amendments thereto through the date hereof (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of up to 8,200,000 shares of your Common
Stock (the "Shares"), including an option granted to the underwriters to
purchase up to an additional 1,095,000 shares to cover over-allotments. We
understand that you are selling the Shares to the underwriters for resale to the
public as described in the Registration Statement. As your legal counsel, we
have examined the proceedings taken, and are familiar with the proceedings
proposed to be taken, by you in connection with the sale and issuance of the
Shares.
It is our opinion that, upon completion of the proceedings being taken or
proposed to be taken by us, as your legal counsel, prior to the issuance of the
Shares, the Shares will be legally issued, fully paid and non-assessable when
sold in the manner described in the Registration Statement.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
EXHIBIT 10.2
FIRST AMENDED AND RESTATED
LICENSE, MAINTENANCE AND DISTRIBUTION AGREEMENT
THIS FIRST AMENDED AND RESTATED LICENSE, MAINTENANCE AND DISTRIBUTION
AGREEMENT is entered as of this 28th day of May, 1999 ("Effective Date"), by and
between Reuters Limited, a company organized under the laws of England and
Wales, with offices at 85 Fleet Street, London EC4P 4AJ, United Kingdom
("Reuters") and TIBCO Finance Technology, Inc., a Delaware corporation, with
offices at 3375 Hillview Avenue, Palo Alto, California 94304 ("TFT"), on the one
hand, and TIBCO Software, Inc., a Delaware corporation, with offices at 3165
Porter Drive, Palo Alto, CA 94304 ("TSI"), on the other.
WITNESSETH:
WHEREAS, Reuters owns all right, title and interest in and to certain
software and related technology for the creation of infrastructure middleware
and devices for linking information, applications, and other software across
local, wide-area and intra/inter networks in an event-driven (publish and
subscribe) fashion;
WHEREAS, TFT is a subsidiary of Reuters that develops and markets products
and services based on such Reuters technology for various applications in the
financial services market and TSI is a majority-owned indirect subsidiary of
Reuters that was established by Reuters to, among other things, develop products
and services based on such Reuters technology for various applications not
related to financial services;
WHEREAS, Reuters, TFT and TSI entered into the License, Maintenance and
Distribution Agreement dated as of December 31, 1996 (the "Existing License
----------------
Agreement");
- ---------
WHEREAS, Reuters, TFT and TSI desire to amend and restate the Existing
License Agreement on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, the parties hereto agree as follows:
ARTICLE 1.
DEFINITIONS
1.1 Construction. All references in this Agreement to "Articles,"
------------
"Sections," and "Schedules" refer to the articles, sections, exhibits and
schedules to this Agreement. As used in this Agreement, neutral pronouns and
any variations thereof shall be deemed to include the feminine and masculine and
all terms used in the singular shall be deemed to include the plural, and vice
versa, as the context may require. The words "hereof", "herein" and "hereunder"
------ ------ ---------
and other words of similar import refer to this Agreement as a whole, including
the exhibits and schedules hereto, as the same may from time to time be amended
or supplemented and not to any
[ * ] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
subdivision contained in this Agreement. The word "including" when used herein
---------
is not intended to be exclusive and means "including without limitation."
-----------------------------
References in this Agreement to "sell" and "sale" and the like, when used with
respect to software, shall be deemed to refer to grant of a license of such
software and shall in no event imply the transfer of title to such software.
1.2 Capitalized Terms. The following capitalized terms will have the
-----------------
meanings provided below:
(a) "Acquiror's Products" means (i) products owned or Controlled by
-------------------
any Person that acquires in a bona fide transaction all or substantially all of
the business or assets of TSI (whether by merger, acquisition, asset sale or
similar transaction), as of immediately prior to the effectiveness of the
acquisition of such business or assets, and including products owned or
Controlled by such Person that are under development as of such acquisition date
and that are first made commercially available within six (6) months thereafter,
and (ii) products derived from or based upon the products described in (i) above
and that are made commercially available within six (6) months of such
acquisition date.
(b) "Affiliate(s)" of a Party means a Person that, but only for so
------------
long as such Person, directly or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, such Party,
provided, however, that, for the purposes of this Agreement, (i) Reuters and TSI
and (ii) TFT and TSI, shall not be considered Affiliates of each other. For the
purposes of the foregoing, unless otherwise stated with respect to the use of
the term "Affiliate", "control" means the direct or indirect ownership by the
controlling entity of 40% or more of the voting stock of the controlled entity
or the right of the controlled entity to appoint more than 40% of the board of
directors of the controlled entity. The term "Affiliates" excludes Persons that
are under common ownership by a governmental or national entity.
(c) "Agreement" means this First Amended and Restated License,
---------
Maintenance and Distribution Agreement, including all exhibits and schedules
hereto.
(d) "Agreement of Organization" means that certain agreement dated as
-------------------------
of November 14, 1996 by and among Reuters, TFT, Reuters Nederland, B.V., TSI and
Vivek Ranadive.
(e) "Authorized License" means a license pursuant to which products
------------------
are licensed, or services are provided, by TSI to a Third-party or to an
Affiliate of TSI, or by the Reuters Parties to a Third-party, and which
contains, at a minimum, terms as protective of the Parties as the terms set
forth in Schedule 1.2(e), and which is consistent with such terms and the terms
of this Agreement.
(f) "Broker" means any Person engaged in the business of effecting
------
transactions in Securities for the account of others, including proprietary
trading systems, electronic brokers, and any such Person that is also a Dealer.
(g) "Commodity Product" means a Licensed Product or any other software
-----------------
product sold or licensed by TSI as an off-the-shelf, stand-alone product, sold
or licensed,
2
<PAGE>
pursuant to an industry standard shrink wrap or click wrap license, directly or
through normal software distribution channels, and which is intended by TSI or
an Affiliate of TSI to be used by the end-user without the requirement for
additional customization, or consulting services, excluding any such product
that constitutes a Financial Product.
(h) "Confidential Information" means any information disclosed by one
------------------------
Party to the other, which if in written, graphic, machine-readable or other
tangible form is marked as "Confidential" or "Proprietary", or which, if
disclosed orally or by demonstration, is identified at the time of initial
disclosure as confidential and reduced to writing and marked "Confidential"
within thirty (30) days of such disclosure.
(i) "Control" means, with reference to rights, software products or
-------
other Technology not owned by a referenced Party, the right of such Party to
grant rights and sublicenses with respect thereto to the other Party or Parties
without violating any obligation owing by such Party to a Third-party or an
Affiliate of such other Party; provided that, if a payment of royalties or other
consideration to such Third-party or such Affiliate is required in connection
with the exercise by such other Party or Parties or their Affiliates of such
rights, such software products and other Technology shall be deemed not to be
Controlled by such Party unless such other Party or Parties agrees in writing to
be responsible for all such royalties and consideration payable to such Third-
party or Affiliate.
(j) "Dealer" means any Person engaged in the business of buying and
------
selling Securities for his own account, through a Broker or otherwise.
(k) "Deliverable" means any tangible material, work or thing delivered
-----------
by one Party to the other hereunder, including, without limitation, the physical
media on which any Source Code or Object Code is stored and associated technical
documentation.
(l) "Derivative Works" has the meaning ascribed to it under the United
----------------
States Copyright Law, Title 17 U.S.C. Sec. 101 et seq.
(m) "Disclosing Party" means a Party that discloses Confidential
----------------
Information to the other Party.
(n) "Distribution License" has the meaning set forth in Section
--------------------
6.1(a).
(o) "Effective Date" has the meaning set forth in the preamble.
--------------
(p) "Embedded" means, with reference to a hardware or software product
--------
or component thereof, the incorporation or integration of such hardware or
software product or component thereof with another hardware or software product
or component thereof that contains significant additional functionality or
features, provided such first hardware or software product or component thereof
(including its application programming interfaces) cannot be accessed and used
by an end-user on a stand-alone basis. In the context of a service offering,
"Embedded" means the use of a hardware or software product or component thereof
in a value-added service offering containing significant additional
functionality or features (such as a Reuters information
3
<PAGE>
service or Personal Trader Workstation); provided that the end user of such
service offering is not able to access and use such product or component
(including its application programming interfaces) directly or on a stand-alone
basis. For the avoidance of doubt, "Embedded" use shall not include stand-alone
rental, service bureau or similar stand-alone use of such software product or
component thereof.
(q) "Enhancement" means any improvement, upgrade, enhancement, fix,
-----------
extension to, or add-on module compatible or interoperable with, or Derivative
Work of, any Technology, including any software or hardware.
(r) "Exclusivity Period" has the meaning set forth in Section 6.1(c).
------------------
(s) "Existing License Agreement" has the meaning set forth in the
--------------------------
Recitals.
(t) "ETX Software" means the TIB/Enterprise Transaction Express
------------
transaction-based messaging system that is based on the TIB Software.
(u) "Financial Product" means a software or hardware product
-----------------
specifically designed for use by a Financial Services Company, including such
products that are intended or designed primarily to operate as, or as part of,
financial trading or financial transactions products or systems, financial news,
financial information or financial data products or systems or market data
systems.
(v) "Financial Services Company" means any Person that is engaged in
--------------------------
or operates a financial services business including, without limitation, banks
(including savings, commercial, merchant, and investment banks and credit
unions), Securities Brokers, Dealers, investment managers, investment funds or
partnerships, insurers, reinsurers, clearing organizations, Securities trading
rooms and Securities exchanges. A Person shall be deemed to be engaged in or
operate a financial services business for purposes of the foregoing sentence if
such Person is a member of a group of related or affiliated companies where a
majority portion measured in terms of revenues or capitalization of such group
is attributable to activities constituting or relating to a financial services
business; provided, however, that any such member of such a group of related or
affiliated companies that itself is not engaged in or does not operate a
financial services business shall not be considered a Financial Services Company
if such member agrees in writing not to provide access to any Licensed Products
or Licensed Services to or for the benefit of any other member of such group
that is or is deemed to be a Financial Services Company. A Person that is
engaged in a financial services business that is merely incidental to the
operation of that Person or its Affiliates shall not by reason of such
incidental activity be considered a "Financial Services Company."
(w) "Intellectual Property Rights" means all rights owned or
----------------------------
Controlled by a Party hereto in, to, or arising out of: (i) any U.S. or foreign
patent or any application therefor and any and all reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof; (ii)
inventions (whether patentable or not in any country), invention disclosures,
improvements, trade secrets, proprietary information, know-how, technology and
technical data; (iii) copyrights, copyright registrations and, applications
therefor in the U.S. or any foreign
4
<PAGE>
country, and all other rights corresponding thereto throughout the world; and
(iv) any other proprietary or intellectual property rights, including any rights
in Technology, including software, arising anywhere in the world, but excluding
any trade names, trademarks, service marks and similar rights.
(x) "Licensed Products" means any software and/or hardware products,
-----------------
based on or incorporating any TIB Technology and Reuters Enhancements, excluding
any Financial Products, if such products are covered by one or more unexpired
and valid patents of the Reuters Parties, incorporate or comprise a work of
authorship (including without limitation any derivative work) that is protected
in whole or in part by any valid copyrights of the Reuters Parties, embody or
utilize any trade secrets of the Reuters Parties that remain protectible under
applicable law or otherwise are protected or covered by valid and subsisting
Intellectual Property Rights of the Reuters Parties. As of the Effective Date,
the Licensed Products include, without limitation, TIB Rendezvous, TIB/Hawk,
TIB/Energy, TIB/ETK and the ETX Software. Following the Effective Date, the
parties will negotiate in good faith appropriate procedures, including dispute
resolution mechanisms, for determining, in a manner binding on the Parties,
which TSI Products, including new TSI Products first released after the
Effective Date, constitute Licensed Products as defined herein.
(y) "Licensed Services" means services, including consulting, design,
-----------------
integration, customization, operation and development services, based on,
related to, or using the TIB Technology and Reuters Enhancements, provided by
TSI to Third-parties that are not a Financial Services Company (it being agreed
and acknowledged that any such services shall continue to constitute Licensed
Services only if such services are based on, relate to or use TIB Technology or
Reuters Enhancements that are covered by one or more unexpired and valid patents
of the Reuters Parties, incorporate or comprise a work of authorship (including
without limitation any derivative work) that is protected in whole or in part by
any valid copyrights of the Reuters Parties, embody or utilize any trade secrets
of the Reuters Parties that remain protectible under applicable law or otherwise
are protected or covered by valid and subsisting Intellectual Property Rights of
the Reuters Parties).
(z) "Maintenance Services" means the maintenance and support services
--------------------
to be provided by TSI to Reuters and TFT in accordance with Section 5.2.
(aa) "Object Code" means machine-executable computer software prepared
-----------
by compiling and linking Source Code or machine independent representations of
computer software intended for subsequent interpretation or just-in-time
compiling.
(bb) "OEM Sales" has the meaning set forth in Section 2.5(b).
---------
(cc) "Original Effective Date" means December 31, 1996, the effective
-----------------------
date of the Existing License Agreement.
(dd) "Party" means either or both of (i) Reuters and TFT; or (ii) TSI.
-----
5
<PAGE>
(ee) "Person" means any legal person or entity, including any
------
individual, corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated association, limited liability corporation,
governmental entity, or other person or entity of similar nature.
(ff) "Quarterly Minimum License Fee Installments" has the meaning set
------------------------------------------
forth in Section 6.3(a).
(gg) "Receiving Party" means a party that receives Confidential
---------------
Information from the other Party.
(hh) "Reserved Field" means the use of TIB Technology or Reuters
--------------
Enhancements in the operation of a Financial Services Company, or the licensing
of the TIB Technology or Reuters Enhancements or any product or service based
thereon, directly or indirectly to (whether or not through the use of an
interposed Person or through or to consultants to or agents of) a Financial
Services Company, or the provision of any consulting, design, integration,
customization, operational, support or development services to any Financial
Services Company.
(ii) "Reuters Enhancements" shall have the meaning set forth in
--------------------
Section 2.3.
(jj) "Reuters Intellectual Property Rights" means all Intellectual
------------------------------------
Property Rights owned or Controlled by Reuters or TFT that cover, protect or are
embodied in any TIB Technology or any Reuters Enhancements or the manufacture or
use of TIB Technology or Reuters Enhancements.
(kk) "Reuters Parties" means Reuters and TFT.
---------------
(ll) "Revenue-Sharing Products" shall have the meaning set forth in
------------------------
Section 6.3(a).
(mm) "Security" means any note, stock, treasury stock, bond,
--------
debenture, certificate of interest or participation in any profit-sharing
agreement or in any oil, gas, or other mineral royalty or lease, any collateral-
trust certificate, preorganization certificate or subscription, transferable
share, investment contract, voting-trust certificate, certificate of deposit,
for a security; any put, call, straddle, option, or privilege on any security;
certificate of deposit, or group or index of securities (including any interest
therein or based on the value thereof), or any, swap, put, call, straddle,
option, or privilege entered into on a securities exchange relating to foreign
currency, or in general, any instrument commonly known as a "security"; or any
certificate of interest or participation in, temporary or interim certificate
for, receipt for, or warrant or right to subscribe to or purchase, any of the
foregoing, all contracts for the sale of any of the foregoing or of any
commodity for future delivery, options thereon, and commodity options (including
but not limited to cash currency options) as those terms are defined in the US
Commodity Exchange Act, that are traded on or subject to the rules of a formally
organized and regulated exchange.
6
<PAGE>
(nn) "Source Code" means computer software and any associated
-----------
documentation in human-readable form, including programmers' comments, and the
following items to the extent that they are confidential: data files and
structures, APIs, header and include files, macros, programming tools not
commercially available, technical specifications, flowcharts and logic diagrams.
(oo) "Special Purpose Joint Venture" means a joint venture or similar
-----------------------------
arrangement between Reuters and TSI for the purposes of undertaking a specific
development or consulting project for one or more Third-parties.
(pp) "Specified Companies" means the following: [ * ] and its
subsidiaries and any other principal competitor of Reuters.
(qq) "Technology" means all technology, including without limitation,
----------
all know-how, show-how, techniques, trade secrets, inventions (whether or not
patented or patentable), algorithms, routines, software (including firmware and
middleware) files, data-bases, processes, devices and hardware.
(rr) "TFT- Reuters License" means that certain Products Distribution
--------------------
Agreement dated as of August 3, 1995 by and between Reuters Limited and
Teknekron Software Systems, Inc.
(ss) "TFT Financial Products" means the TFT products listed on
----------------------
Schedule 1.2(ss) and any other Financial Products that were owned or Controlled
by TFT as of the Original Effective Date.
(tt) "Third-party" means any Person other than (i) a Party or (ii) an
-----------
Affiliate of a Party.
(uu) "Third Party Reseller" has the meaning set forth in Section
--------------------
2.5(a).
(vv) TIB-Derived Technology" means any Technology derived from or
----------------------
based on any TIB Technology or Reuters Enhancements, including any Derivative
Work created from any TIB Technology or Reuters Enhancements.
(ww) "TIB Software" means the infrastructure middleware, in Source
------------
Code and Object Code form, for linking information, applications, or other
software across local, wide area and intra/inter networks in an event-driven
(publish and subscribe) fashion, and its associated administrative components
owned by Reuters as of the Original Effective Date, licensed to TFT pursuant to
the TFT-Reuters License, and licensed to TSI hereunder, but excluding (and the
licenses contemplated hereby exclude): (i) any software applicable exclusively
to the Reserved Field, and also excluding any TFT Financial Products; and (ii)
any software created by TFT exclusively for Reuters pursuant to the Research and
Development Agreement between Teknekron Software Systems Inc. and Reuters, dated
as of August 3, 1995.
7
[ * ] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
<PAGE>
(xx) "TIB Technology" means all Technology, including the TIB
--------------
Software, related to the creation of infrastructure middleware or devices for
linking information, applications, and other software across local, wide-area
and intra/inter networks in an event-driven (publish and subscribe) fashion and
owned or Controlled by a Reuters Party. For the avoidance of doubt, TIB
Technology does not include any Technology independently developed by TSI after
the Original Effective Date.
(yy) "Transferred TIB-Related Marks" means the trademarks, service
-----------------------------
marks and other marks listed on Schedule 1.2(yy) and their derivatives.
(zz) "TSI Intellectual Property Rights" means all Intellectual
--------------------------------
Property Rights owned or Controlled by TSI.
(aaa) "TSI Products" means any software and/or hardware products that
------------
are owned or Controlled by TSI for so long as TSI owns or Controls such
products, but in all events excluding Acquiror's Products (it being agreed and
understood that any TSI software and/or hardware products, and any derivative or
successor products thereto, included in any Acquiror's Products immediately
prior to the time at which the Person in question acquires all or substantially
all of the business or assets of TSI, shall continue to constitute TSI Products
hereunder notwithstanding the foregoing exclusion of Acquiror's Products).
(bbb) "TSI Technology" means any Technology owned or Controlled by
--------------
TSI (including any first developed or acquired after the Effective Date),
including without limitation any Enhancements to the TIB Technology owned or
Controlled by TSI.
(ccc) "TSI Limited Distribution Rights" means those non-exclusive,
-------------------------------
worldwide, distribution rights of TSI to certain TFT products to be designated
in writing from time to time by TFT (but which shall include MarketSheet, value-
added servers such as TIC and GSM, and feed handlers) and distributed by TSI to
non-Financial Services Companies or to Financial Services Companies solely in
connection with TSI-provided TIBCO.net hosting services pursuant to Section
2.12, with (I) TFT providing or having provided second and third-level support
to TSI, (II) TSI paying to TFT a license and maintenance distribution fee of
40% of all revenue recognized in accordance with the allocation principles of
Section 6.4 and GAAP in respect of such products unless otherwise agreed and
(III) as to be specifically set forth in a standard distribution agreement
between TSI and TFT.
ARTICLE 2.
LICENSE GRANTS
2.1 Reuters- TIB Technology License.
-------------------------------
(a) Subject to the terms and conditions of this Agreement, including
Section 2.4, the Reuters Parties hereby grant to TSI a royalty-free, fully paid,
worldwide, perpetual, non-exclusive, non-assignable, non-sublicensable (except
as provided in
8
<PAGE>
Sections 2.1(a)(2), 2.1(b) and 2.5 below) and irrevocable right and license
under the Reuters Intellectual Property Rights to:
(1) Make, have made, internally use, copy, modify, and create
Derivative Works from the TIB Software and otherwise internally use and exploit
the TIB Technology for the purposes of developing, creating and maintaining
Licensed Products;
(2) Perform, display, offer for sale, import, sell, sublicense and
distribute Licensed Products; provided that, except as set forth in Section
2.1(c) below, any TIB Software included in, or forming part of, such Licensed
Products is distributed only in Object Code form and only in accordance with an
Authorized License;
(3) Make, have made, internally use, copy, modify and create
Derivative Works from the TIB Software and otherwise internally use and exploit
the TIB Technology, for the purposes of providing Licensed Services in
accordance with an Authorized License;
(4) Make, have made, internally use, copy, modify and create
Derivative Works from the TIB Software and otherwise internally use and exploit
the TIB Technology, for the purpose of performing TSI's obligations as a
participant in a Special Purpose Joint Venture; and
(5) Make, have made, internally, use, copy, modify and create
Derivative Works from the TIB Software and otherwise internally use and exploit
the TIB Technology for the purpose of performing Maintenance Services.
(b) Subject to and without limiting Sections 2.5 and 6.1(a), (b), (c) and
(d), TSI shall have the right to distribute Licensed Products through Third-
party and Affiliate distributors, resellers and original equipment
manufacturers, provided that the terms and conditions of TSI's distribution
arrangements are consistent with and in compliance with the terms and conditions
of this Agreement.
(c) TSI shall not directly or indirectly license, disclose, or permit or
provide access to, TIB Software Source Code to any Third-party or any TSI
Affiliate except in the following circumstances and in accordance with the
following procedures:
(1) If TSI reasonably believes that it is necessary for it to license
such Source Code to a Third-party (other than a Financial Services Company or a
Specified Company) or any TSI Affiliate for the purposes of pursuing a strategic
relationship with such Third-party or TSI Affiliate necessary to increase the
marketability or value of the TIB Technology (for example, an arrangement
whereby the TIB Technology will be incorporated in a widely distributed Third-
party operating system), it shall so inform Reuters and provide Reuters with
such details of the proposed transaction as Reuters shall reasonably request.
Following Reuters' review of such materials, which shall occur promptly, Reuters
shall inform TSI whether Reuters consents to TSI granting the contemplated
Source Code license and any terms and conditions that Reuters reasonably
requires to be added to the Source Code license between TSI and such
9
<PAGE>
Third-party. Reuters may condition its approval of the Source Code license on
the incorporation of the terms reasonably suggested by Reuters.
(2) Reuters shall not unreasonably withhold or delay its approval
of TSI granting a Source Code license in accordance with the foregoing.
(3) Under no circumstances shall TSI license or provide Source
Code to any Third-party absent Reuters' express, prior written approval in
accordance with the foregoing.
(d) Notwithstanding the provisions of Section 2.3(c), following the
first to occur of December 31, 1999, or the consummation of an initial public
offering of the stock of TSI, TSI shall no longer have the obligation to obtain
Reuters' review or approval prior to, or in connection with, the licensing of
TIB Software Source Code to Third-parties pursuant to Section 2.3(c); provided
that any such licensing shall in all events remain subject to the terms and
conditions of this Agreement, including Section 2.4; and any terms and
conditions of an Authorized License which by nature are inconsistent with the
licensing of Source Code shall be subject to appropriate modification to reflect
such licensing of Source Code.
(e) In consideration of the grant of the foregoing license to TSI by
the Reuters Parties, TSI shall grant to Reuters the license under the TSI
Intellectual Property Rights set forth in Section 2.6.
2.2 Reservation of Rights. All rights in or to any Reuters Intellectual
---------------------
Property Rights not expressly granted toTSI hereunder are reserved to the
Reuters Parties.
2.3 Reuters Enhancements to TIB Technology.
--------------------------------------
(a) Either Reuters Party may, in its sole discretion, create or
acquire any Enhancement to the TIB Software ("Reuters Enhancements") following
--------------------
the Effective Date.
(b) In the event that: (i) either Reuters Party develops any Reuters
Enhancements prior to the fifteenth (15th) anniversary of the Original Effective
Date; and (ii) the incorporation of such Reuters Enhancements into Licensed
Products, or the use of such Reuters Enhancements by TSI, would facilitate
compatibility, interoperability or conformance to common standards between TSI
and Reuters or TFT products based on TIB Technology, then, subject to the terms
and conditions hereof, Reuters shall disclose such Reuters Enhancements to TSI
and shall, and hereby does, grant to TSI a royalty-free, fully-paid, worldwide,
non-exclusive, perpetual, non-sublicensable (except when Embedded in Licensed
Products as provided in Section 2.3(b)(2)), and irrevocable right and license
under all Intellectual Property Rights owned by Reuters at any time prior to the
fifteenth (15th) anniversary of the Original Effective Date, in such Reuters
Enhancements, to:
(1) Internally use, copy, modify and create Derivative Works from
such Reuters Enhancements, and otherwise internally use and exploit such Reuters
Enhancements, or any Technology derived from or based on such Enhancements, in
developing,
10
<PAGE>
making, having made, importing, creating, providing, maintaining and enhancing
Licensed Products or Licensed Services; and
(2) Distribute, perform, display, sell or license such Reuters
Enhancements, or any Technology derived from or based on such Enhancements, in
each case only if Embedded in Licensed Products, including as an integral part
of Licensed Products, or as a feature thereto.
(c) Following the fifteenth (15th) anniversary of the Original
Effective Date, the license granted pursuant to Section 2.3(b) shall continue in
perpetuity without payment of any kind to Reuters; provided, however, that such
license shall not apply to any Reuters Enhancements that come into existence
following such anniversary, except as may be agreed by Reuters and TSI. For the
purpose of the foregoing, any patent rights shall be deemed to have come into
existence as of the earliest priority date that may be claimed by the
application resulting in such patent and regardless of the issuance date of such
patent.
(d) The Parties agree that ETX Software constitutes TIB Software
licensed to TSI pursuant to the Existing License Agreement and that all
Enhancements to ETX Software created or developed by TFT after the Original
Effective Date constitute "Reuters Enhancements" hereunder. TSI shall,
accordingly, maintain ETX Software to the same extent as TSI maintains other
Licensed Products pursuant to Section 5.2. TFT shall retain all revenue it has
recognized or in the future may recognize, if any, with respect to the
licensing, sub-licensing, distribution, maintenance or support of ETX Software
(including its upgrades, Enhancements and subsequent versions). TSI shall
retain all revenue it has recognized with respect to the licensing, maintenance
or support of the ETX Software to or for customers who are not Financial
Services Companies. TFT will pay to TSI, the actual cost (fully burdened, but
not at intercompany charge rates) of TSI personnel who have developed, supported
and maintained, or shall in the future develop, support or maintain, the ETX
Software sold or licensed to TFT customers, effective from the date such
personnel became employees of TSI (as of July of 1998), excluding any costs
incurred in connection with the development of TSI's RVTX product. The actual
cost of such TSI personnel who have developed, supported and maintained the ETX
Software prior to the Effective Date shall be paid by TFT within thirty (30)
days after receipt of an invoice therefor from TSI, together with appropriate
substantiation. The actual cost of TSI personnel who in the future develop,
support or maintain the ETX Software shall be paid on a quarterly basis upon
receipt of an invoice from TSI therefor, together with appropriate
substantiation. TFT shall have the audit rights provided in Section 12.3 in
connection with amounts billed by TSI under this Section 2.3(d).
2.4 Limitations on Right of TSI to Exploit TIB Technology In Reserved
-----------------------------------------------------------------
Field.
-----
(a) TSI is not authorized to, and TSI agrees that it shall not, except
as expressly permitted herein, make available, license, sell, distribute or
otherwise commercially exploit any existing or future Licensed Products directly
to a Financial Services Company or a Specified Company by any means whatsoever,
whether now existing or hereafter devised, subject only to the right of TSI to
license or distribute Commodity Products to Financial Service
11
<PAGE>
Companies when and as provided in Section 6.3(a) and TSI's rights granted in
Section 2.12. Subject to TSI's rights under Section 6.3(a) and Section 2.12, TSI
(i) shall use all commercially reasonable efforts to prevent any licensing or
distribution by it or any of its Affiliates of Licensed Products over the
Internet directly to Financial Services Companies and (ii) shall neither
maintain any sales force to sell any Licensed Products nor provide any Licensed
Services directly to Financial Services Companies and shall neither sell and
distribute any Licensed Products nor provide any Licensed Services indirectly to
Financial Services Companies except through a Third Party Reseller to the extent
expressly permitted by Section 2.5. More specifically, subject to TSI's rights
under Sections 2.5, 2.12 and 6.3(a), the license to TIB Technology and Reuters
Enhancements granted by the Reuters Parties to TSI in Sections 2.1 and 2.3 shall
exclude any right under the Reuters Intellectual Property Rights to, and subject
to Sections 2.5, 2.12 and 6.3(a) under no circumstances shall TSI or any
Affiliate of TSI:
(1) use, copy, display, create Derivative Works from, or otherwise
exploit any TIB Technology, any TIB-Derived Technology or any Reuters
Enhancements for the purposes of developing, creating, enhancing, maintaining or
supplying any products (including without limitation any Financial Product) or
providing any services directly for or to any Financial Services Company (other
than Reuters or a Reuters Affiliate) or Specified Company;
(2) provide, disclose or license any TIB Technology, any TIB-Derived
Technology or any Reuters Enhancements directly to any Financial Services
Company or Specified Company;
(3) provide any design, consulting, integration, embedding, [A
operational support, partnering, co-sourcing, data processing, network
management, service provisioning, or other similar services that utilize in any
way any TIB Technology, or any Reuters Enhancement, or are provided with any TIB
Technology, or any Reuters Enhancements, in any case directly to any Financial
Services Company or Specified Company;
(4) make available, license, sell or otherwise distribute any Licensed
Product, whether stand-alone or on a packaged basis with a Financial Product,
directly to any Financial Services Company or Specified Company; and
(5) use, copy, display, develop, license, or support any Financial
Products that incorporate or are based on any TIB Technology, any TIB-Derived
Technology or any Reuters Enhancements, including any Licensed Products that
include or are packaged with a Financial Product, or any Licensed Product that
includes functionality or features that are specifically designed for use by a
Financial Services Company or a Third-party for the purpose of developing
products or services for Financial Services Companies.
(b) The limitations set forth in Section 2.4(a)(5) shall not prohibit TSI
from developing, supporting, maintaining, enhancing, providing services for,
selling, licensing or otherwise distributing Licensed Products to or for a
Third-party that is not a Financial Services Company or a Specified Company and
(1) that have applicability to Financial Services Companies so long as such
products are generally applicable to other fields and do not include
functionality or features specifically designed for use by a Financial Services
Company and are
12
<PAGE>
not specifically designed for use by a Third-party for the purpose of developing
products or services for Financial Services Companies or (2) that include
functionality or features requested by either of the Reuters Parties.
(c) TSI shall disclose to Reuters the identity of each Person with
whom TSI enters into an agreement or other arrangement to provide Licensed
Products or Licensed Services, or to otherwise disclose Confidential Information
pertaining to any TIB Technology or Reuters Enhancements. Such information
shall be reported to Reuters at least semi-annually. Reuters' receipt of any
report shall be without prejudice to Reuters' rights and remedies under this
Agreement and shall not be construed in any way as the acceptance by Reuters of
the compliance by TSI with any other of the terms of this Agreement. Such
reports shall be provided directly to Reuters and not to TFT and shall be used
by Reuters solely with respect to Reuters' review of TSI's compliance with this
Agreement and the enforcement of this Agreement.
2.5 Extent of Permitted Third-Party Distribution in Reserved Field.
--------------------------------------------------------------
(a) Notwithstanding anything to the contrary stated in this
Agreement, the Reuters Parties hereby grant to TSI a royalty-free (but subject
to the revenue sharing obligations expressly set forth in Section 2.5(b)), fully
paid up, worldwide, perpetual, non-exclusive, non-assignable right and license,
under the Reuters Intellectual Property Rights, to grant any and all systems
integrators, original equipment manufacturers, resellers, distributors or other
licensees other than any Financial Services Company or Specified Company (each a
"Third Party Reseller") of Licensed Products (whether in Object Code or Source
--------------------
Code form), without payment by the Third Party Reseller of any license fees or
other consideration to the Reuters Parties (but subject to the revenue sharing
obligations expressly set forth in Section 2.5(b)), non-exclusive, worldwide,
perpetual, rights and licenses to exercise any and all of the rights under the
license to TIB Technology granted by Reuters to TSI in Section 2.1 and to
Reuters Enhancements granted by Reuters to TSI in Section 2.3, whether inside or
outside the Reserved Field and in each case without subjecting the Third Party
Reseller to the limitations set forth in Section 2.4, but without relieving TSI
of its obligations to comply with the provisions of Section 2.4 and in all cases
subject to the following provisions of this Section 2.5.
(b) Notwithstanding anything to the contrary stated in this Agreement,
nothing herein shall require that the Third Party Reseller itself be subject to
contractual prohibitions on use or distribution of Licensed Products or using,
preparing or distributing any Derivative Work based on any Licensed Products in
the Reserved Field; provided that any revenue received from a Third Party
Reseller and recognized by TSI in accordance with GAAP, (less any discounts not
already deducted from revenues and less any withholding taxes included in such
revenues), that is attributable to sales or distribution of TSI Products that
are Licensed Products by such Third Party Reseller, or the provision of related
maintenance or support by such Third Party Reseller, in each case to Financial
Services Companies shall be spilt equally between Reuters and TSI on a 50/50
basis (with TSI being obligated to pay Reuters its share of any such revenue
within thirty (30) days after the end of each fiscal quarter after receipt by
TSI of any related payments by such Third Party Reseller).
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(1) The provisions of Section 6.4 hereof are applicable with respect
to allocating revenues attributable to sales of such TSI Products that are
Licensed Products (or the provision of related maintenance or support) relative
to revenues attributable to any other TSI products, services or any other item,
sold or provided in connection therewith.
(2) No such sharing of license and maintenance revenue shall be
applicable in respect of sales ("OEM Sales") by a Third Party Reseller (or its
---------
distributor) of any hardware or software products of such Third Party Reseller
into or with which any Licensed Product has been Embedded, integrated or
packaged and to which the Third Party Reseller has contributed substantial
value-added functionality and features in addition to such Licensed Product
(e.g., Cisco bundling TSI Products on a CD with its Active Directory network
applications), but excluding any sales by systems integrators and other
resellers of integrated or packaged products that include Licensed Products to a
customer in connection with a specific transaction rather than as a part of an
integrated or packaged product that is released for commercial sale to their
customers generally ("OEM Reseller").
------------
(3) Nothing in Sections 2.4(b) and 2.5 shall in any way be deemed to
permit TSI (or any TSI Affiliate), directly or indirectly, to assist in any way
in (a) the provision of Licensed Services by any such Third Party Reseller for
any Financial Services Company or Specified Companies, (b) the development by
any such Third Party Reseller of any Derivative Work of TIB Technology or
Reuters Enhancements that constitutes a Financial Product or is specifically
designed for use by a third party that has a purpose of developing a Financial
Product or (c) the provision of a service specifically designed for Financial
Services Companies or Specified Companies, including without limitation by
enhancing or modifying any Licensed Products for the purpose of creating or
facilitating the creation of any such Derivative Work. Furthermore, TSI shall
not, directly or indirectly, assist in any way in the development by any Third
Party Reseller of any products with finance functionality or features that
incorporate, embed or are derived from any TIB Technology, Reuters Enhancements
or TIB-Derived Technology. Notwithstanding the foregoing, nothing in Section
2.5 shall restrict TSI from (1) making available general purpose interfaces or
other integration tools not specifically designed for use with a Financial
Product or specifically designed for use by a Third-party for developing
products or services for Financial Services Companies or Specified Companies
when such interfaces or tools are provided for the purpose of (i) integrating
the Licensed Products with other products or components, including Financial
Products, and/or (ii) developing general purpose interfaces between the Licensed
Products and other products or components, including Financial Products or (2)
providing standard training, maintenance and support for Licensed Products to
Third Party Resellers in accordance with TSI's standard training, maintenance
and support practices.
(c) During such time as any Third Party Reseller (excluding OEM Resellers)
is a party to a reseller or other distribution agreement with TSI and
distributes products to Financial Services Companies in greater than de minimis
amounts, TSI shall exert all reasonable commercial efforts to assist Reuters in
making such Third Party Reseller a reseller or distributor also of Reuters, with
Reuters being the provider of all TSI Products to or for Financial Services
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Companies. TSI will notify Reuters promptly upon commencement of material
negotiations with respect to any such new reseller or other distribution
agreement.
(d) TSI shall include in each reseller or other distribution agreement
with a Third Party Reseller entered into after the Effective Date (i) a
requirement that the Third Party Reseller provide TSI with sufficient
information such that TSI can identify accurately the extent to which any
license fees or other payments made by such Third Party Reseller to TSI are
attributable to sales to Financial Services Companies (other than OEM Sales) and
(ii) adequate mechanisms for verifying the accuracy of the information reported
by such Third Party Reseller with respect to sales by Financial Services
Companies, provided that if the manner of resale utilized by such Third Party
Reseller makes infeasible the identification of the extent to which any license
fees or other payments made by such Third Party Reseller to TSI are attributable
to sales to Financial Services Companies (or TSI after diligent efforts is
otherwise unable to obtain the information), no such covenant shall be required
and the amount of sales by such Third Party Reseller that is deemed to be
attributable to sales to Financial Services Companies will be fixed at a good
faith mutually agreeable specified percentage that is designed to approximate
the actual percentage of such sales by such Third Party Reseller that are
attributable to sales to Financial Services Companies, which percentage shall be
subject to a negotiated adjustment at the request of either Party no more
frequently than annually if such Party believes that such percentage is not
fairly reflective of the actual percentage of such sales by such Third Party
Reseller that are attributable to sales to Financial Services Companies.
(e) The Reuters Parties shall have the right to engage its external
auditor to audit the books and records of TSI pursuant to Section 12.3 for
purposes of verifying the calculation of the amounts payable by TSI to Reuters
Parties in accordance with the foregoing provisions of this Section 2.5, subject
to reasonable confidentiality provisions and further provided that such right
shall be exercised no more frequently than once each calendar year. If any
adjustments are made to the amount of revenues related to Financial Services
Companies that were realized in a given quarter after the payment of the share
thereof that is due to the Reuters Parties in respect of such quarter,
corresponding adjustments will be made to the amount payable to Reuters Parties
in respect of such quarter.
(f) TSI hereby represents and warrants that as of the Effective Date
(i) TSI is not a party to any TSI reseller or other distribution agreement with
a Third Party Reseller (including OEM Resellers) except as disclosed on Schedule
2.5(f) hereto (each such disclosed agreement being referred to as a "Prior TSI
---------
Reseller Agreement"); and (ii) true and correct copies of each Prior TSI
- ------------------
Reseller Agreement have been provided to the Reuters Parties, except to the
extent prohibited by a confidentiality provision therein. If a copy of any
Prior TSI Reseller Agreement or any portion thereof has not been provided to
Reuters by reason of any such confidentiality provision, TSI hereby agrees and
covenants with the Reuters Parties to use reasonable efforts to obtain a waiver
thereof within a reasonable time after the Effective Date. As and when TSI
enters into any reseller or other distribution agreement with a Third Party
Reseller after the Effective Date, TSI shall give the Reuters Parties notice
thereof and shall provide therewith a true and complete copy of such agreement.
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2.6 TSI License.
-----------
(a) TSI hereby grants to Reuters a royalty-free, fully-paid,
worldwide, non-exclusive, perpetual, sublicensable, and irrevocable right and
license under all TSI Intellectual Property Rights at any time prior to the
fifteenth (15th) anniversary of the Original Effective Date, to:
(1) Internally use, make, have made, copy, modify and create
Derivative Works from any TSI Technology and otherwise internally use and
exploit the TSI Technology in developing, making, having made, importing,
creating, providing, maintaining and enhancing any Reuters' (or any of its
Affiliates') products or services; and
(2) Sub-license, distribute, perform, display, sell or license
any TSI Technology, or any Technology derived from or based on such Technology,
Embedded in Reuters' (or any of its Affiliates') products or services, including
as an integral part thereof, or as a feature thereto.
(b) Following the fifteenth (15th) anniversary of the Original
Effective Date, the license granted pursuant to Section 2.6(a) shall continue in
perpetuity without payment of any kind to TSI; provided, however, that such
license shall not apply to any TSI Technology that comes into existence
following such anniversary, except as may be agreed by Reuters and TSI. For the
purpose of the foregoing, any patent rights shall be deemed to have come into
existence as of the earliest priority date that may be claimed by the
application resulting in such patent and regardless of the issuance date of such
patent.
(c) TSI agrees that it will not avoid the acquisition or creation of
Intellectual Property Rights, or dispose of any of its Intellectual Property
Rights for the purposes of avoiding the grant to Reuters of the licenses set
forth in this Section 2.6.
(d) Notwithstanding the foregoing provisions of this Section 2.6, TSI
Technology and TSI Intellectual Property Rights shall exclude all (i) Technology
and/or intellectual property rights owned or Controlled by any Person that
acquires all or substantially all of the business or assets of TSI (whether by
merger, acquisition, asset sale or other similar transaction), immediately prior
to the date of the acquisition of such business or assets, and (ii) Technology
and/or intellectual property rights derived from or based upon the Technology
and/or intellectual property rights described in (i) above (it being agreed and
understood that any TSI software and/or hardware products, and any products
derived from such TSI software and/or hardware products, and the TSI
Intellectual Property Rights therein, that are incorporated or utilized in such
products immediately prior to the time at which such Person so acquires all or
substantially all of the business or assets of TSI shall in all events continue
to constitute TSI Technology and TSI Intellectual Property Rights hereunder).
(e) Reuters may sublicense to all of its Affiliates any and all of
the rights licensed by TSI to Reuters pursuant to the foregoing provisions of
this Section 2.6; provided that, unless TSI otherwise agrees in writing, TFT and
its successors and assigns (other than a successor or assign that is Reuters or
an Affiliate of Reuters) shall in no event be authorized to
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exercise any such rights for the purpose of (i) conducting, supporting,
participating or engaging in any business involving the provision of services
that are not related to a Financial Product to a Person that is not a Financial
Services Company, including providing design, consulting, integration,
embedding, operational support, partnering, co-sourcing, data processing,
network management, service provisioning, or similar services; or (ii) engaging
in the business of creating, licensing or selling a product that is not a
Financial Product to a Person that is not a Financial Services Company. This
Section 2.6(e) shall apply to TFT and its successors and assigns only (other
than a successor or assign that is Reuters or an Affiliate of Reuters), and,
subject to the foregoing, shall not in any way apply to or bind Reuters or any
other Affiliate of Reuters; provided, however, that this Section 2.6(e) shall in
no way limit TFT's ability to use third-party resellers as contemplated by
Section 6.1(m).
2.7 API Publication. Solely for standards-setting purposes or to promote
---------------
the widespread adoption of industry standards associated with the TIB
Technology, TSI may publish generally applicable APIs or technical
specifications related to the TIB Technology, provided that such publication is
designed to achieve broad dissemination, is generally consistent with the then
current TFT procedures with respect thereto and does not materially adversely
affect any Reuters Intellectual Property Rights.
2.8 Trademark License.
-----------------
(a) The Reuters Parties hereby assign and transfer to TSI all of
their respective right, title and interest in and to the Transferred TIB-Related
Marks and all goodwill associated therewith, subject to a perpetual, royalty-
free, irrevocable, worldwide right and license in favor of the Reuters Parties
and their Affiliates to use Transferred TIB-Related Marks in connection with the
marketing, use, sale and distribution of any of the Reuters Parties' and their
Affiliates' respective products or the provision by the Reuters Parties or their
Affiliates of any services. At TSI's sole expense, the Reuters Parties shall
perform such acts and execute such documents as are reasonably required to
perfect the foregoing assignment and obtain and enforce trademark, service mark
and other similar rights in the Transferred TIB-Related Marks. TFT shall be
permitted to continue to use indefinitely TIBCO or TIB as part of its corporate
name, provided that such corporate name is at least as distinctive from TIBCO
Software, Inc. as TFT's current corporate name. The Reuters Parties and their
Affiliates' right to use such Transferred TIB-Related Marks shall be only in
conformance with TSI's trademark usage guidelines delivered to the Reuters
Parties from time to time, which guidelines shall be reasonable and shall not be
inconsistent with the scope of the license herein granted and shall not become
effective prior to thirty (30) days after notice thereof has been given by TSI.
TSI shall maintain the right to substitute any alternative trademark to the
Transferred TIB-Related Marks in the event such Transferred TIB-Related Mark is
held to infringe any other mark; provided that, if TSI advises either or both of
the Reuters Parties in writing of an alleged infringement, Reuters will be
responsible for any and all losses, liabilities, damages, costs and expenses
assessed or incurred as a result of such actual or alleged infringement that
accrue on or after the date of such notice.
(b) The Reuters Parties hereby acknowledge and recognize TSI's
exclusive worldwide ownership of the Transferred TIB-Related Marks and agree not
to take any action
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inconsistent with such ownership. The Reuters Parties acknowledge that their use
and the use by Reuters Parties Affiliates of the Transferred TIB-Related Marks
pursuant to this Agreement and any goodwill established thereby shall inure to
the sole benefit of TSI (or its Affiliates).
(c) The Reuters Parties and their Affiliates shall support TSI in
policing the use of the Transferred TIB-Related Marks and shall cooperate with
TSI in protecting the Transferred TIB-Related Marks, including cooperating in
becoming a registered user immediately of the Transferred TIB-Related Marks.
Such cooperation by the Reuters Parties and their Affiliates shall be at the
sole expense of TSI. Each of the Reuters Parties and their Affiliates shall
notify TSI of any infringement of the Transferred TIB-Related Marks that comes
to its attention.
(d) Neither Reuters Parties nor their Affiliates will attempt to
register with any trademark office, anywhere in the world, any trademark: (i)
that is confusingly similar to any of the Transferred TIB-Related Marks; or (ii)
that otherwise infringes or dilutes in a significant way any of the Transferred
TIB-Related Marks.
(e) The Reuters Parties and their Affiliates shall maintain the
quality of products and services in connection with which any Transferred TIB-
Related Mark is used at a level at least as high as the quality of the Reuters
or Reuters Affiliate products and services bearing the Transferred TIB-Related
Marks prior to the date hereof. The Reuters Parties and their Affiliates shall
not knowingly take or permit to be taken any actions that would detract in a
significant way from the goodwill or reputation associated with the Transferred
TIB-Related Marks.
(f) If TSI reasonably believes that any Reuters Parties product or
service associated with or bearing any of the Transferred TIB-Related Marks
fails to conform to the quality standards set forth herein, TSI shall provide
the Reuters Parties and their Affiliates with written notice thereof and the
Reuters Parties and their Affiliates shall promptly remedy any such failure and
provide TSI with evidence thereof.
(g) Notwithstanding the foregoing provisions of this Section 2.8, TSI
shall consent to the Reuters Parties registering, at their own expense, product
and company names and related marks that include the word "TIB", which (except
for the "TIB" component) are not confusingly similar with any TSI mark in
existence or applied for at such time, and which are used by a Reuters Party
solely in connection with TFT's company name or the marketing, use, sale and
distribution of any of the Reuters Parties' respective products or the provision
by the Reuters Parties of any services; provided, however, that if consent to
such registration is prohibited in a jurisdiction, TSI shall, at the Reuters
Parties' expense, either apply to register or assist the Reuters Parties in
applying to register such name and/or mark and license it to the Reuters Parties
in such jurisdiction. TSI and the Reuters Parties shall enter into a customary
license agreement embodying such terms and limited usage rights by TSI
consistent with the other terms of this Agreement; provided that,
notwithstanding the foregoing provisions of this Section 2.8(g), TSI shall not
be required to take any action pursuant to this Section that would
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injure, harm or otherwise adversely affect the goodwill associated with the TIB
mark or TSI's rights in the mark.
2.9 Reuters Affiliates. All rights and licenses granted by TSI to Reuters
------------------
pursuant to this Agreement, including without limitation the license
granted by TSI to Reuters under Section 2.6 and the Distribution License granted
by TSI to Reuters under Section 6.1, may be assigned, transferred or sublicensed
to, or otherwise exercised and enjoyed by, any Affiliate of Reuters without
limitation; provided that Reuters remains responsible for such Affiliates'
performance under this Agreement.
2.10 Third-party License Grants by the Reuters Parties. Neither the
-------------------------------------------------
Reuters Parties nor their Affiliates shall grant to a Third-party that is not an
Affiliate of Reuters a license to: (i) the TIB Technology of substantially the
same scope or broader as the license to the TIB Technology granted to TSI
hereunder; or (ii) a substantial portion of the Source Code for the TIB Software
that grants such Third-party the right to use such Source Code for the purposes
of creating general purpose, nonapplication specific, middleware products.
Without in any way limiting or expanding the foregoing, nothing set forth in
this Section 2.10 shall in any way restrict the Reuters Parties from licensing
Source Code for the TIB Software or other TIB Technology to Financial Services
Companies or to a Third-party that is licensing TIB Technology for the purposes
of creating products or services for Financial Services Companies or from
granting a confidential license to Source Code in connection with any escrow or
similar arrangement required in the course of granting a license to Object Code
for the TIB Software.
2.11 Payment. Reuters acknowledges the receipt of a payment by TSI of the
-------
sum of $10,000,000.00 in connection with the licenses granted under the
Original License Agreement.
2.12 TIBCO.net. Notwithstanding the restrictions set forth in Article 2,
---------
TSI shall be permitted to make available TIBCO.net Inter/Intranet hosting
services to Financial Services Companies; provided that TSI shall not provide
any Financial Products or services that use Financial Products (either
internally or otherwise) as part of or in connection with such TIBCO.net
services, except that TSI may, as the sole exception to the foregoing, provide
as part of TIBCO.net, hosting services for the stock quote and other financial
market data products offered by Third-parties. Notwithstanding the foregoing,
nothing in this Section 2.12 shall limit or otherwise affect any distribution or
other rights of TSI with respect to TSI Products that are not Licensed Products
after the expiration of the Exclusivity Period. TSI shall pay to Reuters ten
percent (10%) of the TIBCO.net Revenues within thirty (30) days after the end
of the fiscal quarter in which TSI recognizes such revenue. For purposes of this
Section 2.12, "TIBCO.net Revenues" shall mean the revenues recognized by TSI in
accordance with GAAP with respect to TSI's provision of TIBCO.net services to
Financial Services Companies, less hardware costs, Internet service provider
fees and third party software fees in each case to the extent separately
allocable to the customer. TSI will be permitted under the TSI Limited
Distribution Rights to make available TFT products (e.g., feed handlers) in
TIBCO.net hosting services provided directly by TSI subject to payment by TSI to
TFT of a license and maintenance fee of 35% of all revenue (less hardware
costs, Internet service provider fees and third party software fees in each case
to the extent separately allocable to the customer) recognized in accordance
with GAAP and
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allocable to such TFT products, with TFT providing all related third-level
support for such TFT products inclusive in such fee. To the extent that any TFT
products or TSI Products are licensed, and related services are provided,
directly to Financial Services Companies (rather than as part of TSI-provided
TIBCO.net hosting services), the TFT products and related services shall be
provided by TFT and the TSI Products and related services shall, during the
Exclusivity Period, be provided by TFT. Any TFT products and related services
that are licensed or provided directly to non-Financial Services Companies
(rather than provided as part of TIBCO.net hosting services) shall be licensed
or provided by TSI pursuant to the TSI Limited Distribution Rights. All
allocations in this Section 2.12 shall be made consistent with Section 6.4.
2.13 Distribution Rights. All rights and licenses granted to a Party
-------------------
hereunder to sell, sublicense or otherwise distribute any products or Technology
shall include the right to sell, sublicense or distribute such products or
Technology by any and all means whatsoever whether now known or hereafter
devised, subject to any limitations or other provisions applicable to
distribution over the Internet or other specified means that are expressly set
forth in this Agreement.
ARTICLE 3.
DELIVERABLES
3.1 Initial Delivery of Licensed Technology. Pursuant to Section 3.1 of
---------------------------------------
the Existing License Agreement, Reuters has delivered by electronic transfer to
TSI the Deliverables related to the TIB Technology contemplated to be delivered
by Reuters to TSI.
3.2 Delivery of TSI Technology. During the period beginning on the
--------------------------
Effective Date and ending on the fifteenth (15th) anniversary of the Original
Effective Date, TSI will disclose, and where reasonably necessary, deliver, or
cause to be disclosed or delivered to Reuters, or its designee, all TSI
Technology including, any TSI Source Code and other materials and information as
may reasonably be requested by Reuters, related to TSI Technology, hereafter
owned or Controlled by TSI. Such TSI Technology shall be so delivered promptly
upon the creation of such TSI Technology; provided that TSI shall deliver Source
Code (in the form of human-readable Source Code listing printouts, in machine-
readable electronic form) of all TSI Products, including Enhancements to
existing TSI Products promptly as each alpha, beta and general release version
(including any customizable TSI Products supported by TSI) is available and in
any event no less frequently than every 90 days. TSI represents and warrants
that all TSI Technology, including Source Code, existing on the Original
Effective Date has been disclosed or, if reasonably necessary, delivered to
Reuters or its designee as provided in Section 3.2 of the Existing License
Agreement. Through and until the fifteenth (15th) anniversary of the Original
Effective Date, the Parties will maintain in effect the "clean room" procedures
established pursuant to Paragraph 2 of the letter agreement entered into by the
Parties as of the Original Effective Date.
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ARTICLE 4.
OWNERSHIP
4.1 Ownership by Reuters. As between each of the Reuters Parties and TSI,
--------------------
such Reuters Party shall be the exclusive owner, subject to the rights granted
to TSI hereunder or to Third-parties, of: (i) all Technology independently
developed by such Reuters Party, including in the course of providing
maintenance services; and (ii), subject to any patent rights of TSI, all
Intellectual Property Rights that cover, protect or embody such Technology set
forth in (i) of this Section 4.1.
4.2 Ownership by TSI. As between the Reuters Parties and TSI, TSI shall
----------------
be the exclusive owner, subject to the rights granted to Reuters hereunder and
to Third-parties, of: (i) any Technology independently developed by TSI,
including in the course of providing Maintenance Services; and (ii), subject to
any patent rights of the Reuters Parties, all Intellectual Property Rights that
cover, protect or embody such Technology. To the extent that such Technology is
a Derivative Work with respect to, or based on any TIB Technology, TSI's
ownership of such Technology shall be subject to Reuters' ownership of the TIB
Technology on which such Derivative Work is based or that is incorporated in
such Derivative Work, and its Intellectual Property Rights therein.
4.3 Cooperation. Each Party shall, upon the other Party's request,
-----------
cooperate with the requesting Party in obtaining, perfecting or protecting such
Party's interests, including Intellectual Property Rights, in any Technology,
software or product, at the requesting Party's expense.
4.4 Jointly-Developed Technology. The allocation of Intellectual
----------------------------
Property Rights in any Technology that is jointly developed by the Parties shall
be determined by mutual agreement allocating ownership and related rights and
obligations with respect to such Technology on a case-by-case basis in
accordance with the principles of Section 5.10.
ARTICLE 5.
DEVELOPMENT AND MAINTENANCE SERVICES
5.1 Development of TIB Technology.
-----------------------------
(a) Reuters may, in its sole discretion, continue to improve and
enhance the TIB Technology including by creating Reuters Enhancements that are
licensed under Section 2.3 hereof.
(b) Subject to Section 5.4, TSI shall continue to enhance, update and
improve the TIB Technology as it relates to Licensed Products and Licensed
Services. All such Enhancements shall be licensed and disclosed to Reuters in
accordance with Sections 2.6 and 3.2, respectively.
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5.2 Maintenance Services.
--------------------
(a) TSI shall provide second and third level maintenance and support
for TSI Products to Reuters and its Affiliates with respect to all Reuters and
Reuters Affiliates' direct and indirect customers that acquire TSI Products
(whether or not such TSI Products are Embedded and including without limitation
customers that have entered into agreements with TFT after the Original
Effective Date). Such maintenance and support shall be in accordance with TSI's
then current normal maintenance and support practices, but in all events shall
be of no less quality and scope than the second and third level of maintenance
and support being provided by TSI on the Effective Date and in any event of not
less quality and scope than generally accepted industry standards. TSI shall
have no obligation to provide maintenance or support directly to any such
customers; provided that, notwithstanding the foregoing, the Reuters Parties
reserve the right to request any member of the TFT/Reuters dedicated staff
maintained pursuant to Section 5.2(b) to provide such direct support in cases
where such direct support is reasonably necessary, and TSI agrees to provide
such direct support when and as so requested.
(b) Without limiting the generality of any other provision of this
Agreement that relates to the maintenance and support obligations of TSI, TSI
shall maintain, at no additional charge to Reuters or its Affiliates during any
period that minimum annual license fees are payable pursuant to Section 6.3,
TFT/Reuters-dedicated staff of at least ten (10) full-time employees (subject to
semi-annual proportionate increase based on the extent to which license fees
paid to TSI in any semi-annual period are proportionately greater than the
license fees that were paid during the previous semi-annual period, without
regard to any minimum license fee payments) that are exclusively dedicated to
the performance of maintenance, technical, sales and administrative support for
and as directed by Reuters and TFT in connection with Reuters and TFT sales and
support of TSI Products and, as TSI and TFT shall mutually agree in order for
TSI to carry out such obligations, located in whole or in part at TFT's offices.
Additional TFT/Reuters-dedicated staff that may be necessary to provide adequate
support shall be provided by TSI as Reuters or TFT shall require; provided that
such additional staff shall be provided at support rates to be agreed by TSI and
the Reuters Parties. Additional dedicated maintenance and support for Embedded
TSI Products will be on a time and materials basis to the extent requested by
TFT.
(c) The Maintenance Services to be provided by TSI shall be equivalent
to or better than the normal level of maintenance provided by TSI to its
customers and shall, at a minimum, include the following:
(1) TSI shall promptly disclose to the Reuters Parties any bugs,
defects or errors in the operation of the TSI Products as the same become known
to TSI;
(2) TSI shall use its diligent efforts to remedy any bugs,
defects, or errors in the operation of the TSI Products known to it, including
as a result of any request from Reuters to remedy any bugs, errors or other
defects in such software in accordance with the severity level of such bugs,
defects or errors set forth in Schedule 5.2(a);
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(3) TSI shall promptly provide to the Reuters Parties any Enhancements
made by TSI, or available to TSI, to the TSI Products and any materials or
documentation related to the operation or use of such software, in each case in
sufficient number and form to provide to all end-users; and
(4) Qualified TSI personnel will be available during normal business
hours in each region where TSI normally provides maintenance and support
services and will respond in accordance with the standards set forth in Schedule
5.2(c) to calls from Reuters Parties regarding assistance with, or malfunctions
or errors in the operation of, the TSI Products.
5.3 Sharing of Maintenance Revenue. The payments owing in respect of
------------------------------
maintenance revenue shall be as provided in Section 6.3; provided that the
Parties shall allocate pursuant to Section 6.4 the portion of Reuters or TFT
maintenance revenues generated with respect to a Reuters or TFT product
containing an Embedded TSI Product that is attributable to such Embedded TSI
Product.
5.4 Maintenance of TIB Software Products. TSI shall be responsible for
------------------------------------
maintaining, enhancing, supporting and improving any TIB Software products
licensed to TSI hereunder. TSI shall use its reasonable efforts to assure that
such software products are, to the extent reasonably practicable, at all times
maintained as competitive and viable products in the relevant market place.
Notwithstanding the foregoing, TSI may, in its discretion, determine that it no
longer wishes to continue to maintain or support one or more TIB Software
products, and in such event, it shall provide Reuters with reasonable advance
notice thereof and, at Reuters' request, shall provide Reuters with reasonable
assistance, at no cost to Reuters, to permit Reuters to acquire the resources,
skills and expertise to continue to maintain and support such product upon the
discontinuance of maintenance and support thereof by TSI.
5.5 Other TSI Development Services. If Reuters requests that TSI
------------------------------
undertake other development or consulting services related to the TIB
Technology, the parties shall negotiate in good faith toward an agreement for
the provision of such services by TSI, on a most-favored-customer basis, to
Reuters.
5.6 Other TFT Consulting Services. If TSI requests the consulting or
-----------------------------
other services of TFT in connection with the provision by TSI of products or
services to a Third-party, it shall provide TFT written notice thereof. TFT or
Reuters shall have the option, but not the obligation, to provide such services
on terms to be reasonably negotiated.
5.7 TFT Support of TSI Products. TFT shall make available to TSI on
---------------------------
reasonable terms and conditions (including compensation to be agreed and
consistent with TFT's marketing of its own products and services), the services
of TFT's international sales and service offices which services shall be for the
purpose of enabling TSI to market, install and maintain Licensed Products or to
provide Licensed Services in the regions served by such TFT offices.
5.8 Builds and Flavoring, Etc. If requested by Reuters or any of its
-------------------------
Affiliates in connection with any license of TSI Products by Reuters, such
Affiliate or their distributors, TSI shall promptly and diligently generate
builds of such products to be delivered to such licensees
23
<PAGE>
and shall perform such flavoring and ticketing as reasonably requested by
Reuters or such Affiliate for such licensee in a manner designed to satisfy any
reasonable acceptance criteria or specifications relating to such products,
provided that all costs and expenses related to such builds or flavoring or
ticketing that are not normally done by TSI in the ordinary course of building
and releasing such TSI Products shall be paid by Reuters or the requesting
Affiliate on a time and materials basis.
5.9 Year 2000. TSI will ensure that as part of Maintenance Services it
---------
has available as and when reasonably required by the Reuters Parties a
proportionate share of its field and central support and technical staff of at
least the same scope as set forth in Section 5.2 during the period from December
30, 1999 through January 30, 2000 as may be required to address Year 2000 issues
with respect to the TSI Products previously licensed to end-users by Reuters,
its Affiliates and their distributors. The proportionate share shall be
determined by reference to revenues attributable to TSI Products sold by
Reuters, its Affiliates and their distributors as compared to all other TSI
Product revenue since December 31, 1996.
5.10 Certain Intellectual Property Ownership. In the event that TSI or a
---------------------------------------
Reuters Party provide consulting or development services, one to the other,
involving the development of software, the parties shall agree in writing as to
the respective ownership of intellectual property rights (including patents,
copyrights, trade secrets and similar rights) in and to any such software
("Developed Software") and their respective obligations with respect thereto.
Nothing in this Section 5.10 shall be deemed to constitute or create any
transfer of any intellectual property rights of either party that existed prior
to the provision of the particular consulting or development services and that
were used in the provision of such consulting or development services, and the
intellectual property ownership of such Developed Software shall be subject to
any such pre-existing rights.
ARTICLE 6.
REUTERS DISTRIBUTION RIGHTS
6.1 Distribution of TSI Products.
----------------------------
(a) Subject to the terms and conditions of this Article 6, Reuters
(and its Affiliates) shall be the preferred distribution channel to Financial
Services Companies, for all existing and future TSI Products, and TSI hereby
agrees and covenants with Reuters not to take any action, the purpose or effect
of which is to circumvent the role of Reuters (and its Affiliates) as such
preferred distribution channel, including without limitation by appointing any
Third Party Reseller to sell TSI Products principally to Financial Services
Companies or appointing any Third Party Reseller that TSI is aware intends to
sell TSI Products principally to Financial Services Companies.
(b) TSI hereby grants to Reuters the right and license (the
"Distribution License") to copy, make, have made, perform, display, offer for
- ---------------------
sale, import, sell sublicense and otherwise distribute on the terms and
conditions set forth in this Article 6, any and all current or future TSI
Products (including hardware and/or software products) that TSI, either
24
<PAGE>
directly or through others, now or hereafter makes available, sells, licenses,
distributes or otherwise exploits.
(c) For the five (5)-year period commencing on the Effective Date (the
"Exclusivity Period"), the Distribution License, to the extent it authorizes
------------------
Reuters to sublicense, distribute and otherwise exploit TSI Products to or for
Financial Services Companies shall be sole and exclusive throughout the world
(including as to TSI), subject only to the provisions of Sections 6.1(d) and (e)
and the right of TSI to license, distribute or otherwise provide or exploit TSI
Products through Third Party Resellers to the same extent as TSI is permitted
to license, distribute or otherwise provide or exploit Licensed Products
pursuant to Section 2.5. As an adjunct to the exclusive rights of Reuters under
the Distribution License during the Exclusivity Period and to ensure that
Reuters (and its Affiliates) enjoy the full benefit of such exclusive rights,
TSI agrees that, during the Exclusivity Period, it shall not, and shall cause
its subsidiaries not to, directly or indirectly (whether or not through the use
of an interposed Person or through or to consultants or agents), conduct,
support, participate or engage in any business involving the provision of
services to a Financial Services Company, including providing consulting,
design, integration, customization, operation, support, development, partnering,
co-sourcing, data-processing, network management and similar services to a
Financial Services Company. Except as provided in the foregoing provisions of
this Section 6.1(c), the Distribution License shall be non-exclusive.
Notwithstanding the exclusive rights granted in this Section 6.1(c), TSI agrees
and acknowledges that Reuters and its Affiliates have no best efforts obligation
with respect to the exercise by Reuters of any such exclusive rights.
(d) Without limiting the generality of the foregoing, the distribution
rights of Reuters (and its Affiliates) set forth in Section 6.1(c) shall not
limit the right of TSI (at any time) to provide to a Third-party that is not a
Financial Services Company any TSI Products and related services: that (i) are
generally applicable to all fields, (ii) do not include functionality or
features specifically designed for use by a Financial Services Company, and
(iii) are not specifically designed for use by such Third-party or TSI Affiliate
for the purposes of creating products or services for Financial Services
Companies. In addition, commencing with the first year in respect of which
Reuters has elected not to pay a minimum annual license fee pursuant to Section
6.3(a) and continuing thereafter, the foregoing exclusive distribution rights
shall not limit TSI from selling, licensing, distributing or otherwise
exploiting Commodity Products to any third party; provided that, if TSI
materially breaches any of its obligations under this Agreement, and such breach
has not been cured within the period and in the manner specified in Section
6.6(a), solely with respect to Financial Services Companies, TSI thereafter
shall be prohibited from selling, licensing, distributing or otherwise
exploiting, (x) during the Exclusivity Period, any and all Commodity Products,
and (y) after the expiration of the Exclusivity Period, any and all Commodity
Products that are Licensed Products, in each case irrespective of whether
Reuters has continued to elect pursuant to Section 6.3(a) to pay a minimum
annual license fee to TSI at the time of any such breach. For the avoidance of
doubt, the Parties agree that nothing in this Section 6.1 creates any exceptions
or otherwise affects any rights or limitations set forth in Article 2 with
respect to the licensing or other exploitation of Licensed Products.
25
<PAGE>
(e) In addition, nothing in Section 6.1(a), (b) or (c) will prohibit
TSI from bona fide mergers, acquisitions, purchases of assets or other similar
transactions by TSI of or with going concerns that sell products or provide
services to Financial Services Companies. In the event of such transaction, TSI
shall be permitted to continue and expand the business of such acquired or
merged entity in all respects or the assets so acquired including with respect
to Financial Services Companies, notwithstanding any provision of this Agreement
to the contrary, except that the restrictions in Section 2.4 shall continue to
apply following any such transaction with respect to the products or services of
such going concerns that are sold or provided to Financial Services Companies to
the extent that TSI has Embedded or incorporated any TIB Technology, Reuters
Enhancements or TIB-Derived Technology into such product or services. TSI
Affiliates shall be subject to, and have the rights under, the terms of this
Agreement. Notwithstanding the foregoing provisions of this Section 6.1(e), and
subject to TSI's right to grant sublicenses as and to the extent provided in
Sections 2.1(a)(2), 2.1(b) and 2.5 above, TSI shall not, except with Reuters'
consent (in accordance with Section 12.6), directly or indirectly, assign its
rights under this Agreement.
(f) TSI shall cause, and shall cause its subsidiaries to cause, their
respective employees to comply with the exclusivity rights in favor of Reuters
for so long as they are employees of TSI or a subsidiary of TSI.
(g) TSI shall not, directly or indirectly, assign, transfer or dispose
of its rights under this Agreement (by change of control, through affiliate
action, takeover, reorganization, restructuring, spin-off or similar corporate
transactions or otherwise), for the purposes of circumventing, avoiding or
limiting the exclusivity rights of Reuters set forth in Section 6.1(c).
(h) During the Exclusivity Period, and provided that TSI is actively
in the business of supplying Licensed Products and Licensed Services in
accordance in all material respects with the rights granted to it hereunder,
except as otherwise agreed by TSI in writing, TFT, including any subsidiary of,
or successor (other than a successor that is Reuters or an Affiliate of Reuters)
to TFT, shall neither: (i) conduct, support, participate or engage in any
business involving the provision of services that are not related to a Financial
Product to a Person that is not a Financial Services Company, including
providing design, consulting, integration, embedding, operational support,
partnering, co-sourcing, data processing, network management, service
provisioning, or similar services; nor (ii) engage in the business of creating,
licensing or selling a product that is not a Financial Product to a Person that
is not a Financial Services Company. TSI agrees and acknowledges that TIB
Mercury and TIB Exchange each constitutes a Financial Product. This Section
6.1(h) shall apply to TFT only, and, without limiting the foregoing, shall not
in any way apply to or bind Reuters or any other Affiliate of Reuters.
(i) The exclusive rights of the parties contained in this Section 6.1
relate to matters which are of a special, unique and extraordinary character and
a violation of any of the terms of this Section 6.1 will cause irreparable
injury to the aggrieved party, the amount of which will be impossible to
estimate or determine and which cannot be adequately compensated. Therefore,
the aggrieved party shall be entitled to an injunction, restraining order or
other
26
<PAGE>
equitable relief from any court of competent jurisdiction in the event of any
breach of the exclusivity rights of such party under this Section 6.1. The
rights and remedies provided by this Section 6.1 are cumulative and in addition
to any other rights and remedies, including damages (including monetary,
punitive or enhanced damages), which the aggrieved party may have hereunder or
at law or in equity.
(j) The parties hereto agree that, if any court of competent
jurisdiction in a final nonappealable judgment determines that a specified time
period, a specified geographical area, a specified business limitation or any
other relevant feature of this Section 6.1 is unreasonable, arbitrary or against
public policy, then a lesser time period, geographical area, business limitation
or other relevant feature which is determined to be reasonable, not arbitrary
and not against public policy may be enforced against the applicable Party.
(k) Nothing set forth in this Section 6.1 is intended to or shall
otherwise grant TSI any rights or licenses with respect to the Reuters
Intellectual Property Rights.
(l) TSI Products shall be sublicensed and otherwise distributed under
this Section 6.1 pursuant to Authorized Licenses.
(m) Notwithstanding the foregoing provisions of this Section 6.1,
solely with respect to TFT and its successors and assigns (other than a
successor or assign that is Reuters or an Affiliate of Reuters), and except as
otherwise agreed by TSI in writing, the Distribution License exercisable by TFT
shall be limited to the sale, sublicense and distribution to Financial Services
Companies and the sale, sublicense and distribution of TSI Products on a
Embedded basis with Financial Products, provided that TFT shall not be
prohibited from providing TSI Products through a third party distributor or
reseller of TFT (each a "TFT Distributor") so long as the following conditions
are satisfied: (i) TFT cooperates with TSI to avoid channel conflict with TSI
in relation to any such provision of TSI Products or related services to non-
Financial Services Companies; and (ii) TFT makes the payments specified in
Section 6.3(b). In the event that any such TFT Distributor engages in more than
such de minimis sales of TSI Products to entities that are not Financial
Services Companies ("Non-FSC Sales"), (x) TFT shall use reasonable commercial
efforts to assist TSI in obtaining a distribution or resale relationship
directly with the TFT Distributor with TSI being the provider of all TSI
Products to or for non-Financial Services Companies; (y) if more than 30% (but
less than 50% ) of the revenues received by TFT from any such TFT Distributor
are attributable to Non-FSC Sales, 75% of such revenues from Non-FSC Sales
shall be paid by TFT to TSI; and (z) if more than 50% of the revenues received
by TFT from any such TFT Distributor are attributable to Non-FSC Sales, all of
such revenues from Non-FSC Sales shall be paid by TFT to TSI.
(n) If either Reuters or TSI wish to have TSI engage in an activity,
or to produce a product, otherwise prohibited to TSI pursuant to Section 6.1(c),
the Parties shall engage in good faith negotiations in relation to whether to
permit TSI, on such terms and conditions as may be agreed in writing, to engage
in such otherwise prohibited activities either on its own or jointly with
Reuters and/or TFT. If either TFT or TSI wish to have TFT engage in
27
<PAGE>
an activity otherwise prohibited to TFT pursuant to this Section 6.1, the
Parties shall engage in good faith negotiations in relation to whether to permit
TFT, on such terms and conditions as may be agreed in writing, to engage in such
otherwise prohibited activities either on its own or jointly with TSI.
6.2 Supply of Products. In order to permit Reuters to distribute TSI
------------------
Products in accordance with Section 6.1, TSI shall promptly inform Reuters of
the existence of each new TSI Product that TSI intends generally to make
available, sell, embed, license, sublicense or distribute. At the same time
that TSI makes such TSI Product available for sale or license to any Third-
party, TSI shall also make such TSI Product, and true and correct copies of any
related documentation and release notes, available to Reuters for distribution
and sale by Reuters and Reuters Affiliates pursuant to Section 6.1. TSI shall
make TSI Products available to Reuters at least to the same extent such products
are made available for sale or license to Third-parties (e.g., as indicated on
TSI's "Product Availability" chart).
6.3 Distribution Fee.
----------------
(a) Reuters shall pay TSI minimum annual license fees in respect of
licensing and maintenance revenue recognized by the Reuters Parties in respect
of TSI Products other than ETX Software (collectively the "Revenue-Sharing
---------------
Products") of $16 million, $18 million and $20 million during 1999, 2000 and
- --------
2001, respectively. The minimum annual license fees will be payable in
quarterly installments on the last day of each calendar quarter ("Quarterly
---------
Minimum License Fee Installments"); provided that (x) a Quarterly Minimum
- --------------------------------
License Fee Installment shall be payable at such time only if Reuters reasonably
determines in good faith that TSI is not then in material breach of this
Agreement and (y) the $16 million minimum annual license fee for 1999 shall be
paid in three equal quarterly installments at the end of each quarter in 1999
beginning with the quarter ending June 30, 1999 (with the $16 million minimum
license fee payable over the last three quarters of 1999 being reduced by the
amount of any license fees paid previously by the Reuters Parties to TSI in
respect of sales of TSI Products during 1999). Any such Quarterly Minimum
License Fee Installment that is so withheld as provided in clause (x) above will
be payable by Reuters to TSI (without interest) promptly after TSI shall have
cured any and all such material breaches or if the breach is not capable of such
cure, TSI shall have taken remedial measures to substantially mitigate any
adverse impact on the Reuters Parties of such breach to Reuters' reasonable
satisfaction. In no event shall any Quarterly Minimum License Fee Installment
payable in respect of a given quarter exceed the difference between (i) the sum
of the scheduled Quarterly Minimum License Fee Installment payable in respect of
such quarter and any Quarterly Minimum License Fee Installments payable in
respect of any prior quarter during the year in question and (ii) the aggregate
amount of license fees (including Quarterly Minimum License Fee Installments)
paid in respect of any such prior quarters during such year.
Commencing with TSI's last fiscal quarter of 2001 and, so long as Reuters
shall have elected in accordance herewith to pay a minimum annual license fee in
respect of each intervening year, during TSI's last fiscal quarter of each
succeeding year thereafter (or, if TSI's fiscal year is hereafter changed, the
last calendar quarter of each such year), Reuters may elect at
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<PAGE>
any time prior to the end of such quarter to pay, in the following year, a
minimum annual license fee, in the case of each of the year 2002 and the year
2003, equal to $20 million, and for each year thereafter 110% of the minimum
annual license fee payable by Reuters hereunder in such year in which the
election is made (with the minimum annual license fee for the year 2004
accordingly being set at $22 million); provided that if Reuters does not elect
to pay such minimum license fee in the following year the following arrangements
will be applicable:
(1) Reuters shall pay to TSI, on a quarterly basis, 35% of the
licensing and maintenance revenue of the Reuters Parties and their Affiliates
that is attributable to Revenue-Sharing Products recognized in accordance with
GAAP or its foreign equivalent by the Reuters Parties and their Affiliates
during each quarter;
(2) notwithstanding any provision of this Agreement to the contrary,
but subject to Section 6.6, the provisions of Section 2.4 and in Section 6.1(c)
shall be deemed not to apply to Commodity Products, and TSI shall be permitted
to sell, license or otherwise distribute Commodity Products to Financial
Services Companies, with TSI permitted to provide standard maintenance,
including upgrades, enhancements and bug fixes to customers of Commodity
Products; and
(3) the provisions of Section 5.2(b) regarding TSI's dedicated support
obligations will be waived and TSI's maintenance obligation will consist of
third level only, with Reuters having a right to contract with TSI for second
level maintenance.
Once the arrangements in clauses (1), (2) and (3) above become effective
following Reuters opting not to elect in respect of any applicable year to pay a
minimum annual license fee in accordance with the foregoing provisions of this
Section 6.3(a), such arrangements shall continue in effect in perpetuity,
subject to the provisions of Section 6.6.
(b) At all times during which Reuters (or any Reuters Affiliate)
distributes any TSI Products pursuant to this Article 6, Reuters shall pay TSI,
on a quarterly basis, a license fee in respect of TSI Products equal to 40%
(or such lower rate as is expressly provided in Section 6.3(a) or Section 6.6)
of the license and maintenance revenues attributable to Revenue-Sharing Products
recognized by the Reuters Parties or any of their Affiliates during the prior
quarter in accordance with GAAP or its foreign equivalents (less any discounts
not already deducted from revenues and less any withholding taxes included in
such revenues), excluding revenues attributable to TSI Products that are
Embedded in TFT or Reuters products, such as TFT's Market Data System product or
Reuters' Triarch product (including any successor products of Reuters or its
Affiliates that incorporates or combines such TFT Market Data System or Reuters
Triarch product, any and all such products being referred to as an "MDS") or
---
where TIB/Rendezvous is packaged with an MDS for use exclusively with such MDS,
such that the end user may utilize TIB/Rendezvous only in connection with such
MDS and with no other application, thereby requiring separate sale of
TIB/Rendezvous to the end user for use in connection with other applications.
However, if either of the Reuters Parties or any of their Affiliates sells or
distributes such Revenue-Sharing Products through a Third-party, such license
and maintenance fee shall be 50% of the revenue recognized by such Reuters
Parties or Affiliates
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<PAGE>
in accordance with GAAP or its foreign equivalents (less any discounts not
already deducted from revenues and less any withholding taxes included in such
revenues). The foregoing license fee rate shall be effective as of January 1,
1998. License Fees in excess of the applicable Quarterly Minimum License Fee
Installment will be payable in respect of a particular calendar quarter only if
and to the extent the aggregate amount of license fees accrued in respect of
such quarter, together with the license fees accrued during all prior calendar
quarters during the year in question, exceed the sum of the Quarterly Minimum
License Fee Installment payable for such quarter and all such prior quarters in
such year.
(c) TSI shall have the right, at its sole expense, to engage its
external auditors to audit the books and records of the Reuters Parties or any
of their Affiliates relating to the maintenance and distribution of TSI Products
for purposes of verifying the calculation of the license fees payable to TSI,
subject to reasonable confidentiality provisions and further provided that such
right shall be exercised no more frequently than once each calendar year. If
any adjustments are made to the amount of licensing revenues that were
recognized in a given quarter after the payment of license fees in respect of
such quarter, corresponding adjustments will be made to the amount of license
fees payable in respect of such quarter. The Reuters Parties shall maintain
complete and accurate files and books and records of account with respect to the
revenues earned from maintenance and distribution of the TSI Products by the
Reuters Parties and their Affiliates. Records will be maintained for a period
of at least three (3) years after the creation of such records.
6.4 Allocation of Revenue. In order to allocate fairly revenues relating
---------------------
to licenses of TSI and Reuters Parties products, services or any other item and
the provision of related maintenance and support, such revenues shall be
determined in accordance with the following:
(i) The Reuters Parties shall allocate fees fairly as between the
TSI Product license and maintenance fees, on the one part, and
any Reuters or TFT products, services or any other item, sold in
connection with any customer transaction or series of related
transactions. Such fair allocation shall be based on a
presumption that TSI Product license or maintenance fees have
not been discounted at a greater rate (based on standard list
price) than any Reuters or TFT products, maintenance, services or
any other item, sold in connection with any customer transaction
or series of related transactions.
(ii) The Reuters Parties shall not structure any customer transaction
or series of transactions with the purpose of reducing the
pricing or allocation of TSI Product license or maintenance fees
in relation to any such Reuters or TFT products or services or
other items. For example, in a transaction that includes TSI
Products and Reuters or TFT services, Reuters and TFT shall
fairly allocate service fees only for services actually performed
and shall not, in connection with the determination of the amount
properly allocable to sales of products, deem TSI Product or
license fees to have been discounted in a proportionate amount
greater than the proportionate amount that such services have
been discounted.
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The provisions of this Section 6.4(i) and (ii) shall apply mutatis mutandis
to the allocation of revenues of TSI that are subject to a payment obligation
from TSI to any Reuters Party under this Agreement.
6.5 Reconciliation of 1998 License Fee Amounts. The amount payable by
------------------------------------------
TFT to TSI in respect of the licensing by the Reuters Parties of TSI Products
and the provision of related maintenance services during 1998 shall be
reconciled on the books of TFT and TSI (and an appropriate adjusting payment
shall be made) to reflect the actual amount owing to TSI under the Existing
License Agreement based on the 40% license fee payable as described in
Section 6.3 above.
6.6 Effect of the Occurrence of Specified Events on License Fee
-----------------------------------------------------------
Obligations of Reuters.
- ----------------------
(a) In the event that (i) any of the material restrictions imposed on
TSI pursuant to Section 2.4 or the exclusivity rights of Reuters in Section
6.1(c) ceases to be legally and fully effective (in the case of the exclusivity
rights granted in Section 6.1(c), other than by reason of expiration of the
Exclusivity Period), or (ii) TSI shall have materially breached any of its
obligations under this Agreement, and such breach shall not have been cured
within a reasonable period not to exceed six months from the date written notice
of such breach is given by Reuters or, in the case of an incurable breach, TSI
shall not have taken remedial measures to substantially mitigate any material
adverse impact on Reuters (and its Affiliates) of such breach to Reuters'
reasonable satisfaction within a reasonable period not to exceed six months from
the date written notice of such breach is given by Reuters, then,
notwithstanding anything contained in this Agreement to the contrary,
(x) if and to the extent applicable, Reuters, at its election, may
cease immediately paying any further Quarterly Minimum License
Fee Installments owing by Reuters for the remainder of such year
or in any future year as to which Reuters otherwise would have an
obligation to pay any minimum annual license fees pursuant to
Section 6.3(a);
(y) only in the event of a material breach by TSI of any of its
obligations under this Agreement that is not cured when and as
provided above in clause (ii) of this Section 6.6(a), and
irrespective of whether Reuters is or is not then paying a
minimum annual license fee to TSI pursuant to Section 6.3(a), TSI
thereafter shall, solely with respect to Financial Services
Companies, be prohibited from selling, licensing, distributing or
otherwise exploiting, (I) during the Exclusivity Period, any and
all Commodity Products, and (II) after the expiration of the
Exclusivity Period, any and all Commodity Products that are
Licensed Products, with the effect that thereafter TSI shall be
prohibited from selling, licensing or distributing Commodity
Products (or, after the expiration of the Exclusivity Period,
Commodity Products that are Licensed Products) to Financial
Services Companies without regard to any election by Reuters to
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pay, or any payment by Reuters of, any minimum annual license fee
pursuant to Section 6.3(a); and
(z) the license fee rates specified in Section 6.3 in respect of
licensing and maintenance revenue shall be reduced to 30% (or,
if lower, the lowest equivalent distribution fee or license fee
received by TSI at such time for equivalent volumes from any
other distributor or reseller of TSI Products), in each case
effective as of the date on which such notice of breach has been
given by the Reuters Parties.
(b) If, after the expiration of the Exclusivity Period, TSI engages
in any activity of a kind that is defined to be within the exclusive rights of
Reuters under Section 6.1(c) (and thus such activity would have violated the
exclusive rights of Reuters but for the expiration of the Exclusivity Period),
and if such activity has not ceased in its entirety and the adverse impact of
such activity on Reuters (and its Affiliates) eliminated in its entirety
(including without limitation through the termination of all rights and licenses
granted by TSI in connection with such activity) within six (6) months after TSI
commenced such activity, or if TSI is incapable of causing such activity to
cease in its entirety and eliminating the adverse impact of such activity on
Reuters (and its Affiliates) in its entirety, TSI shall have failed to take
remedial measures to substantially mitigate any material adverse impact on the
Reuters Parties of such activity to Reuters' reasonable satisfaction within six
(6) months after TSI commenced such activity,
(i) if and to the extent applicable, Reuters, at its election, may
cease immediately paying any further Quarterly Minimum License
Fee Installments owing by Reuters for the remainder of such year
or in any future year as to which Reuters otherwise would have an
obligation to pay any minimum annual license fees pursuant to
Section 6.3(a) (it being understood that, upon any such election
by Reuters, TSI shall be permitted to sell, license or distribute
Commodity Products to any third party in perpetuity, subject to
Section 6.6(a)); and
(ii) the license fee rates specified in Section 6.3 in respect of
license and maintenance revenue attributable to Revenue-Sharing
Products shall be reduced to thirty percent (30%) (or, if lower,
the lowest equivalent distribution fee or royalty received by TSI
at such time for equivalent volumes from any other distributor or
reseller of TSI Products), effective as of the date on which TSI
commenced such activity.
ARTICLE 7.
CONFIDENTIAL INFORMATION
7.1 Treatment of Confidential Information.
-------------------------------------
(a) The Receiving Party shall treat as confidential all of the
Disclosing Party's Confidential Information (except to the extent that the
Receiving Party receives such
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Confidential Information in connection with a transfer of ownership thereof
pursuant to this Agreement) and shall not use such Confidential Information
except as expressly permitted under this Agreement. Without limiting the
foregoing, the Receiving Party shall use at least the same degree of care which
it uses to prevent the disclosure of its own confidential information of like
importance, but in no event with less than reasonable care, to prevent the
disclosure of the Disclosing Party's Confidential Information.
(b) All Deliverables provided by Reuters to TSI, other than published
documents and materials, disclosing the TIB Technology shall be deemed
Confidential Information of Reuters notwithstanding any failure to mark such
documents or materials as "Confidential."
(c) TSI may disclose Reuters Confidential Information to a Third-party
only: (i) as may be permitted by this Agreement; (ii) subject to a written
Confidentiality Agreement that contains terms at least as protective of such
information as this Agreement; or (iii) with Reuters' express, prior written
approval.
7.2 Exclusions.
----------
(a) Confidential Information shall exclude information that the
Receiving Party can demonstrate: (i) was independently developed by the
Receiving Party; (ii) became known to the Receiving Party, without restriction,
from a Third-party or Affiliate who had a right to disclose it; (iii) was in the
public domain at the time it was disclosed or enters the public domain through
no act or omission of the Receiving Party; or (iv) was known to the Receiving
Party at the time of disclosure.
(b) The restrictions set forth in Section 7.1 shall not apply to
Confidential Information which is required to be disclosed by the Receiving
Party pursuant to an order or requirement of a court, administrative agency, or
other governmental body; provided, however, that the Receiving Party shall
provide prompt notice thereof to the Disclosing Party and shall use reasonable
efforts to obtain a protective order or otherwise prevent public disclosure of
such information.
7.3 Confidentiality of Agreement. Each Party agrees that the terms and
----------------------------
conditions of this Agreement, but not the existence of this Agreement, shall be
treated as Confidential Information and that no reference to the terms and
conditions of this Agreement or to activities pertaining thereto can be made in
any form of pubic or commercial advertising without the prior written consent of
the other Parties; provided, however, that each Party may disclose the terms and
conditions of this Agreement:
(a) as required by any court or other governmental body;
(b) as otherwise required by law;
(c) to legal counsel of the parties;
33
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(d) in connection with the requirements of any securities market
filing or public offering;
(e) in confidence, to accountants, banks, and financing sources and
their advisors; or
(f) in confidence, in connection with the enforcement of this
Agreement or rights under this Agreement.
7.4 Third-party Disclosure. Each Party agrees that, to the extent it is
----------------------
permitted to disclose Confidential Information to a Third-party or Affiliate
(other than a Party), it shall do so pursuant to a written non-disclosure
agreement containing terms at least as protective of Confidential Information as
those set forth in this Agreement.
7.5 Remedies. Unauthorized use by a Receiving Party of the Disclosing
--------
Party's Confidential Information will result in irreparable harm to the
Disclosing Party. Therefore, if a Party breaches any of its obligations with
respect to confidentiality and unauthorized use of Confidential Information
hereunder, the Disclosing Party, in addition to any rights and remedies it may
have, shall be entitled to seek equitable, including injunctive, relief to
protect its Confidential Information.
ARTICLE 8.
[INTENTIONALLY OMITTED]
ARTICLE 9.
TERM
9.1 Term. The term ("Term") of this Agreement shall commence on the
----
Effective Date and shall continue in perpetuity unless terminated by written
agreement of the Parties.
9.2 No Termination for Breach.
-------------------------
(a) This Agreement may not be terminated by any Party and, subject to
any modified terms that shall become applicable hereunder in the event of the
happening of specified events or actions, the rights granted, and obligations
imposed, under this Agreement shall continue in full force and effect,
notwithstanding any material breach of any term hereof by any party.
(b) In the event of a breach of any term of this Agreement by a Party
(the "Breaching Party"), the other Party (the "Non-Breaching Party") may bring
--------------- -------------------
any action against the Breaching Party and may seek any and all relief and
remedies, including damages (including monetary, punitive or enhanced damages),
injunctive relief and equitable relief against the
34
<PAGE>
Breaching Party. In the event of an adjudicated material breach by TSI of any
term of this Agreement, a court or other tribunal shall award, and TSI agrees to
pay, all costs, including court costs and attorneys' and expert fees, incurred
by Reuters in bringing and maintaining such action (including any appeals).
ARTICLE 10.
REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 Warranties and Representations of the Reuters Parties. The Reuters
-----------------------------------------------------
Parties represent and warrant to TSI that: (i) they have the right, power and
authority to enter into this Agreement and to fully perform their obligations
hereunder; and (ii) the making of this Agreement does not violate any agreement
existing between the Reuters Parties and any other Person.
10.2 Warranties and Representations of TSI. TSI represents and warrants
-------------------------------------
to the Reuters Parties that: (i) it has the right, power and authority to enter
into this Agreement and to fully perform its obligations hereunder; (ii) the
making of this Agreement does not violate any agreement existing between TSI and
any Person; (iii) to its knowledge, the TSI Products do not infringe or result
in a misappropriation or other violation of the Intellectual Property Rights of
any Third-party; (iv) the TSI Products provided by TSI to the Reuters Parties
and the exercise by the Reuters Parties of any right granted to it by TSI
hereunder with respect thereto will not infringe or result in a misappropriation
or other violation the Intellectual Property Rights of any Third-party (but
excluding the combination of TSI Products with third party hardware or software
or such infringement or misappropriation that results from any modification by a
Reuters Party to such TSI Product); (v) for ninety (90) days following delivery
of any TSI Product to TFT or Reuters, such TSI Product, under normal use and
service, will substantially conform in all material respects with the functional
descriptions described in the then current user documentation provided by TSI
for such product and will be free from viruses (provided that (1) TSI's
obligation under the foregoing warranty shall be limited solely to repair or
replacement of any such product defects and correction of functionality problems
of which TSI is notified during such ninety (90) day period, with the period
tolled after such notice; (2) a Reuters Party shall give TSI prompt notice of
any alleged defect and shall provide TSI with such reasonable information and
materials as such Reuters Party shall have available in order for TSI to
diagnose and replicate the problem; (3) TSI shall have reasonable time to
review such information and materials and to determine the necessary repair; and
(4) TSI's warranty shall not apply (x) to program defects which have been
previously identified by TSI to the Reuters Parties and for which program
corrections have been submitted to the Reuters Parties, (y) in the event there
has been an alteration or revision to the TSI Product that was not authorized by
TSI, or (z) where the latest TSI Product update or revision has been supplied
but not used); and (vi) will not contain any undisclosed timers, lock-outs,
backdoors or trapdoors or any other means of disabling the product (excluding
flavoring or ticketing mechanisms).
10.3 Year 2000 Warranties TSI represents and warrants to the Reuters
--------------------
Parties that, through July 31, 2000 and subject to the provisions set out below
in this Section 10.3, each TSI
35
<PAGE>
Product shall be Year 2000 Compliant (the "Year 2000 Warranty"). "Year 2000
------------------ ---------
Compliant" shall mean that there will not be a reduction in any material respect
- ---------
in the TSI Product's functionality, as a result of its inability to process date
information accurately before, on or after January 1, 2000 (including leap
years), which is solely attributable to the TSI Product. Where any Other
Materials are used in connection with any TSI Product, TSI will not be in breach
of the Year 2000 Warranty if the failure of the TSI Product to be Year 2000
Compliant is caused by any Other Materials being unable to process date
information accurately before, on or after January 1, 2000 (including leap
years). "Other Materials" means any hardware, firmware, software (including
---------------
databases and operating systems), and other materials, and any data or
information, which are used in connection with the TSI Products and are not part
of the TSI Products, including any other materials, software, data or
information provided by the Reuters Parties or a Third-party licensee or
distributor of the Reuters Parties and used in connection with the TSI Products.
Neither TSI nor any Affiliates, employees, officers or directors, nor any third
party supplier to TSI will be liable to the Reuters Parties or to any third
party for any loss or damage in connection with any breach of the Year 2000
Warranty, except as provided in this Section 10.3. If TSI is in breach of the
Year 2000 Warranty in relation to a TSI Product, the Reuters Parties' exclusive
remedies, and TSI's exclusive obligations are: (a) to require TSI, at TSI's
option, to either repair, replace or provide a workaround for the relevant
product; or (b) if TSI is unable to provide a repair, replacement or workaround
within a reasonable period of time, to release Reuters Parties from the
obligation to pay maintenance fee royalties in respect of that TSI Product
during the period from 1 January 2000 to the date on which the relevant product
becomes Year 2000 Compliant. The Year 2000 Warranty does not apply to any data
or other information provided to TSI by any information provider. Accordingly,
TSI shall not be liable for any loss or damage arising from the fact that any
such data or other information is not Year 2000 Compliant.
10.4 WARRANTY EXCLUSIONS. EXCEPT AS PROVIDED IN SECTIONS 10.2 AND 10.3
-------------------
ABOVE, ALL SOFTWARE, TECHNOLOGY AND INTELLECTUAL PROPERTY LICENSED OR PROVIDED
HEREUNDER, IS LICENSED AND PROVIDED, AS IS, AND WITHOUT WARRANTY OF ANY KIND.
ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING WARRANTIES OF TITLE, NON-
INFRINGEMENT, MERCHANTABILITY, UNINTERRUPTED SERVICE OR FITNESS FOR A PARTICULAR
PURPOSE ARE EXPRESSLY DISCLAIMED.
10.5 Indemnification.
---------------
(a) TSI shall defend, indemnify and hold harmless the Reuters Parties
from and against any third-party claim, lawsuit or proceeding, and any debts,
liabilities, losses, cost or expenses relating thereto or arising therefrom,
including reasonable attorneys' fees, to the extent based on a claim that the
TSI Products infringe, result in a misappropriation of or otherwise violate the
Intellectual Property Rights of a Third-party (excluding any claim based on the
combination of the TSI Products with any third party hardware or software, where
the TSI Products would not so infringe, misappropriate or violate absent such
combination, or where such infringement or misappropriation is attributable to
any TIB Technology or Reuters Enhancement and would not have occurred but for
such TIB Technology or Reuters
36
<PAGE>
Enhancement); provided that TSI is promptly notified in writing of such claim
and provided further that TSI shall have the exclusive right to control such
defense and/or settlement, and the Reuters Parties provides reasonable
assistance (at TSI's expense and reasonable request) in the defense of same. In
no event shall the Reuters Parties settle any claim, lawsuit or proceeding
without TSI's prior written approval. The Reuters Parties may, at its own
expense, join in such defense if it so chooses.
(b) In the event of any such claim, lawsuit or proceeding, TSI, at its
sole option and expense, may (1) procure for the Reuters Parties the right to
continue to use the TSI Products that are the subject thereof to the full extent
provided in this Agreement or (2) replace or modify the TSI Products with
software that in all material respects is functionally equivalent. If neither
of the foregoing alternatives is reasonably practical in the reasonable opinion
of TSI, after giving due consideration to all factors including financial
expense, TSI may give notice to the Reuters Parties that all further use or
exploitation of such TSI Product shall be at the sole risk of the Reuters
Parties and the Reuters Parties thereafter will be responsible for any and all
losses, damages, costs and expenses assessed or incurred as a result of such
actual or alleged infringement that accrue on or after the date of such notice.
(c) The foregoing states the entire liability of TSI with respect to
the infringement of any Third-party Intellectual Property Rights.
ARTICLE 11.
LIMITATION OF LIABILITY
EXCEPT AS PROVIDED IN SECTION 6.1(f), IN NO EVENT SHALL A PARTY BE LIABLE
TO THE OTHER FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
INCLUDING LOST PROFITS, COST OF COVER OR LOST BUSINESS OPPORTUNITIES, ARISING
OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY EVENTS OR TRANSACTIONS
ARISING BY VIRTUE OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION ANY BREACH
HEREOF AND WHETHER THE CAUSE OF ACTION IS BASED IN CONTRACT, TORT (INCLUDING
NEGLIGENCE) OR OTHERWISE. THE FOREGOING LIMITATIONS SHALL APPLY EVEN IF THE
PARTY AGAINST WHOM DAMAGES ARE SOUGHT HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES.
ARTICLE 12.
MISCELLANEOUS
12.1 Notices. Any notice or reports required or permitted to be given
-------
under this Agreement shall be given in writing and shall be delivered by
personal delivery, telegram, telex, telecopier, facsimile transmission or
registered mail, postage prepaid, return receipt requested, and shall be deemed
given upon personal delivery five (5) days after deposit in the mail or upon
acknowledgment of receipt of electronic transmission. Notices shall be sent to
the Parties as follows or to such other person and address that a Party may
specify in writing;
37
<PAGE>
If to Reuters: If to TSI:
- --------------- ---------
Reuters Limited TIBCO Software, Inc.
85 Fleet Street 3165 Porter Drive
London, England Palo Alto, CA 94304
EC4P 4 AJ Attn: Chief Executive Officer
Attention: General Counsel Tel: (415) 846-5000
Tel: 011-44171-250-1122 Fax: (415) 846-5005
Fax: 011-44171-324-5406
If to TFT:
- ---------
TIBCO Finance Technology, Inc.
3375 Hillview Avenue
Palo Alto, CA 94304
Attn: Chief Executive Officer
Tel: (415) 846-5000
Fax: (415) 846-5005
12.2 Bankruptcy. All rights and licenses granted to a Party under or
----------
pursuant to this Agreement by the other (other than the trademark license
pursuant to Section 2.8) are, and shall otherwise be deemed to be, for purposes
of Section 365(n) of the U.S. Bankruptcy Code (11 U.S.C. 101, et seq.), licenses
to rights of "intellectual property" as defined thereunder. Notwithstanding any
provision contained herein to the contrary, if a party is under any proceeding
under the Bankruptcy Code and the trustee in bankruptcy of such party, or the
party, as a debtor in possession, rightfully elects to reject this Agreement,
the other party may, pursuant to 11 U.S.C. Section 365(n)(1) and (2), retain any
and all rights hereunder granted to it, to the maximum extent permitted by law,
subject to the payments, if any, specified herein.
12.3 Audit. Reuters shall have the right, subject to reasonable limits
-----
and reasonable confidentiality provisions, upon reasonable notice, to enter
TSI's premises during normal business hours provided that such rights be
exercised not more than once per calendar year for the purposes of (i)
inspecting TSI's operations and determining TSI's compliance with the terms of
this Agreement or (ii) auditing TSI's financial records for the sole purpose of
verifying the calculations of the amounts payable to the Reuters Parties
pursuant to Section 2.5. TSI shall cooperate with Reuters during such inspection
or audit and shall make available to Reuters such materials and information as
Reuters shall reasonably request. TSI shall maintain complete and accurate files
and books and records of account with respect to all of its activities hereunder
and all transactions relating to the Licensed Products and Licensed Services.
Records will be maintained for a period of at least three (3) years after the
creation of such records.
12.4 Export Regulation. Neither TSI nor any of its sublicensees or
-----------------
assignees shall export, directly or indirectly, any Technology or information
acquired or licensed under this Agreement or any products utilizing any such
Technology or information to any country for
38
<PAGE>
which the U.S. Government or any agency thereof at the time of export requires
an export license or other government approval without first obtaining such
license or approval.
12.5 Waiver or Delay. Any waiver of any kind or character by a Party of a
---------------
breach of this Agreement must be in writing, shall be effective only to the
extent set forth in such writing, and shall not operate or be construed as a
waiver of any subsequent breach of the other party. No failure of a Party to
insist upon strict compliance by the other with any obligation or provision
hereunder, and no custom or practice of the parties at variance with the terms
hereof, shall constitute a waiver of such Party's right to demand exact
compliance with the terms of this Agreement. Nor shall a Party's delay or
omission in exercising any right, power or remedy upon a breach or default by
the other Party impair any such right, power or remedy. The exercise of any
right or remedy provided by this Agreement shall be without prejudice to the
right to exercise any other right or remedy provided by law or equity.
12.6 Assignment.
----------
(a) TSI may not directly or indirectly assign or transfer this
Agreement or any of its rights, duties or obligations hereunder, except with the
express written consent of Reuters, which consent shall not unreasonably be
withheld. Reuters may, in its sole discretion, assign or transfer this
Agreement, assign its rights and benefits under this Agreement, or delegate its
duties hereunder to a Third-party, in whole or in part. Without limiting the
foregoing, the acquisition by, or the merger of TFT with, an Affiliate of
Reuters shall not in any way affect the rights or obligations of TFT hereunder
and such acquiring or surviving corporation shall succeed to all of TFT's rights
and be bound by the obligations under this Agreement.
(b) In the event of the sale of any Reuters Affiliate, or
substantially all of the assets of such Reuters Affiliate to a Third-party, all
of such Affiliate's rights hereunder shall be transferable to such Third-party
provided that such Third-party is bound by the provisions hereof and Reuters may
grant, or sublicense to such Third-party, a license to all TSI Intellectual
Property rights granted to Reuters hereunder as of the date of such acquisition,
and such grant shall not in any way affect or limit Reuters' rights to such
Intellectual Property Rights hereunder. In the event of any such transfer of a
Reuters Affiliate that is not a Reuters Party, such Third-party shall not be
entitled to any license to Enhancements created after the date of such transfer.
12.7 Sales Tax. The Parties shall reasonably cooperate with one another in
----------
order to minimize sales and use taxes applicable to each of them as a result of
the transactions contemplated hereby, provided that a Party shall not be
required to act in a manner that is disadvantageous to itself.
12.8 Force Majeure. If by reason of labor disputes, strikes, lockouts,
-------------
riots, war, inability to obtain labor or materials, earthquake, fire or other
action of the elements, accidents, governmental restrictions, appropriation or
other cause beyond the control of a Party hereto, either party is unable to
perform in whole or in part its obligations as set forth in this Agreement, then
such party shall be relieved of those obligations to the extent it is so unable
to perform and such inability to perform shall not make such Party liable to the
other Party. Neither Party shall
39
<PAGE>
be liable for any loss, injury, delay or damages suffered or incurred by the
other Party due to the above causes.
12.9 Severability. The provisions of this Agreement are severable and if
------------
any one or more such provisions shall be determined to be invalid, illegal or
unenforceable, in whole or in part, the validity, legality and enforceability of
any of the remaining provisions or portions thereof shall not in any way be
affected or impaired thereby and shall nevertheless be binding between the
parties hereto. Notwithstanding the foregoing, if any Section or provision
respecting limitations on the scope of any license grants to TSI with respect to
any Reuters Intellectual Property Rights is declared void or unenforceable, then
the corresponding grant of such license or rights to TSI shall also be void.
12.10 Headings. The Section and article headings and captions of this
--------
Agreement are included merely for convenience of reference. They are not to be
considered part of, or to be used in interpreting, this Agreement and in no way
limit or affect any of the contents of this Agreement or its provisions.
12.11 Governing Law. This Agreement shall be constructed in accordance
-------------
with, and all disputes hereunder shall be governed by, the laws of the State of
New York (without regard to that State's principles of choice of laws). The
parties exclude in its entirety the application to this Agreement of the United
Nations Convention on Contracts for the International Sale of Goods. Any
dispute arising out of this Agreement shall be brought in, and the parties
consent to personal and exclusive jurisdiction of a venue in, the State and
federal courts within New York City, New York.
12.12 Relationship of the Parties. Nothing contained in this Agreement,
---------------------------
as such, shall be construed as creating any agency, partnership, or other form
of joint enterprise between the Reuters Parties and TSI. The relationship
between the Reuters Parties and TSI shall at all times be that of independent
contractors with respect to the matters contemplated by this Agreement. Neither
the Reuters Parties nor TSI shall have authority to contract for or bind the
other in any manner whatsoever. This Agreement confers no rights upon a Party
except those expressly granted herein.
12.13 Entire Agreement. This Agreement is the complete, entire, final
----------------
and exclusive statement of the terms and conditions of the agreement between the
parties. This Agreement supersedes, and the terms of this Agreement govern, any
prior agreements, term sheets or letters of intent between the parties with
respect to the subject matter hereof, including without limitation the Existing
License Agreement, which the Parties hereby agree to terminate effective on the
Effective Date. This Agreement may not be modified except in a writing executed
by duly authorized representatives of the Parties. In the event of any conflict
between any terms of this Agreement and the Agreement of Organization, the terms
of this Agreement shall control.
12.14 Counterparts. This Agreement may be executed in counterparts, each
------------
of which shall be deemed an original, but all of which together shall constitute
one and the same instruments.
40
<PAGE>
12.15 Non-Solicitation. TSI and the Reuters Parties shall agree not to
----------------
solicit the employees of the other party or parties for the two-year period
commencing on the Effective Date.
12.16 Joint Marketing Activities. TSI and TFT may from time to time
--------------------------
agree on joint marketing activities. Neither party shall have any financial
obligation to the other in relation to marketing or advertising except as may be
agreed in writing in advance.
12.17 Publicity. The parties shall maintain the confidentiality of this
---------
Agreement and not disclose or discuss its contents or the matters contemplated
herein other than with affiliates and advisors that are subject to
confidentiality restrictions or duties without, in the case of the Reuters
Parties, the written consent of TSI and, in the case of TSI, the written consent
of Reuters, subject in either case to applicable law. No press release or
similar public communication regarding this Agreement or the matters
contemplated herein shall be made without the prior written consent of both
parties.
12.18 Cedel Contract. The assignment, effective January 1, 1998 of the
--------------
Software License and Development Agreement dated January 1, 1994, as amended
(the "Cedel Contract"), with Cedel Bank is hereby ratified by the Parties, and
TSI shall have the right in the future to continue such contractual relationship
with Cedel Bank, Cedel Global Services, or their Affiliates, or their successors
and assigns (the "Cedel Parties"), and to enter into amendments and additional
similar agreements with the Cedel Parties; provided, however, to the extent that
TSI is requested to provide products or services not related to Cedel's
"Strategic Businesses" (as defined in the agreement with Cedel Global Services
dated May 11, 1999) for Deutsche Borsa in connection with the merger of Cedel
and Deutsche Borsa, TSI shall, to the extent permitted by the terms of that
agreement, offer TFT the first right to provide such products or services.
12.19 Subcontractors. Any Party shall have the right to appoint and use
--------------
third party subcontractors with respect to performance of its obligations
hereunder, provided that such Party remains responsible for such subcontractors'
performance hereunder.
12.20 Authority. Notwithstanding that an obligation of TSI is expressly
---------
stated as being to either or both of Reuters of TFT, the satisfaction or
performance by TSI of any such obligation to either Reuters or TFT shall be
deemed to satisfy all such obligations of TSI to both Reuters and TFT and as
between Reuters and TFT, Reuters shall be deemed to have the authority to
provide all consents and approvals, and otherwise act on behalf of and bind, TFT
with respect to any issue or dispute arising out of or related to this Agreement
or the making or interpretation of this Agreement. In addition, Reuters and TFT
shall be jointly and severally liable to TSI for either of Reuters or TFT's
breach of any provision of this Agreement.
41
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers or representatives as of the
date first above written.
REUTERS LIMITED TIBCO SOFTWARE, INC.
By:_____________________________ By:__________________________
Name:___________________________ Name:________________________
Title:__________________________ Title:_______________________
TIBCO FINANCE TECHNOLOGY, INC.
By:_____________________________
Name:___________________________
Title:__________________________
42
<PAGE>
Exhibit 10.6
FORM OF ASSIGNMENT AND ASSUMPTION OF INDUSTRIAL LEASE AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION OF INDUSTRIAL LEASE AGREEMENT ("ASSIGNMENT")
shall be effective as of _________ ____, 1999 (the "Effective Date") and is made
by and between TIBCO FINANCE TECHNOLOGY, INC., a Delaware corporation,
("Assignor") and TIBCO SOFTWARE, INC., a Delaware corporation, ("Assignee").
RECITALS
--------
This Assignment is made with reference to the following facts and with the
following intentions:
A. The Board of Trustees of the Leland Stanford Junior University, a
California corporation ("Stanford"), is the owner of that certain improved real
property, consisting of approximately 5.884 acres of land and currently known as
3165 Porter Drive, Palo Alto, California ("Premises"). The Premises are subject
to that certain Ground Lease, dated as of June 1, 1962, ("Ground Lease") between
Stanford, as ground lessor, and Utah Construction & Mining Company, a Delaware
corporation ("Utah"), as ground lessee, as more particularly described therein.
B. On January 24, 1964, Utah assigned the Ground Lease to Harrigan,
Weidenmuller Co, a California corporation ("Harrigan"), which assignment was
recorded on February 10, 1964 in Book 6380 at page 224, Official Records of
Santa Clara County. Pursuant to that certain Assignment of Lease, dated as of
October 26, 1966, Harrigan assigned all of its right, title and interest as
ground lessee under the Ground Lease to Teledyne, Inc., a Delaware corporation
("Teledyne").
C. Teledyne, as sublessor, and Porter Drive Associates, LLC, a
California limited liability company ("Landlord"), as sublessee, entered into a
sublease of the Premises pursuant to that certain Sublease Agreement ("Master
Lease"), dated as of November 30, 1994.
D. Landlord, as landlord, and Teknekron Software Systems (Delaware),
Inc., a Delaware corporation, ("Teknekron"), as tenant, entered into a sub-
sublease of the Premises, pursuant to that certain Industrial Lease Agreement,
dated as of December 14, 1995 (the "Lease"), a copy of which is attached hereto
as Exhibit A. The Premises consist of approximately 5.884 acres of land and all
---------
of the improvements thereon, including, without limitation, an approximately
91,644 rentable square foot building the address of which is 3165 Porter Drive,
Palo Alto, California and an approximately 1,138 square foot freestanding
storage structure.
E. Following the execution date of the Lease, Teknekron subsequently
changed its name to Tibco Inc., and then to Tibco Finance Technology, Inc.
F. Subject to the limitations contained in this Assignment, Assignor
wishes to assign all of its right, title and interest under the Lease to
Assignee, and Assignee wishes to assume, all of Assignor's rights and
obligations which accrue on or after the Effective Date.
<PAGE>
NOW THEREFORE, for good and valuable consideration, receipt and sufficiency
of which are hereby acknowledged, the parties hereby agrees as follows:
1. Assignment: Assignor hereby grants to Assignee, as of the Effective
----------
Date, all of Assignor's right, title and interest in the Lease and the Premises.
2. Acceptance and Assumption: Assignee hereby accepts the foregoing
-------------------------
assignment of the Lease and Assignor's rights thereunder and, subject to the
terms of this Agreement, Assignee hereby expressly assumes and agrees to perform
and fulfill all of the terms and obligations to be performed by the "Tenant"
under the Lease which accrue on and after the Effective Date.
3. Security Deposit: Assignor hereby represents and warrants to Assignee
----------------
that Landlord holds the sum of $120,793.34 as a security deposit to be applied
in accordance with the terms of the Lease. Assignor hereby assigns its rights
to that sum to Assignee, and the sum shall be held by Landlord for the benefit
of Assignee, subject to the provisions of the Lease. Concurrently, with the
execution of this Assignment, Assignee shall deliver the cash sum of $120,793.34
to Assignor as payment for Assignor's interest in the security deposit held by
the Landlord under the Lease.
4. Assignor's Representations and Warranties: Assignor hereby represents
-----------------------------------------
and warrants to Assignee that: (i) the Lease is in full force and effect and
there is no default or event of default under the Lease by either Assignor or,
to Assignor's actual knowledge, Landlord, nor has there occurred any event
which, with the giving of notice or passage of time or both, could constitute
such a default or event of default; (ii) the Lease attached hereto as Exhibit A
---------
(a) is a true, correct and complete copy of the Lease, (b) has not been amended
or modified, and (c) represents the entire agreement between Assignor and
Landlord with respect thereto; (iii) there are no pending or threatened actions,
suits or proceedings before any court or administrative agency against Assignor
or to Assignor's actual knowledge, against Landlord or the Premises, which
could, in the aggregate, adversely affect the Lease or the Premises, or any part
thereof'; (iv) Assignor has not assigned, encumbered or otherwise transferred
any interest of Assignor under the Lease; and (v) to the Assignor's actual
knowledge, the Ground Lease and the Master Lease are in full force and effect.
5. Assignor's Indemnity: Assignor shall indemnify, defend and hold
--------------------
Assignee harmless from any and all claims, losses, damages, liabilities, costs
or expenses (including reasonable attorney's fees and costs) (a) arising under
the Lease prior to the Effective Date, (b) arising at any time as a result of
any occurrence in, on, under or about the Premises prior to the Effective Date,
or (c) as a consequence of Assignor's breach of the obligations on its part to
be performed under the terms of the Lease prior to the Effective Date. The
provisions of this paragraph shall survive the expiration or termination of the
Lease and this Assignment.
6. Assignee's Indemnity: Subject to Section 5 of this Assignment,
--------------------
Assignee shall indemnify, defend and hold Assignor harmless from any and all
claims, losses, damages, liabilities, costs or expenses (including reasonable
attorney's fees and costs) (a) arising under the Lease on or
<PAGE>
after the Effective Date or (b) as a consequence of Assignee's breach of the
obligations assumed by Assignee with respect to the Lease. The provisions of
this paragraph shall survive the expiration or termination of the Lease and this
Assignment.
7. Miscellaneous:
-------------
A. Entire Agreement: This Assignment contains the entire
----------------
understanding between the parties with respect to the matters contained herein.
No subsequent change or addition to this Assignment shall be binding unless in
writing and signed by Assignor and Assignee.
B. Successors: This Assignment shall be binding upon and inure to
----------
the benefit of the parties hereto and their respective successors and assigns.
C. Attorneys' Fees: If either party brings any action or legal
---------------
proceeding with respect to this Assignment, the prevailing party in such action
shall be entitled to recover its reasonable attorneys' fees and costs.
D. Severability: If any one or more of the provisions contained in
------------
this Assignment shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
E. Captions: Captions are inserted for convenience only and will
--------
not affect the construction hereof.
F. Notices: Unless five (5) days prior written notice is given in
-------
the manner set forth in this paragraph, the address of Assignor and Assignee for
all purposes connected with this Assignment shall be the address set forth below
their signatures at the end of this Assignment. All notices, demands, or
communications in connection with this Assignment shall be considered received
when (i) personally delivered or (ii) if properly addressed and deposited in the
United States mail (registered or certified, return receipt requested), on the
date shown on the return receipt for acceptance or rejection.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
intending it to be effective as of the Effective Date.
"ASSIGNOR" "ASSIGNEE"
TIBCO FINANCE TECHNOLOGY, INC., TIBCO SOFTWARE INC.,
a Delaware corporation a Delaware corporation
By:___________________________ By:___________________________
Its:__________________________ Its:___________________________
Date:__________________________ Date:__________________________
Address:______________________ Address: 3165 Porter Drive
______________________ Palo Alto, California 94301
______________________ Attn: Chief Financial Officer
<PAGE>
Exhibit 10.11
-------------
Form of Master Services Agreement
---------------------------------
This Agreement, dated as of __________ (the "Effective Date"), by and
---------------
between TIBCO Finance Technology Inc., a Delaware corporation ("TFT"), and TIBCO
---
Software Inc., a Delaware corporation ("TSI").
---
WHEREAS, TFT and TSI have entered into an Amended and Restated License,
Maintenance and Distribution Agreement, dated May 28, 1999, as the same may be
further amended, the "Agreement"); and
---------
WHEREAS, TSI is currently contemplating an initial public offering, TFT has
moved to a new corporate headquarters, TFT and its affiliates and agents and
assigns (the "Providers") currently provide certain support services to the TSI,
---------
and TFT and TSI have agreed that the Providers from time to time will continue
to provide certain of such services to TSI or its designees (the "Recipients")
----------
after the Effective Date, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. Definitions. Capitalized terms shall have the meanings ascribed to
-----------
them in this Agreement.
2. Services to be Provided.
-----------------------
(a) Services. At TSI's option, TFT hereby agrees to provide, or cause
--------
another Provider to provide, to the Recipient any one or more of the services as
listed and upon terms and conditions set forth in Schedules 1 through __ (the
"Services") for a period of time not to exceed the maximum term of one (1) year
- ---------
(unless otherwise expressly set forth for a longer period in any such Schedule
with respect to any such particular Service); provided, if TSI has requested
--------
Services pursuant to this Agreement for a term expiring prior to the maximum
term, such Recipient may extend such term at any time, provided that any such
extension shall not extend beyond the maximum term.
(b) Assistance. (i) Services and Dispute Resolution Coordination. In
---------- --------------------------------------------
addition to the persons named in the Schedules, listed on Annex A attached
hereto are the persons who TSI and TFT have designated as knowledgeable persons
who will provide continuous oversight and coordination of, and communicate
concerning disputes with respect to, the Services, who will be available to the
Recipients and the Providers during normal business hours and who will be
responsible for providing for or delegating the provision of assistance
regarding the Services. (ii) Documentation. TFT will provide, or cause the
-------------
Provider to provide, to the Recipient at its
1
<PAGE>
expense all service operating manuals and other materials relating to the
Services and, as reasonably requested by the Recipient, any supplements or
updates to the service operating manuals or other materials; subject to Section
10, the Recipient may duplicate the materials provided pursuant to this clause.
(c) Updating. The parties have exercised due diligence in preparing this
--------
Agreement and the Schedules, which Schedules are intended to describe all of the
Services currently provided by the Providers to TSI to the extent necessary to
conduct the business of TSI in all material respects as currently conducted but
the parties anticipate that the complexity of the transactions contemplated by
this Agreement may result in incomplete Schedules. Each party will promptly
notify the other if it becomes aware of additional items that were inadvertently
omitted from a Schedule, or additional information which, if known at the time a
Schedule was originally prepared, would have caused the parties to have prepared
the Schedule in a different manner. The parties will cooperate in good faith to
promptly update the Schedules as necessary and appropriate to reflect any
additional items or information that is discovered after the execution of this
Agreement; provided, however, that TFT shall not be obligated to materially
increase any of its obligations hereunder unless expressly agreed in writing by
TFT.
3. Term and Termination.
--------------------
(a) This is a master agreement and shall be construed as a separate and
independent agreement for each and every Service provided under this Agreement.
Each of the Schedules is hereby incorporated in its entirety by reference
herein. Any specific Service may be subject to termination by the parties. Any
termination of this Agreement with respect to any Service shall not terminate
the Agreement with respect to any other Service then being provided subject to
this Agreement.
(b) This Agreement will expire with respect to any Service at the end of
the stated term provided in Section 2(a).
(c) Subject to paragraph (a) of this Section, TSI may terminate this
Agreement (i) for breach with respect to any Service upon written notice, unless
within a period of thirty (30) days after such notice the Provider that is in
breach remedies such breach and (ii) for any reason with respect to any Service
upon ninety (90) days' notice. Upon the effective date of such termination,
each party will, and will cause the relevant Provider or Recipient to, return
immediately to the all of the Provider's or Recipient's Confidential Information
and Equipment (each as defined below) associated with the provision of the
Service in the possession or control of the Recipient or Provider, as the case
may be.
(d) After any termination or expiration of this Agreement pursuant to the
terms hereof, Sections 3(c), 4, 5(c), 6, 10, 13-20 and 22-25 shall survive.
4. Compensation; and Taxes. Prices and invoicing for each of the Services
-----------------------
provided hereunder will be determined in accordance with terms set forth in the
respective
2
<PAGE>
Schedule relating to such Service. Each party will pay all taxes for which it is
the primary obligor as a result of the provision of Services under this
Agreement.
5. Representations.
---------------
(a) TFT. TFT hereby represents to Buyer that: (i) it is duly organized,
---
validly existing and has the authority to execute, deliver and perform its
obligations under this Agreement; (ii) this Agreement has been duly authorized
by all necessary corporate action, has been duly executed and delivered and
(assuming the due execution and delivery of this Agreement by, and binding
effect of this Agreement on, Buyer) constitutes its legal, valid, binding and
enforceable obligation (subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to creditors rights and to general equity principles and, as to
enforcement, to regulatory supervision); (iii) the performance of its or any
Provider's obligations hereunder does not (and will not) violate any provision
of law or any material agreement applicable to it; and (iv) it and the Providers
have in effect (and will continue to maintain in effect) all material
registrations, approvals, authorizations and consents required by any government
authority in order to effect the provision of the Services hereunder.
(b) TSI. TSI hereby represents to TFT that: (i) it is duly organized,
---
validly existing and has the authority to execute, deliver and perform its
obligations under this Agreement; (ii) this Agreement has been duly authorized
by all necessary corporate action, has been duly executed and delivered and
(assuming the due execution and delivery of this Agreement by, and binding
effect of this Agreement on, WF and WFB) constitutes its legal, valid, binding
and enforceable obligation (subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of general
applicability relating to creditors rights and to general equity principles and,
as to enforcement, to regulatory supervision); (iii) the performance of its or
any Recipient's obligations hereunder does not (and will not) violate any
provision of law or any material agreement applicable to it; and (iv) it and the
Recipients have in effect (and will continue to maintain in effect) all material
registrations, approvals, authorizations and consents required by any government
authority in order to effect the provision of the Services hereunder.
(c) THE WARRANTIES STATED IN THIS SECTION ARE THE SOLE AND EXCLUSIVE
WARRANTIES MADE BY TFT AND TSI. THERE ARE NO OTHER WARRANTIES RESPECTING THE
SERVICES PROVIDED UNDER THIS AGREEMENT, WHETHER EXPRESS, IMPLIED OR STATUTORY,
INCLUDING BUT NOT LIMITED TO ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE EVEN IF TSI HAS BEEN INFORMED OF SUCH PURPOSE. NO AGENT OF
TFT OR TSI IS AUTHORIZED TO ALTER OR EXCEED THE WARRANTY OBLIGATIONS OF ANY
PARTY AS SET FORTH HEREIN.
6. Indemnity. (a) TFT agrees to indemnify each of the Recipients and each
---------
of its directors, officers, employees and agents (the "Indemnified Recipient
---------------------
Parties") for, and to hold
- -------
3
<PAGE>
each of the Indemnified Recipient Parties harmless against, any direct loss,
liability or expense, including without limitation any tax, penalties or
expenses, incurred as a result of any breach of this Agreement, any violation of
laws, rules or regulations or of the gross negligence or bad faith on the part
of TFT or its Providers (it being acknowledged that so long as any Provider is
in compliance with the service levels and procedures described in the relevant
Schedule, no gross negligence or bad faith shall be imputed to such Provider),
arising out of or in connection with the provision of Services as provided
hereunder, or the failure to perform any Services, including the costs and
expenses of defending any claim of liability and of enforcing this provision.
(b) TSI agrees to indemnify each of the Providers and each of its
directors, officers, employees and agents (the "Indemnified Provider Parties")
----------------------------
for, and to hold each of the Indemnified Provider Parties harmless against, any
direct loss, liability or expense, including without limitation any tax,
penalties or expenses, incurred as a result of any violation of laws, rules or
regulations or of the gross negligence or bad faith on the part of TSI or its
Recipients, arising out of or in connection with the provision of Services as
provided hereunder, including the costs and expenses of defending any claim of
liability and of enforcing this provision.
(c) NEITHER PARTY SHALL NOT BE RESPONSIBLE TO THE OTHER OR ANY
PROVIDER OR RECIPIENT FOR ANY LOST DATA, DOWN-TIME, LOSS-OF-PROFIT, INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE SERVICES OR THIS
AGREEMENT. Neither party shall be liable hereunder for cumulative damages
greater than one hundred percent (100%) of the service fees having then actually
been paid, or which are then payable, to TFT under the terms of this Agreement
for the relevant Services. TSI, on its behalf and on behalf of its Recipients,
releases TFT and its Providers from all obligations, liability, claims or
demands relating to the Services and this Agreement in excess of the limitation
provided for herein. THE PARTIES ACKNOWLEDGE THAT THE LIMITATIONS SET FORTH IN
THIS SECTION ARE INTEGRAL TO THE AMOUNT OF FEES LEVIED IN CONNECTION WITH THE
SERVICES RENDERED HEREUNDER AND THAT, WERE TFT TO ASSUME ANY FURTHER LIABILITY
OTHER THAN AS SET FORTH HEREIN, SUCH FEES WOULD OF NECESSITY BE SET
SUBSTANTIALLY HIGHER.
7. Policies and Procedures. TFT and TSI agree that Provider will perform
-----------------------
the Services or cause the Services to be performed in accordance with the
reasonable policies and procedures as adopted by the Provider from time to time
and supplied by the Provider. TFT and TSI each agree that, if, in the course of
performing the Services, any Recipient believes that a policy or procedure of
the Provider should be modified or amended in any respect, the Recipient shall
so recommend to TFT and TFT shall cause such recommendation to be considered in
good faith but shall not be obligated to effect any policy or procedure changes.
8. Equipment. At Recipient's or Provider's expense, as mutually agreed,
---------
and after giving reasonable notice to the Recipient, the Provider may install or
maintain computer terminals, printers, servers, network equipment or other
computer input, processing or output
4
<PAGE>
devices (collectively "Equipment") that will be connected to the computer system
---------
of the Recipient or Provider (the "Computer System") to provide Services. TFT
---------------
will ensure that the Equipment meets the equipment certification standards
established by the Recipient for similar equipment connected to its Computer
System. TSI and TFT each agree that it and its Providers or Recipients shall not
alter or modify the Computer System of a Provider or Recipient in any way that
detrimentally affects its functioning or performance without the prior written
consent of the Recipient or Provider, as the case may be. Equipment acquired at
Recipient's expense shall remain the property of the Recipient and acquired at
Provider's expense shall remain the property of Provider.
9. Insurance. TFT and TSI will cause each Provider's and Recipient's
---------
public liability and property damage insurance policies to be (i) appropriately
endorsed to insure the interests of the Recipient or Provider, as the case may
be, against all risks to which it may be exposed by reason of the provision of
Services under this Agreement and (ii) [???of such types and in such amounts as
are not less than the limits of the public liability and property damage
insurance maintained by any Provider or Recipient with insurers of recognized
responsibility].
10. Confidentiality.
---------------
(a) Confidential Information. Secret or confidential information,
------------------------
including, without limitation, client and prospective client lists, source code,
object code, manufacturing, financial and marketing data, orders, forecasts,
plans, designs, drawings and specifications of the Provider or Recipient (the
"Disclosing Party"), that is or has been provided to the Recipient or Provider
- -----------------
(the "Receiving Party") and which is marked as "Confidential" (or with a similar
---------------
designation) or which the Receiving Party should reasonably know is confidential
information (hereafter "Confidential Information"), will be treated as
------------------------
confidential and not further disclosed to any person who is not an affiliate of
the Receiving Party, or a director, officer, employee or agent of such affiliate
or Receiving Party, without the prior written consent of the Disclosing Party,
except as provided under the terms of this Agreement, for the later of December
31, 2009 or for ten ears from the date such Confidential Information was first
received, unless such information (i) was already in the possession of the
Receiving Party, (ii) is placed in the public domain through no fault of the
Receiving Party, (iii) is independently developed by the Receiving Party, or
(iv) becomes rightfully available to the Receiving Party through other sources
without restriction on disclosure. Nothing contained in this paragraph will act
or is intended to affect or limit the obligations of any party to this Agreement
regarding confidentiality and nondisclosure of Confidential Information provided
for elsewhere in this Agreement. If any Receiving Party to this Agreement is
served with a subpoena or other legal process (or a request from applicable
regulators) requiring the production or disclosure of any Confidential
Information, then TSI (if the Receiving Party is a Recipient) or TFT (if the
Receiving Party is a Provider) will immediately notify the Disclosing Party, and
will in good faith attempt to permit the Disclosing Party at its expense to
intervene and contest such disclosure or production. TFT and TSI each agrees
that, if TFT or TSI, or any Provider or Recipient, is to be the subject of an
internal or external audit involving or referencing anything relating to the
Services or the provision thereof, the relevant Recipient or Provider, as the
case may be, shall have a right to receive advance
5
<PAGE>
notice thereof within a reasonable period of time before such audit, a right to
participate meaningfully in such audit process and a meaningful opportunity to
review and comment on such audit processes or materials before such audit
becomes final in each case to the extent such audit could reasonably be expected
to materially affect the rights, reputation or obligations of such Recipient or
Provider.
(b) Non-Disclosure. TSI (if the Receiving Party is a Recipient) or TFT (if
--------------
the Receiving Party is a Provider) each agree that the Receiving Party will (i)
allow access to the Disclosing Party's Confidential Information only to
affiliates of the Receiving Party or the directors, officers, employees and
agents of such affiliates and the Receiving Party; and (ii) take reasonable
precautions to maintain the confidentiality of the Disclosing Party's
Confidential Information, which in no event will be less than those precautions
that such employs to protect its own proprietary information.
11. Relationships among the Parties, Recipients and Providers. Nothing in
---------------------------------------------------------
this Agreement shall cause the relationship between TSI on the one hand and TFT
on the other, or between any Provider on the one hand and any Recipient on the
other, to be deemed to constitute a partnership or joint venture. Neither TSI on
the one hand nor TFT on the other, nor any Provider on the one hand nor any
Recipient on the other, shall have any authority, express or implied, to bind,
commit or act as agent for the other in any way except as provided herein. Each
Recipient and Provider shall be responsible for the salaries, payroll taxes,
severance costs and benefits of its own employees [???], and the terms of this
Agreement are not intended to constitute the parties, or the Recipients or the
Providers, as a joint employer for any purpose. Each of the parties agrees that
the provisions of this Agreement as a whole are not intended to, and do not,
constitute control of the other party (or any affiliates thereof) or provide it
with the ability to control such other party (or any affiliates thereof), and
each party hereto expressly disclaims any right or power under this Agreement to
exercise any power whatsoever over the management or policies of the other (or
any affiliates thereof). Nothing in this Agreement shall oblige either party
hereto to act in breach of the requirements of any law, rule or regulation
applicable to it, including securities, export and privacy laws, written policy
statements of securities commissions and other regulatory authorities, and the
by-laws, rules, regulations and written policy statements of relevant securities
and self-regulatory organizations.
12. Books and Records. At TFT's or TSI's request, the other will make
-----------------
available, during normal business hours, the books and records relating to
Services provided hereunder for inspection and photocopying by the other's
agents, auditors, accountants or other representatives.
13. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
-------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO ITS
CONFLICTS OF LAWS PRINCIPLES. Each
6
<PAGE>
of the parties irrevocably consents to the exclusive personal jurisdiction of
the federal and state courts located in San Jose County, California for any
matter arising out of or relating to this Agreement, except that in actions
seeking to enforce any order or any judgment of such courts such personal
jurisdiction shall be nonexclusive.
14. Dispute Resolution.
------------------
(a) Mandatory Arbitration. The parties hereto shall promptly submit any
---------------------
dispute, claim, or controversy arising out of or relating to this Agreement
and/or the provision of Services hereunder, including, without limitation,
effect, validity, breach, interpretation, performance, or enforcement
(collectively, a "Dispute") to binding arbitration in San Francisco, California
-------
at the offices of the American Arbitration Association before a panel of three
arbitrators (the "Arbitrators") in accordance with the Expedited Commercial
-----------
Arbitration Rules of the American Arbitration Association. The parties agree
that binding arbitration shall be the sole means of resolving any Dispute.
(b) Costs. The costs of the arbitration proceeding and any proceeding in
-----
court to confirm or to vacate any arbitration award (including, without
limitation, actual attorneys' fees and costs), shall be borne by the
unsuccessful party and shall be awarded as part of the Arbitrators' decision,
unless the Arbitrators shall otherwise allocate such costs in such decision.
15. Assignment. Neither this Agreement nor the rights or obligations
----------
hereunder shall be assignable by either party hereto, by operation of law or
otherwise, without the prior written consent of the other party hereto, and any
purported assignment shall be null and void; provided, however, that TFT may
-------- -------
subcontract to third parties to provide certain Services hereunder. Subject to
the foregoing, this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns.
16. Force Majeure/Delay. No party will be responsible for delays in or
-------------------
suspension of performance caused by acts of God or governmental authority.
17. Entire Agreement. This Agreement, the Schedules and the License
----------------
Agreement constitute the entire agreement, and supersedes all prior agreements
and understandings (oral and written), by and among the parties hereto with
respect to the subject matter hereof.
18. Conflicts. To the extent the License Agreement, or any other document
---------
or other agreement executed in connection with the License Agreement, is in
conflict with any term or provision of this Agreement or any Schedule to this
Agreement with respect to any Service expressly described in a Schedule, this
Agreement will take precedence. To the extent this Agreement is in conflict
with any Schedule, this Agreement will take precedence.
19. Third-Party Rights. Nothing contained in this Agreement, express or
------------------
implied, establishes or creates, or is intended or will be construed to
establish or create, any right in or remedy of, or any duty or obligation to,
any third party other than the Recipients and Providers.
7
<PAGE>
20. Notices. All notices or other communications hereunder shall be
-------
deemed to have been duly given and made if in writing and if served by personal
delivery upon the party for whom it is intended on the day so delivered, if
delivered by registered or certified mail, return receipt requested, on the
third business day following such mailing or by a national courier service on
the Business Day following such mailing, or if sent by telecopier on the day
telecopied, or if not a business day, the next succeeding business day, provided
--------
that the telecopy is promptly confirmed by telephone confirmation thereof, to
- ----
the person at the address set forth below, or such other address as may be
designated in writing hereafter, in the same manner, by such person:
To TSI or any Recipient:
TIBCO Software Inc.
3165 Porter Drive
Palo Alto, CA 94304
Tel: (650) -
Fax: (650) -
Attn: General Counsel
with a copy to:
Chief Financial Officer as above
To TFT or any Provider:
TIBCO Finance Technology Inc.
3375 Hillview Avenue
Palo Alto, CA 94304
Tel: (650) 846-5000
Fax: (650) 846-5005
Attn: General Counsel
with a copy to:
Chief Financial Officer as above
8
<PAGE>
21. Disaster Recovery. TSI and TFT each agrees that the other shall have
-----------------
a right meaningfully to participate in and comment on the business resumption
and/or disaster recover plans, exercises and drills conducted by the other or
any Provider from time to time, including without limitation in connection with
Millennium planning.
22. Counterparts. This Agreement may be executed by the parties hereto in
------------
one or more counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument.
23. Amendment; Waiver. Any provision of this Agreement may be amended or
-----------------
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the parties, or in the case of a waiver, by the
party against whom the waiver is to be effective. No failure or delay by any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. Except as otherwise provided herein, the rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
24. Severability. The provisions of this Agreement shall be deemed
------------
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or enforceability of such provision, or the
application thereof, in any other jurisdiction.
25. Headings. Headings contained in this Agreement are for reference
--------
purposes only. They shall not affect in any way the meaning or interpretation
of this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their duly authorized officers as of the date first above
written.
TIBCO FINANCE TECHNOLOGY INC.
By:___________________________
Name:
Title:
TIBCO SOFTWARE INC.
By:___________________________
Name:
Title:
10
<PAGE>
SCHEDULE 1
----------
TIBCO Software, Inc/TIBCO Finance Technologies
Travel Services Agreement
TIBCO Finance Technology, Inc ("TFT") will provide Travel Services to TIBCO
Software, Inc. ("TSI").
Staffing: TFT will provide the appropriate staffing as agreed upon with TSI for
the Travel Services department to continue the current service levels. TFT
will maintain primary responsibility for managing the Travel Services
department, and ensuring the staff are properly trained. Travel Services staff
will rotate between TFT and TSI buildings based on travel volume and activity
requirements.
Travel Agency: TFT will be the primary contact with the Travel Agency, and will
ensure that service-levels for TSI are maintained in accordance with the
agreement with the Travel Agency ("Travel Agency Agreement").
Hours: Travel office hours will be 8:00am to 6:00pm, Monday through Friday PST.
After-hours and emergency services will be available to TSI in accordance with
the Travel Agency agreement.
Equal priority: Travel services will be provided to TFT and TSI on equal
priority. Staff location will be based on service requirements. If there are
at least two staff on duty at any time, at least one will be at the TSI
location.
Facilities: TSI will provide, at it's own cost, facilities for Travel Services
located at the TSI building.
Fixed costs: TFT expects to incur approximately $10,000 in upfront costs to
convert to a new travel agency. TSI will pay 50% of the actual costs incurred,
which will be refundable on a pro-rata basis if this agreement is terminated for
breach within the first 24 months.
Ongoing costs: TFT will charge TSI for Travel Services by allocating the loaded
costs of the Travel Services department based on dollar volume for TFT and TSI
for the prior quarter. "Loaded Costs" for purposes of this agreement are
defined as salary plus employee benefits overhead, which shall exclude
facilities and depreciation charges. If TFT and TSI agree that additional
agents are required to support service-level requirements, and those agents are
provided by the Travel Agency, fees for additional travel agents provided by the
Travel Agency to will be netted out of commissions due to TSI based on the
dollar volume for TFT and TSI for the prior quarter.
Travel Accounting and Billing: TFT will ensure that travel accounting and
billing activity with the Travel Agency for TFT and TSI is separately
maintained. All expenses, commissions,
11
<PAGE>
refunds and rebates will be separately identified between the two companies, and
a separate billing from the Travel Agency prepared.
Payment: TFT will invoice TSI monthly for all Travel Services charges related
to the TFT Travel Services employees. TSI will pay amounts due to TFT within 7
days of receiving a correct invoice and supporting documentation. TSI will pay
the separate TSI billing from the Travel Agency in accordance with the payment
terms in the Travel Agency Agreement. This payment can be made through TFT or
directly to the Travel Agency as mutually agreed between TFT and TSI.
Travel Policies: TFT agrees that Travel Services will administer TSI travel in
accordance with the documented TSI travel policy.
Term and Termination: Travel Services shall be provided for a one-year term,
which shall automatically renew for additional one-year terms on an annual basis
unless terminated by either party for any reason upon 60 days written notice.
12
<PAGE>
SCHEDULE 2
TIBCO Software Inc./TIBCO Finance Technology Inc.
Cafe Services Agreement
TIBCO Software, Inc. (TSI) amd TIBCO Finance Technology, Inc. (TFT) will share
the services of Bon Appetite and the Bon Appetite cafe manager, Ken Sligar. TFT
will manage the contractual relationship with Bon Appetite.
TSI will receive a direct bill from Bon Appetite for costs directly incurred at
the Porter Drive site, including the cafeteria service and food, catering
service, coffee service, and subsidy.
Ken Sligar will continue to manage both the TSI facility at Porter Drive and the
TFT facility at Hillview Drive. Ken will spend as much time as required at the
Porter site to ensure that the cafeteria and related services are satisfactory
to TSI. It is currently estimated that this will require 35% of Ken's time over
the next six months. TFT will communicate to Bon Appetite the allocation of
Ken's expenses to be included in the TSI invoice. This allocation will be set
at 35% for the first six months. TFT and TSI will review this charge and adjust
as appropriate every six months, or sooner if one or both parties feel the
allocation is materially misrepresenting the service being provided to either
party.
The foregoing agreement can be cancelled with 60 days written notice by either
party at any time for any reason.
13
<PAGE>
SCHEDULE 3
----------
Service Level Agreement
between
TIBCO Finance Technology Inc. (TFTI)
and
TIBCO Software Inc. (TSI)
For the delivery of Information Technology Services
Version 0.7
June 24, 1999
14
<PAGE>
Executive Overview
TFTI currently provides a range of Information Technology services to TSI,
including helpdesk support, desktop management, network management,
infrastructure management, asset management, Internet & Intranet support to TSI
end users. Subsequent to the relocation of TFTI to the Hillview Avenue building,
the nature of that support will necessarily change, and TSI will take over
responsibility for the day-to-day operations of TIBCO Software Inc., especially
the Porter Drive site. This Service Level Agreement defines the Information
Technology services that TFTI will provide to TSI through the calendar year
1999.
This service level agreement ("SLA") provides detailed documentation for each
service provided by TFTI including: a description of the services presently
being provided, and to be provided; the deliverables resulting from the service
provided; and the service levels to be expected by TSI.
15
<PAGE>
1. Services
16
<PAGE>
This Service Level Agreement ("SLA") is a working agreement between TSI and
TFTI. This document defines the level of service which will be provided to TSI
by TFTI, and is the foundation for all Information Technology Services provided
to TSI by TFTI.
1.1. Levels of Support
<TABLE>
<CAPTION>
Support Level Description Explanation
- ------------------------------------------------------------------------------------------------
<C> <S> <C>
First level of user support
1 Front Line Support - E-mail, and interaction. Primary
phone, & drop-ins channel of communication with
user.
------------------------------------------------------------------------------------------------
Direct hands-on intervention
2 Hands-On Support - Desktops & of an IT staff member in
Servers resolving an issue.
- -------------------------------------------------------------------------------------------------
Utilization of specialized
knowledge. Aspects of design
3 Advisement/Consultation and planning as well as
Support - Infrastructure research & discovery also
covered.
- ------------------------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
1.2. Service Coverage Level over Time for Specific Services
1.2.1. TFTI Information Technology Group will provide the following
service levels to TSI for TFTI infrastructure at Porter Drive. The
chart refers to components with the following descriptors:
<TABLE>
<CAPTION>
Service Description Apr May/Jun July/Aug/Sep Oct/Nov/Dec
<S> <C> <C> <C> <C>
LAN Services 1,2,3 3 3 3
WAN Services 1,2,3 3 3 3
Remote Access 1,2,3 3 3 3
Helpdesk Support 1,2,3 3 3 3
Desktop System Support 1,2,3 3 3 3
Server System Support 1,2,3 3 3 3
Naming Services 1,2,3 3 3 3
On-call Support 1,2,3 3 3 3
Internet & Intranet Support 1,2,3 3 3 3
Remote Office Support 1,2,3 3 3 3
</TABLE>
1.2.2. TFTI Information Technology Group will provide the following
service levels to TSI for TFTI infrastructure at Hillview Ave.
<TABLE>
<CAPTION>
Service Description Apr May/Jun July/Aug/Sep Oct/Nov/Dec
<S> <C> <C> <C> <C>
OC3c between Porter and Hillview 1,2,3 2,3 2,3 2,3
Remote Services 1,2,3 2,3 2,3 2,3
Server System Support 1,2,3 2,3 2,3 2,3
On-call Support 1,2,3 2,3 3 3
Remote Office Support 1,2,3 2,3 2,3 2,3
</TABLE>
18
<PAGE>
1.3. Service Description
1.3.1. Palo Alto LAN Services: TFTI will provide LAN access to assets that are
moved from Porter Drive to Hillview Avenue through a SONET interface
that is solely managed and operated by TFTI. TFTI currently provides
day-to-day management of the LAN infrastructure in the Porter Drive
facility. TSI will migrate from the existing infrastructure in calendar
year 1999. During this transition period, TFTI will provide third-level
support for problems with the existing LAN infrastructure.
1.3.2. WAN Services: TFTI will provide WAN services for TSI employees,
workgroups and assets that are located in TFTI managed facilities
world-wide. WAN services include providing network connectivity for all
locations in North America, Europe, and Asia-Pacific. In addition, TFTI
will provide integration support to this network for TSI managed
networks, both local and wide-area.
1.3.3. Remote Access Networking: TFTI currently provides dial-in network
support for TSI, supporting asynchronous and ISDN connections. TFTI
will continue providing this support throughout calendar year 1999.
1.3.4. Helpdesk Support: TFTI currently provides Helpdesk support to TSI
users. After the move of TFTI to the Hillview Avenue facility, TSI will
be responsible for providing this support. However, issues requiring
special knowledge of the Porter Drive infrastructure, will be referred
to TFTI IT support staff for third-level support by TSI Helpdesk.
1.3.5. Desktop Systems Support: TSI will be responsible for providing Desktop
support for TSI users and employees. This support includes desktop
Windows and UNIX machines and laptop Windows machines. However, issues
requiring special knowledge of the Porter Drive infrastructure, will be
referred to TFTI IT support staff for third-level support by TSI
Helpdesk.
1.3.6. Server Systems Management: TFTI Server Systems Administration is
responsible for the installation, configuration, troubleshooting, and
day-to-day management of Hillview Avenue server environment. The server
environment includes such devices as Microsoft NT Servers and UNIX
Servers, and the servers included in this service category are defined
in Appendix A. TFTI will also provide third-level support for servers
that were deployed at Porter Drive for TSI use, but that are directly
supported by TSI.
1.3.7. Naming Services: TFTI currently provides DNS, NIS, and WINS services
for TSI end users. These services will continue uninterrupted after the
move to the Hillview Avenue location. The server environment includes
such devices as Microsoft NT Servers and UNIX Servers. TSI end users
can obtain TFTI Server Systems Administration services by placing a
call to the IT Help Desk and requesting assistance. TFTI Server Systems
Administration is responsible for the installation, configuration,
troubleshooting, and day-to-day management of the Hillview Avenue
19
<PAGE>
server environment. TFTI will also provide third-level support for
servers that were deployed by them at Porter Drive for TSI use.
1.3.8. On-Call Support: TFTI currently provides 24x7 on-call support to TSI.
At some future date (but before the end of calendar year 1999), TSI
will become responsible for on-call support for TSI end users. Before
this shift in responsibility, TFTI will continue to provide third-level
support for equipment, services or issues that were deployed or
encountered prior to the shift.
1.3.9. Internet & Intranet Support Services: TFTI currently provides access to
the Internet and Intranet services that are used and shared by TSI end
users. It is TSI's intention to migrate its usage of these services to
TSI provided facilities and assets. However, that migration cannot be
successful without the full attention, willingness and coordinated
execution of both TFTI and TSI. Recognizing that other priorities may
take precedence, TFTI will continue to provide these services to TSI
until a mutually agreed-upon migration takes place.
1.3.10. Remote Site Support: TFTI currently provides a full range of services
to TSI employees, contractors, agents and/or other assets (such as
routers, hubs and servers) that reside in TFTI managed facilities. TSI
will continue to share space in these TFTI managed sites. TFTI will
provide services and support to the TSI users as if they were TFTI
users.
1.3.11. Electronic Mail: TFTI currently provides email services to TSI,
including server support, distribution of email to various mail servers
through a mail relay, and the maintenance and synchronization of mail
aliases. TFTI will continue to provide these services to TSI until a
mutually agreed-upon migration takes place. On or before June 1, 1999,
responsibility for the "tibco.com" domain will transfer to TSI. At that
time, TSI will provide mail relay services to TFTI, to support their
transition to a new domain.
1.3.12. Telecommunications Services: TFTI will provide the following services
to TSI:
.Access Management
.Long Distance
.Calling Cards
. Ordering calling cards for new employees
. Canceling cards for terminated employees
.Pagers
. Ordering new and replacement pagers and returning them for
terminated employees
. Keep updated list of employee pager numbers
.System administration of CBX and PhoneMail
. Create phone stations for new employees
. Install phones
20
<PAGE>
. Wiring in switch room
. Create PhoneMail box
. Provide information and instruction when needed
. Moves, adds and changes
. Contact Siemens technician when needed
. Order digital and analog cards, phones, and accessories
. Call detail recording
. Provide reports as requested
21
<PAGE>
2. TFTI Staff Levels of Service (Service Hours)
The following table defines the hours that TFTI staff provides to TSI. The
percentage is based on a 40-hour week.
2.1.IT
<TABLE>
<CAPTION>
Name Apr May/Jun July/Aug/Sep Oct/Nov/Dec
<S> <C> <C> <C> <C>
Jennifer Casillas 33% 20% 10%
HD Admin 33%
HD Admin 33%
Jack Wang 33% 25% 20% 20%
Kunal Handa 33% 20% 10% 5%
UNIX Admin 33%
UNIX Admin 33%
Lemuel Lee 33% 5% 10% 5%
PC/NT Admin 33%
PC/NT Admin 33%
Total 3.3 FTE .9 FTE .5 FTE .3 FTE
</TABLE>
2.2. Telecomm
<TABLE>
<CAPTION>
Name Apr May/Jun July/Aug/Sep Oct/Nov/Dec
<S> <C> <C> <C> <C>
Jenny McGuire 50% 50% 50% 50%
Total 0.5 FTE 0.5 FTE 0.5 FTE 0.5 FTE
</TABLE>
Note: FTE = Full Time (40-hour week) Equivalent
3. Fees
[Fees to be filled in by TFT]
4. Key Assumptions/Requirements
. TSI will establish Helpdesk Support on April 26th, 1999, 2 weeks prior to
the May 7th, 1999 move date. A transition period of 4 weeks will ensue,
during which TFTI and TSI Helpdesk Support will be jointly supporting the
TFTI and TSI infrastructures. At the close of the 4th week (May 21st,
22
<PAGE>
1999) TFTI and TSI will be handling support separately for each
perspective company.
. TSI will provide On-Call Support information (e.g. pager, cellular phone,
and home phone numbers) to TFTI On-Call Support the week prior to the May
7th, 1999 move date. TFTI will continue to provide third-level support
for TFTI Infrastructure at Porter Drive, and TSI will provide contact
information for TSI individuals that will provide first and second level
support for said infrastructure.
. TFTI will not be providing any first or second level support for any
infrastructure at Porter Drive. TFTI will provide TSI with third level
support for Infrastructure at Porter Drive.
. TFTI will provide second and third level support for Hillview
Infrastructure that TSI relies on. First level support must be provided
by TSI then routed appropriately to TFTI.
23
<PAGE>
Appendix A: Supported Servers
<TABLE>
<CAPTION>
Computer Name Operating
Description System Function Location
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Compute Servers Sun UNIX Compute Server Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
NIS Servers Sun UNIX NIS Server Porter Drive
- ---------------------------------------------------------------------------------------------------------------------
Badger22 Sun UNIX GP for UNIX Users Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Bonestorm Compaq NT Exchange Server Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Bonestorm2 Compaq NT Exchange Server Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Condor Sun UNIX GP for UNIX Users Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Diablo Compaq NT BDC Porter Drive
- ---------------------------------------------------------------------------------------------------------------------
Falcon Sun UNIX GP for UNIX Users Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Flash Sun UNIX Mail Gateway Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Galaxy Sun E450 UNIX File Server Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Heretic Compaq NT PDC Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Key Largo Auspex UNIX File Server Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Oxford Sun UNIX UNIX Print Server Porter Drive
- ---------------------------------------------------------------------------------------------------------------------
Post Compaq NT Print Server Porter Drive
- ---------------------------------------------------------------------------------------------------------------------
Relic Compaq NT File Server Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Relic Compaq NT PDC Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Script Compaq NT Print Server Porter Drive
- ---------------------------------------------------------------------------------------------------------------------
Skyhawk Sun UNIX GP for UNIX Users Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Surfme Sun UNIX Intranet Web Server Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Tekbspa Sun UNIX Mail Server & Relay Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
WINS/ MB Server Compaq NT WINS/Browser Servers Porter Drive
- ---------------------------------------------------------------------------------------------------------------------
Tickle Sun UNIX Proxy Server Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
Zebra Sun UNIX GP for UNIX Users Hillview Avenue
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: This appendix may not be complete and may not contain all of the servers
which TFTI will maintain for TSI's use. All the servers and racks located at
Porter Drive are properties of TFTI, and TSI will return these servers to TFTI
no later than January 5, 2000.
24
<PAGE>
Exhibit 10.12
SOFTWARE LICENSE AND DEVELOPMENT AGREEMENT
Cedel Global Services, societe anonyme
and
TIBCO Software Inc.
[ * ] = CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED
SEPARATELY WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
<PAGE>
Table of Contents
<TABLE>
<S> <C>
I. Definitions.................................................... 5
II. Scope of Services.............................................. 7
III. Taxes.......................................................... 8
IV. Title.......................................................... 8
A. CGS Applications:........................................... 8
B. Generic Business Applications:.............................. 9
C. Generic Technical Applications:............................. 9
V. License........................................................ 9
VI. Marketing of Products and Royalties............................ 10
VII. Termination.................................................... 11
VIII. Warranties..................................................... 13
IX. Non-Solicitation of Employees and Non-Competition.............. 14
X. Compliance With Law............................................ 15
XI. Applicable Law................................................. 16
XII. Dispute Resolution............................................. 16
XIII. Proprietary Rights Indemnity................................... 17
XIV. General Indemnity.............................................. 18
XV. Insurance...................................................... 18
XVI. Limitation of Liability........................................ 18
XVII. Force Majeure.................................................. 18
XVIII. Confidentiality................................................ 19
XIX. Notices........................................................ 20
XX. Assignment..................................................... 20
XXI. General........................................................ 20
Exhibit A: Existing Software.... ......................................... 24
Exhibit B: Capital Market Services
of Cedel International and its subsidiaries.................... 25
Exhibit C: TIBCO Standard Provisions for Maintenance and Support.......... 26
I. Coverage....................................................... 26
II. Description of Software Maintenance............................ 26
A. Access to TIBCO Support Centers in London and Palo Alto..... 26
B. Remedial Maintenance........................................ 26
C. Software Updates and Enhancements........................... 27
III. On-Site Support................................................ 28
IV. Per Call Support............................................... 29
V. Time and Materials Services.................................... 29
A. For Non-TIBCO Problems...................................... 29
B. For Non-TIBCO Software...................................... 29
VI. Access......................................................... 29
VII. Problem Reporting and Tracking Procedures...................... 30
VIII. Payment........................................................ 30
IX. Support Agreement Number....................................... 30
Exhibit D: Contract Coordination Procedures............................... 31
1. Organization................................................... 31
1.1 CGS Contract Representatives.............................. 31
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
1.2 TIBCO Contract Representatives.............................. 31
1.3 Work Order Managers......................................... 31
1.4 Production and Maintenance Managers......................... 32
1.5 Management Arbitration Board................................ 32
1.6 Work Order Organization..................................... 32
2. Correspondence.................................................... 33
2.1 General Procedures......................................... 33
2.2 Addresses.................................................. 33
3. Meetings.......................................................... 34
3.1 Progress Meetings.......................................... 34
3.2 Contract Commitments....................................... 34
3.3 Work Order Progress/Technical Review Meetings.............. 34
4. Reporting......................................................... 34
4.1 Methodologies and Reporting................................ 34
5. Travel............................................................ 34
5.1 Visits to Europe by TIBCO Personnel........................ 34
5.2 Visits to Palo Alto by CGS Personnel....................... 35
5.3 Long Term Assignments...................................... 35
6. Work Order Proposals.............................................. 35
6.1 Origination................................................ 35
6.2 Request for Work Order Proposal............................ 35
6.3 Submission of Work Order Proposals......................... 36
6.4 Approval of Work Order Proposals.......................... 37
7. Work Order Management............................................. 37
7.1 Initiation................................................. 37
7.2 Quality Management......................................... 37
7.3 Work Order Change Management............................... 38
7.4 Work Order Acceptance...................................... 38
7.5 Training................................................... 39
7.6 Documentation.............................................. 39
8. Invoicing......................................................... 40
8.1 General.................................................... 40
8.2 License Fees and Maintenance............................... 40
8.3 Work Order Invoices........................................ 40
9.0 Administrative Charges................................................. 41
Exhibit E: Contract Price............................................. 42
Schedule 1: License Fees............................................... 42
Schedule 2: Maintenance Fees........................................... 42
2.1 Base Fees.................................................. 42
2.2 Maintenance Fee Escalation................................. 43
Schedule 3. CGS Funded Development Projects............................ 43
3.1 Work Orders................................................ 43
3.2 Time & Materials [T&M]..................................... 44
3.3 Charges Plus a Fixed Profit Work Orders [CPFP]............. 45
3.4 Adjusted Charges Work Orders [AC].......................... 45
3.5 Total Estimated Charge..................................... 45
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
3.6 Fixed Price Work Orders [FP].............................. 46
3.7 Rate Escalation............................................ 46
3.8 Equipment Purchase Through Work Orders..................... 46
3.9 Expense Policy............................................. 47
Schedule 4. Payment.................................................... 48
Exhibit F: Work Order Procedures...................................... 49
Exhibit G: Protected Jurisdictions.................................... 50
Exhibit H: TIBCO Shrink Wrap End User License Agreement............... 51
Exhibit I: Year 2000 Warranty......................................... 52
Exhibit J: Individual Confidentiality Agreement....................... 55
</TABLE>
4
<PAGE>
SOFTWARE LICENSE AND DEVELOPMENT AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into by and between TIBCO
Software Inc., a Delaware corporation, (hereinafter called "TIBCO") and Cedel
Global Services, societe anonyme, (hereinafter, together with its Affiliates,
called "CGS") and made effective as of the last date signed below (the
"Effective Date").
WHEREAS, Cedel, societe anonyme and Teknekron Software Systems, Inc.
entered into a Software License and Development Agreement effective July 11,
1994, as amended via letters dated December 11, 1995 and March 6, 1998 (the
"Prior Agreement"), which Prior Agreement the parties desire to be replaced and
superseded by this Agreement, exclusive of all outstanding work orders and
payment obligations under the Prior Agreement which will remain in effect;
WHEREAS, this Agreement provides for CGS's payment of additional fees in
consideration for the right to use the Licensed Software, as defined below,
throughout the term of the Agreement for: (i) CGS's internal use, (ii)
distribution as an embedded component in CGS's applications and (iii) in
connection with Outsourcing, as defined in Article V below, all as more fully
described below;
WHEREAS, CGS has established itself as a technology and services provider
in securities clearing and settlement, banking, and the financial community and
desires to develop and market new technology solutions to its core business
areas;
WHEREAS, CGS and TIBCO desire to continue their strategic relationship,
the purpose of which is to migrate CGS' technology infrastructure from its
existing proprietary platforms to open systems, provide CGS' management a look-
ahead at new technologies and techniques, and improve CGS' business and market
position through technology; and
WHEREAS, TIBCO has the technical and professional capability,
qualifications and existing technology required to design, develop and install
an integrated system and desires to work with CGS to develop and market new
technology solutions.
NOW THEREFORE, in consideration of the mutual covenants contained in this
Agreement, the parties hereby agree to adjust their long-term strategic
relationship as follows:
I. Definitions
A. "Affiliate": An entity which conducts as its principal businesses the
Strategic Businesses and which now or in the future directly or indirectly
owns or controls fifty percent (50%) or more, or is fifty percent (50%) or
more owned or controlled by, or is under common control with Cedel
International, or an entity in the clearing and settlement industry which
is at least 20% owned and controlled by Cedel International.
B. "Agreement": This Software License and Development Agreement between TIBCO
and CGS, including all Exhibits hereto which are incorporated herein for
all purposes.
5
<PAGE>
C. "Cedelbank": Cedel s.a. which changed its name and status with effect on 1
January 1995 and which is an Affiliate.
D. "Cedel International": A Luxembourg company that owns or controls fifty
percent (50%) or more of CGS.
E. "Cedel International and its Subsidiaries": Cedel International and its
Affiliates, including CGS.
F. "Existing Software": Existing TIBCO products which are licensed to the
general public and are listed on Exhibit A.
G. "Future Products": All future software products developed or acquired by
TIBCO during the term of this Agreement which are offered for licensing to
the public and not developed pursuant to this Agreement.
H. "Generic Applications": Generic Business Applications, and Generic
Technical Applications, as defined below in Article IV of this Agreement.
I. "Licensed Software": Existing Software, Future Products, Generic
Applications, and Third Party Materials.
J. "Productized Software": Generic Applications which are offered for sale or
license by TIBCO to a third party.
K. "Software": Licensed Software and CGS Applications.
L. "Strategic Businesses": The Capital Market Services of Cedel International
and its subsidiaries as outlined in the chart attached as Exhibit B, plus
Collateral Services and Information Dissemination within the context of the
Capital Market Services. It is understood that Cedel International and its
subsidiaries may add additional services from time to time. CGS's license
rights under this Agreement with respect to those additional services shall
be subject to separate discussions and mutual agreement at the time.
M. "Third Party Materials": Software obtained by TIBCO from third parties which
is included in its Existing Software and/or Future Products.
N. "Work Order": Documentation of the services to be performed and Software to
be delivered by TIBCO for CGS under the terms of this Agreement as more
specifically set forth in Exhibit D hereof.
6
<PAGE>
II. Scope of Services
TIBCO will perform all services under this Agreement pursuant to Work Orders
established in accordance with the procedures and provisions set forth in
Exhibit D. All such Work Orders will be performed on one of the following
contractual forms:
A. "Fixed Price": Tasks specified with sufficient certainty to enable the
establishment of a fixed price for performance.
B. "Time and Materials": Tasks which require development which, by its
nature, contains uncertainties which preclude establishing a fixed price.
Charges for performance are charged at the TIBCO standard billing rate as
set forth in Exhibit E.
C. "Charges Plus a Fixed Profit": Tasks which contain some uncertainty.
This form will provide for the recovery of all charges for performance
(TIBCO standard billing rates minus a predetermined profit percentage) as
specifically set forth in Exhibit E and the payment of a pre-established
fixed sum for profit ("Fixed Profit") which is not dependent upon the
amount of actual charges incurred.
D. "Adjusted Charges": Tasks which contain some uncertainty. This form
provides for TIBCO standard billing rates minus a specified percent for
corporate allocation plus a Fixed Profit plus a fixed amount for corporate
allocation. The terms of this form are the same as for the Charges Plus a
Fixed Profit contract form.
For all Fixed Price Work Orders, TIBCO will perform the services, deliver on
the scheduled dates, and install the Software as set forth therein, and time
shall be of the essence, unless otherwise stated in the Work Order. For all
other Work Orders such services, deliveries and installation will be
performed on a "best commercially reasonable efforts" basis, unless otherwise
stated on the Work Order.
In the event the parties are unable to agree on which of the four contract
forms are applicable to any particular Work Order, the issue shall be
resolved by the Management Arbitration Board. The parties will endeavor in
such instance to establish specifications for each Work Order that will
enable TIBCO to use Fixed Price, Adjusted Charges or Charges Plus a Fixed
Profit Work Orders.
CGS agrees to timely complete all CGS tasks identified in Work Orders.
Except for employment of its affiliates, TIBCO shall not employ any
subcontractors for the performance of this Agreement or any Work Order
without the prior written consent of CGS; excluding, however, individual
consultants working under the control and management of TIBCO.
All Work Orders shall be delivered by CGS to TIBCO and shall be effective
only upon and at the time of written acceptance of the Work Order by each
party as indicated by the signature of the authorized officer of each party.
7
<PAGE>
Maintenance and support of the Existing Software and Future Products shall be
performed by TIBCO pursuant to the Maintenance and Support provisions
attached hereto as Exhibit C.
Maintenance of all Productized Software shall be covered by the fee specified
in Exhibit C. Upon delivery of source code to CGS, TIBCO shall have no
maintenance obligations for such software, including version compatibility,
unless such obligation is established in a Work Order.
III. Taxes
Except as specified below in this paragraph, CGS agrees to indemnify and hold
TIBCO harmless from any taxes including, but not limited to, sales tax, use
tax, withholding, value-added or similar tax, and property taxes that may be
assessed or levied by any jurisdiction arising out of the performance of this
Agreement but excluding any taxes based upon or determined by reference to
TIBCO's income or level of business activity ("Taxes"). TIBCO shall identify
in the Work Order all taxes that will be incurred with regard to delivery of
the products into the United States, the United Kingdom and Luxembourg, which
identified Taxes shall be the obligation of CGS. All taxes incurred in
excess of such identified Taxes with regard to delivery of the products into
the United States, the United Kingdom or Luxembourg shall be paid by TIBCO.
Notwithstanding the foregoing, TIBCO agrees that its invoices will be all
inclusive. No additional Taxes (except VAT) shall be borne by CGS.
IV. Title
TIBCO shall retain right, title and interest to and all intellectual property
rights embodied in its Existing Software and Future Products, systems design
and documentation and all modifications, extensions and improvements thereto
(provided however that the parties acknowledge that CGS Applications as
defined below shall not be deemed to be modifications, extensions and
improvements to the Existing Software and Future Software).
During the course of performance, new software applications will be developed
either by TIBCO solely or jointly with CGS. Each Work Order shall identify
each component of the software to be developed in accordance with the
following descriptions, and the rights thereto as set forth herein shall
apply.
A. CGS Applications:
Those applications and other system software which are designed for CGS's
specific approach to its business operations. An example of such an
application is the algorithm for Cedelbank's securities loan operation.
All right, title and interest to and all intellectual property rights in
CGS Applications and all modifications, upgrades, improvements, and
derivative products shall be assigned and conveyed exclusively to CGS.
TIBCO will at CGS's cost do all things reasonably necessary to assist CGS
in perfecting such rights. TIBCO will deliver the source
8
<PAGE>
code to such software and CGS will be responsible for maintenance at the
completion of the warranty period.
B. Generic Business Applications:
Those applications which embody functions or logic which pertain to business
operations that are not specific to CGS's approach to its business
operations. An example of such an application is one which calculates yield
to maturity for a corporate bond. Except as provided for specifically in
the Work Order originating the application, all right, title and interest to
and all intellectual property rights in Generic Business Applications shall
be assigned and conveyed exclusively to TIBCO. CGS will at TIBCO's cost do
all things reasonably necessary to assist TIBCO in perfecting such rights.
TIBCO will deliver the source code to Generic Business Applications and CGS
will be responsible for maintenance at the completion of the warranty
period.
C. Generic Technical Applications:
Those applications which embody functions or logic which do not pertain to
business operations. An example of a Generic Technical Application is an
algorithm which traverses in representation in memory of a directed graph
or, for another example, the VSAM-TIB Adapter. All right, title and
interest to and all intellectual property rights in Generic Technical
Applications shall be assigned and conveyed exclusively to TIBCO. CGS will
at TIBCO's cost do all things reasonably necessary to assist TIBCO in
perfecting such rights. CGS shall have the right at time of award of any
Work Order to request source code to Generic Technical Applications
developed thereunder. If TIBCO agrees to such request then CGS's source
code rights shall be documented in the Work Order. Where such documentation
is not contained in the Work Order TIBCO shall be responsible for
maintenance (at no additional charge to CGS) and CGS shall not have the
right to receive source code.
Subject to the provisions of this Article IV, the parties agree as outlined
below regarding intellectual property ownership rights of the following
components of the Stargate project:
[ * ]
V. License
TIBCO hereby grants, and CGS hereby accepts, subject to the terms and
conditions of this Agreement, a perpetual, non-exclusive and non-transferable
license to use the: (i) object code version of Existing Software and Future
Products, including Third Party Materials and modifications, improvements and
upgrades to the Existing Software and Future Products provided under TIBCO's
maintenance and support programs, and (ii) object code version and, where
applicable, source code version of Generic Technical Applications and Generic
Business Applications for CGS's and its Affiliates' own internal data
processing and computing needs without limitation of location, number of
copies, machine utilization (except that such Existing Software and Future
Products shall at all times be used on the computer systems on which such
products are made generally commercially available from TIBCO), and manner of
use (provided such use is for a Strategic Business). Subject to the
provisions of the following paragraph, CGS shall not permit any third party
to use the Licensed Software. Authorized agents or contractors of CGS acting
for CGS shall not be considered "third parties" for purposes of such
limitation provided, however that disclosure of TIBCO confidential
information to such agents or contractors will be subject to the provisions
of Article XVIII "Confidentiality." Except for source code provided to CGS
pursuant to the terms of this Agreement, CGS shall not, either directly, or
through a third party, reverse engineer,
[ * ] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
9
<PAGE>
disassemble or decompile any software provided by TIBCO, or make any attempt
in any fashion to obtain the source code to any Licensed Software.
In addition to the foregoing internal use license and the internal use
licenses granted pursuant to the Prior Agreement, CGS shall have the right to
(i) embed Existing Software and Future Products, inclusive of Third Party
Materials but exclusive of TIBCO Finance Technology's Market Data Products
described in Exhibit A, in CGS applications that are licensed by CGS to CGS's
customers for the sole purpose of providing access to CGS's services, and
(ii) use the Existing Software and Future Products as described in (i)
hereinbefore in connection with Outsourcing operated by CGS (the applications
and services described in (i) and (ii) in this paragraph above are
collectively hereinafter referred to as the "Solutions"). For purposes of
this Agreement, "Outsourcing" is a service in which CGS provides business
processes and/or automation services of securities clearing and settlement of
financial transactions for its customers. The Solutions shall only be
provided to CGS's customers in object code versions. CGS is not permitted to
distribute the Existing Software and Future Products on a stand alone basis
and shall ensure that such Existing Software and Future Products are embedded
such that the APIs in such products are not exposed to customers. CGS will
distribute the Solutions only to customers who have agreed to be bound by
provisions substantially similar to those contained within TIBCO's shrink-
wrap end user license agreement attached to this Agreement as Exhibit H. In
no event will the license granted under this Article V extend to third party
products resold by TIBCO.
In connection with the foregoing distribution right of CGS's Solutions, CGS
agrees:
(i) to indemnify TIBCO and hold TIBCO harmless from and defend any claim,
suit or proceeding, and pay any settlement amounts or damages awarded by a
court of final jurisdiction arising out of third party claims resulting from
CGS's distribution of its Solutions, and
(ii) to be responsible for providing first line and second line technical
support and maintenance to its customers. First and second line technical
support second line technical support and maintenance shall include the
manufacture and distribution of all enhancements, bug fixes, updates, new
versions or any other modifications made for the Licensed Software as well as
responding to requests for technical assistance from customers. CGS's
customers may not seek support directly from TIBCO. Provided CGS purchases
maintenance and support from TIBCO, as set forth on Exhibit C, TIBCO shall
provide third line technical support to two (2) individuals named by CGS
through TIBCO's technical support center. CGS shall use best commercially
reasonable efforts to isolate the problem and create a reproducible test case
before contacting TIBCO.
VI. Marketing of Products and Royalties
Except as otherwise provided herein, and subject to the Confidentiality
provisions of this Agreement, TIBCO shall have the exclusive right to market
Generic Applications. TIBCO shall, upon completion of a sale or licensing of
such Generic Applications, (which definition shall at all times exclude
Existing Software and Future Software and enhancements, modifications,
extensions or improvements thereto) and full payment therefor, grant to CGS a
royalty in the amount of [ * ] percent ([ *] %) of the sale price or license
fee received (exclusive of taxes, reimbursable costs, Third Party Materials
and any development charges to the customer associated with such sale or
license). Amounts due to CGS as royalties shall be offset as a credit against
labor to be performed by TIBCO pursuant to future Work Orders. At the
completion of the contract term, and any extensions thereof, if there remain
any royalties due CGS which have
[ * ] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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not been offset as set forth, such royalties shall be offset against any
residual incentives earned by TIBCO which have not been paid. If after such
offset there remain royalties due CGS, entitlement thereto shall be deemed
discharged. Notwithstanding anything contained herein to the contrary, the
amount of the royalty payable by TIBCO to CGS shall not exceed the cost paid
to TIBCO to develop each such new technology component involved, exclusive of
payments to third parties and expenses. The development cost thereof shall be
equitably determined by the parties and allocated to each and every Work
Order under which such component was developed. When CGS's contribution is
less than one hundred percent (100%) of the development cost, the royalty
shall be prorated accordingly.
CGS shall have the right with respect to any Generic Applications developed
pursuant to this Agreement which TIBCO does not desire to become Productized
Software to market and sell such software to third parties one year following
acceptance thereof (and in such event CGS shall have the right to receive the
source code for all such Generic Technical Applications). TIBCO has the
right to determine whether any such software shall become Productized
Software until the conclusion of the aforesaid one year period following
acceptance of each such software component.
To the extent that TIBCO desires to market to third parties any software
developed hereunder which contains proprietary business methods or concepts
of CGS including CGS Applications, TIBCO shall first obtain the written
consent of CGS, which consent may be withheld at CGS's discretion.
VII. Termination
A. TIBCO shall have the right to terminate this Agreement or any specific
Work Order and license(s) granted herein:
(a). Upon written notice in the event that CGS, its officers or employees
violate any material provision of this Agreement or any Work Order
including, but not limited to, confidentiality and payment, provided
that TIBCO is in compliance in all material respects with the terms
of this Agreement. TIBCO shall first give a written notice of
default by certified mail ("Default Notice") to CGS. The Default
Notice must be clearly identified as such, and be referenced to this
Article VII and specify in detail the basis for the alleged material
breach(es). Except with regard to breaches of confidentiality, CGS
shall have thirty (30) days from receipt of such Default Notice to
correct such breach;
(b). In the event CGS (i) terminates or suspends its business, (ii)
becomes subject to any bankruptcy or insolvency proceedings (which
is not discharged within ninety (90) days), or (iii) becomes
insolvent or becomes subject to direct control by a trustee,
receiver or similar authority.
In the event of termination by reason of CGS's failure to substantially
comply with any material part of this Agreement or a Work Order, or upon
any act which shall give rise to TIBCO's termination right, TIBCO shall
have the right to terminate the license(s) and take
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immediate possession of the Future Products and Upgrades to Existing
Software licensed pursuant to this Agreement and documentation and all
copies wherever located, without additional demand or notice. Within five
(5) days after termination of the license(s) as provided above, CGS will
return to TIBCO the Licensed Software in the form provided by TIBCO or as
modified by CGS at CGS's cost, or upon request by TIBCO destroy the
Licensed Software and all copies, and certify in writing that they have
been destroyed. Termination under this Article shall not relieve CGS of
obligations regarding confidentiality of the Licensed Software or
otherwise.
Without limiting any of the above provisions, in the event of termination
as a result of CGS's failure to substantially comply with any of its
obligations under this Agreement, CGS shall continue to be obligated for
any payments, including reasonable termination costs, then due, but shall
not be obligated for any future payments due under the schedules in
Exhibit E. Termination of the license(s) shall be in addition to and not
in lieu of any equitable or other remedies available to TIBCO.
B. Upon a breach by TIBCO of a material obligation under a particular Work
Order, or, in the event of such breach of a material obligation of this
Agreement, CGS shall have the right, in addition to any other remedy it
may have with regard to such breach, to terminate this Agreement, or any
particular Work Order pursuant to the procedures of this sub-article B.
CGS shall first give a written notice of default by certified mail
("Default Notice") to TIBCO. The Default Notice must be clearly
identified as such, and be referenced to this Article VII and specify in
detail the basis for the alleged material breach(es) and the specific
Work Order involved. TIBCO shall cure such breach within thirty (30)
days of receipt of such Default Notice, provided however that if such
breach is not cured within thirty (30) days despite TIBCO's best
commercially reasonable efforts then TIBCO shall have one hundred and
eighty (180) days from receipt of the Default Notice to cure such breach,
which cure shall be effected diligently. If TIBCO does not cure such
breach(es) within the allotted time, CGS may terminate the applicable
Work Order or the Agreement as the case may be for cause by giving a
written notice of termination by certified mail ("Notice of Termination")
to TIBCO, which may include a termination date corresponding to the date
of the Notice of Termination. The notice and cure provisions set forth
herein constitute a condition precedent to the exercise of any legal
rights and remedies alternative to termination.
In the event of termination of the Agreement (as distinguished from Work
Orders), CGS shall have the option of retaining its rights under this
Agreement to the Software delivered up to the effective date of
termination with no further payment of license fees due past the
effective date of termination. However, no additional Software will be
licensed. In the event that CGS elects to retain use of the licenses,
the Maintenance Fee Schedule in Exhibit E (Schedule 2) shall survive such
termination in the event CGS elects to continue purchasing such services
for the Software.
In the event of such termination of a Work Order, TIBCO shall refund any
fees paid applicable to the Work Order(s) then terminated (subject to
Article XVI "Limitation of
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Liability"). Upon such termination and repayment, the parties hereto
shall be discharged of all further liabilities under such Work Order(s).
C. CGS shall have the right to terminate this Agreement and all current Work
Orders in the event TIBCO (i) terminates or suspends its business; (ii)
becomes subject to any bankruptcy or insolvency proceeding under federal
or state statute (which is not discharged within ninety (90) days); or
(iii) becomes insolvent or becomes subject to direct control by a
trustee, receiver or similar authority. In such event, CGS shall retain
the license to the Licensed Software then delivered.
VIII. Warranties
A. TIBCO warrants that for thirty (30) days following acceptance, all
deliverables, exclusive of any Third Party Materials, will conform in all
material respects to the level of performance as accepted on the date of
acceptance ("Warranty"). TIBCO's sole obligation under the Warranty is
to use its best commercially reasonable efforts to correct in a timely
manner any defect. The warranty period for non-productized software
which is not released to production upon acceptance will commence upon
release to production. TIBCO maintenance obligations for Exhibit A
items, or subsequent revisions thereof, commence upon delivery to CGS.
All generally commercially available Existing Software is accepted upon
delivery to CGS.
If a defect occurs in regard to Software or other deliverables which have
been charged on other than a Fixed Price basis, then CGS shall pay the
cost of any warranty work on a Adjusted Charges basis. If the Software
or other deliverables were charged on a Fixed Price basis, then such
warranty work is included in the fixed price. Notwithstanding the
foregoing, in the event that TIBCO determines that the Software or other
deliverables are not defective in such respect, CGS shall reimburse TIBCO
for its services at the T&M rates set forth in Exhibit E.
To the extent its agreement with a supplier of Third Party Materials
permits, TIBCO shall pass through to CGS any performance warranty
relative to such Third Party Materials; provided, however, that TIBCO
makes no additional or supplemental warranty with respect thereto.
B. TIBCO warrants that it is the exclusive owner of all right, title and
interest in the Software, and, with respect to Third Party Materials
incorporated in the Software, it has the necessary rights to license such
software to CGS. TIBCO warrants that the Software does not infringe the
proprietary rights of any third party; provided, however, the parties
agree that the sole and exclusive remedy for any such infringement shall
be the proprietary rights indemnification as contained in article XIII
below.
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C. TIBCO warrants that TIBCO's technical and consulting services will be of
a professional quality conforming to the highest industry standards and
practices and that TIBCO has the necessary capability, including
developmental tools, to perform the services required under this
Agreement or any Work Order.
D. The Warranty does not cover defects or nonperformance due to causes and
products external to the Software, and is not valid with respect to such
defects or nonperformance. However, TIBCO warrants that the Software
will perform to the accepted level of performance when utilized with the
specified or agreed operating system and operating environment.
E. If the deliverables are not in substantial compliance with the Warranty
at the end of the Warranty Period, TIBCO shall extend the Warranty Period
until the deliverables are brought into such compliance.
F. If, before the end of the warranty period, CGS modifies the Licensed
Software, without consultation and agreement with TIBCO, or the operating
system is changed or other conditions of the operating environment are
changed which impact the Licensed Software, this Warranty shall
immediately be terminated. Correction for difficulties or defects
traceable to CGS's unauthorized modifications or unauthorized systems
changes shall be billed to CGS at TIBCO's standard Time and Materials
charges.
G. TIBCO makes no warranties with regard to Third Party Materials. Along
with the transfer of title, TIBCO agrees to transfer and assign to CGS
all of TIBCO's rights and interests in and with respect to all purchase
agreements for Third Party Materials being supplied under this Agreement
between TIBCO and other manufacturers and distributors, subject to any
limitations set forth in such agreements relating to such transfers.
TIBCO will execute any documents or instruments reasonably necessary to
effect the transfer and assignment of TIBCO's rights and interests
thereunder. TIBCO makes no representation as to the effectiveness,
adequacy or enforceability of such transferred rights.
H. THE WARRANTIES IN THIS ARTICLE VIII ARE LIMITED WARRANTIES AND ARE THE
ONLY WARRANTIES MADE BY TIBCO. TIBCO MAKES AND CLIENT RECEIVES NO
ADDITIONAL EXPRESS, IMPLIED, OR STATUTORY WARRANTY, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. NEITHER PARTY SHALL HAVE ANY LIABILITY WITH RESPECT TO ITS
OBLIGATIONS UNDER THIS AGREEMENT FOR CONSEQUENTIAL, EXEMPLARY, OR
INCIDENTAL DAMAGES EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
IX. Non-Solicitation of Employees and Non-Competition
A. Each party agrees that, during the period of performance of this
Agreement, and for a period of one year following completion of the
period of performance or termination for
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any reason, it will not solicit for employment or hire the employees of
the other party without such other party's prior written consent thereto.
B. In connection with the Stargate project, TIBCO (exclusive of Reuters
Limited and/or its affiliates/subsidiaries) agrees not to enter into a
substantially similar project with MGT/EOC, Deutsche Borse Clearing or
Sicovam ("Noncompete Commitment") contingent upon the following:
. CGS agrees to promote with TIBCO the success of the Stargate project and
to allow TIBCO to use the Stargate project as a reference and success
story in TIBCO selling, marketing and promotional efforts.
. TIBCO's Noncompete Commitment extends for one year from the planned
implementation date of the Stargate project (whether or not CGS actually
implements on this day). Such planned implementation date will be
mutually agreed in writing by the end of 1999.
. In the event (i) TIBCO terminates this Agreement for any reason or (ii)
CGS terminates this Agreement for cause, TIBCO's Noncompete Commitment
will continue for an eighteen (18) month period following the termination
date of this Agreement.
C. TIBCO's Noncompete Commitment does not extend as a restriction on any of
TIBCO's resellers which are able to resell commercially available
Existing Software on a stand alone basis or as part of any solution the
reseller may develop.
X. Compliance With Law
This Agreement is made subject to any laws, regulations, orders or other
restrictions on the export of the Software, or information about the
Software, which may be imposed at any time or from time to time by the United
States Government. Both parties (i) shall comply with all such laws,
regulations, permits, orders and other restrictions to the extent that they
are applicable; and (ii) CGS shall not, directly or indirectly, export or re-
export (as defined in the United States Export Administration Regulations)
the Software or any information about the Software to any country for which
the United States Government, or any agency thereof, requires an export
license or other governmental approval without first obtaining the same.
In performance of this Agreement, neither party shall knowingly do anything
that will cause the other party to violate any applicable United States law,
rule, regulation or policy and, to the extent not inconsistent therewith, any
other applicable law, rule, regulation and policy. Neither party shall make
any offer, payment, promise or gift, nor shall either party authorize the
same, of any money or any other thing of value, to any person in connection
with the performance of this Agreement while knowing, or having reason to
know, that any portion of such money or value will, either directly or
indirectly, be offered or promised to, or received by, any (i) officer,
employee or other person acting in an official capacity for or on behalf of
any government or any department, agency or instrumentality of such
government; or (ii) any political party or official of such party, or any
candidate for political office. Each party shall indemnify the other
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party and hold it harmless from and against any and all damages, losses,
costs or expenses (including attorney's fees) that such party may suffer or
incur by reason of any unauthorized act by the party, its agents or employees
as set forth in this Article X. Each party shall promptly, upon request,
furnish the other party with such documents and additional assurances as may
be necessary to establish compliance with the terms of this Article X.
TIBCO shall comply with all applicable statutes with respect to labor
employed, and shall protect and indemnify CGS against any payroll taxes or
contributions imposed with respect to employees of TIBCO or any subcontractor
by any applicable law dealing with old age benefits, FICA, unemployment
compensation, health insurance and related subjects. TIBCO and CGS agree
that TIBCO is an independent contractor. TIBCO shall be liable for and
hereby represents and warrants to CGS that all payments and obligations to
subcontractors and suppliers will be timely made and satisfied at all times
during the term of this Agreement, and agrees to indemnify CGS for any loss
to CGS relating to TIBCO's violation of the warranties of this Article,
provided, however, TIBCO is given prompt written notice of any claim or
action and control, authority, information, and reasonable assistance for
defense or settlement thereof; and provided further that CGS shall not settle
such claim, suit or proceeding without the written consent of TIBCO.
XI. Applicable Law
Except for dealings exclusively between TIBCO and any United States
Affiliate, the law of the sovereign country of Luxembourg applies to this
Agreement and the rights, duties and obligations of the parties hereto.
Subject, however, to the provisions of Article XXII of this Agreement, the
courts of Luxembourg shall have jurisdiction of any action arising out of or
relating to this Agreement and each of the parties further irrevocably agrees
to waive any objection to the venue of any such suit or proceeding in
Luxembourg or to in personam jurisdiction, provided that service is
effective. As to dealings exclusively between TIBCO and any United States
Affiliate, subject to the provisions of Article XII, the law of the State of
New York shall apply to this Agreement and the rights, duties and obligations
of such parties and the courts of the State of New York shall have
jurisdiction over such parties and venue shall be deemed proper only in the
courts of the City of New York.
XII. Dispute Resolution
A. To expedite the resolution of legal disputes, either party may as its
sole and exclusive remedy elect to have any dispute arising in connection
with this Agreement resolved under the Rules of Conciliation and
Arbitration of the International Chamber of Commerce then in effect, by
one or more arbitrators appointed in accordance with said Rules, whose
decision shall be binding on the parties. The parties agree to arbitrate
such disputes in Paris, France. Any final arbitration decision may be
enforced in any court of competent jurisdiction.
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B. Notwithstanding the terms of this Article XII to the contrary, in the
event of a breach of confidentiality, the parties may elect in their sole
discretion to proceed with all available equitable relief in any court of
competent jurisdiction.
XIII. Proprietary Rights Indemnity
A. TIBCO shall defend, indemnify and hold harmless CGS with respect to any
claim, CGS demand, cause of action, debt, or liability, including
attorneys' fees, to the extent that such is based upon a claim that the
Software, exclusive of any Third Party Materials, used by CGS within the
scope of the licenses granted hereunder, infringes any Protected
Jurisdiction's patent issued as of the effective date of this Agreement,
any Protected Jurisdiction's copyright, or any trade secret; provided
that TIBCO is promptly notified in writing of such claim and provided
further that TIBCO shall have the exclusive right to control such
defense. The term "Protected Jurisdiction" means any country listed in
Exhibit G, as such Exhibit is amended from time to time at the reasonable
request of CGS. In no event shall CGS settle any claim, lawsuit or
proceeding without TIBCO's prior written approval. In the event of any
such claim, litigation or threat thereof, TIBCO, at its sole option and
expense, may procure for CGS the right to continue to use the Software
or, at its sole option and expense, may replace or modify the Software
with a functionally-compatible, non-infringing system. If such
settlement or such modification is not reasonably practical, after giving
due consideration to all factors including financial expense, TIBCO may
cancel the applicable Work Order and the licenses granted thereunder upon
fifteen (15) days' written notice to CGS and shall refund to CGS the
portion of the License Fee paid to TIBCO by CGS applicable to that
portion of the Software subject to such claim. CGS may, at its own
expense, assist in such defense if it so chooses. Notwithstanding
anything to the contrary contained herein, TIBCO shall have no obligation
under this section XIII.A to the extent any claim of infringement results
from (i) use of the Software in combination with any other product, end
item, or subassembly not intended by TIBCO, (ii) use or incorporation in
the Software of any design, technique or specification which TIBCO can
show was furnished by CGS, if the infringement would not have occurred
but for such combination, incorporation or use, (iii) continued use of
Software by CGS after the later of the date CGS is advised that such use
may constitute infringement or misappropriation, or (iv) any modification
or enhancement to the Software by or on behalf of CGS wherein such
claimed infringement or misappropriation would not have occurred but for
such modification or enhancement.
B. To the extent its agreement with a vendor of Third Party Materials
permits, TIBCO will pass through to CGS any proprietary rights indemnity
relating to such Third Party Materials; provided, however, that TIBCO
gives no additional or supplemental indemnity with respect thereto.
C. The foregoing states the entire liability of TIBCO with respect to the
infringement of any proprietary rights by the Software or any parts
thereof.
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XIV. General Indemnity
The parties acknowledge that it may be necessary for the employees of each to
be present at the facilities of the other for extended periods of time. CGS
agrees to provide the employees of TIBCO with all reasonable facilities and
services to assure that their services may be properly performed. Each party
will instruct its employees to conform with the internal regulations and
procedures of the other party while on such party's premises.
Additionally, each party agrees to indemnify, defend, and save harmless the
other party, its officers, agents and employees from any and all claims and
losses accruing or resulting to any person, firm, or corporation for personal
injury or tangible property damage by reason of the negligence of the first
party in performance of this Agreement.
XV. Insurance
TIBCO certifies, and will provide evidence thereof at CGS's request, that
TIBCO maintains:
A. A standard policy covering the obligations of TIBCO for worker's
compensation insurance pursuant to the laws of California, or such
other jurisdiction as applicable.
B. Liability and property damage insurance covering:
1. Bodily injury liability in the amount of $10,000,000 for each
occurrence and $10,000,000 aggregate.
2. Property injury liability in amount of $10,000,000 for each
occurrence and $10,000,000 aggregate.
XVI. Limitation of Liability
Neither party shall be liable to the other party for cumulative damages for
breaches of this Agreement or of any one or more Work Orders greater than Two
Million Dollars (US$2,000,000.00), provided, however, that the limitation of
this sentence shall not apply to any liability of a party pursuant to Article
XIII "Proprietary Rights Indemnity" and XVIII "Confidentiality" of this
Agreement and for such liabilities covered by the insurance defined in
Article XV in which case the limits of such coverage will govern.
XVII. Force Majeure
Neither party shall be liable for default or delay caused by any occurrence
beyond its reasonable control, including but not limited to fires, strikes,
accidents, acts of God. In the event TIBCO
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should be delayed in the completion of any portion of the work by reason of
any such occurrence, the time within which the portion of work is to be
completed shall be extended by the period of such delay, but no such
extension shall be made unless a notice thereof is presented by TIBCO to CGS
in writing within ten (10) working days after the occurrence of such delay
and no payment shall be made by CGS to TIBCO for any expenses incurred by
TIBCO by reason of any such default or delay.
XVIII. Confidentiality
All information concerning TIBCO and Cedel International and its subsidiaries
or any affiliate or subsidiary thereof or of the Software, designated as
"Confidential" and/or "Proprietary" at the time of disclosure ("Confidential
Information") and any financial models developed or used by CGS which TIBCO
may acquire in connection with the performance of services under this
Agreement, shall at all times and for all purposes be regarded as
confidential and held in trust solely for the benefit and use of TIBCO or
CGS, as appropriate for purposes of this Agreement; and neither TIBCO nor CGS
shall disclose, directly or indirectly, any such information to any other
person, firm or corporation, except the authorized agents of each party
without the prior written consent of the other party. All employees, agents
and contractors of each party shall enter into confidentiality agreements
with such party that protect the Confidential Information of the other party
from being disclosed. CGS may require TIBCO to directly furnish its agents
or contractors with Confidential Information. As additional consideration
for TIBCO's approval of disclosure to CGS's agents or contractors, either
directly by CGS, or by TIBCO at the direction of CGS, CGS promises and agrees
to indemnify TIBCO for any and all damages TIBCO may sustain resulting from
unauthorized use and or disclosure of Confidential Information by CGS's
agents and contractors. Such damages shall include all of TIBCO's reasonable
expenses incurred in seeking both legal and equitable remedies. TIBCO agrees
to notify CGS of any claim hereunder and to cooperate with CGS in pursuing
any actions against the agent or contractor involved. If Confidential
Information is communicated orally, such communication shall be confirmed as
Confidential Information in writing within thirty (30) days of such
disclosure. TIBCO and CGS shall cause their officers, employees, agents
and/or representatives to take such action which may be necessary and/or
advisable to preserve and protect the confidentiality of information obtained
by TIBCO or CGS in connection with this Agreement. No actions taken in
reference to acceptance or payment will relieve either party of its
obligations regarding confidentiality. Notwithstanding the above, nothing
herein shall be construed as Confidential Information which, at the time of
its disclosure (a) was known to the party to whom disclosed, or after such
disclosure becomes generally known or published without any violations of any
provisions hereof, (b) is lawfully disclosed by a third party, (c) is
independently developed by a party, or (d) is released pursuant to the order
of a court of competent jurisdiction or governmental agency. In the event
that TIBCO conducts any business with an entity that conducts as its
principal business the clearing and settlement of securities, TIBCO shall
notify CGS prior to disclosing to such entity any information derived from
its conduct of this Agreement concerning CGS or its business or software
systems and CGS shall determine in its sole discretion whether such
information is "Confidential Information". TIBCO employees working at CGS'
premises with access to Confidential Information will be required to sign an
individual confidentiality agreement in the form and substance attached to
this Agreement as Exhibit J.
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Notwithstanding the restrictions of this Article XVIII, TIBCO or CGS may
announce the parties' relationship in a press release subject to the
reasonable approval of the other party.
XIX. Notices
All notices, approvals, consents, requests, demands, or other communication
to be given to either party shall be given in accordance with Exhibit D.
XX. Assignment
This Agreement shall be binding upon and inure to the benefit of the parties'
respective successors and permitted assigns. Neither party may assign this
Agreement and/or any of its rights and/or obligations hereunder without the
prior written consent of the other party and any such attempted assignment
shall be void. Notwithstanding the prior sentence, (i) TIBCO may assign this
Agreement and/or any of its rights and/or obligations hereunder, upon written
notice to the other party to an affiliate (which may be its parent company)
in the event of TIBCO's merger or consolidation with such affiliate and (ii)
CGS may assign this Agreement and/or any of its rights and/or obligations
hereunder to any of its Affiliates in the event of CGS's merger or
consolidation with such other Affiliate, each without the consent of the
other party, provided that the assignee is capable of fulfilling and intends
to fulfill the obligations of the assigning party under this Agreement.
TIBCO acknowledges and agrees that the rights granted to CGS hereunder shall
extend to all Affiliates of Cedel International
XXI. General
A. This Agreement constitutes the complete and exclusive statement of the
agreement between the parties as relates to the subject matter and
supersedes all proposals, oral or written, and all other representations,
statements, negotiations and undertakings relating to the subject matter,
hereof.
B. No change in, addition to, or waiver of any of the provisions of this
Agreement shall be binding upon either party unless in writing signed by
an authorized representative of such party. No waiver by either party of
any breach by the other party of any of the provisions of this Agreement
shall be construed as a waiver of that or any other provision on any
other occasion.
C. In the event any one or more of the provisions of this Agreement shall be
held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, the remaining provisions of this Agreement shall remain in
effect and the Agreement shall be read as though the offending provision
had not been written or as the provision shall be determined by such
court to be read.
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D. If, at any time, the provisions of this Agreement are found to be in
conflict with the terms of a Work Order, the terms of the Work Order
shall prevail.
E. The United Nations Convention on Contracts for the International Sale of
Goods is excluded from application hereto.
F. The captions used in this Agreement are inserted for the convenient
reference of the parties and in no way define, limit or describe the
scope or intent of this Agreement or any part hereof.
G. Neither CGS nor TIBCO shall disclose the contents of this Agreement to
third parties, except Reuters Ltd, unless required to do so by legal
proceedings.
H. This document, its contents, Exhibits, Attachments, and Amendments, and
any and all correspondence and deliverables related thereto shall be
considered and treated as Confidential Information in the sense of
Article XVIII.
I. Dates or times by which TIBCO is required to make performance under this
Agreement shall be postponed automatically for so long as TIBCO is
prevented from meeting them by causes which are CGS's responsibility.
J. The prevailing party in a controversy or claim shall have the right to
collect its reasonable expenses incurred in enforcing this Agreement,
including reasonable attorney's fees.
K. This Agreement may be executed in two original counterparts, which
together shall constitute the same Agreement, but only one of which need
be produced to evidence the Agreement.
L. The parties further agree that the rights and obligations set forth in
the above referenced Articles III, IV, V, VI, VIII, IX, X, XI, XII,
XIII, XIV, XVI, XVIII, XIX, XX and sub-sections A, B, C, D, E, G, H, J,
M, N, O, and this sub-section L of this Article XXI shall survive the
completion or termination of this Agreement for any reason and
enforcement thereof pursuant to this article shall not be subject to any
conditions precedent.
M. The parties agree to execute a three party agreement with Data
Securities, Inc. by which TIBCO will deposit and update the source code
to Licensed Software (excluding Third Party Materials) in escrow with
Data Securities, Inc. for the benefit of CGS. Updates to the escrowed
software will be maintained as long as CGS is under a software
maintenance program with TIBCO.
N. The term of this Agreement shall commence on the Effective Date and end
on December 31, 2000. As stated in the recitals above, this Agreement
supersedes and replaces the Prior Agreement; provided, however, all
outstanding work orders and payment obligations under the Prior Agreement
remain in effect. Nothing in this Agreement shall terminate or impair
any license rights, limitations or obligations in Existing Software
granted under the Prior Agreement that would otherwise survive
termination of the Prior Agreement; except
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for the right to provide input into TIBCO's product priorities, which
right becomes null and void as of the Effective Date of this Agreement.
O. CGS shall be liable for any breach of this agreement by its Affiliates.
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IN WITNESS WHEREOF, each party has caused counterpart original of this Agreement
to be executed, by its authorized representative, as of the last date below
written.
ACCEPTED BY:
Cedel Global Services, societe anonyme TIBCO SOFTWARE INC.
By ____________________________ By:___________________________
Signature Signature
Print Name:____________________ Print Name:___________________
Title:_________________________ Title:________________________
Date:__________________________ Date:_________________________
By ____________________________
Signature
Print Name:____________________
Title:_________________________
Date:__________________________
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Exhibit A: Existing Software
TIB/Rendezvous
TIB/Hawk
TIB/EventConsole
TIB/ContentBroker
TIB/Connect for Web
TIB/MessageBroker
TIB/ObjectBus
TIB/ETX
TIB/Adapter for R/3
TIB/Adapter for SDK
TIB/Connect for MQ
TIB/Adapter for Web
and
TIBCO Finance Technology Market Data Products:
DESKTOP INTEGRATION & DISPLAY:
MarketSheet for Windows (MSW)
MarketSheet for Unix (MSU)
MSJ Terminal
MSJ Toolkit
TIB Automation
VALUE ADDED SERVERS:
Historical TIB (HTIB)
Global Historical Manager (GHM)
Global Services Manager (GSM)
TIBCO Information Cache (TIC)
TIBNews
Histdb
DATA DISTRIBUTION:
Market Data API
TIB API
TIBRouter+
FEED HANDLERS:
~50 various feed handlers are supported.
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Exhibit B: Capital Market Services of Cedel International and its subsidiaries
The "Capital Market Services" of Cedel International and its subsidiaries are
illustrated on the following chart, such services performed directly or as an
Outsourcing service subject to the provisions of Article V:
[ * ]
[ * ] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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Exhibit C: TIBCO Standard Provisions for Maintenance and Support
I. Coverage
This Exhibit covers the Licensed Software listed on Exhibit A, or subsequent
revisions thereof, plus other Software delivered under this Agreement where
the source code has not been released to CGS. For the purposes of this
Exhibit, the term "Licensed Software" shall be limited to the software
described above. All such Licensed Software is only covered when utilized
with the specified or agreed operating system and operating environment.
Licensed Software does not include hardware vendor operating systems and
other system software, client-developed software, or third-party software
unless supplied by TIBCO.
II. Description of Software Maintenance
Software maintenance supported under this Agreement ("Software Maintenance")
consists of the following:
A. Access to TIBCO Support Centers in London and Palo Alto.
The Support Centers HOTLINES operate during the following hours, 7:00 a.m.,
GMT (or GMT plus one hour for European Summer Time) to 7:00 p.m., Pacific
Time, Monday through Friday, excluding legal holidays. Extended coverage is
available for an additional fee unless such coverage is generally provided
to other TIBCO customers at no fee for such extended coverage. The HOTLINES
can be used to notify TIBCO of problems associated with the Licensed
Software and related documentation. on contacting the support center(s),
authorized CGS staff will be connected directly to knowledgeable support
engineers by telephone. The TIBCO Support Center HOTLINES can be used for
questions regarding the use and operation of the Licensed Software.
B. Remedial Maintenance.
Upon receipt by TIBCO of notice from CGS through the Support Center HOTLINE,
or a designated on-site support contact, of an error, defect, malfunction or
nonconformity in the Licensed Software, TIBCO shall respond as provided
below:
Severity 1: Produces an emergency situation in which the Licensed
Software is inoperable, produces incorrect results, or fails
catastrophically.
RESPONSE: TIBCO will provide a response by a qualified member of its
staff to begin to diagnose and to correct a Severity 1 problem as
soon as reasonably possible, but in any event a response via
telephone will be provided within one (1) hour with the aim of
providing a work-around to reinstate production operations within two
(2) hours. TIBCO will continue to provide best efforts to resolve
Severity 1 problems in less than forty-eight (48) hours. The
resolution will be delivered to CGS as a work-
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around and/or as an emergency software fix. If TIBCO delivers an
acceptable work-around, the severity classification will drop to a
Severity 2.
Severity 2: Produces a detrimental situation in which performance
(throughput or response) of the Licensed Software degrades substantially
under reasonable loads, such that there is a severe impact on use; the
Licensed Software is usable, but materially incomplete; one or more
mainline functions or commands is inoperable; or the use is otherwise
significantly impacted.
RESPONSE: TIBCO will provide a response by a qualified member of its
staff to begin to diagnose and to correct a Severity 2 problem as
soon as reasonable possible, but in any event a response via
telephone will be provided with four (4) hours. TIBCO will exercise
best commercially reasonable efforts to resolve Severity 2 problems
within five (5) days. The resolution will be delivered to CGS in the
same format as Severity 1 problems. If TIBCO delivers an acceptable
work-around for a Severity 2 problem, the severity classification
will drop to a Severity 3.
Severity 3: Produces an inconvenient situation in which the Licensed
Software is usable, but does not provide a function in the most
convenient or expeditious manner, and the user suffers little or no
significant impact.
RESPONSE: TIBCO will exercise reasonable commercial efforts to resolve
Severity 3 problems in the next maintenance release.
Severity 4: Produces a noticeable situation in which the use is affected
in some way which is reasonably correctable by a documentation change or
by a future, regular release from TIBCO.
RESPONSE: TIBCO will provide, as agreed by the parties, a fix or fixes
for Severity 4 problems in future maintenance releases.
C. Software Updates and Enhancements.
Software updates and enhancements are provided for the Licensed Software
listed in Exhibit A, or subsequent revisions thereof. Software updates and
enhancements will be provided on an as-available basis and include the items
listed below:
(1) Bug fixes;
(2) Enhancements to market data service software provided by TIBCO to keep
current with changes in market data services or as TIBCO makes
enhancements;
(3) Enhancements to keep current with the current hardware vendor's OS
releases, as available from TIBCO, provided that the current hardware
vendor's OS release is both binary and source-compatible with the OS
release currently supported by TIBCO; and
(4) Performance enhancements to Licensed Software.
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(5) Unless and until software becomes an Exhibit A, software enhancements
do not include:
------
(a) Platform extensions including product extensions to (i) different
-------------------
hardware platforms; (ii) different windowing system platforms;
(iii) different operating system platforms; and
(b) New functions such as (i) new functionality in the TIB or market
-------------
data delivery infra-structure; (ii) new market data feeds; (iii)
new applications; and (iv) new presentation tools.
Software updates and enhancements will be provided in machine-readable
format and updates to related documentation will be provided in hard copy
form. All such deliveries shall be made by a single communication to a
single CGS-designated distribution point specified. Duplication,
distribution and installation of software updates is the responsibility of
CGS. If requested, TIBCO will provide on-site assistance in the
installation of software updates in accordance with sub-section 3.2 of
Exhibit E.
TIBCO will support previous releases for a minimum period of nine (9) months
following the general availability of a new release or software update.
After this time, TIBCO shall have no further responsibility for supporting
and maintaining the prior releases.
TIBCO assumes no responsibility for the correctness of, performance of, or
any resulting incompatibilities with, current or future releases of the
Licensed Software if CGS has made changes to the system hardware/software
configuration or modifications to any supplied source code which changes
effect the performance of the Licensed Software and were made without prior
notification and written agreement with TIBCO. TIBCO assumes no
responsibility for the operation or performance of any CGS Application or
third-party application not provided by TIBCO.
III. On-Site Support
As requested by CGS, and upon reasonable notice and agreement with TIBCO,
TIBCO shall maintain personnel at any of the Covered Sites in accordance with
the terms of sub-section 3.2 of Exhibit E. On-site personnel will perform
ongoing system administration, monitoring, reconfiguration and tuning,
problem diagnosis, and resolution, and interfacing with CGS personnel on
production system issues, to the extent possible during normal business
hours. These personnel shall also be responsible for the installation of new
TIBCO software releases on the production system and the distribution of
documentation updates. In addition, on-site personnel will provide training
to CGS personnel on the operation and administration of the Licensed Software
as time permits.
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IV. Per Call Support
A. TIBCO shall provide emergency contact numbers that may be used by CGS to
call TIBCO support staff during hours not supported by the HOTLINES
described above. Additionally, TIBCO shall provide CGS with current
remote communication contact numbers to assist out-of-hours contact to
TIBCO support personnel. Out-of-hours calls made to these contact
numbers shall be subject to a call charge consistent with the rates in
sub-section 3.2 of Exhibit E.
B. Visits by TIBCO engineers to the Covered Sites can be provided for non-
maintenance related activities to supplement the services provided under
this Agreement. Tasks performed under Per Call Support include, but are
not limited to, installation of additional hardware, training, and
consulting for non-TIBCO applications. At any time, CGS may request Per
Call Support. All requests will be covered by a Work Order and response
by TIBCO will be on a best commercially reasonable efforts basis. The
minimum call duration is two (2) hours
V. Time and Materials Services
A. For Non-TIBCO Problems.
In the event that CGS notifies TIBCO of a problem experienced by CGS in
connection with the operation of the Licensed Software, TIBCO shall respond
as provided in Section II.B., above. If the cause of such problem is not an
error, defect or nonconformity in the Licensed Software, CGS shall
compensate TIBCO for all work performed by TIBCO in connection therewith, on
a Time and Materials basis in accordance with Exhibit E.
B. For Non-TIBCO Software.
Upon request and reasonable notice from CGS, TIBCO will provide assistance
in the installation of non-TIBCO software as provided for in a Work Order
covering this service. Non-TIBCO software includes the following:
1. New releases and updates to hardware vendor operating systems and other
system software;
2. CGS-developed software; and
3. Third-party software.
VI. Access
Software Maintenance is conditioned upon provision by CGS to TIBCO of
appropriate access to the system(s) running the Licensed Software, including,
but not limited to, passwords, system
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data, file transfer capabilities, and remote log-in-capabilities. TIBCO will
maintain security of the system and use such access only for the purposes of
this Agreement and will comply with CGS's standard security procedures.
CGS shall also provide an active voice telephone line at each site which is
available continuously when required for support access.
VII. Problem Reporting and Tracking Procedures
CGS may use the services described herein only by making reference to the
authorized support Agreement number. All such reports and requests will be
made through the authorized individuals (up to two [2] per site), designated
by the CGS Production Manager. These individuals may be changed by CGS from
time to time by written notice to TIBCO.
VIII. Payment
Fees for all supplemental support options will be invoiced in accordance with
Exhibit D.
IX. Support Agreement Number
TIBCO shall issue to CGS a Maintenance Agreement Number for the purposes of
problem notification.
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Exhibit D: Contract Coordination Procedures
1. Organization
1.1 CGS Contract Representatives
The following representatives are appointed by CGS with responsibility for
this contract:
Technical Manager: Mr. Yves Baguet
Contract Manager: Mr. Steve Quinn
The Technical Manager is responsible for the technical direction of the
work, development of work orders and their acceptance and the resolution of
technical issues relating to the work.
The Contract Manager is responsible for the administration of the contract,
approvals of payments, maintenance of contract files and the resolution of
contract issues relating to the work.
Further responsibilities of the contract representatives are stated in the
Agreement and Exhibits. CGS may change these appointments from time to time
by written notice.
1.2 TIBCO Contract Representatives
Technical Manager (except Stargate): Mr. Malcolm Windsor
Technical Manager (Stargate): Mr. Paul Nordin
Contract Manager: Mr. Murray Rode
European Relationship Manager: To be mutually determined
Contract Administrator: Ms. Pebbie Lee
1.3 Work Order Managers
Both CGS and TIBCO shall appoint, for each Work Order, a Work Order Manager
responsible for the day-to-day technical direction and progress of the work.
The responsibilities of the Work Order Managers are further stated in the
Agreement and the Exhibits.
Once the Work Order is approved, the TIBCO Work Order Manager shall not be
re-assigned or removed from the work, until the acceptance note is issued,
without prior approval from CGS. In all events at least one month's notice
shall be given in the request for approval to change the Work Order Manager.
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1.4 Production and Maintenance Managers
Following acceptance of any software into production, TIBCO shall appoint a
Maintenance Manager to co-ordinate the support services provided under
Exhibit C. Additionally, CGS shall appoint a Production Manager to act as
the point of contact for all maintenance support services. The
responsibilities of these two managers is further stated in the Agreement
and the Exhibits.
1.5 Management Arbitration Board
Both parties shall appoint two members of their management team to act
jointly as a board for escalation and arbitration in the event of dispute
between the parties ("Management Arbitration Board"). The Management
Arbitration Board shall only meet when necessary to resolve a dispute. The
call to convene the Board may be made by either party. Matters that cannot
be resolved by the Board will follow the course laid down in the Agreement
for dispute resolution.
The Management Arbitration Board shall consist of:
For CGS: Mr. Andre Lussi
Mr. Graham Prosser
For TIBCO: Mr. Vivek Ranadive
Mr. Raj Mashruwala
1.6 Work Order Organization
TIBCO shall nominate the key individuals who will be assigned to each Work
Order. Key individuals shall be defined as those individuals of
significance to the work who will be assigned either full time, or the
majority of their time, to the Work Order. TIBCO will not remove any key
individuals from the work without prior written approval from CGS which will
not be unreasonably withheld and a suitable hand-over period to their
replacement. On T&M and other cost reimbursable work orders, CGS will not
pay for any time related to such hand-over.
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2. Correspondence
2.1 General Procedures
Letters may be forwarded by fax for expediency but in this case the fax
shall be a cover only, not the body of the letter. Faxed correspondence
shall also be mailed for record purposes.
Both parties shall maintain a subject log of all correspondence, by number.
Contractual commitments and requests for contractual commitments, including
technical discussions leading to instructions that have any contractual
implications, must be forwarded in writing under cover of letter. Each
letter shall only deal with a single subject.
Email messages that are used to agree contractual issues must be confirmed
by letter before the commitment is deemed to be agreed.
2.2 Addresses
All correspondence addressed to CGS shall be sent to:
The TIBCO Contract Manager
Cedel Global Services
5 Rue Hoehenhof
SenningerbergL--2963 Luxembourg
All correspondence addressed to TIBCO will be sent to:
Mr. Paul Nordin
TIBCO Software Inc.
3165 Porter Drive
Palo Alto, California 94304
All correspondence to TIBCO which addresses legal matters, including
required notices, shall additionally be sent to:
TIBCO Software Inc.
3165 Porter Drive
Palo Alto, California 94304
Attn: General Counsel
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3. Meetings
3.1 Progress Meetings
Progress meetings shall be held throughout the course of performance of each
work order. In general these shall be monthly but other periods may be
agreed upon depending on the nature of the ongoing work.
TIBCO shall be responsible for preparing brief minutes of these meetings
noting action items for both parties. The minutes shall be prepared within
five (5) working days of the meeting and faxed to CGS for agreement. The
progress meetings shall be numbered for reference and separate numbering
systems will be maintained CGS system work.
3.2 Contract Commitments
Contract commitments will not be made at progress meetings. Any agreements
reached at the meeting shall be documented by letter and subject to the
usual approvals. Such agreements will not be contractually binding until
confirmed in writing. Similarly, meetings will not be used to formally
accept products or release progress payments or in any way to circumvent the
written approval process.
3.3 Work Order Progress/Technical Review Meetings
Work Order progress/technical review meetings shall be held as necessary to
review the work. These meetings will only require minutes if documentation
is needed to clarify the results of the meeting. Contractual commitments
cannot be made at Work Order Progress Meetings.
4. Reporting
4.1 Methodologies and Reporting
TIBCO commits to use the AMS time and reporting system where available, and
the use of CGS project and programme management methodologies. CGS will
provide necessary documentation and training for TIBCO to be able to use the
project and programme management methodologies.
5. Travel
5.1 Visits to Europe by TIBCO Personnel
CGS recognizes that the geographic separation of the parties will
necessitate a large degree of travel. Except in response to an emergency
callout, and for local travel, all TIBCO travel, that is to be reimbursed by
CGS must be approved in advance. Travel not so approved will not be
reimbursed. Requests for such travel authorization must be addressed to the
Contract
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Manager, by Email, stating the reason for the visit, its timing and
duration, any facilities required to be arranged (hotel bookings, conference
rooms etc.), CGS staff required to participate in the meetings and the
persons attending from TIBCO. Wherever possible, at least five working days
notice should be given of all visits to allow time for approval. Approval
will be given by Email to the requester, copied to the TIBCO contract
administrator. This Email reference must be used against the expenses claim
when invoicing for travel. Travel expenses must follow the TIBCO's standard
policies and procedures. CGS has the right to audit TIBCO records of
approved travel expenses for the purpose of verifying compliance with these
policies.
5.2 Visits to Palo Alto by CGS Personnel
As required to further the work, CGS personnel will visit TIBCO offices in
Palo Alto. TIBCO shall give CGS personnel every assistance necessary during
their visit and provide reasonable accommodation services at no additional
cost the CGS.
CGS will give five working days notice of visits including a detailed
itinerary and requirements for conference facilities and TIBCO personnel to
attend meetings during the visit.
5.3 Long Term Assignments
For TIBCO personnel required by the nature of the work to spend extended
periods in Europe, CGS will agree an all-inclusive day-rate as set forth in
Schedule 3, section 3.9 below to cover all such travel, living and
disturbance charges for that work period plus extraordinary expenditures
which may include air travel, with CGS's prior approval.
TIBCO shall be responsible, at all times, for complying with legal, tax and
work permit requirements for such work periods. CGS will give TIBCO whatever
assistance it can to achieve this compliance.
TIBCO shall, wherever possible and practical, utilize personnel from its
nearest office to provide candidates for long term assignments.
6. Work Order Proposals
6.1 Origination
Either party may originate an idea for a Work Order. Where the originator
is CGS this will be a "Request for Work Order Proposal". Where the
originator is TIBCO this will be an unsolicited "Work Order Proposal".
6.2 Request for Work Order Proposal
At any time during the course of the Agreement, CGS may issue a Request for
a Work Order Proposal. These requests will be issued under cover of a
letter by the Contract Manager and
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countersigned by the Technical Manager. All Requests for Work Orders will be
issued with a sequential Work Order number for ease of reference.
The Request for Work Order Proposal shall include; the objectives of the
Work Order; the scope and deliverables; the expected development and
implementation schedule; supporting documentation, specifications, and the
like; the suggested location where the services will be performed; the
suggested rate basis for the work, the suggested acceptance test
requirements; and any other information required to clarify the work. Upon
receipt of such Request, TIBCO shall inform the Contract Manager promptly,
via Email, of a date by which it will reply with its offer of services and
any additional information required to prepare its proposal for the work.
TIBCO is encouraged to hold whatever discussions are necessary to clarify
the work and arrive at a firm proposal. TIBCO shall co-ordinate all
discussions with the Technical Manager for CGS system work.
6.3 Submission of Work Order Proposals
TIBCO shall submit all Work Order Proposals to the CGS Contract Manager for
agreement and approval. Proposals that are in response to a CGS request
shall reference that request. Proposals shall include the contract format
as specified in Article II, a statement of the work to be performed and the
schedule for the deliverables; a listing of the productised components (pre-
existing) that will be included in the deliverables; a listing of any Third
Party license restrictions applying to the deliverables; the schedule for
delivery of the output of the Work Order; nomination of the Work Order
Manager and other key individuals that will be used to perform the work;
input requirements from CGS together with schedule dates; infrastructure
requirements to be supplied by CGS together with dates; a proposed
Acceptance Test Plan; proposed warranty criteria and duration, the key tasks
that will be performed in bar chart format together with progress % attached
to the completion of each task; and a schedule, justified by earned
progress, for payment of any fixed price component of the price; and
details, supported by separate quotations, of any exceptional or unique
system components required to complete the work. The price or estimated
charge shall also include an estimate of the travel budget for the work.
The charges for generating the Work Order proposals will be paid by CGS
under a Work Order issued for that purpose. CGS is not bound to accept any
proposals submitted by TIBCO. To the extent that a Work Order designates
specific individuals as "key" individuals, TIBCO will not assign such
individuals to other duties or projects without the approval of CGS. In the
event that such a replacement becomes necessary, then TIBCO will replace
such individual with a person of appropriate qualifications. TIBCO further
agrees that it will maintain the availability of key personnel for a period
of three months following completion of the Work Order and shall assign such
personnel to Work Orders issued within such three-month period as required
by CGS. In consideration thereof, CGS agrees to pay TIBCO for such
personnel during such three-month period when such personnel are not
assigned to a Work Order at the billing rates for such individuals.
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6.4 Approval of Work Order Proposals
Upon receipt of any Work Order proposal, CGS will proceed to reach agreement
to issue approval or clarifications required for approval. CGS will prepare
the final version of the Work Order, incorporating any clarifications and
issue it to TIBCO for agreement. Such issue for agreement shall be
considered an instruction to begin work, if acceptable to TIBCO. No work
shall be performed prior to receipt of this instruction. The Work Order
will be approved for CGS by both the Contract Manager and the Technical
Manager.
Once approved, TIBCO shall include the Work Order on its progress reports.
7. Work Order Management
7.1 Initiation
Upon agreement to proceed with the Work Order, CGS shall appoint a Work
Order Manager to act as the day-to-day co-ordinator on technical issues
relating to the work. The CGS Work Order Manager cannot instruct TIBCO to
change the work or make any contractual commitments outside the terms of the
approved Work Order.
The respective Work Order Managers shall meet to agree upon the detailed
schedule for the Work Order and ensure that their are no open issues without
agreed dates for closure. Open issues or potential problems shall be
brought to the attention of the Technical Manager immediately who will
decide whether the Work Order can commence or should be placed on hold
awaiting resolution of these issues.
7.2 Quality Management
The subject work will, in production, support mission-critical applications
of strategic importance to the world's financial community. Accordingly,
TIBCO is responsible for producing work of the highest quality and ensuring
that this happens through the application of a Quality Management programme
to the output of each Work Order. At the start of each Work Order, TIBCO
shall prepare a Quality Plan for the work, following the procedures
established within TIBCO for such plans, which procedures shall be subject
to review and approval by CGS. As a minimum the Quality Plan shall
identify; organizational roles and responsibilities; working practices to be
used on the work; test plans for the work; and definition of quality
hold/check/inspection points that will be supported by documentation and
approvals. The adherence to the Quality Plan shall be independently
verifiable.
The Quality Plan shall be subject to approval by the CGS Technical Manager,
and audit by CGS's Quality Assurance Manager. The results of such audits and
specific non-compliance's shall be presented to TIBCO for action. Serious
non-compliance may result in suspension of the work pending resolution.
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7.3 Work Order Change Management
In the event that either party believes that a change in the scope of work
of any work order is required, it shall detail such proposed change to the
other party. The parties shall endeavor, in good faith, to amend the work
order to incorporate necessary changes to all the terms and conditions.
Additionally, CGS shall have the unilateral right to issue changes within
the scope of work. No such change can alter the terms of the Agreement,
provide for the assignment of specific named individuals, or determine title
to software components. Such unilateral change orders must be in writing,
signed by a person authorized to contractually obligate CGS, and set forth
all the necessary details, terms, conditions and specifications required for
implementation. Upon receipt of such change order, TIBCO shall acknowledge
and promptly implement same.
In consideration thereof, TIBCO shall be entitled to an equitable adjustment
of all terms and conditions including, as applicable, modification of
specifications or acceptance criteria, delivery schedule, fixed priced,
fixed profit and/or total Estimated Charge for performance. The fixed
profit in CPFP (Charges Plus Fixed Profit) and Adjusted Charges work orders
will not be changed unless there is a fundamental change in the scope of
work. TIBCO shall submit its proposal for equitable adjustment within
thirty days of receipt of such change order and the parties shall endeavor
to negotiate and incorporate such equitable adjustment in a work order
modification as soon as possible. In all cases, TIBCO' obligation to
perform the change is not subject to, or affected by, resolution of TIBCO'
claim for equitable adjustment.
Where possible, the parties shall endeavor to establish such equitable
adjustment modification prior to commencement of performance of the change
order.
7.4 Work Order Acceptance
Following proper installation of the Licensed Software by TIBCO, the parties
will perform the acceptance tests pursuant to the Acceptance Test Plan as
set forth in the applicable Work Order. If the Licensed Software
substantially meets the acceptance tests in all material respects as set
forth in the Acceptance Test Plan, CGS shall notify TIBCO within five (5)
days, and the date of notification shall be the Acceptance Date.
In principle, Acceptance will only be given following successful completion,
by CGS, of the Acceptance Test Plan. If, during the execution of the
Acceptance Test Plan, CGS identifies a substantive reason to alter the
schedule of the Acceptance Test Plan then, upon agreement with TIBCO, the
Acceptance Test Plan shall be extended to cover the additional testing.
Such agreement to extend the Test Plan shall not be unreasonably withheld by
TIBCO. If CGS fails to notify TIBCO of any material defect, or issue an
Acceptance Notice within thirty (30) days of the scheduled end of the
Acceptance Test Plan, or subsequent agreed revisions thereof, the Licensed
Software shall be deemed accepted by CGS.
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If CGS notifies TIBCO in writing and describes in detail to TIBCO that the
Licensed Software does not materially meet the Acceptance Test criteria,
TIBCO shall make corrections and modifications thereto. The charges for
corrections and modifications to components which are included in a Fixed
Price Work Order are included in such Fixed Price. The charges for
corrections and modifications to components included in a T&M Work Order
will be charged on a T&M basis subject to the Total Estimated Charge
therefor set forth in the applicable Work Order. The charges for correction
of components included in other than Fixed Price and T&M Work Orders will be
charged at the adjusted billing rates established for such Work Orders and
subject to the Total Estimated Charge set forth in each such Work Order.
The foregoing will be accomplished on a timely basis to make it ready for
retesting by the parties. The parties shall repeat the Acceptance Test as
soon as reasonably requested by TIBCO and CGS shall notify TIBCO within five
(5) days of such request if and when the Licensed Software is accepted. The
date of notification shall be the Acceptance Date.
In the event the Licensed Software (or parts thereof) does not pass the
Acceptance Test, but is utilized by CGS in a production environment for a
period of thirty (30) days, it shall be deemed accepted for all purposes as
if it had successfully passed the Acceptance Test.
In the event the parties are unable to agree on an acceptance test plan, the
Work Order shall be deemed converted to a unilateral Work Order as provided
in Section 6.5 of this Exhibit.
The issuance of an Acceptance Notice is also contingent on acceptance of
documentation as called out in the Work Order and agreement to the final
form of any Warranty Support that may be provided for in the Work Order.
7.5 Training
TIBCO has an obligation to provide CGS with structured training in
technology and applications, for development, maintenance, and production
administration tasks; the requirements and pricing for specific training as
required shall be stated on a Work Order
7.6 Documentation
TIBCO shall deliver, with the output of the Work Orders, system
documentation, as specified, in a reproducible form and electronically. Two
paper copies will be issued, one bound for record purposes and one unbound
for CGS's copying and internal distribution subject to any third party
copyright restrictions which shall be clearly marked on the documentation.
The system documentation shall include as a minimum, user documentation,
system administration documentation and other documentation needed for CGS
to carryout its operation, support and maintenance responsibilities. All
documentation shall clearly indicate release or revision numbers for cross-
reference to CGS's library management systems.
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<PAGE>
8. Invoicing
8.1 General
As set out below, TIBCO shall issue invoices for payment of the services
covered by this Agreement. The invoices shall contain all supporting
documentation, Acceptance Certificates, travel authorizations etc. needed
for CGS to approve promptly the validity of the amounts invoiced and wire
the funds to TIBCO's account (directions for payment should be clearly
stated on the invoice). Where items on any invoice are disputed by CGS, CGS
shall promptly notify TIBCO of the area of the dispute and its value.
Notwithstanding this, CGS shall pay the undisputed portions of all invoices
within 30 days. Invoices should be sent, single copy only, to:
Cedel Global Services
5 Rue Hoehenhof
Senningerberg L-2963 Luxembourg
8.2 License Fees and Maintenance
TIBCO shall, at the beginning of each year for the term of the Agreement,
raise an invoice for the stage payment of the license fees and the yearly
maintenance as set out in Exhibit E.
8.3 Work Order Invoices
8.3.1 Fixed Price and Fixed Fee Work Orders
For fixed price Work Orders and the fixed fee portions of AC and CPFP
Work Orders, the fixed components are invoiced on a stage payment basis
against agreed deliverables. The invoices for these portions shall be
issued, accompanied by proof of deliverable acceptance by CGS, i.e.
acceptance notes, letters, Acceptance Certificates and the like, as and
when such acceptance is agreed. Invoices shall make reference to the
Work Order number and state the details of the stage payment claimed.
8.3.2 Man-hour Charges
T&M Work Orders and the man-hour rate component of AC and CPFP Work
Orders shall be covered by a single invoice issued on a monthly basis.
This invoice shall be broken down by Work Order and shall include the
following information:
1. Name of individual charging and charge category;
2. Number of hours worked in the month of the referenced Work Order;
3. Summary of travel expenses, by name;
4. Details of any other reimbursable schedule items;
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<PAGE>
5. Total charge in month and to date.
Details of backup and support documentation will be subject to CGS's
agreement.
8.3.3 Discount from Third Party Sales
Third party sales of new products developed, either wholly or partially,
out of this Agreement are, on an agreed percentage of the sale basis,
allowable as a discount against Work Order charges. TIBCO shall report
these sales quarterly and allow the full value, if any, of the credit
balance so arising against any future labor Work Order specified by CGS
until the balance is cleared. Such discounts shall be applied before
calculation of taxes.
9.0 Administrative Charges
The charges for administrative services and support, including contract
administration, will be established in a work order.
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<PAGE>
Exhibit E: Contract Price
Schedule 1: License Fees
The annual consideration for the license for expanded use of Existing
Software and Future Products as stated in Article V of the Agreement is
US$[ * ] due to TIBCO according to the following schedule: US$[ * ]on or
before the first day of each calendar quarter with the first such payment due
on or before April 1, 1999 (CGS has paid its first quarterly installment
payment of US$[ * ] for 1999 prior to the execution date of this Agreement,
which amount included additional sums not subject to refund or credit), and
the last such payment due on or before October 1, 2000.
All the above figures are exclusive of taxes due for delivery of the software
into Luxembourg or London as declared on the invoice supporting the claim for
payment.
As of December 31, 2000, CGS will cease further deployment of the Future
Products pursuant to Article V of this Agreement but will retain its
perpetual right and license to use Future Products in production as of such
date.
Notwithstanding the foregoing, CGS will have the option to extend the term of
this Agreement and its rights under Article V for Future Products through
December 31, 2002, by making annual payments of US$[ * ] for license fees and
maintenance fees in equal quarterly payments as specified in Schedule 1 and
Schedule 2 throughout 2001 and 2002, subject to the provisions of section 2.2
below. CGS will exercise such option upon written notice to TIBCO no later
than December 1, 2000.
Schedule 2: Maintenance Fees
2.1 Base Fees
In addition to the amounts described in Schedule 1 above, CGS will pay to
TIBCO equal annual amounts of US$[ * ] due to TIBCO according to the
following schedule: US$[ * ] on or before the first day of each calendar
quarter with the first such payment due on or before April 1, 1999 (CGS has
paid its first quarterly installment payment of US$[ * ] for 1999 prior to
the execution date of this Agreement), and the last such payment due on or
before October 1, 2000. Such fees will be applied toward TIBCO's provision
of maintenance services, software new releases and Existing Software and
Future Products upgrades, until 31st December 2000, as more fully described
in Exhibit C. Additionally, TIBCO must provide documentation for CGS to
maintain any non-productized software which is not included in Exhibit A.
Such documentation shall conform to generally accepted industry standards.
Whether or not CGS elects to extend the term of this Agreement regarding the
licensing of Future Products beyond December 31, 2000, following expiration
of this Agreement on December 31, 2000 CGS will continue making annual
maintenance payments to TIBCO of at least US$[ * ] in equal quarterly
[ * ] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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<PAGE>
installments of at least US$[ * ] on or before the first day of each
calendar quarter with the first payment due on or before January 1, 2001 and
the last payment due on or before October 1, 2002, for which TIBCO will
provide maintenance and support services for the Existing Software and
Future Products deployed as of December 31, 2000. Such rates are subject to
escalation pursuant to the provisions of Schedule 2, Section 2.2 below. In
such event, the provisions of Exhibit C will survive expiration of the term
of this Agreement through December 31, 2002.
2.2 Maintenance Fee Escalation. Commencing in calendar year 2000, CGS will
calculate its internal use of the Existing Software and Future Products
semi-annually (in June and December) by counting the number of machines
(e.g. mainframe, server, PC) on which any Existing Software and/or Future
Product is running ("Machine Count"). Such Machine Count calculation may
exclude temporary increased use of the Existing Software and Future Products
in connection with development projects. In the event that CGS's cumulative
Machine Count in any semi-annual calculation is thirty percent (30%) or more
above the total Machine Count at the end of the previous calendar year,
CGS's annual maintenance fees will increase commencing in the next calendar
quarter by XX of the percentage increase which would otherwise be paid due
to such percentage increase in the Machine Count.
By way of example, if CGS's Machine Count increases by thirty percent (30%)
during the first semi-annual review period of any given year after calendar
year 2000, CGS's maintenance fees would increase by [ * ] of thirty percent
(30%), commencing in the third quarter. Thereafter, if CGS's Machine Count
increases by an additional ten percent (10%) during the second semi-annual
review period of such given year, CGS's maintenance fees would further
increase by [ * ] of ten percent (10%), commencing in the first quarter of
the following year.
CGS will submit verification of its Machine Count calculation to TIBCO, and
CGS hereby grants to TIBCO the right to conduct an inspection of CGS's
records relative to such calculation at TIBCO's expense and upon ten (10)
days' prior written notice in order to verify CGS's Machine Count
calculation. The provisions of this Schedule 2, Section 2.2 will survive
expiration of this Agreement through December 31, 2002 for purposes of
calculation of annual maintenance fees in the event CGS does not elect to
extend the term beyond December 31, 2000. The parties agree to negotiate
maintenance terms in good faith beyond calendar year 2002.
Schedule 3. CGS Funded Development Projects
3.1 Work Orders
All development work will be documented on Work Orders issued under the
terms of this Agreement. No payment will be made for any development work
not covered by a correctly executed Work Order. Work Orders will be issued
in one of the contractual forms set forth in Article II.
[ * ] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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<PAGE>
3.2 Time & Materials [T&M]
For T&M Work Orders the following rate schedule shall apply throughout the
term of this Agreement, subject to the provisions of Schedule 3, section 3.7
below. TIBCO agrees that such rates will be applicable to a five (5) day
work week, not to exceed forty (40) hours per week:
Resource Classification Daily Rate
Management $[ * ]
Team Leader/Arch $[ * ]
Senior Technical $[ * ]
Technical $[ * ]
Junior Technical $[ * ]
Project Control $[ * ]
Admin. Support $[ * ]
TIBCO agrees to provide CGS with a discount on monthly invoices for T&M
charges in accordance with the table below:
<TABLE>
<CAPTION>
Monthly
Invoice Incremental CGS
Amount Discount Pays
<S> <C> <C>
$[ * ] 0% $[ * ] No discount up to this amount.
$[ * ] 10% $[ * ] 10% discount on incremental amount over
$[ * ] and up to $[ * ].
$[ * ] 20% $[ * ] 20% discount on incremental amount over
$[ * ].
</TABLE>
These rates are inclusive of all payroll, social and medical charges; office
overheads and secretarial costs; computing equipment required to carry-out
and test the work; communications charges including telephone, telex,
facsimile, Email, postage, marketing, internal research and development and
management overheads; financing costs; taxes not declared on invoices;
documentation printing costs; general working consumables including computer
disks, tapes, print costs, machine costs and the like; and profit.
Charging using these rates shall be up to a maximum of forty (40) hours per
working week unless specifically agreed to in advance.
In addition to the rates quoted above, TIBCO shall invoice for approved
travel and living expenses required to perform the work. All international
travel must be approved by CGS. Travel and living expenses shall be
invoiced at cost.
[ * ] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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<PAGE>
Estimates of these items shall be included in the "Total Estimated Charge"
assigned to the Work Order.
All other charges that many be agreed for the purposes of the work shall be
invoiced at cost.
3.3 Charges Plus a Fixed Profit Work Orders [CPFP]
For CPFP Work Orders TIBCO will be paid a fixed profit for performing the
work. This profit shall be calculated by multiplying the man-hour cost
estimate using the rate table in 3.2 above by [*] percent ([*]%). This
profit shall be invoiced as follows:
On award of the Work Order 20%;
through agreed, deliverable based stage payments 60%;
on issue of the Acceptance Certificate 20%.
3.4 Adjusted Charges Work Orders [AC]
For AC Work Orders TIBCO will be paid a fixed profit for performing the
work. This profit shall be calculated by multiplying the man-hour cost
estimate using the rate table in 3.2 above by [ * ] percent ([ * ]%). This
profit shall be invoiced as follows:
On award of the Work Order 20%;
through agreed, deliverable based stage payments 60%;
on issue of the Acceptance Certificate 20%.
3.5 Total Estimated Charge
Each reimbursable Work Order shall establish the estimated charges required
for performance (the "Total Estimated Charge").
No liability shall be incurred by CGS for any charges, including those set
forth in Article VII(D), in excess of the Total Estimated Charge unless and
until the applicable Work Order is so amended in a written amendment signed
by both parties. If and when TIBCO reasonably expects that the Total
Estimated Charge of a Work Order will be equaled or exceeded, TIBCO shall
notify CGS and provide its best estimate of revised charges for performance
and the reasons justifying such revised charges.
TIBCO is not required to continue performance beyond the Total Estimated
Charge set forth in each Work Order, as may be modified by amendment, unless
and until CGS shall have notified TIBCO in writing that such Total Estimated
Charge has been increased and shall have specified in such notice a revised
Total Estimated Charge. When and to the extent that the Total Estimated
Charge set forth has been increased, any charges incurred by TIBCO in excess
of the Total Estimated Charge prior to the increase shall be allowable, due
and payable to the same extent as if such charges were incurred after such
increase in the Total Estimated
[ * ] CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
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<PAGE>
Charge. In the event that CGS does not notify TIBCO within fifteen (15)
working days from the date the costs of performance equaled or exceeded the
Total Estimated Charge, the Work Order shall be deemed terminated pursuant
to Article VII(D) except however the termination charges provided for in
Article VII(D) shall, in that event, not apply to the extent that the Total
Estimated Charge would thereby be exceeded.
For CPFP and AC based Work Orders, in the event that TIBCO advises CGS that
the proposed increase to the Total Estimated Charge exceeds 20% of the
original Total Estimated Charge, then CGS shall have the right to terminate
the Work Order without payment of the termination costs as set forth in
Article VII(D).
3.6 Fixed Price Work Orders [FP]
For FP Work Orders TIBCO agrees to provide a total fixed price for
performing the work. This price shall be established in the Work Order.
The price shall be invoiced as follows:
On award of the Work Order 20%;
through agreed, deliverable based stage payments 60%;
on issue of the Acceptance Certificate 20%.
In addition to the fixed price, TIBCO shall invoice and be paid for approved
travel and living expenses required to perform the work. All international
travel must be approved by CGS. Travel and living expenses shall be
invoiced at cost. No other charges will be allowed on Fixed Price Work
Orders.
3.7 Rate Escalation
All the man-hour rates listed above shall be subject to escalation from the
1st January for each year of this Agreement in accordance with the ECI, and
any government-caused increases which are not generally reflected in such
index, which may include mandated health insurance. "ECI" means the US
Labor Department Bureau of Statistics Employment Cost Index for white collar
occupations.
All other rates shall remain fixed for the term of the Agreement.
3.8 Equipment Purchase Through Work Orders
In general, Work Orders are not to be used for the purchase of equipment.
Where the requirements of the Work Order necessitate the purchase of
extraordinary equipment, such equipment must be itemized on the Work Order.
CGS shall own all equipment purchased through Work Orders and such equipment
shall be delivered to CGS, at CGS's cost, in good condition, before the
issuance of the Acceptance Certificate.
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<PAGE>
3.9 Expense Policy.
<TABLE>
<CAPTION>
CGS
Project
Location Luxembourg Luxembourg London London
- -----------------------------------------------------------------------------------------------------------------------
Employee Short Term (0- Long Term Short Term Long Term
Home 6Mths) (greater than 6Mths) (0-6Mths) (greater than 6Mths)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hotel, $200 flat rate per 365 Hotel, $200 flat rate per 365
days a year days a year
US IRS set Per Diem TIBCO manages the IRS set Per Diem TIBCO manages the
expense policy and expense policy and
Flights home compensation package Flights home Compensation package
Compliance with Compliance with TIBCO
TIBCO travel policy travel policy
- -----------------------------------------------------------------------------------------------------------------------
London Hotel,
IRS set Per Diem
Flights home $0
Compliance with TIBCO
travel policy
- -----------------------------------------------------------------------------------------------------------------------
Continental Hotel, Hotel,
Europe IRS set Per Diem IRS set Per Diem
Flights home $0 Flights home $0
Compliance with TIBCO Compliance with
TIBCO
travel policy travel policy
- -----------------------------------------------------------------------------------------------------------------------
CGS
Project
Location US US
- ------------------------------------------------------
Employee Short Term Long Term
Home (0-6Mths)* (greater than 6Mths)
- ------------------------------------------------------
<S> <C> <C>
US
- ------------------------------------------------------
London Hotel, $38 per diem
IRS set Per Auto Rental
Diem
Flights home $40 day house
Compliance
with TIBCO
travel policy
- ------------------------------------------------------
Continental Hotel, $38 per diem
Europe IRS set Per Auto Rental
Diem
Flights home $40 day house
Compliance
with TIBCO
travel policy
- ------------------------------------------------------
</TABLE>
*Short term is valid until a long term house is found
47
<PAGE>
Schedule 4. Payment
CGS shall pay the undisputed portions of all invoices, drawn up in accordance
with clause 8 of Exhibit D, within thirty (30) days by wire transfer in US
dollars. A service charge of the London Interbank Offered Rate plus one and
one-half percent (1.5%) will be applied to all undisputed invoices which are
not paid on time.
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<PAGE>
Exhibit F: Work Order Procedures
CGS shall request the performance of TIBCO services as more fully described
in Exhibit D, Section 6.3, and licensing of Licensed Software by execution
and delivery of a Work Order which shall contain, at a minimum, the following
terms:
(a) Statement of the scope of services to be performed, implementation and
schedule.
(b) The specific product or products which will be acquired by CGS;
(c) Third Party Materials, if any;
(d) The price for fixed price items or tasks ("Fixed Price") and/or
currently estimated charges for performance of tasks on other than a
Fixed Price basis. Currently estimated charges on a particular Work
Order shall be referred to hereinafter as the "Total Estimated Charge";
(e) Designation of whether services are to be performed on a Fixed Price or
other basis as the parties may establish, and the schedule on which
payment shall be made for such services;
Each Work Order shall establish an Acceptance Test Plan which will
demonstrate that the Licensed Software conforms, in all material respects to
the TIBCO specifications therefor.
Each Work Order shall set forth CGS Tasks which shall define and describe the
environmental site requirements and specify the time by which the site will
be ready for installation of equipment. CGS will be responsible for meeting
the environmental site requirements in a timely manner and at CGS's cost.
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<PAGE>
Exhibit G: Protected Jurisdictions
Pursuant to the provisions of Article XIII "Proprietary Rights Indemnity" the
following countries constitute Protected Jurisdictions subject to such
article:
United States of America
Canada
Member Countries of the European Economic Area
Switzerland
United Arab Emirates
Brazil
Japan
50
<PAGE>
EXHIBIT H
TIBCO Shrink Wrap End User License Agreement
READ THE TERMS AND CONDITIONS OF THIS LICENSE AGREEMENT CAREFULLY BEFORE YOU
OPEN THE PACKAGE CONTAINING THE MEDIA, THE COMPUTER SOFTWARE THEREON AND THE
ACCOMPANYING DOCUMENTATION (THE "PROGRAM"), OR IF YOU ARE DOWNLOADING THE
SOFTWARE ELECTRONICALLY, BEFORE YOU INDICATE YOUR ACCEPTANCE TO THE TERMS OF
THIS AGREEMENT. THE PROGRAM IS COPYRIGHTED AND LICENSED (NOT SOLD). BY
BREAKING THE SEAL ON THE PACKAGE CONTAINING THE PROGRAM, YOU AGREE TO THE
PROVISIONS SET FORTH IN THIS LICENSE AGREEMENT. IF YOU ARE NOT WILLING TO BE
BOUND BY THE TERMS AND CONDITIONS OF THIS LICENSE AGREEMENT, YOU SHOULD
IMMEDIATELY RETURN THE UNOPENED PACKAGE AND YOU WILL RECEIVE A REFUND OF YOUR
MONEY.
License Agreement. TIBCO Software Inc. ("TIBCO") hereby grants to you and you
accept a non-transferable and non-exclusive license to use the media and the
proprietary computer software product contained thereon in machine-readable,
object code form only ("Software") under the following terms and conditions.
The term of this license commences upon your opening this package and shall
continue until terminated. The license fees paid by you are paid in
consideration of the licenses granted under his License Agreement and correspond
to the number of permitted users. If you desire to increase the number of
permitted users, you may do so by notifying TIBCO and paying any additional fee
therefor. TIBCO will then provide you with a password(s) or registration number
which will enable the requested number of additional users to use the Software
in accordance with the terms and conditions of this License Agreement.
Notwithstanding the foregoing, if the Program is being provided for
demonstration or evaluation purposes only, then your license to use the Software
shall automatically terminate at the time designated by TIBCO.
In addition to automatic termination, TIBCO may terminate this License Agreement
upon breach by you of any term hereof. In the event of termination for any
reason, you will immediately cease using the Program and all copies and portions
thereof shall be returned or destroyed. Your obligation to pay accrued charges
and fees shall survive any termination of this Agreement.
You agree that you will not assign, sublicense, transfer, pledge, lease, rent or
share your rights under this License Agreement. Also, you will not reverse
assemble, reverse compile or otherwise translate the Software. You may make one
copy of the Software for the purpose of backup in the event the Program media is
damaged or destroyed. Any copies of the Software shall include TIBCO's
copyright or other proprietary notices. Except as authorized by this paragraph,
no copies of the Program or any portions thereof may be made by you or any
person under your authority or control.
The acceptance of a purchase order from you for the Program is conditional on
your agreeing to the provisions of this License Agreement and TIBCO will furnish
the Program only on the terms and conditions set forth herein, not those in your
Purchase Order. In the event of any conflict, the terms of this License
Agreement shall apply.
Limited Warranty. TIBCO warrants for your sole benefit for a period of thirty
(30) days from the date of commencement of this License Agreement (the "Warranty
Period") that the Software will substantially achieve the functionality
described in the Documentation, provided it is used on the computer hardware and
with the operating system for which it was designed, and that the media
containing the Software, if provided by TIBCO, is free from defects in material
and workmanship. If, during the Warranty, Period, a defect in the Software or
the media appears, you may return the media containing the Software to TIBCO for
either replacement or, if so elected by TIBCO, refund of amounts paid by you
under this License Agreement. The foregoing constitutes your sole and exclusive
remedy for breach by TIBCO of any warranties made under this Agreement.
EXCEPT AS SPECIFICALLY PROVIDED ABOVE, TIBCO MAKES NO WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WITH RESPECT TO THE PROGRAM,
INCLUDING ITS QUALITY, PERFORMANCE, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. NO TIBCO DEALER, DISTRIBUTOR, AGENT OR EMPLOYEE IS AUTHORIZED TO MAKE
ANY MODIFICATIONS, EXTENSIONS OR ADDITIONS TO THIS WARRANTY.
Limitation of Liability. In no event will TIBCO be liable for indirect,
incidental, consequential, special or exemplary damages or lost profits arising
out of the use or the inability to use the Program even if advised of the
possibility of such damages. In no case shall TIBCO's liability exceed the
amount of the license fee paid by you.
General. You may not export or otherwise transfer this Software outside the
United States unless you do so in full compliance with the U.S. Export
Administration Act and any other laws or regulations governing the export of
materials of this nature.
This License Agreement shall be construed and governed in accordance with the
laws of the State of California.
U.S. Government Restricted Rights. The enclosed Program is provided with
restricted and limited rights. Use, duplication or disclosure by the Government
is subject to restrictions as set forth in FAR (S) 52.227-14 (June 1987)
Alternate III(g)(3) (June 1987), FAR (S) 52.227-19 (June 1987), or DFARS (S)
252.227-7013(c)(1)(ii) (June 1988) as applicable. Contractor/Manufacturer is
Teknekron Software Systems, Inc., 530 Lytton Avenue, Palo Alto, California
94301.
Costs of Litigation. If any action is brought by either party to this License
Agreement against the other party regarding the subject matter hereof, the
prevailing party shall be entitled to recover, in addition to any other relief
granted, reasonable attorney fees and expenses of litigation.
(C) 1998 TIBCO Software, Inc.
All rights reserved.
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<PAGE>
EXHIBIT I
Year 2000 Warranty
As used in this Exhibit, capitalized terms shall have the same meaning as set
forth in the Agreement unless otherwise specified. Terms and provisions of this
Exhibit shall control over any conflicting terms in the Agreement, including
without limitation, provisions relating to warranties and limitations of
liability.
1. Year 2000 Warranty
TIBCO warrants to CGS that, subject to the provisions set out below, the
Licensed Software will be Year 2000 Compliant on and from the date on which it
is confirmed on TIBCO's Web Site to be Year 2000 Compliant.
2. Other materials
Where any Other Materials are used in connection with any Licensed Software,
TIBCO will not be in breach of the Year 2000 Warranty if the failure of the
Licensed Software to be Year 2000 Compliant is caused by any Other Materials not
being Year 2000 Compliant.
3. Cooperation
CGS shall provide TIBCO with such assistance as TIBCO reasonably requires and
complying with such directions as TIBCO may give including but not limited to,
providing access to any location to which the Services are supplied upon TIBCO
giving CGS notice and co-operating in any installation of new releases of
software.
4. Duration of Warranty
The Year 2000 Warranty will remain in effect throughout the term of the
Agreement.
5. Liability
5.1 Neither TIBCO nor any Affiliates, employees, officers or directors, nor any
third party supplier to TIBCO will be liable to CGS or to any third party
for any loss or damage in connection with any breach of the Year 2000
Warranty, except as provided in this paragraph 5.
5.2 If TIBCO is in breach of the Year 2000 Warranty in relation to any Licensed
Software, CGS's sole remedy, and TIBCO's sole obligation, is to require
TIBCO to either repair, replace or provide a workaround for the relevant
Licensed Software if and to the extent that it is proven not to be Year
2000 Compliant, provided that the Licensed Software is at such time subject
to a maintenance agreement with TIBCO.
5.3 Except as expressly set forth in this Schedule, all express or implied
conditions, warranties or undertakings, whether oral or in writing, in law
or equity, including without limitation warranties as to satisfactory
quality, merchantability and fitness for a particular purpose, are
excluded.
52
<PAGE>
5.4 NEITHER TIBCO NOR ANY AFFILIATE, EMPLOYEE, OFFICER OR DIRECTOR, NOR ANY
THIRD PARTY SUPPLIER TO TIBCO WILL BE LIABLE TO CGS OR TO ANY THIRD PARTY
FOR ANY INDIRECT, SPECIAL, CONSEQUENTIAL OR ANY SIMILAR TYPE OF LOSS OR
DAMAGE ARISING OUT OF OR IN ANY WAY RELATED TO A BREACH OF THE YEAR 2000
WARRANTY, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS OR LOST DATA.
5.5 The Year 2000 Warranty does not apply to any data or other information
provided to TIBCO by any information provider. Accordingly, neither TIBCO
nor its Affiliates, employees, officers or directors will be liable for any
loss or damage arising from the fact that any such data or other
information is not Year 2000 Compliant. It is TIBCO's practice to use
reasonable efforts to obtain Year 2000 warranties from its third party
suppliers.
5.6 This paragraph 5 is enforceable by and to the benefit of TIBCO and third
party suppliers to TIBCO.
6. Definitions
For purposes of this Year 2000 Warranty, the following terms have the following
meanings:
6.1 Licensed Software means a TIBCO software product as described on TIBCO's
Web Site which is confirmed on the Web Site to be Year 2000 Compliant, but
does not include any Other Materials;
6.2 Year 2000 Compliant means:
(a) in relation to any Licensed Software, there will not be a reduction in
any material respect in its functionality, as a result of its
inability to process date information accurately before, on or after
January 1, 2000 (including leap years), which is solely attributable
to that piece of Licensed Software; and
(b) in relation to any Other Materials, there will not be a reduction in
any material respect in their functionality, as a result of their
inability to process date information accurately before, on or after
January 1, 2000 (including leap years).
"Year 2000 Compliance" shall be construed accordingly;
6.3 Year 2000 Warranty means the warranty set out in paragraph 1 above;
6.4 Other Materials means any hardware, firmware, software, (including
databases and operating systems), and other materials which are used in
connection with the Licensed Software and any data or information provided
to us by any third party which is used in connection with the Licensed
Software;
6.5 Affiliates means TIBCO's direct and indirect parents and subsidiaries
(being a company in which another company owns, directly or indirectly, 50%
or more of the issued share capital and over which it exercises effective
control);
53
<PAGE>
6.6 Web Site means the portion of the Internet-accessible site at www.tibco.com
that is specifically designated by TIBCO to describe TIBCO's Year 2000 Program.
54
<PAGE>
EXHIBIT J
Individual Confidentiality Agreement
I have read and understand the confidentiality provisions of Section XVIII of
the Software License and Development Agreement between TIBCO and CGS,
specifically:
All information concerning TIBCO and CGS or any affiliate or subsidiary
thereof or of the Software, designated as "Confidential" and/or "Proprietary"
at the time of disclosure ("Confidential Information") and any financial
models developed or used by CGS which TIBCO may acquire in connection with
the performance of services under this Agreement, shall at all times and for
all purposes be regarded as confidential and held in trust solely for the
benefit and use of TIBCO or CGS, as appropriate for purposes of this
Agreement; and neither TIBCO nor CGS shall disclose, directly or indirectly,
any such information to any other person, firm or corporation, except the
authorized agents of each party without the prior written consent of the
other party. All employees, agents and contractors of each party shall enter
into confidentiality agreements with such party that protect the Confidential
Information of the other party from being disclosed. CGS may require TIBCO
to directly furnish its agents or contractors with Confidential Information.
If Confidential Information is communicated orally, such communication shall
be confirmed as Confidential Information in writing within thirty (30) days
of such disclosure. TIBCO and CGS shall cause their officers, employees,
agents and/or representatives to take such action which may be necessary
and/or advisable to preserve and protect the confidentiality of information
obtained by TIBCO or CGS in connection with this Agreement. No actions taken
in reference to acceptance or payment will relieve either party of its
obligations regarding confidentiality. Notwithstanding the above, nothing
herein shall be construed as Confidential Information which, at the time of
its disclosure (a) was known to the party to whom disclosed, or after such
disclosure becomes generally known or published without any violations of any
provisions hereof, (b) is lawfully disclosed by a third party, (c) is
independently developed by a party, or (d) is released pursuant to the order
of a court of competent jurisdiction or governmental agency. In the event
that TIBCO conducts any business with an entity that conducts as its
principal business the clearing and settlement of securities, TIBCO shall
notify CGS prior to disclosing to such entity any information derived from
its conduct of this Agreement concerning CGS or its business or software
systems and CGS shall determine in its sole discretion whether such
information is "Confidential Information". In the latter case, the
information shall be Confidential Information which shall not be disclosed.
I am also aware that the disclosure of any information protected under the
legislation regarding banking secrecy Law of 5 April 1993 relating to the
Financial Sector, as amended, might constitute a criminal offence which can
be punished according to Article 458 of the Penal Code. Specifically, such
information includes all information confided to me in the course of my
professional activity with CGS.
Full Name: .....................................................
(Capitals)
Signature: .......................................................
Date: .................................................
55
<PAGE>
EXHIBIT 10.13
INDUSTRIAL LEASE AGREEMENT
between
PORTER DRIVE ASSOCIATES LLC, a California limited liability company,
as Landlord
and
TEKNEKRON SOFTWARE SYSTEMS (DELAWARE), INC., a Delaware corporation,
as Tenant
For the Premises
Located At:
3165 Porter Drive
Palo Alto, California
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. PREMISES............................................................... 1
1.1 Lease of Premises............................................... 1
1.2 Construction of Tenant Improvements............................. 1
2. TERM................................................................... 1
2.1 Term............................................................ 1
2.2 Early Occupancy................................................. 1
2.3 Renewal Option.................................................. 2
3. RENT AND SECURITY...................................................... 3
3.1 Base Rent....................................................... 3
3.2 CPI Increases................................................... 3
3.3 Late Charges.................................................... 3
3.4 Security........................................................ 4
3.5 Security Deposit................................................ 5
4. UTILITIES............................................................... 5
5. TAXES.................................................................. 6
5.1 Payment of Real Property Taxes.................................. 6
5.2 Definition of Real Property Taxes............................... 6
5.3 Personal Property Taxes......................................... 6
6. USE.................................................................... 7
6.1 Use of Premises................................................. 7
6.2 Compliance with Laws............................................ 7
6.3 Outside Areas................................................... 7
6.4 Signs........................................................... 8
6.5 Waste Disposal.................................................. 8
6.6 Hazardous Material.............................................. 8
6.7 Parking......................................................... 10
6.8 Rules and Regulations........................................... 10
7. LANDLORD'S MAINTENANCE AND REPAIR...................................... 11
7.1 Landlord's Maintenance.......................................... 11
7.2 Procedure and Liability......................................... 11
7.3 Waiver.......................................................... 11
7.4 Landlord's Right to Perform Tenant's Covenants.................. 11
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
8. TENANT'S MAINTENANCE AND REPAIR........................................ 11
8.1 Tenant's Obligation to Maintain................................. 11
9. ALTERATIONS............................................................ 12
9.1 Trade Fixtures.................................................. 12
9.2 Consent Requirement for Alterations............................. 12
9.3 Possession...................................................... 13
9.4 Alterations Required by Law..................................... 13
9.5 Mechanic's Liens................................................ 14
10. FIRE AND CASUALTY DAMAGE............................................... 14
10.1 Notice of Destruction........................................... 14
10.2 Loss Covered by Insurance....................................... 14
10.3 Loss Not Covered by Insurance................................... 15
10.4 Loss Caused by Tenant or Tenant's Parties....................... 15
10.5 Destruction Near End of Term.................................... 15
10.6 Destruction of Improvements and Personal Property............... 15
10.7 Exclusive Remedy................................................ 15
10.8 Lender Discretion............................................... 15
11. CONDEMNATION........................................................... 15
11.1 Landlord's Termination Right.................................... 15
11.2 Tenant's Termination Right...................................... 16
11.3 Restoration and Abatement of Rent............................... 16
11.4 Temporary Taking................................................ 16
11.5 Division of Condemnation Award.................................. 16
12. LIABILITY OF LANDLORD; INDEMNITY BY TENANT............................. 16
12.1 Limitation on Landlord's Liability.............................. 16
12.2 Limitation on Tenant's Recourse................................. 17
12.3 Indemnification of Landlord..................................... 17
12.4 Indemnification of Tenant....................................... 17
12.5 Notice of Claim or Suit......................................... 17
13. INSURANCE.............................................................. 17
13.1 Tenant's Insurance Obligations.................................. 17
13.2 Requirements of Tenant's Insurance Coverage..................... 18
13.3 Evidence of Tenant's Insurance Coverage......................... 18
13.4 Release and Waiver of Subrogation............................... 19
13.5 Landlord's Insurance............................................ 19
13.6 Tenant's Obligation to Reimburse................................ 19
13.7 Delivery of Insurance Proceeds to Landlord...................... 19
14. LANDLORD'S RIGHT OF ACCESS............................................. 19
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
15. ASSIGNMENT AND SUBLETTING.............................................. 20
15.1 Consent Requirement............................................. 20
15.2 Procedure....................................................... 20
15.3 Terms of Transfer............................................... 21
15.4 Corporate Reorganization........................................ 21
15.5 Transfers to Affiliates......................................... 21
15.6 Assignment in Bankruptcy........................................ 22
15.7 Transfer by Landlord............................................ 22
16. DEFAULT AND REMEDIES................................................... 22
16.1 Events of Tenant's Default...................................... 22
16.2 Landlord's Remedies............................................. 23
16.3 Limitation on Exercise of Rights................................ 24
16.4 Waiver by Tenant of Certain Remedies............................ 24
16.5 Remedies Cumulative............................................. 25
17. TENANT'S REMEDIES...................................................... 25
17.1 Landlord's Default.............................................. 25
17.2 Tenant's Remedies............................................... 25
18. SURRENDER AND HOLDING OVER............................................. 25
18.1 Surrender of the Premises....................................... 25
18.2 Holding Over.................................................... 26
18.3 Entry at End of Term............................................ 26
19. MORTGAGES.............................................................. 26
19.1 Subordination................................................... 26
19.2 Modifications of Lease.......................................... 26
19.3 Mortgagee Protection and Attornment............................. 27
19.4 Estoppel Certificates and Financial Statements.................. 27
20. GENERAL PROVISIONS..................................................... 27
20.1 Construction of Meaning......................................... 27
20.2 Interest on Past-Due Obligations................................ 27
20.3 Time of Essence................................................. 27
20.4 Binding Effect.................................................. 28
20.5 Choice of Law................................................... 28
20.6 Captions........................................................ 28
20.7 Amendments...................................................... 28
20.8 Waivers......................................................... 28
20.9 Fees and Expenses............................................... 28
20.10 Merger.......................................................... 28
20.11 Severability.................................................... 28
20.12 Security Measures............................................... 28
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
20.13 Easements....................................................... 29
20.14 Performance Under Protest....................................... 29
20.15 Conflict........................................................ 29
20.16 No Third Party Beneficiaries.................................... 29
20.17 Effective Date/Nonbinding Offer................................. 29
20.18 Water, Oil and Mineral Rights................................... 29
20.19 Confidentiality................................................. 29
20.20 Notices......................................................... 29
20.21 Corporate Authority............................................. 29
20.22 Successors and Assigns.......................................... 30
20.23 Brokerage Commissions........................................... 30
20.24 Entire Agreement................................................ 30
20.25 Joint and Several Liability..................................... 30
20.26 Quiet Enjoyment................................................. 30
20.27 Survival........................................................ 30
20.28 Recording....................................................... 30
20.29 Counterparts.................................................... 30
20.30 Agency, Partnership or Joint Venture............................ 30
20.31 Merger.......................................................... 31
20.32 Required Consents............................................... 31
20.33 Condition Subsequent............................................ 31
20.34 Landlord's Representations, Warranties and Covenants............ 31
</TABLE>
iv
<PAGE>
INDUSTRIAL LEASE AGREEMENT
--------------------------
(3165 Porter Drive)
BASIC LEASE PROVISIONS
----------------------
1. Effective Date: December 14, 1995
2. Landlord: PORTER DRIVE ASSOCIATES, LLC, a California
limited liability company
3. Landlord's Address
For Notice: c/o Schreck Brown & Associates
550 Montgomery Street, Suite 900
San Francisco, CA 94111
Attention: Mr. Steven R. Brown or Mr. Charles Schreck
Telephone: (415) 989-9639
Fax: (415) 391-2779
4. Tenant: TEKNEKRON SOFTWARE SYSTEMS
(DELAWARE), INC., a Delaware corporation
5. Tenant's Address
For Notice:
Before Commencement
Date: 530 Lytton Avenue, Suite 301
Palo Alto, California 94301
Attn: Chief Financial Officer
Telephone: (415) 325-1025
Fax: (415) 328-9608
After Commencement
Date: 3165 Porter Drive
Palo Alto, California 94301
Arm: Chief Financial Officer
6. Building: The 91,644 rentable square foot building located at
3165 Porter Drive in Palo Alto, California.
7. Premises: The land ("Land") and all of the improvements,
including the Building and an approximately 1,138
square foot freestanding storage structure (the
"Storage Structure") located thereon and more
particularly shown as Exhibit A attached hereto.
----------
v
<PAGE>
8. Term: Ten (10) years, subject to extension pursuant to
Section 2.3 of this Lease
9. Anticipated
Commencement Date: July 1, 1996
10. Base Rent Per Month: $120,793.34, subject to increase pursuant to the terms
of Section 3.2 of this Lease.
11. Broker: CB Commercial Real Estate Group, Inc. and Gordon Smith
for Tenant; Renault & Handley for Landlord.
12. Parking Spaces: 361 spaces
13. Permitted Uses: The research, development and manufacture of software
and electronics devices and other, lawful uses with
the prior written consent of Landlord, which consent
shall not be unreasonably withheld, but in no event
for any use prohibited by the terms of the Master
Lease or Ground Lease or otherwise prohibited by
either Master Lessor, Ground Lessor or any Private
Restrictions (as defined in Section 6.2).
14. Tenant's Minimum
Liability Insurance
Amount: Two Million Dollars ($2,000,000)
15. Guarantor: Fleet Street Holdings, Inc., a Delaware corporation,
subject to Section 3.4
16. Ground Lease: That certain Lease dated June 1, 1962 between The
Board of Trustees of the Leland Stanford Junior
University, a California corporation ("Ground
Lessor"), as landlord, and Utah Construction & Mining
Company, as evidenced by a memorandum thereof recorded
December 3, 1963 in Book 6294 at page 372 of the
Official Records of Santa Clara County, California and
attached hereto as Exhibit F.
----------
17. Master Lease: That certain Sublease dated November 30, 1994 between
Teledyne Corporation ("Master Lessor"), as sublessor,
and landlord, as sublessee attached hereto as Exhibit
-------
G
-
18. Lease Year: Shall refer to each Three Hundred Sixty-Five (365) day
period during the Term commencing on the Commencement
Date and on each anniversary thereof.
vi
<PAGE>
19. Security Deposit: $120,793.34
20. Exhibits:
"A" Site Plan of Premises
"B" Improvement Agreement
"C" Environmental Questionnaire and Disclosure Statement
"D" Rules and Regulations
"E" Guaranty of Lease
"T" Master Lease
"G" Ground Lease
"H" Recognition and Attornment Agreement (Master Lessor)
"I" Recognition and Attornment Agreement (Ground Lessor)
21. Schedule:
"1" Net Earnings Report
The Basic Lease Provisions set forth above and the Exhibits and Addenda, if
any, attached hereto are hereby incorporated into and made a part of this Lease.
Each reference in this Lease to any of the Basic Lease Provisions shall mean the
respective information hereinabove set forth and shall be construed to
incorporate all of the terms provided under the particular paragraph pertaining
to such information. In the event of any conflict between any of the Basic Lease
Provisions and the Lease, the latter shall control.
Landlord (/s/ SIGNATURE ILLEGIBLE^^) and Tenant (/s/ SIGNATURE ILLEGIBLE^^)
------------------------- -------------------------
Agree.
vii
<PAGE>
1. PREMISES.
1.1 Lease of Premises. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, the Premises. Except as otherwise provided herein,
Landlord reserves the use of the exterior walls, the roof and the area beneath
and above the Building, together with the right to install, maintain, use and
replace ducts, wires, conduits and pipes leading through the Building in
locations which will not materially interfere with Tenant's use of the Building.
Landlord and Tenant agree that (a) each has had an opportunity to determine to
its satisfaction the actual square footage of the Building, (b) all measurements
of area contained in this Lease are conclusively agreed to be correct and
binding upon the parties, even if a subsequent measurement of any one of these
areas determines that it is more or less than the amount of area reflected in
this Lease, and (c) any such subsequent determination that the area is more or
less than shown in this Lease shall not result in a change in any of the
computations of Rent, improvement allowances, or other matters described in this
Lease where area is a factor.
1.2 Construction of Tenant Improvements. Prior to the Commencement Date,
Landlord shall (i) cause certain improvements (the "Tenant Improvements") to be
-------------------
constructed in the Premises in accordance with the terms of the Improvement
Agreement attached hereto as Exhibit B (the "Improvement Agreement") and (ii) at
--------- ---------------------
Landlord's sole expense, perform the following with respect to the Storage
Structure: (a) repair the roof thereof, (b) clean and repaint the interior and
exterior walls thereof in the same color in which the exterior of the Building
is repainted by Landlord, and (c) place a water-based sealant on the floor
thereof.
2. TERM.
2.1 Term. The Term of this Lease shall commence on the Commencement Date,
as defined in the Tenant Improvement Agreement attached hereto as Exhibit B, and
---------
shall continue in full force and effect for the Term hereof, unless terminated
earlier pursuant to the terms hereof or extended pursuant to the terms of
Section 2.3 hereof. If Landlord, for any reason whatsoever, cannot deliver
possession of the Premises to Tenant on or before the Commencement Date, this
Lease shall not be void or voidable nor shall Landlord be liable to Tenant for
any resulting loss or damage. Notwithstanding the foregoing, if the Commencement
Date has not occurred for any reason other than a Tenant Delay or a Force
Majeure Event (both as defined in Exhibit B) on or before the date three hundred
---------
sixty-five (365) days after the Anticipated Commencement Date (the "Drop Dead
Date"), then Tenant may, as Tenant's sole right and remedy, terminate this Lease
by written notice to landlord within five (5) days of the Drop Dead Date,
whereupon any monies previously paid by Tenant to Landlord and not used for the
Tenant Improvements shall be reimbursed to Tenant.
2.2 Early Occupancy. Notwithstanding anything to the contrary in this
Lease, Tenant and Tenant's Parties (as defined below) shall have the right at
any time after the Effective Date to enter the Premises, at their sole risk, to
install the Tenant Improvements and Tenant's Trade Fixtures (as defined in
Section 9.1), communications equipment and other equipment therein; provided,
however, that (i) Tenant's early entry shall not unreasonably interfere with any
of Landlord's activities on the Premises during such period; (ii) Tenant shall
give Landlord written notice of such entry at least five (5) days in advance;
(iii) such entry on the Premises shall be on the terms of this Lease, except
that Tenant shall not be required to pay any monthly Base Rent hereunder during
any period of early entry, (iv) during such period of early occupancy, the cost
of all utilities services, including but not limited to storm and sanitary sewer
service, gas, electric, domestic and irrigation water and trash shall be evenly
divided between Landlord and Tenant while the Base Building (as defined in the
Improvement Agreement) is being constructed and, after the Base Building is
complete, shall be paid exclusively by Tenant, and all such utility costs to be
paid by Tenant under this Section 2.2 shall be treated as part of the costs of
the Tenant Improvements for the purposes of the capitalization thereof; (v)
Tenant shall provide Landlord before such early entry with certificates of the
insurance required of Tenant pursuant to the terms of this Lease and (vi) such
early entry will only be allowed if Master Lessor and Ground Lessor have already
consented to this Lease in writing.
1.
<PAGE>
2.3 Renewal Option. Provided (i) Tenant is not in default under the terms
of this Lease beyond applicable grace periods at the time this renewal is
exercised or at the commencement of any Renewal Term (as defined below),
(ii)Tenant has not assigned this Lease and is occupying at least ninety percent
(90%) of the Premises including any expansion space, and (iii) Landlord has not
given more than two (2) notices of default in any twelve (12) month period for
nonpayment of monetary obligations, Tenant shall have the option to renew this
Lease for one (1) period of approximately seven (7) years (the "Renewal Term"),
commencing on the day immediately following the last day of the initial Term and
continuing until May 31, 2013. The Renewal Term shall be on all the terms and
conditions of this Lease, except that (i) Base Rent for the Renewal Term shall
be equal to ninety-five percent (95%) of the Market Rent for the Premises (as
defined below); provided, however, that if the then-existing Market Rent is less
than the Base Rent for the last month of the initial Term of the Lease, the Base
Rent for the Renewal Term shall be at one hundred percent (100%) of the Market
Rent. Tenant must exercise its option to renew this Lease by giving Landlord
written notice (an "Extension Notice") of its election to do so no later than
three hundred sixty-five (365) days prior to the end of the initial Term (the
"Extension Cut-Off"); provided, however, that Tenant may delay the deadline for
providing Landlord the Extension Notice to the date that is two hundred seventy-
five (275) days prior to the end of the initial Term (such additional ninety 90)
day period being hereinafter referred to as the "Delay Period") by prodding
Landlord with written notice thereof (a "Delay Notice") prior to the Extension
Cut-Off Date. If Tenant provides Landlord with a Delay Notice in accordance with
the terms of this Section 2.3, and then provides Landlord with an Extension
Notice within the Delay Period, Tenant shall be entitled to the Renewal Term as
provided for in this Section 23. If Tenant provides Landlord with a Delay Notice
but fails to deliver an Extension Notice to Landlord within the Delay Period,
then (i) Tenant's rights to the Renewal Term shall be void and forfeit, and (ii)
the initial Term of the Lease shall be extended for a time period equal to the
Delay Period. Any notice not given in a timely manner shall be forever void and
Tenant shall be deemed to have waved its renewal rights. The renewal option set
forth herein is personal to Tenant and shall not be included in any assignment
of this Lease.
The term "Market Rent" shall mean the monthly amount per rentable square foot in
the Premises in question that a willing, non-equity, non-renewal, non-expansion
new tenant would pay and a willing landlord would accept at arm's length for
space in a comparable building or buildings, with comparable tenant
improvements, in the Stanford Research Park, subject to the terms of this Lease,
giving appropriate consideration to monthly rental rates per rentable square
foot, the presence or absence of rent escalation clauses such as operating
expense and tax pass-throughs length of lease term, size and location of
premises being leased, if any, and other generally applicable terms and
conditions of tenancy for a similar building or buildings.
Landlord and Tenant shall have a period of thirty (30) days from Landlord's
receipt of the Extension Notice in which to agree on the Market Rent. If they
agree within that period, they shall immediately execute an amendment to this
Lease stating the Base Rent for such period.
If Landlord and Tenant are unable to agree upon the Market Rent within such
thirty (30) day period, then the dispute shall proceed to arbitration conducted
pursuant to the provisions of the laws of the state in which the Premises is
located and the Real Estate Arbitration Rules of the American Arbitration
Association or its successor insofar as said rules do not conflict with said
laws or this section. Within ten (10) days of the expiration of the aforesaid
thirty (30) day period, Landlord and Tenant shall select one joint arbitrator
or, if they cannot agree on one joint arbitrator, then each shall select an
arbitrator within fifteen (15) days of the expiration of the aforesaid thirty
(30) day period and notify the other party of its selection. The two arbitrators
selected shall designate the third arbitrator forthwith. Bach arbitrator
selected shall be a real estate appraiser with an MAI certification or a real
estate broker, with at least five (5) years of experience appraising or leasing
building space comparable to the Premises in the city and county where the
Premises is located. The arbitrators shall convene in the city or county in
which the Premises are located as soon as practicable and offer Landlord and
Tenant the opportunity to present their cases. If any party fails to appear,
participate or produce evidence in an arbitration proceeding, the arbitrators
may make their decision based solely on the evidence actually presented. The
arbitrators shall, by majority vote, make their determinations of Market Rent
based on the factors referenced above; and such decision shall be binding
2.
<PAGE>
upon Landlord and Tenant and enforceable in a court of law. Each party shall be
responsible for the costs, charges and fees of its appointee; and the parties
shall share equally in the costs, charges and fees of the third arbitrator. In
the event either party fails to appoint an arbitrator or the two arbitrators
fail to select a third arbitrator within the time required by this section, upon
application of either party, the arbitrator shall be appointed by the American
Arbitration Association, or if there is no American Arbitration Association or
it shall refuse to perform this function, then by the then Presiding Judge of
the Superior Court and/or presiding trial court of the State and County in which
the Premises is located.
3. RENT AND SECURITY.
3.1 Base Rent. From and after the Commencement Date, Tenant shall pay the
Base Rent to landlord on the first day of each calendar month in lawful money of
the United States, at Landlord's Address or such other address as Landlord shall
from time to time designate in writing to Tenant for the payment of Rent,
without notice, demand, abatement, offset or deduction. If the Term commences
(or ends) on a date other than the first (or last) day of a month, Tenant shall
pay on the Commencement Date or first day of the last month a pro rata portion
of Base Rent, prorated on a per diem basis with respect to the portion of the
month within the Term. Any sums other than Base Rent which Tenant is obligated
to pay under this Lease shall be deemed to be Additional Rent due hereunder,
whether or not such sums are designated "Additional Rent." The term "Rent" means
the Base Rent and all Additional Rent payable hereunder.
3.2 CPI Increases. Effective as of each anniversary of the Commencement
Date ("CPI Adjustment Dates"), the Base Rent in effect immediately before each
CPI Adjustment Date shall be increased by the lesser of (i) the percentage
increase in the CPI (as hereinafter defined) measured from the Last CPI
Publication Date to the New CPI Publication Date or (ii) three percent (3%) of
the Base Rent in effect for the immediately preceding Lease Year; provided,
however, that in no event shall (a) any CPI Adjustment be less than zero and (b)
the Base Rent in effect on any CPI Adjustment Date be less than the Base Rent in
effect for the Lease Year immediately preceding the CPI Adjustment Date. The
"CPI" is the Consumer Price Index, All Items, 1982-1984 = 100, All Urban
Consumers, for the San Francisco-Oakland-San Jose area, as published by the
United States Department of Labor, Bureau of Labor Statistics, or its successor
index. The "Last CPI Publication Date" is the month for which the CPI was
published immediately before the prior date for adjustment to the Base Rent (or
prior to the Commencement Date in the case of the first adjustment to the Base
Rent). The "New CPI Publication Date" is the month for which the CPI is
published immediately preceding the CPI Adjustment Date. If the CPI as of the
New CPI Publication Date is not available on a CPI Adjustment Date or the CPI
has been modified or adjusted in any significant way (as determined by Landlord,
in Landlord's sole but reasonable discretion) from the way that CPI is computed
as of the Effective Date of this Lease, the Base Rent shall be increased on each
such CPI Adjustment Date by an amount equal to two and one half percent (2.5%)
per annum.
3.3 Late Charges. Tenant acknowledges that late payment by Tenant of any
amount owed to Landlord under this Lease will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of such costs being extremely
difficult and impracticable to fix. Such costs include, without limitation,
processing and accounting charges, time spent addressing the issue with Tenant,
and late charges that may be imposed on Landlord by the terms of any encumbrance
or note secured by any encumbrance covering the Premises. Therefore, if any
installment of Rent or other payment due from Tenant is not received by Landlord
within five (5) days after written notice that the same is due (or, if Tenant
shall be failed to pay rent when due more than twice in any calendar year, if
such amounts are not received by landlord on the date due), Tenant shall pay to
Landlord, as liquidated damages for Tenant's failure to make such timely
payment, an additional sum of five percent (5%) of the overdue Rent or other
payment per month as a late charge. The parties agree that the late charge
represents a fair and reasonable estimate of the administrative costs that
Landlord will incur by reason of a late payment by Tenant. Acceptance of any
late payment charge shall not constitute a waiver of Tenant's default with
respect to the overdue payment, nor prevent Landlord from exercising any of the
other rights and remedies available to Landlord under this Lease, at law or in
equity, including, but not limited to, charging the Interest Rate imposed
pursuant to Section 20.2.
3.
<PAGE>
3.4 Security. Within sixty (60) days of the end of any calendar year,
Tenant shall provide Landlord with a certified copy of the Report of Independent
Accountants on Calculation of the Net Earnings Per Share of Teknekron Software
Systems, Inc. (as defined in Section 5 of the Teknekron Software Systems, Inc.
Stock Appreciation Rights Plan and Section 5 of the Teknekron Software Systems,
Inc. Employee Bonus Plan (the "Net Earnings Report"), in the form attached
hereto as Schedule 1, or, if the Net Earnings Report is no longer produced with
----------
a report audited by a certified public accountant showing, in reasonable detail,
the 'Operating income before items excluded from SAR calculation" ("Pre-SAR
Income") of Tenant (measured on a basis consistent with the methods used in the
Net Earnings Report as of the Effective Date of this Lease), for the previous
calendar year. (Landlord and Tenant acknowledge and agree that such Net Earnings
Report is referred to herein and used by Landlord and Tenant for calculation
purposes only, and that the author of said Net Earnings Report shall have no
liability whatsoever to Landlord or Tenant for any failure in accuracy or
completeness of the Net Earnings Report arising from the purposes for which the
Net Earnings Report is used under this Section 3.4.). If the Net Earnings Report
(or the replacement report, if relevant) demonstrates that the Pre-SAR Income of
Tenant (measured on a basis consistent with the Net Earnings Report for the
previous calendar year are equal to or less than Five Million Dollars
($5,000,000), then Tenant shall provide Landlord, in addition to (and not in
lieu of) the Security Deposit with one of the following forms of security, at
Tenant's selection, for the performance of Tenant's obligations hereunder
(Tenant retaining the right to chose which form is to be used):
(a) a cash deposit (the "Cash Deposit") in an amount equal to the Rent
due hereunder for the next five (5) years of the Term of the Lease (or any
lesser period remaining in the Term as of the date the need for the Cash Deposit
is determined), but in no event in excess of Ten Million Dollars ($10,000,000),
which sum shall be held by Landlord in an account mutually approved by Landlord
and Tenant and subject to terms reasonably suggested by Tenant as security for
the performance of Tenant's covenants and obligations under this Lease, it being
expressly understood and agreed that the Cash Deposit is not an advance rental
deposit or a measure of landlord's damages in case of Tenant's default. Landlord
may from time to time apply such portion of the Cash Deposit as is reasonably
necessary for the following purposes: (i) to remedy any default by Tenant in the
payment of Rent; (ii) to repair damage to the Premises caused by Tenant; (iii)
to clean the Premises upon termination of the Lease; and (iv) to remedy any
other default of Tenant to the extent permitted by law and, in this regard,
Tenant hereby waives any restriction on the uses to which the Cash Deposit may
be put contained in California Civil Code Section 1950.7. In the event the Cash
Deposit or any portion thereof is so used, Tenant agrees to pay to Landlord
promptly upon demand an amount in cash sufficient to restore the Cash Deposit to
the full original amount. Landlord shall not be deemed a trustee of the Cash
Deposit. Tenant shall be entitled to any interest accruing on the Cash Deposit,
which shall be held or applied in the same manner as the Cash Deposit. If
Landlord transfers the Premises during the Term, Landlord may pay the Cash
Deposit to any transferee of Landlord's interest in conformity with the
provisions of California Civil Code Section 1950.7 and/or any successor statute,
in which event the transferring Landlord will be released from all liability for
the return of the Cash Deposit.
(b) Tenant may, in lieu of depositing the Cash Deposit with Landlord,
deliver to Landlord a clean, irrevocable and unconditional letter of credit in
the amount of the Cash Deposit issued by a financial institution, and subject
only to terms, acceptable to Landlord. Such letter of credit shall provide for
its payment to Landlord upon its presentation of a statement from Landlord that
Tenant is in default hereunder. Upon the failure of Tenant to deliver a
replacement letter of credit (or an extension of the existing letter of credit)
on or before thirty (30) days prior to any maturity date of any such letter of
credit, Landlord may draw upon the same and thereafter treat such cash as the
Cash Deposit. Any costs associated with the issuance or renewal of such letter
of credit shall be the sole responsibility of Tenant.
(c) a guaranty from the Guarantor (or any successor Company which owns
directly or indirectly the assets or shares of the business operations of
Guarantor in the United States and has a net worth equal to or greater than the
net worth of Guarantor as of the Effective Date of this Lease) of Tenant's
obligations to pay Rent hereunder during the next five (S) years of the Term of
the Lease (or any lesser period remaining in the Term as of the date the need
for the Cash Deposit is determined), but in no event in excess of Ten Million
Dollars
4.
<PAGE>
($10,000,000), in the form attached hereto as Exhibit E. If Guarantor is sold or
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otherwise transferred such that it is no longer affiliated with Tenant or if
Guarantor is or becomes bankrupt or insolvent, makes an assignment for the
benefit of creators, or institutes or is the subject of any proceeding under the
Bankruptcy Act or other similar law for the protection of creditors (or, if
Guarantor is a partnership or consists of more than one person or entity, if any
partner of the partnership or such other person or entity is or becomes bankrupt
or insolvent, institutes any such proceeding, or makes an assignment for the
benefit of creditors), then Landlord shall have the option to terminate this
Lease upon such sixty (60) days written notice unless Tenant, within such sixty
(60) day period provides Landlord with either (i) a substitute or additional
guarantor reasonably satisfactory to Landlord and any Lender whose consent is
required to the identity of the substituted or additional guarantor, or (ii)
adequate assurance of the performance of each and every obligation of Tenant
hereunder, satisfactory to Landlord and such Lender; provided, however, that no
such termination of this Lease shall become effective without the prior written
consent of Master Lessor and any such Lender. Provided that no uncured Event of
Tenant Default exists, if the remaining Term of the Lease is five (5) years or
less on the date on which the adjustment described herein would occur, then, on
each anniversary of the making of the Cash Deposit pursuant to Section 3.4(a),
or delivery of the letter of credit pursuant to Section 3.4(b), the amount of
the Cash Deposit or letter of credit, as appropriate, shall be reduced to an
amount equal to the Rent anticipated to be due hereunder for the remainder of
the Term (but in no event in excess of Ten Million Dollars ($10,000,000)).
Landlord and Tenant shall cooperate as necessary to require any excess portion
of the Cash Deposit to be paid promptly to Tenant, or to cause a revised letter
of credit to be delivered to Landlord, provided that the cost thereof, including
but not limited to fees for replacement letters of credit and breakage fees on
any investment of the Cash Deposit, shall be borne solely by Tenant.
Notwithstanding anything to the contrary in this Section 3.4, in the event the
annual Pre-SAR Income of Tenant in any succeeding calendar year exceeds Five
Million Dollars ($5,000,000), then the obligation of Tenant to provide one of
the forms of security described in (a), (b) and (c) above shall terminate for
such year and, upon receipt of satisfactory evidence thereof, Landlord shall
return and/or terminate the relevant form of security previously delivered to
Landlord by Tenant (except the guaranty, which the parties hereto agree shall be
executed by Guarantor upon the execution of this Lease and shall be held
throughout the Term by Landlord, but shall only be effective when the annual
Pre-SAR Income of Tenant is less than Five Million Dollars ($5,000,000));
provided, however, that nothing herein shall be deemed to prohibit Landlord from
requiring such security in the next, or any subsequent, calendar should Tenant's
annual Pre-SAR Income be equal to or less than Five Million Dollars ($5,000,000)
again. Provided that no Event of Tenant's Default then exists hereunder, any of
the forms of security described in (a), (b), or (c) above which is then held by
Landlord, or so much thereof as has not been used by Landlord in accordance with
the terms of this Lease, shall be returned to Tenant within thirty (30) days
after the expiration or earlier termination of this Lease.
3.5 Security Deposit. Upon the Effective Date, Tenant shall deliver to
Landlord a sum equal to the Security Deposit provided in Item 19 of the Basic
Lease Provisions, which sum shall be held by Landlord as security for the
performance of Tenant's covenants and obligations under this Lease, it being
expressly understood and agreed that the Security Deposit is not an advance
rental deposit or a measure of Landlord's damages in case of an Event of
Tenant's Default. Landlord may from time to time apply such portion of the
Security Deposit as is reasonably necessary for the following purposes: (i) to
remedy any default by Tenant in the payment of Rent; (i) to repair damage to the
Premises caused by Tenant; (ii) to clean the Premises upon termination of the
Lease; and (ii) to remedy any other default of Tenant to the extent permitted by
law and, in this regard, Tenant hereby waives any restriction on the uses to
which the Security Deposit may be put contained in California Civil Code Section
1950.7. In the event the Security Deposit or any portion thereof is so used,
Tenant agrees to pay to Landlord promptly upon demand an amount in cash
sufficient to restore the Security Deposit to the full original amount. Landlord
shall not be deemed a trustee of the Security Deposit, may use the Security
Deposit in business, and shall not be required to segregate it from its general
accounts. Tenant shall not be entitled to any interest on the Security Deposit.
If Landlord transfers the Premises during the Lease Term, Landlord may pay the
Security Deposit to any transferee of Landlord's interest in conformity with the
provisions of California Civil Code Section 1950.7 and/or any successor statute,
in which event the transferring Landlord will be released from all liability for
the return of the Security
5.
<PAGE>
Deposit. Provided that no Event of Tenant's Default then exists hereunder, the
Security Deposit, or so much thereof as has not been used by Landlord in
accordance with the terms of this Section 3.5, shall be returned to Tenant
within thirty (30) days after the expiration or earlier termination of this
Lease.
4. UTILITIES. On or before the Commencement Date, Tenant shall, at Tenant's
sole expense, cause any and all utilities or services furnished to the Premises
to be separately metered and billed directly to Tenant, to the extent such is
not already the case. Tenant shall promptly pay, as the same become due, all
charges for domestic and irrigation water, gas, electricity (including parking
lot lighting), telephone, storm and sanitary sewer service, waste pick-up and
Tenant shall comply with all rules, regulations and requirements promulgated by
national, state or local governmental agencies or utility suppliers concerning
the use of utility services, including any rationing, limitation or other
control. Tenant shall not be entitled to terminate this Lease nor to any
abatement in Rent by reason of such compliance. Landlord shall not be liable for
damages or otherwise for any failure or interruption of any utility or other
service furnished to the Premises, and no such failure or interruption shall be
deemed an eviction or entitle Tenant to terminate this Lease or withhold or
abate any Rent due hereunder. Landlord shall at all reasonable time have free
access to all electrical and mechanical installations of the Premises.
5. TAXES.
5.1 Payment of Real Property Taxes. Tenant shall pay directly to the
appropriate taxing authority the Real Property Taxes due with respect to the
Premises within ten (10) days before the obligation in question becomes
delinquent. Landlord shall provide Tenant with all invoices for such Real
Property Taxes at least thirty (30) days prior to the due date. If Landlord pays
any assessment levied against the Premises in full, Tenant shall pay to Landlord
with each payment of Real Property Taxes the amount that would have been payable
had Landlord allowed the assessment to go to bond.
5.1.1 If Tenant desires in good faith to contest the imposition of
any tax which is the obligation of Tenant to pay under this paragraph, Tenant
shall within at least ten (10) days prior to the delinquency of such tax, give
Landlord written notice of Tenant's intention to do so. Tenant may withhold
payment of such tax only if nonpayment is permitted during the pendency of the
proceeding without the foreclosure of any tax lien or the imposition of any fine
or penalty. Any such contest shall be prosecuted to completion and shall be
conducted solely at Tenant's expense. Tenant shall protect and indemnify
Landlord against any and all expenses or damages resulting from such proceeding.
Within ten (10) days after the final determination of the amount due from Tenant
with respect to the tax contested, Tenant shall pay the amount so determined to
be due, together with costs or expenses, whether or not this Lease shall have
terminated.
5.2 Definition of Real Property Taxes. "Real Property Taxes" shall be the
sum of the following: all real property taxes, possessory interest taxes,
business or license taxes or fees, service payments in lieu of such taxes or
fees, annual or periodic license or use fees, excises, transit charges, housing
fund assessments, open space charges, childcare fees, school fees or any other
assessments, levies, fees or charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen (including fees "in-lieu" of any
such tax or assessment) which are assessed, levied, charged, confirmed or
imposed by any public authority upon the Premises (or any real property
comprising any portion thereof) or its operations, together with all taxes,
assessments or other fees imposed by any public authority upon or measured by
any Rent or other charges payable hereunder, including any gross income tax or
excise tax levied by the local governmental authority, the federal government or
any other governmental body with respect to receipt of such rental, or upon,
with respect to or by reason of the development, possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises or any portion thereof (including, without limitation, any reassessment
levied on the value of the Base Building due to the renovation thereof) or
reassessment based on the value of any improvements made thereon by Tenant, or
upon this transaction or any document to which Tenant is a party creating or
transferring an interest in the Premises, together with any tax imposed in
substitution, partially or totally, of any tax previously included within the
aforesaid definition or any additional tax the nature of which was previously
included within the aforesaid definition, together with the costs and
6.
<PAGE>
expenses (including attorneys fees) of challenging any of the foregoing or
seeking the reduction in or abatement, redemption or return of any of the
foregoing, but only to the extent of any such reduction, abatement, redemption
or return. Nothing contained in this Lease shall require Tenant to pay any
franchise, corporate, estate or inheritance tax of Landlord, or any income,
profits or revenue tax or charge upon the net income of Landlord. In addition,
notwithstanding the foregoing, sanitary and storm sewer assessments shall not be
included as Real Property Taxes, but shall instead be payable by Tenant as
provided in Section 4 of this Lease.
5.3 Personal Property Taxes. Prior to delinquency, Tenant shall pay all
taxes and assessments levied upon trade fixtures, alterations, additions,
improvements, inventories and other personal property located and/or installed
on the Premises by Tenant; and Tenant shall provide Landlord copies of receipts
for payment of all such taxes and assessments. To the extent any such taxes are
not separately assessed or billed to Tenant, Tenant shall pay the amount thereof
as invoiced by Landlord.
6. USE.
6.1 Use of Premises. Tenant shall use the Premises solely for the
Permitted Uses specified in Item 13 of the Basic Lease Provisions. Tenant shall
not do anything in or about the Premises which will (i) cause structural injury
to the Building; or (ii) cause damage to any part of the Building, except to
the extent reasonably necessary for the installation of Tenant's Trade Fixtures
and Tenant's Alterations (each as defined in Section 9 of this Lease), and then
only in a manner which has been first approved by Landlord in writing, in
accordance with the provisions of Section 9. Tenant shall not operate any
equipment within the Premises which will (w) materially damage the Building; (x)
overload existing electrical systems or other mechanical equipment servicing the
Building; (y) impair the efficient operation of the sprinkler system or the
heating, ventilating or air conditioning ("HVAC") equipment within or servicing
the Building; or (z) damage, overload or corrode the sanitary sewer system.
Tenant shall have the right to install telecommunications equipment, including a
satellite dish on the roof of the Building, subject to the terms of this Lease,
provided that (i) Tenant will not invalidate the terms of any warranty with
respect to the roof membrane of which Tenant is aware; (ii) such equipment shall
not interfere with the use of other similar telecommunications equipment by
other occupants of Stanford Business Park; (iii) Tenant shall remove such
equipment from the roof of the Building upon the expiration or earlier
termination of this Lease and repair any damage caused thereby; and (iv) Tenant
obtains any consents that are necessary from Ground Lessor or Master Lessor to
the use of such telecommunications equipment. Tenant shall not attach, hang or
suspend anything from the ceiling, roof, walls or columns of the Building or set
any load on the floor in excess of the load limits for which such items are
designed. Any dust, fumes, or waste products generated by Tenant's use of the
Premises shall be contained and disposed so that they do not (1) create an
unreasonable fire or health hazard; (2) damage the Premises; or (3) result in
the violation of any law, ordinance, rule, ruling, statute or restriction
affecting the Premises (collectively, "Laws"). Tenant shall not change the
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exterior of the Building or install any equipment or antennas on or make any
penetrations of the exterior or roof of the Building, except as provided for in
Section 9 below. Tenant shall not commit any waste in or about the Premises, and
Tenant shall keep the Premises in a neat, clean, attractive and orderly
condition, free of any nuisances. Tenant shall not conduct on any portion of the
Premises any sale of any kind, including any public or private auction, fire
sale, going-out-of-business sale, distress sale or other liquidation sale.
6.2 Compliance with Laws. Tenant shall be responsible for and shall at
Tenant's own cost and expense obtain any and all licenses and permits necessary
for any Permitted Use. Tenant shall not use the Premises in any manner which
violates any Laws or Private Restrictions which affect the Premises. Landlord
will not voluntarily create any additional Private Restrictions affecting the
Premises without the prior written consent of Tenant, which consent will not be
unreasonably withheld or delayed. Tenant shall abide by and promptly observe and
comply with all Laws and Private Restrictions. Tenant shall not use the Premises
in any manner which will cause a cancellation of any insurance policy covering
Tenant's Alternations, Trade Fixtures or any improvements installed by Landlord
at its expense or which poses an unreasonable risk of damage or injury to the
Premises. Tenant shall not sell, or permit to be kept, used, or sold in or about
the Premises any article which may be prohibited by the standard form
7.
<PAGE>
of fire insurance policy. Tenant shall comply with all reasonable requirements
of any insurance company, insurance underwriter, or Board of Fire Underwriters
which are necessary to maintain the insurance coverage carried by either
Landlord or Tenant pursuant to this Lease. As used herein, the term "Private
Restrictions" shall mean all recorded covenants, conditions and restrictions,
private agreements, reciprocal easement agreements, and any other recorded
instruments affecting the use of the Premises.
6.3 Outside Areas. No materials, supplies, tanks or containers, equipment,
finished products or semifinished products, raw materials, inoperable vehicles
or articles of any nature shall be stored upon or permitted to remain outside of
the Building except in fully fenced and screened areas outside the Building
which have been designed for such purpose and have been approved in writing by
Landlord for such use by Tenant.
6.4 Signs. Tenant shall not place on any portion of the Building or
Premises any sign, placard, lettering in or on windows, banner, displays or
other advertising or communicative material which is prohibited by Applicable
Laws or Private Restrictions, including any such restrictions in the Ground
Lease or Master Lease. All such approved signs shall strictly conform to all
Laws and Private Restrictions and shall be installed at the expense of Tenant.
Tenant shall maintain such signs in good condition and repair. If Tenant fails
to maintain Tenant's signs, or if Tenant fails to remove such sign(s) upon the
expiration or earlier termination of this Lease and repair any damage caused by
such removal, Landlord may do so at Tenant's expense, which expense, together
with interest thereon at the Interest Rate, shall be paid by Tenant to Landlord
upon demand.
6.5 Waste Disposal. Tenant shall store its waste either inside the
Building or within outside trash enclosures on the Premises that are fully
fenced and screened in compliance with all Private Restrictions, and designed
for such purpose. All entrances to such outside trash enclosures shall be kept
closed, and waste shall be stored in such manner as not to be visible from the
exterior of such outside enclosures. Tenant shall cause all of its waste to be
regularly removed from the Premises at Tenant's sole cost. Tenant shall keep all
fire corridors and mechanical equipment rooms in the Building free and dear of
all obstructions at all times.
6.6 Hazardous Material.
6.6.1 Definition of Hazardous Materials. For purposes of this Lease,
the term "Hazardous Materials" shall mean the substances included within the
definitions of the terms "Hazardous Substance" under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as mended, 42
U.S.C. Section 9601 et. seq., and the California Carpenter-Presley-Tanner
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Hazardous Substances Account Act, California Health & Safety Code Section 25300
et. seq., and regulations promulgated thereunder, as amended, and shall include
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asbestos. "Hazardous Waste" shall mean (a) any waste listed as or meeting the
identified characteristics of a "Hazardous Waste" under the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901 et. seq., and
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regulations promulgated pursuant thereto, or (b) any waste meeting the
identified characteristics of "Hazardous Waste" under California Hazardous Waste
Control Law, California Health and Safety Code Section 25100 et. seq., and
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regulations promulgated pursuant thereto.
6.6.2 Prohibition on Use. Tenant shall not cause or permit any of
Tenant's agents, employees, contractors, assigns, subtenants or invitees
(collectively, the "Tenant's Parties") Hazardous Materials to be brought upon,
----------------
stored, used, generated, released or disposed of on, under, from or about the
Premises (including without limitation the soil and groundwater thereunder)
without the prior written consent of Landlord, which consent, subject to the
terms and conditions of this Section 6.6.2, shall not be unreasonably withheld.
Landlord may, in its sole discretion, based on presenting practices of present
owners of similarly situated properties in the vicinity of the Premises, place
such conditions as Landlord deems appropriate with respect to any such Hazardous
Materials, and may further require that Tenant demonstrate that any such
Hazardous Materials are necessary or useful to Tenant's business and will be
generated, stored, used and disposed of in a manner that complies with all
applicable Laws and Private Restrictions and with good business practices.
Tenant understands that Landlord may utilize an environmental consultant to
assist in determining conditions of approval in connection with the presence,
storage,
8.
<PAGE>
generation or use of Hazardous Materials by Tenant on or about the Premises, and
Tenant agrees that any costs incurred by Landlord in connection therewith shall
be reimbursed by Tenant to Landlord as Additional Rent hereunder upon demand, if
such consultants' investigations demonstrate the presence of Hazardous Materials
on the Premises that were brought thereon by Tenant or Tenant's Parties;
otherwise, the cost thereof shall be paid by Landlord.
6.6.3 Environmental Questionnaire; Reports. Prior to the execution of
this Lease, Tenant shall complete, excite and deliver to Landlord an
Environmental Questionnaire and Disclosure Statement (the "Environmental
Questionnaire") in the form of Exhibit C attached hereto. The completed
---------
Environmental Questionnaire shall be deemed incorporated into this Lease for all
purposes, and Landlord shall be entitled to rely fully on the information
contained therein. On each anniversary of the Commencement Date until the
expiration or sooner termination of this Lease, Tenant shall disclose to
Landlord in writing the names and amounts of all Hazardous Materials which were
stored, generated, used or disposed of on, under or about the Premises by Tenant
or Tenant's Parties for the twelve (12) month period prior thereto, and which
Tenant desires to store, generate, use or dispose of on, under or about the
Premises for the succeeding twelve (12) month period. In addition, to the extent
Tenant is permitted to utilize Hazardous Materials upon the Premises, Tenant
shall promptly provide Landlord with complete and legible copies of all the
following environmental documents relating thereto; reports filed pursuant to
any self-reporting requirements; permit applications, permits, monitoring
reports, workplace exposure and community exposure warnings or notices and all
other reports, disclosures, plans or documents relating to water discharges, air
pollution, waste generation or disposal, and underground storage tanks for
Hazardous Materials; orders, reports, notices listings and correspondence of or
concerning the release, investigation of, compliance, cleanup, remedial and
corrective actions, and abatement of Hazardous Materials; and all complaints,
pleadings and other legal documents filed by or against Tenant related to
Tenant's use, handling, storage or disposal of Hazardous Materials.
6.6.4 Landlord's Investigation Rights. Landlord and Landlord's
agents, employees, contractors and assigns (collectively, "Landlord's Parties")
------------------
shall have the right, but not the obligation, to inspect, sample and/or monitor
the Building and/or the soil or groundwater of the Premises thereunder at any
time upon prior written notice thereof (except in cases of emergency, in which
event no notice shall be necessary) to determine whether Tenant is complying
with the terms of this Section 6.6, and in connection therewith Tenant shall
provide Landlord with full access to all relevant facilities, records and
personnel. If Tenant is not in compliance with any of the provisions of this
Section 6.6, or in the event of a release of any Hazardous Material on, under or
about the Premises, Landlord and Landlord's Parties shall have the right, but
not the obligation, without limitation upon any of Landlord's other rights and
remedies under this Lease, to immediately enter upon the Premises without notice
and to discharge Tenant's obligations under this Section 6.6 (at Tenant's
expense, to the extent Tenant or Tenant's Parties are the cause of such
Hazardous Materials), including without limitation the taking of emergency or
long-term remedial action. Landlord and Landlord's Parties shall endeavor to
minimize interference with Tenant's business in connection therewith, but shall
not be liable for any such interference. In addition, Landlord, at Tenant's
expense, shall have the right, but not the obligation, to join and participate
in any legal proceedings or actions initiated in connection with any claims
arising out of the storage, generation, use or disposal by Tenant or Tenant's
Parties of Hazardous Materials on, under, from or about the Building or
Premises.
6.6.5 Tenant's Remediation Obligations. If the presence of any
Hazardous Materials on, under, from or about the Premises caused by Tenant or
Tenant's Parties results in (i) injury to any person; (ii) injury to or any
contamination of the Premises; or (iii) injury to or contamination of any real
or personal property wherever situated, Tenant, at Tenant's expense, shall
promptly take all actions necessary to return the Premises to the condition
existing prior to the introduction of such Hazardous Materials and to remedy or
repair any such injury or contamination, in accordance with applicable Laws,
including without limitation, any cleanup, remediation, removal, disposal,
neutralization or other treatment of any such Hazardous Materials.
Notwithstanding the foregoing, Tenant shall not, without Landlord's prior
written consent, take any remedial action in response to the presence of any
Hazardous Materials on, under or about the Premises or enter into any similar
agreement, consent, decree or other compromise with any governmental agency with
respect to any Hazardous Materials claims; provided however,
9.
<PAGE>
Landlord's prior written consent shall not be necessary in the event that the
presence of Hazardous Materials on, under or about the Premises (a) imposes an
immediate threat to the health, safety or welfare of any individual or (b) is of
such a nature that an immediate remedial response is necessary and it is not
possible to obtain Landlord's consent before taking such action. If Landlord at
any time discovers that Tenant or Tenant's Parties may have caused or permitted
the release of Hazardous Materials on, under, from or about the Premises in
violation of the terms of this Lease, Tenant shall, at Landlord's request,
immediately prepare and submit to Landlord a comprehensive plan, subject to
Landlord's approval (which approval shall not be unreasonably withheld or
delayed), specifying the actions to be taken by Tenant to remedy or repair such
violation. Upon Landlord's approval of such cleanup plan, Tenant shall, at is
expense, and without limitation of any rights and remedies of Landlord under
this Lease or at law or in equity, immediately implement such plan and proceed
to cleanup such Hazardous Materials in accordance with all applicable Laws and
as required by such plan and this Lease.
6.6.6 Tenant's Indemnification. To the fullest extent permitted by
law, Tenant shall indemnify, hold harmless, protect and defend (with attorneys
acceptable to Landlord) Landlord, Master Lessor and Ground Lessor and any
successors to all or any portion of Landlord's interest in the Premises from and
against any and all liabilities, losses, damages, diminution in value,
judgments, fines, demands, claims, recoveries, deficiencies, costs and expenses
(including without limitation attorneys' fees, court costs and other
professional expenses), whether foreseeable or unforeseeable, arising directly
or indirectly out of the presence, use, generation, storage, treatment, on- or
off-site disposal or transportation of Hazardous Materials on, into, from, under
or about the Premises by Tenant or Tenant's Parties, specifically including
without limitation the cost of any required or necessary repair, restoration,
cleanup or detoxification of the Premises, and the preparation of any closure or
other required plans, whether or not such action is required or necessary during
the Term or after the expiration of this Lease.
6.6.7 Landlord's Indemnification. Landlord shall indemnify, protect,
defend (by counsel reasonably acceptable to Tenant) and hold harmless Tenant and
its partners, directors, officers, employees, shareholders, lenders, agents,
contractors and each of their respective successors and assigns (individually
and collectively, the 'Indemnified Parties") from and against any and all
claims, judgments, causes of action, damages, penalties, fines, taxes, costs,
liabilities, losses and expenses (including reasonable attorneys' fees) arising
at any time during or after the Term as a result of (directly or indirectly, but
only to the extent caused by) or in connection with (i) the presence of
Hazardous Materials on, under or about the Premises or other properties adjacent
thereto as of the Effective Date of this Lease, including but not limited to (a)
the Hazardous Material subject to the Remediation Plan (as defined in Section
12.7 of the Master Lease); and (b) any Hazardous Materials migrating onto the
Premises from the adjacent Hewlett-Packard property, or (ii) the presence of
Hazardous Materials on, under or about the Premises due to the activities of
Landlord and/or Landlord's agents, employees, contractors or assigns at any time
before or after the Effective Date of this Lease. This indemnity shall include
the cost of any required or necessary repair, cleanup or detoxification, and the
preparation of any closure or other required plans, whether such action is
required or necessary prior to or following the termination of this Lease. The
strict compliance by Landlord with all Environmental Laws shall not excuse
Landlord from Landlord's obligation of indemnification pursuant hereto.
Landlord's obligations pursuant to the foregoing indemnity shall survive the
termination of this Lease. The provisions of this Section 6.6.7 hereof pertain
only to Hazardous Materials existing on or originating from the Premises or
adjacent properties thereto on the Effective Date or due to the activities of
Landlord and/or Landlord's agents, employees, contractors or assigns before or
after the Effective Date and shall in no way be construed or understood to
require Landlord to investigate, remediate, or indemnify any person in respect
of any Hazardous Materials caused directly or indirectly by Tenant, its
assignees or sublessees or any of its or their activities after the Effective
Date.
6.6.8 Survival. The provisions of this Section 6.6 shall expressly
survive the expiration or sooner termination of this Lease.
6.7 Parking. Tenant is allocated and shall have the right to use not more
than the number of Parking Spaces described in Item 12 of the Basic Lease
Provisions for Tenant's use and the use of Tenant's Parties. All trucks and
delivery vehicles shall be (i) loaded and unloaded in a manner which does not
interfere with the businesses
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of other occupants of neighboring buildings; and (ii) permitted to remain on the
Premises only so long as is reasonably necessary to complete loading and
unloading. Nothing contained in this Lease shall be deemed to create liability
upon Landlord for any damage to motor vehicles of visitors or employees, for any
loss of property from within those motor vehicles, or for any injury to Tenant
or Tenant's Parties, unless ultimately determined to be caused by the sole act
of negligence or willful misconduct of Landlord, or Landlord's Parties.
6.8 Rules and Regulations. Tenant agrees to observe faithfully and comply
strictly with the Rules and Regulations attached hereto as Exhibit D, and any
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reasonable and nondiscriminatory amendments, modifications and/or additions as
may be adopted and published by written notice to tenants by Landlord for the
safety, care, security, good order or cleanliness of the Premises. Landlord
shall not be liable to Tenant for any violation of the Rules and Regulations or
the breach of any covenant or condition in any lease by any other tenant. One or
more waivers by Landlord of any breach of the Rules and Regulations by Tenant or
by any other tenant(s) shall not be a waiver of any subsequent breach of that
rule or any other. Tenant's failure to keep and observe the Rules and
Regulations shall constitute a default under this Lease. In the case of any
conflict between the Rules and Regulations and this Lease, this Lease shall be
controlling.
7. LANDLORD'S MAINTENANCE AND REPAIR.
7.1 Landlord's Maintenance. Landlord shall maintain and repair (i) the
structural portions of the roof, (ii) the failure of any skylights, windows or
window frames to be watertight during the first two (2) Lease Years only, (iii)
the foundation of the Building; (iii) the exterior walls of the Building
(subject to Section 8.1.2 below) in good condition, reasonable wear and tear
excepted; and (iv) any damages to the Premises caused by the negligence of
willful misconduct of Landlord or Landlord's Parties. The term "walls" as used
herein shall not include windows, glass or plate glass, doors, special store
fronts or office entries, unless otherwise specified by Landlord in writing.
7.2 Procedure and Liability. Tenant shall immediately give Landlord
written notice of any apparent defect or need for repair of the items described
above, after which Landlord shall have reasonable opportunity to repair same or
cure such defect with contractors of Landlord's choice. Landlord's liability
with respect to any defects, repairs or maintenance for which Landlord is
responsible under any of the provisions of this Lease shall be limited to the
cost of such repairs or maintenance or the curing of such defect, and shall be
further limited by the terms of Sections 12 and 17 of this Lease. Subject to
Section 13.4 hereof, Tenant or Tenant's Parties cause any damage necessitating
such repair, then Tenant shall pay the cost thereof to Landlord, upon landlord's
demand therefor.
7.3 Waiver. Tenant hereby waives the benefit of California Civil Code
Section 1941 and 1942 and any other statute providing a right to make repairs
and deduct the cost thereof from the Rent.
7.4 Landlord's Right to Perform Tenant's Covenants. Tenant agrees that, if
Tenant shall at any time fail to pay within the grace period herein provided any
mechanic's lien, taxes or other fees and charges arising from the acts or
omissions of Tenant, the non-payment of which may place in jeopardy Landlord's
interest in the Premises or any portion thereof, or if Tenant shall at any time
fail to perform any other act to be made or performed by it under this Lease
within the grace period provided therefor, Landlord may, but shall not be
obligated to, make such payment or perform such other act to the extent Landlord
may reasonably deem such action necessary for the protection of the Premises,
and without waiving or releasing Tenant from any obligation under this Lease.
All sums so paid by Landlord and all reasonable expenses paid in connection
therewith, including without limitation reasonable attorneys' fees, together
with interest thereon at the Interest Rate from the date of such payment until
repaid by Tenant, shall be paid by Tenant to Landlord on demand.
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8. TENANT'S MAINTENANCE AND REPAIR.
8.1 Tenant's Obligation to Maintain. Tenant shall be responsible for the
following during the Term:
8.1.1 General. Tenant shall clean and maintain in good order,
condition, and repair and replace when necessary the Premises and every part
thereof through regular inspections and servicing, including but not limited to:
(i) all plumbing and sewage facilities (including all sinks, toilets, faucets
and drains), and all ducts, pipes, vents or other parts of the HVAC or plumbing
system; (ii) all fixtures, interior walls, floors, carpets and ceilings; (iii)
all windows, doors, entrances, plate glass, showcases and skylights (including
cleaning both interior and exterior surfaces); (iv) all electrical facilities
and all equipment (including all lighting fixtures, lamps, bulbs, tubes, fans,
vents, exhaust equipment and systems); (v)any automatic fire extinguisher
equipment in the Premises; (vi) the roof membrane of the Building; (vii) the
common areas of the Premises, if any, including but not limited to, mowing grass
and general maintenance and replacement of landscaping, maintenance of parking
areas, driveways and alleys, parking lot sweeping, exterior lighting, pest
control and window washing and, if there is central HVAC or other building
service equipment and/or utility facilities serving portions of the common area,
Tenant shall maintain and operate (and replace when necessary) such equipment
and (viii) any other portions of the Premises which are not the responsibility
of Landlord pursuant to Section 7.1 above. Tenant shall replace any damaged or
broken glass in the Premises (including all interior and exterior doors and
windows) with glass of the same kind, size and quality. Tenant shall repair any
damage to the Premises (including all exterior doors and windows) caused by
vandalism or any unauthorized entry. Notwithstanding anything to the contrary
herein, in the event that Landlord reasonably determines that Tenant is not
properly performing Tenant's obligations as set forth in this Section 8.1.1
Landlord shall notify Tenant of the specific instances of such non-performance
by Tenant and, if Tenant does not correct any such non-performance within
fifteen (15) days of written notice of such non-performance from Landlord (or,
if such non-performance cannot reasonably be cured within such fifteen (15) day
period, in whatever period of time is necessary to complete such cure, provided
that Tenant commences to accomplish such cure within said fifteen (15) day
period and proceeds diligently to complete the same), Landlord shall have the
right to perform such activities itself, and the costs thereof, together with a
property management fee equal to 1.2% of the Base Rent then due hereunder
(adjusting as the Base Rent adjusts due to increased in CPI, pursuant to Section
3.2 hereof), shall be due and owing to Landlord as Additional Rent within thirty
(30) days of request therefor or, at Landlord's option, the annual cost thereof
shall be due and payable in equal monthly installments of one twelfth (1/12)
each at the same time and in the same manner as Base Rent is due hereunder.
8.1.2 Maintenance Contracts. Tenant shall (i) maintain, repair and
replace when necessary all HVAC equipment which services the Premises, and shall
keep the same in good condition through regular inspection and servicing, (ii)
maintain continuously throughout the Term a service contract for the maintenance
of all such HVAC equipment with a licensed HVAC repair and maintenance
contractor approved by Landlord (which approval shall not be unreasonably
withheld), which contract provides for the periodic inspection and servicing of
the HVAC equipment at least once every sixty (60) days during the Term and (iii)
maintain continuously throughout the Term a service contract for the maintenance
of the landscaping of the outdoor portions of the Premises with a contractor,
and on terms and conditions, satisfactory to Landlord. Tenant shall maintain
continuously throughout the Term a service contract for the washing of all
windows (both interior and exterior surfaces) in the Premises with a contractor
approved by Landlord, which contract provides for the periodic washing of all
such windows at least once every one hundred eighty (180) days during the Term.
Tenant shall furnish Landlord with copies of all such service contracts, which
shall provide that they may not be cancelled or changed without at least thirty
(30) days' prior written notice to Landlord.
8.1.3 Standards. All repairs and replacements required of Tenant
shall be promptly made with materials of like kind and quality and shall be
performed in accordance with all applicable Laws, Private Restrictions, and the
terms of Section 9 of this Lease.
9. ALTERATIONS.
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9.1 Trade Fixtures. During the Term of this Lease, Tenant may install
Tenant's Trade Fixtures on the Premises without the prior consent of Landlord.
All Trade Fixtures shall remain Tenant's property. The term "Trade Fixtures"
shall mean (i) Tenant's inventory, furniture, signs, and business equipment,
which can be removed without injury to the Premises (e.g., demountable
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partitions, business and production equipment and systems, furniture and
furnishings) unless such thing has, by the manner in which it is affixed, become
an integral part of the Premises; and (ii) anything affixed to the Premises by
Tenant at its expense for purposes of trade, manufacture, ornament or domestic
use (except replacement of similar work or material originally installed by
Landlord) which can be removed without material injury to the Premises unless
such thing has, by the manner in which it is affixed, become an integral part of
the Premises. Notwithstanding the foregoing, the term "Trade Fixtures" shall not
include any Tenant Improvements paid for with the funds of Landlord nor any
improvements thereafter made to the Premises by Landlord at any time with
Landlord's funds.
9.2 Consent Requirement for Alterations. Except as provided below, Tenant
shall make no alterations, additions or improvements (collectively,
"Alterations") to the Premises (including, without limitation, roof and wall
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penetrations) or any part thereof without obtaining the prior written consent
of Landlord and, if required, Master Lessor in each instance, which consent
shall not be unreasonably withheld or delayed. Landlord may impose as a
condition to such consent such requirements as Landlord may reasonably deem
necessary, in its sole and absolute discretion, including, without limitation:
(i) that Landlord be furnished with working drawings before work commences; (ii)
that performance and labor and material payment bonds be furnished, in the event
of Alterations costing in excess of Five Hundred Thousand Dollars ($500,000)
only, (iii) that Landlord approve the contractor by whom the work is to be
performed, which approval shall not be unreasonably withheld; (iv) that adequate
course of construction insurance be in place and the Landlord is named as an
additional insured under the contractor's liability and property damage
policies; and (iv) that Landlord's instructions relating to the manner in which
the work is to be done be complied with. Notwithstanding the foregoing, Tenant
shall have the right, without Landlord's consent, to make any non-structural
Alterations to the Premises which, for any single proposed Alteration (or any
series of related Alterations), does not cost more than Twenty-Five Thousand
Dollars; provided, that (a) Tenant shall provide Landlord with fifteen (15)
days' advance written notice of the commencement of any such Alteration, (b)
such Alteration shall not affect the Building's "core" electrical, mechanical,
HVAC systems (including, but not limited to the central corridors, restrooms,
elevators, main duct runs, distribution from main panels to subpanels and
subfeeders and sprinkler mains) or any other structural part of the Building or
Premises, and (c) such Alteration is otherwise performed in accordance with the
terms of this Section 9.1. All such alterations, additions or improvements must
be done in compliance with all applicable Laws and Private Regulations, in a
good and workmanlike manner and diligently prosecuted to completion. Tenant
shall deliver to Landlord upon commencement of such work a copy of the building
permit with respect thereto. All such work shall be performed so as not to
obstruct the access of any other tenant of any neighboring building. Should
Tenant make any Alterations without Landlord's prior written consent, Landlord
shall have the right, in addition to and without limitation of any right or
remedy Landlord may have under this Lease, at law or in equity, to require the
Tenant to remove all or some of the Alterations at Tenant's sole cost and
restore the Premises to the same condition as existed prior to undertaking the
Alterations. Tenant shall notify Landlord in writing at least ten (10) days
prior to the commencement of any such work in or about the Premises and Landlord
shall have the right at any time and from time to time to post and maintain
notices of nonresponsibility in or about the Premises.
9.3 Possession. All Tenant's Alterations shall remain the property of
Tenant during the Term but any Alterations which have become affixed to the
Premises shall not be altered or removed from the Premises. At the expiration or
sooner termination of the Term, all Tenant's Alterations which have become
affixed to the Premises shall be surrendered to Landlord and shall then become
Landlord's property, and Landlord shall have no obligation to reimburse Tenant
for all or any portion of the value or cost thereof; provided, however, that if
Landlord requires Tenant to remove any Tenant's Alterations, Tenant shall so
remove such Tenant's Alterations, and Tenant shall restore the Premises to the
condition which existed prior to the installation of such Tenant's Alterations,
prior to the expiration or sooner termination of the Term. Notwithstanding the
foregoing, Tenant shall not be obligated to remove any Tenant's Alterations with
respect to which the following is true: (i) Tenant was required, or elected, to
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Obtain the approval of Landlord to the installation of the Alteration in
question; (ii) at the time Tenant requested Landlord's approval, or, if no
consent to the proposed Alterations is required, any time before the Alteration
in question is installed, Tenant requested of Landlord in writing that Landlord
inform Tenant of whether or not Landlord would require Tenant to remove such
Alteration at the expiration of the Term; and (iii) at the time Landlord granted
its approval, it did not inform Tenant that it would require Tenant to remove
such Alteration at the expiration of the Term.
9.4 Alterations Required by Law. Tenant shall make any Alteration or
change of any sort to the Premises (except the Base Building and any related
site improvements to the Premises performed by Landlord, at Landlord's expense,
prior to the Commencement Date of the Lease) that is required by any Law,
including but not limited to changes required due to (i) Tenant's particular use
or change of use of the Premises, (ii) Tenant's application for any permit or
governmental approval, or (iii) Tenant's construction or installation of any
Tenant's Alterations, Tenant Improvements or Trade Fixtures. Landlord shall, at
Landlord's sole expense, make any Alterations required by law to the Base
Building.
9.5 Mechanic's Liens. Tenant covenants and agrees that it will pay or
cause to be paid all sums legally due and payable by it on account of any labor
performed or materials furnished in connection with any work performed by Tenant
on the Premises. Tenant shall keep the Premises free from any liens and shall
pay when due all bills arising out of any work performed, materials furnished,
or obligations incurred by Tenant or Tenant's Parties relating to the Premises.
If any claim of lien is recorded with respect to work performed by or on behalf
of Tenant or Tenant's Parties, Tenant shall bond against or discharge the same
within ten (10) business days after the same has been recorded against the
Premises or Landlord shall have the right, at Landlord's option, of paying and
discharging the same or any portion thereof without inquiry as to the validity
thereof, and any amounts so paid, including expenses, together with interest
thereon at the Interest Rate, shall be Additional Rent immediately due and
payable upon rendition of a bill therefor. Should any lien be filed against the
Premises or any action be commenced affecting title to the Premises, the party
receiving notice of such lien or action shall immediately give the other party
written notice thereof. Tenant shall indemnify, defend (by counsel satisfactory
to Landlord), protect and hold Landlord harmless from any and all loss, cost or
expense based on or arising out of asserted claims or liens against the
leasehold estate or against the right, title and interest of Landlord in the
Premises or this Lease arising from the act or agreement of Tenant. Tenant
agrees to give Landlord immediate written notice of the placing of any lien or
encumbrance against the Premises.
10. FIRE AND CASUALTY DAMAGE.
10.1 Notice of Destruction. If the Building should be damaged or destroyed
by fire, earthquake or other casualty, Tenant shall give immediate written
notice thereof to Landlord.
10.2 Loss Covered by Insurance. If at any time prior to the expiration or
termination of this Lease, the Building is wholly or partially damaged or
destroyed by a risk, the loss to Landlord from which is fully covered by the
property insurance maintained by Tenant hereunder pursuant to Section 13.1.2
hereof, without regard to any deductible amount with respect to such insurance,
which risk renders the Building totally or partially inaccessible or unusable by
Tenant in the ordinary conduct of Tenant's business, then:
(a) If (i) all repairs to the Building can, in Landlord's judgment,
bc completed within two hundred seventy (270) days following the date of notice
to Landlord of such damage or destruction without the payment of overtime or
other premiums; and (ii) Landlord is not prevented by applicable Laws from
rebuilding the Building to its preexisting condition, Landlord shall, at
Landlord's expense, repair the same and this Lease shall remain in full force
and effect and a proportionate reduction of Rent shall be allowed Tenant for
such portion of the Building as shall be rendered inaccessible or unusable to
Tenant during the period of time that such portion is unusable or inaccessible.
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(b) If such damage or destruction cannot, in Landlord"s judgment, be
repaired within two hundred seventy (270) days following the date of notice to
Landlord of such damage or destruction without the payment of overtime or other
premiums, Landlord may, at Landlord"s sole and absolute option, upon written
notice to Tenant given within sixty (60) days after notice to Landlord of the
occurrence of such damage or destruction, elect to repair such damage or
destruction at Landlord"s expense, and in such event, this Lease shall continue
in full force and effect but the Rent shall be proportionately reduced as
provided in Section 10.2(a). If Landlord does not elect to make such repairs,
then either party may by written notice to the other, terminate this Lease as of
the date of the occurrence of such damage or destruction. If Landlord elects to
repair the damage to the Building, Tenant shall pay to Landlord any and all
proceeds payable under the property insurance to be maintained by Tenant
pursuant to Section 13.1.2 hereof. If the damage or destruction is the result of
an earthquake, then Landlord shall reimburse Tenant an amount equal to 14.2857%
of the "deductible" portion of such property insurance policy (but in no event
more than $100,000), upon receipt of evidence of such costs, once the Premises
have been Substantially Completed (as defined in the Improvement Agreement)
after such event of damage or destruction. Tenant shall be solely responsible
for the payment of the remaining portion of such "deductible." Tenant shall be
solely responsible for the payment of the "deductible" portion of the property
insurance policy in the event of a casualty event other than an earthquake.
10.3 Loss Not Covered by Insurance. If, at any time prior to the
expiration or termination of this Lease, the Building is totally or partially
damaged or destroyed from a risk, the loss to Tenant from which is not fully
covered by insurance maintained by Tenant pursuant to Section 13.1.2 hereof,
without regard to any deductible amount with respect to such insurance, Landlord
may, at its option, upon written notice to Tenant within sixty (60) days after
notice to Landlord of the occurrence of such damage or destruction, elect to
repair or restore such damage or destruction, or Landlord may elect to terminate
this Lease. If Landlord elects to repair or restore such damage or destruction,
this Lease shall continue in full force and effect, but the Rent shall be
proportionately reduced as provided in Section 10.2(a).
10.4 Loss Caused by Tenant or Tenant's Parties. Except as provided in
Section 13.4, if the Building is wholly or partially damaged or destroyed as a
result of the negligence or willful misconduct or omission of Tenant or Tenant's
Parties, Tenant shall forthwith diligently undertake to repair or restore all
such damage or destruction at Tenant's sole cost and expense.
10.5 Destruction Near End of Term. Notwithstanding the foregoing, if the
Building is wholly or partially damaged or destroyed within the final six (6)
months of the Term, and restoration of the damage or destruction will reasonably
require an excess of thirty (30) days from the date of such damage or
destruction, Landlord may, at its option, elect to terminate this Lease;
provided, however, that Landlord may not terminate this Lease pursuant to this
subparagraph if Tenant at the time of such damage has a then valid express
written option to extend the Term and Tenant exercises such option to extend the
Term within fifteen (15) days following the date of such damage.
10.6 Destruction of Improvements and Personal Property. In the event of
any damage to or destruction of the Building, under no circumstances shall
Landlord be required to repair, replace or compensate anyone for the personal
property, Trade Fixtures, Alterations, machinery, equipment or furniture of
Tenant or any of Tenant's Parties, and Tenant shall repair and replace all such
personal property, Alterations and Trade Fixtures at Tenant's sole cost and
expense to the extent necessary for the conduct of Tenant's business at the
Premises.
10.7 Exclusive Remedy. This Section 10 shall be Tenant's sole and
exclusive remedy in the event of damage or destruction to the Premises or the
Premises, and Tenant waives and releases Tenant's rights under California Civil
Code Sections 1932 and 1933(4). No damages, compensation or claim shall be
payable by Landlord for any inconvenience, any interruption or cessation of
Tenant's business, or any annoyance, arising from any damage or destruction of
all or any portion of the Premises.
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10.8 Lender Discretion. Notwithstanding anything herein to the contrary,
in the event the holder of any indebtedness secured by a mortgage or deed of
trust covering the Premises requires that the insurance proceeds from insurance
held by Landlord be applied to such indebtedness, then Landlord shall have the
right to deliver written notice to Tenant terminating this Lease.
11. CONDEMNATION.
11.1 Landlord's Termination Right. Landlord shall have the right to
terminate this Lease if, as a result of a taking by means of the exercise of the
power of eminent domain (including a voluntary sale or transfer by Landlord to a
condemnor under threat of condemnation), (i) all or any part of the Premises is
so taken, (ii) more than ten percent (10%) of the leasable area of the Building
is so taken, or (iii) more than fifty percent (50%) of the Common Area is so
taken. Such termination shall be effective as of the date the condemning
authority takes title or possession of the condemned area, whichever occurs
first.
11.2 Tenant's Termination Right. Tenant shall have the right to terminate
this Lease if, as a result of any taking by means of the exercise of the power
of eminent domain (including any voluntary sale or transfer by Landlord to any
condemnor under threat of condemnation), (i) ten percent (10%) or more of the
Premises is so taken and that part of the Premises that remains cannot be
restored within a reasonable period of time and thereby made reasonably suitable
for the continued operation of the Tenant's business, or (ii) there is a taking
affecting the Common Area and, as a result of such taking, Landlord cannot
provide Tenant the Parking Spaces within reasonable walking distance of the
Premises. Tenant must exercise such right within a reasonable period of time, to
be effective on the date that possession or title of that portion of the
Premises or Common Area that is condemned is taken by the condemnor, whichever
occurs first.
11.3 Restoration and Abatement of Rent. If any part of the Premises or the
Common Area is taken by condemnation and this Lease is not terminated, then,
only to the extent proceeds from the Award (as defined in Section 11.5) exist,
Landlord shall restore the remaining portion of the Premises and Common Area and
interior improvements constructed by Landlord as they existed as of the
Commencement Date, excluding any Tenant's Alterations, Trade Fixtures and/or
personal property constructed or installed by Tenant. Thereafter, except in the
case of a temporary taking, as of the date possession or title is taken
(whichever occurs first), the Base Rent shall be reduced to the extent that the
taking in question interferes with Tenant's use of the Premises.
11.4 Temporary Taking. If any portion of the Premises is temporarily taken
for one year or less, and the Premises continue to be reasonably suitable for
the conduct of Tenant's business, this Lease shall remain in effect. If any
portion of the Premises is temporarily taken by condemnation for a period which
exceeds one (1) year or which extends beyond the natural expiration of the Term,
and such taking materially and adversely affects Tenant's ability to use the
Premises for the Permitted Uses, then Tenant shall have the right to terminate
this Lease, effective on the date possession or title is taken by the condemnor,
whichever occurs first.
11.5 Division of Condemnation Award. Any award ("Award") made as a result
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of any condemnation or of the taking of the Premises or the Common Area shall
belong to and be paid to Landlord, and Tenant hereby assigns to Landlord all of
its right, tide and interest in any such Award; provided, however, that Tenant
shall be entitled to receive any Award that is made directly to Tenant for the
following, so long as the award made to landlord is not thereby reduced: (i) for
the taking of personal property, Alterations, Tenant Improvements or Trade
Fixtures belonging to Tenant, (ii) for the interruption of Tenant's business or
its moving costs, (iii) for loss of Tenant's goodwill; or (iv) for any temporary
taking where this Lease is not terminated as a result of such taking. The rights
of Landlord and Tenant regarding any condemnation shall be determined as
provided in this Section 11.5, and each party hereby waives the provisions of
California Code of Civil Procedure Section 1265.130 and the provisions of any
similar law hereinafter enacted allowing either party to petition the Superior
Court to terminate this Lease in the event of a partial taking of the Premises.
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12. LIABILITY OF LANDLORD; INDEMNITY BY TENANT.
12.1 Limitation on Landlord's Liability. Except as otherwise provided
herein, Landlord shall not be liable to Tenant, nor shall Tenant be entitled to
terminate this Lease or to any abatement of Rent, for any injury to Tenant or
Tenant's Parties, damage to the property of Tenant or Tenant's Parties, or loss
to Tenant's business resulting from any cause, including without limitation any:
(i) failure, interruption or installation of any HVAC or other utility system or
service; (ii) failure to furnish or delay in furnishing any utilities or
services when such failure or delay is caused by fire or other peril, the
elements, labor disturbances of any character, or any other accidents or other
conditions beyond the reasonable control of Landlord; (iii) limitation,
curtailment, rationing or restriction on the use of water or electricity, gas or
any other form of energy or any services or utility serving the Premises; (iv)
vandalism or forcible entry by unauthorized persons or the criminal act of any
person; or (v) penetration of water into or onto any portion of the Building
through roof leaks or otherwise. Notwithstanding the foregoing but subject to
Sections 12.2 and 13.4, Landlord shall be liable for any such injury, damage or
loss which is proximately caused by Landlord's willful misconduct or gross
negligence of which Landlord has actual notice and the opportunity to cure
described in Section 17.1 hereof, but which it fails to so cure.
12.2 Limitation on Tenant's Recourse. If landlord is a corporation, trust,
partnership, joint venture, unincorporated association or other form of business
entity:. (i) the obligations of Landlord under this Lease shall not constitute
personal obligations of the officers, directors, trustees, partners, joint
venturers, members, owners, stockholders, or other principals or representatives
of such business entity, and (ii) Tenant shall not have recourse to the assets
of such officers, directors, trustees, partners, joint venturers, members,
owners, stockholders, principals or representatives except to the extent of
their interest in the Premises. Notwithstanding anything to the contrary in this
Lease, Tenant shall have recourse only to the interest of Landlord in the
Premises for the satisfaction of each and every remedy of Tenant in the event of
default by Landlord hereunder; such exculpation of personal liability is
absolute and without exception whatever. No other property or assets of Landlord
shall be subject to levy, attachment, execution or other enforcement procedures
for the satisfaction of any judgment (or other judicial process) or for the
satisfaction of any other remedy of Tenant arising out of, or in connection
with, this Lease or the relationship of Landlord and Tenant or Tenant's use of
the Premises.
12.3 Indemnification of Landlord. Tenant shall hold harmless, indemnify,
protect and defend Landlord, and its employees, agents, contractors, directors,
partners, shareholders, officers, advisors, consultants and lenders with legal
counsel reasonably satisfactory to Landlord from all liability, penalties,
losses, damages, costs, expenses (including attorneys' fees and court costs),
causes of action, claims and/or judgments arising by reason of any death, bodily
injury, personal injury or property damage resulting from (i) any cause or
causes whatsoever (other than the willful misconduct or negligence of Landlord
of which Landlord has had notice and the opportunity to cure described in
Section 17.1 hereof, but which Landlord has failed to cure) occurring in or
about or resulting from an occurrence in or about the Premises during the Lease
Term; (ii) the negligence or willful misconduct of Tenant or Tenant's Parties,
wherever the same may occur; or (iii) an Event of Tenant's Default. The
provisions of this Section 12.3 shall survive the expiration or sooner
termination of this Lease.
12.4 Indemnification of Tenant. Landlord shall hold harmless, indemnity,
protect and defend Tenant, Guarantor and their employees, agents, contractors,
partners, shareholders, officers, advisors, consultants and lenders with legal
counsel reasonably satisfactory to Tenant from all liability, penalties, losses,
damages, costs, expenses (including attorneys' fees and court costs), causes of
action, claims and/or judgments arising by reason of any death, bodily injury,
personal injury or property damage resulting from the gross negligence or
willful misconduct of Landlord or Landlord's Parties. The provisions of this
Section 12.4 shall survive the expiration or sooner termination of this Lease.
12.5 Notice of Claim or Suit. Tenant shall promptly notify Landlord of any
claim, action, proceeding or suit instituted or threatened against Tenant of
which Tenant received notice or of which Tenant acquires knowledge and which
names Landlord as a party thereto.
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13. INSURANCE.
13.1 Tenant's Insurance Obligations. Tenant agrees that at all times from
and after the date Tenant is given access to the Premises for any reason, Tenant
shall carry and maintain, at its sole cost and expense, the following types,
amounts and forms of insurance:
13.1.1 Public Liability Insurance. A broad form comprehensive
general liability or commercial general liability policy including contractual
liability coverage for obligations under this Lease, covering the Premises in an
amount of not less than the amount per occurrence specified in Item 14 of the
Basic Lease Provisions. Such policy shall be in the occurrence form with a per
location general aggregate naming Landlord as an additional insured. Said policy
shall provide primary coverage to Landlord; when any policy issued to Landlord
provides duplicate coverage or is similar in coverage, Landlord's policy will be
excess over Tenant's policies. The amounts of such insurance required hereunder
shall be subject to adjustment from time to time as requested by Landlord based
upon Landlord's determination as to the amounts of such insurance generally
required at such time for comparable tenants, premises and buildings in the
general geographical location of the Building or as requested by any Lender (as
hereinafter defined).
13.1.2 Property Insurance for Base Building and Tenant
Improvements. A policy or policies of "special form" (including earthquake
coverage) property damage insuring against physical damage to the Base Building,
Building and Tenant Improvements, with coverage of not less than one hundred
percent (100%) of the full replacement cost thereof, and insuring Landlord (and
such others as Landlord may designate in writing) against loss of rents for a
period equal to twelve (12) months. The "deductible" portion of such insurance
policy shall not be in excess of an amount previously approved by Landlord in
writing, which approval shall not be unreasonably withheld, provided that
Landlord hereby approves a deductible amount under the property insurance policy
described in Section 13.1.2 of no more than Twenty Thousand Dollars ($20,000)
and a deductible amount under the earthquake portion of that policy, if such
deductible amount is separately stated, of no more than One Million Dollars
($1,000,000).
13.1.3 Property Insurance for Trade Fixtures, Alterations. A policy
or policies, including the "special form" of coverage, including vandalism and
malicious mischief, theft, sprinkler leakage and water damage coverage in an
amount equal to the full replacement value, new without deduction for
depreciation of all Trade Fixtures, furniture and equipment in the Premises, and
all Alterations to the Premises installed by or for Tenant or provided to
Tenant. Such insurance shall also include business interruption and extra
expense coverage for Tenant's operations and debris removal coverage for removal
of property of Tenant and Tenant's Parties which may be damaged on the Premises.
13.1.4 Workers' Compensation Insurance. Workers' compensation
insurance, including employers' liability coverage, is to comply with the
applicable California law. Such insurance shall include a waiver of subrogation
in favor of Landlord.
13.1.5 Other Insurance. Such other insurance that is either (i)
required by Master Lessor, Ground Lessor or any Lender, or (ii) reasonably
required by Landlord and customarily carried by tenants of similar property in
similar businesses.
13.2 Requirements of Tenant's Insurance Coverage. Each policy of insurance
required to be carried by Tenant pursuant to Section 13.1: (i) shall name
Landlord, any Lender (as defined in Section 17.1 hereof) and such other parties
in interest as Landlord reasonably designates as additional insureds; (ii) shall
be primary insurance which provides that the insurer shall be liable for the
full amount of the loss up to and including the total amount of liability set
forth in the declarations without the right of contribution from any other
insurance coverage of Landlord; (iii) shall be in a form satisfactory to
Landlord; (iv) shall be carried with companies licensed to do business in
California and which have a general policy holders' rating of at least "A" and a
financial rating of at least "VIII" as set forth in the most current issue of
Best's Insurance Guide; (v) shall provide that such policy shall not be subject
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to cancellation, lapse or change except after at least thirty (30) days prior
written notice to Landlord so long as such provision of thirty (30) days notice
is reasonably obtainable, but in any event not less than ten (10) days prior
written notice; (vi) shall contain a cross liability endorsement; (vii) shall
contain a "severability" clause and (viii) shall be written on an "occurrence"
basis only, unless such forms are no longer available, in which case the policy
form obtained by Tenant shall be subject to Landlord's prior written reasonable
approval. If Tenant has in full force and effect a blanket policy of liability
insurance with the same coverage for the Premises as described above, as well as
other coverage of other premises and properties of Tenant, or in which Tenant
has some interest, such blanket insurance shall satisfy the requirements of this
Section 13, provide that Landlord is named as an additional insured thereunder
and provide that the coverage afforded with respect to the Premises shall not be
reduced or diminished by reason of the use of such blanket policy of insurance.
13.3 Evidence of Tenant's Insurance Coverage. A copy of each paid-up
policy evidencing the insurance required to be carried by Tenant pursuant to
Section 13.1 (appropriately authenticated by the insurer) or a certificate of
the insurer, certifying that such policy has been issued, providing the coverage
required by Sections 13.1 and 13.2, and containing the provisions specified
herein, shall be delivered to Landlord prior to the time Tenant or any of
Tenant's Parties enters the Premises and upon renewal of such policies, but not
less than ten (10) day prior to the expiration of the term of such coverage. If
any Lender or insurance advisor reasonable determines at any time that the
amount of coverage required for any policy of insurance Tenant is to obtain
pursuant to Section 13.1 is not adequate, then Tenant shall increase such
coverage for such insurance to such amount as such Lender or insurance advisor
reasonably deems adequate, not to exceed the level of coverage for such
insurance commonly carried by comparable businesses similarly situated. If
Tenant fails to obtain the insurance required hereby or provide evidence thereof
to Landlord, Landlord may, but shall not be obligated to, and Tenant hereby
appoints Landlord as its agent to procure such insurance and bill the cost of
the insurance to Tenant. Tenant shall pay such costs to Landlord as Additional
Rent with the next monthly payment of Rent.
13.4 Release and Waiver of Subrogation. Tenant hereby releases Landlord
and its agents and employees from any liability for injury to any person or
damage to property that is caused under any valid and collectible insurance
policy carried by Tenant which contains a waiver of subrogation by the insurer
and is in force at the time of such injury or damage; subject to the following
limitations: (i) the foregoing provisions shall not apply to the commercial
general liability insurance described by Section 13.1.1; (ii) such release shall
apply to liability resulting from any risk insured against or covered by self-
insurance maintained or provided by Tenant to satisfy the requirements of
Section 13.2 to the extent permitted by this Lease; and (iii) Tenant shall not
be released from any such liability to the extent any damages resulting from
such injury or damage are not covered by instance required to be carried
hereunder or actually carried. Tenant represents and warrants that the insurance
coverage required to be maintained by Tenant hereunder permits a partial release
in connection with obtaining a waiver of subrogation from the insurer as of the
date of this Lease, and shall provide Landlord with advance written notice of
any impending invalidity of the waiver described herein. Tenant shall cause each
insurance policy obtained by Tenant to provide that the insurer waives all right
of recovery by way of subrogation against Landlord and Landlord's Parties in
connection with any injury or damage covered by such policy.
13.5 Landlord's Insurance. Landlord shall maintain a policy of
comprehensive general liability insurance (including a blanket "contractual"
liability endorsement) against liability for personal injury, bodily injury,
death and damage to property occurring in or about, or resulting from an
occurrence in or about, the Premises with combined single limit coverage of not
less than the amount of Two Million Dollars ($2,000,000.00). Landlord shall
provide Tenant (i) with reasonably satisfactory evidence of the existence of
such coverage, in the form a copy of the policies in question or a certificate
of the insurer, certifying that such policy has been issued, promptly following
the Effective Date hereof and (ii) shall provide at least ten (10) days prior
written notice before the expiration of any then-current coverage.
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13.6 Tenant's Obligation to Reimburse. Tenant shall reimburse Landlord for
the full amount of the cost of any insurance required to be carried by Landlord
pursuant to this Lease with respect to the Premises within thirty (30) days of
Tenant's receipt of Landlord's billing therefor.
13.7 Delivery of Insurance Proceeds to Landlord. Tenant shall immediately
deliver to Landlord any insurance proceeds received by Tenant with respect to
the policy of property insurance described in Section 13.1.2 hereof. Tenant
agrees to cooperate with Landlord and execute, acknowledge and deliver such
further documents and instruments and do such further acts as may be reasonably
required or desirable to carry out the intent of this Section 13.7. Tenant shall
not settle, collect or compromise any claims against the insurance company
issuing the policy of property insurance described in Section 13.1.2 hereof
without the prior written consent of landlord, who shall have the right, but not
the obligation, to join and participate in any legal proceedings or actions
initiated in connection with any claims arising out such insurance policy.
14. LANDLORD'S RIGHT OF ACCESS.
Upon twenty-four (24) hours' written notice (except in cases of emergency,
in which event no notice shall be necessary), Tenant shall permit Landlord and
Landlord's Parties, and Master Lessor and Ground Lessor (to the extent that
Master Lessor and Ground Lessor have reserved the right of entry in the Master
Lease or Ground Lease, respectively, or are permitted such entry by law) at all
reasonable times and at any time in case of emergency, in such manner as to
cause as little disturbance to Tenant as reasonably practicable and in a manner
consistent with any reasonable security procedures of Tenant which have
previously been provided to Landlord in written form (a) to enter into and upon
the Premises to inspect them, to protect the Landlord's interest therein, or to
post notices of non-responsibility, (b) to take all necessary materials and
equipment into the Premises, and perform necessary work therein, and (c) to
perform environmental testing, monitoring, sampling, digging, drilling and
analysis for Hazardous Materials on, under or about the Premises, and to review
and copy any documents, materials, data, inventories, financial data, notices or
correspondence to or from private parties or governmental authorities in
connection therewith. No such work shall cause or permit any rebate of Rent to
Tenant for any loss of occupancy or quiet enjoyment of the Premises, or damage,
injury or inconvenience thereby occasioned. Landlord may at any time place on or
about the Building any ordinary "for sale" and "for lease" signs. Subject to the
terms of this Section 14, Tenant shall also permit Landlord and Landlord's
Parties, upon request, to enter the Premises or any part thereof, at reasonable
times during normal business hours, to show the Premises to the fee owners,
lessors of superior leases holders of encumbrances on the interest of Landlord
under the Lease, or prospective purchasers, mortgagees or lessor of the Building
as an entirety. At any time after the Extension Cut-Off, if Landlord has not
been provided an Extension Notice, or during the period of twelve (12) months
prior to the expiration date of any Renewal Term, Landlord may exhibit the
Premises to prospective tenants.
15. ASSIGNMENT AND SUBLETTING.
15.1 Consent Requirement. Tenant shall not do any of the following
(collectively referred to herein as a "Transfer"), whether voluntarily,
involuntarily or by operation of law, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld, delayed or
conditioned: (i) sublet all or any part of the Premises or allow the Premises to
be sublet, occupied or used by any person or entity other than Tenant; (ii)
assign its interest in this Lease; (iii) mortgage or encumber the Lease (or
otherwise use the Lease as a security device) in any manner; or (iv) materially
amend or modify an assignment, sublease or other transfer that has been
previously approved by Landlord. Tenant shall reimburse Landlord for all
reasonable costs and attorneys' fees incurred by Landlord in connection with the
evaluation, processing, and/or documentation of any requested Transfer, whether
or not Landlord's consent is granted. Landlord's reasonable costs shall include
the cost of any review or investigation performed by Landlord or consultant
acting on Landlord's behalf of (a) Hazardous Materials used, stored, released,
or disposed of by the potential subtenant or assignee, and/or (b) violations of
Law by the Tenant or the proposed subtenant or assignee. Any Transfer so
approved by Landlord shall not be effective until Tenant has delivered to
Landlord an executed counterpart of the document evidencing the Transfer which
(x) is in a form reasonably
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approved by Landlord, (y) contains the same terms and conditions as stated in
Tenant's notice given to Landlord pursuant to Section 15.2, and (z) in the case
of an assignment of the Lease, contains the agreement of the proposed transferee
to assume all obligations of Tenant under this Lease arising after the effective
date of such Transfer and to remain jointly and severally liable therefor with
Tenant. Any attempted Transfer without Landlord's consent shall constitute an
Event of Tenant's Default and shall be voidable at Landlord's option. Landlord's
consent to any one Transfer shall not constitute a waiver of the provisions of
this Section 15.1 as to any subsequent Transfer. No Transfer, even with the
consent of Landlord, shall relieve Tenant of its personal and primary obligation
to pay the Rent and to perform all of the other obligations to be performed by
Tenant hereunder. The acceptance of Rent by Landlord from any person shall not
be deemed to be a waiver by Landlord of any provision of this Lease nor to be a
consent to any Transfer.
15.2 Procedure. At least thirty (30) days before a proposed Transfer is to
become effective, Tenant shall give Landlord written notice of the proposed
terms of such Transfer and request Landlord's approval, which notice shall
include the following: (i) the name and legal composition of the proposed
transferee; (ii) a current financial statement of the transferee, financial
statements of the transferee covering the preceding three (3) years if the same
exist, and (if available) an audited financial statement of the transferee for a
period ending not more than one year prior to the proposed effective date of the
Transfer, all of which statements are prepared in accordance with generally
accepted accounting principles; (iii) the nature of the proposed transferee's
business to bc carried on in the Premises; (iv) all consideration to be given on
account of the Transfer; (v) a current financial statement of Tenant; and (vi)
an accurately filled out response to Landlord's standard Hazardous Materials
Questionnaire. Tenant shall provide to Landlord such other information as may be
reasonably requested by Landlord within seven days after Landlord's receipt of
such notice from Tenant. Landlord shall respond in writing to Tenant's request
for Landlord's consent to a Transfer within the later of (a) fifteen (15) days
of receipt of such request together with the required accompanying
documentation, or (b) seven (7) days after Landlord's receipt of all information
which Landlord reasonably requests within seven days after it receives Tenant's
first notice regarding the Transfer in question. If Landlord fails to respond in
writing within said period, Landlord will be deemed to have withheld consent to
such Transfer. Tenant shall immediately notify Landlord of any material
modification to the proposed terms of such Transfer.
15.3 Terms of Transfer. If Landlord consents to a Transfer proposed by
Tenant, Tenant may enter into such Transfer, and if Tenant does so, the
following shall apply:
(a) Tenant shall not be released of its liability for the performance
of all of its obligations under the Lease.
(b) Tenant shall be entitled to one hundred (100%) of the positive
difference, if any, between (i) all Subrent paid by the subtenant to Tenant,
less (ii) the sum of all Base Rent and Additional Rent allocable to the space
subject to the Transfer. As used in this Section 15.3, the term "Subrent" shall
mean any consideration of any kind received, or to be received, by Tenant as
result of the Transfer, if such sums are related to Tenant's interest in this
Lease or in the Premises, including payments from or on behalf of the transferee
(in excess of the book value thereof) for Tenant's assets fixtures, leasehold
improvements, inventory, accounts, goodwill, equipment, furniture and general
intangibles.
15.4 Corporate Reorganization. If Tenant is a corporation, the following
shall be deemed a voluntary assignment of Tenant's interest in this Lease: (i)
any dissolution, merger, consolidation or other reorganization of or affecting
Tenant, whether or not Tenant is the surviving corporation; and (ii) if the
capital stock of Tenant is not publicly traded, the sale or transfer to one
person or entity (or to any group of related persons or entities), stock
possessing more than fifty percent (50%) of the total combined voting power of
all classes of Tenant's capital stock issued, outstanding and entitled to vote
for the election of directors. If Tenant is a partnership, any withdrawal or
substitution (whether voluntary, involuntary or by operation of law, and whether
occurring at one time or over a period of time) of any partner owning twenty-
five percent (25%) or more (cumulatively) of any interest in the capital
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or profits of the partnership, or the dissolution of the partnership, shall
be deemed a voluntary assignment of Tenant's interest in this Lease.
15.5 Transfers to Affiliates. Notwithstanding anything contained in this
Section 15, so long as Tenant otherwise complies with the provisions of this
Section 15, Tenant may enter into any of the following transfers (a "Permitted
Transfer") without Landlord's prior written consent.
(a) Tenant may sublease all or part of the Premises or assign its
interest in this Lease to any corporation which controls, is controlled by, or
is under common control with Tenant by means of an ownership interest of more
than 50%;
(b) Tenant may assign its interest in the Lease to a corporation
which results from a merger, consolidation or other reorganization in which
Tenant is not the surviving corporation, so long as the surviving corporation
has a net worth at the time of such assignment that is equal to or greater than
the net worth of Tenant immediately prior to such transaction; and
(c) Tenant may assign this lease to a corporation which purchases or
otherwise acquires all or substantially all of the assets of Tenant, so long as
such acquiring corporation has a net worth at the time of such assignment that
is equal to or greater than the net worth of Tenant immediately prior to such
transaction.
15.6 Assignment in Bankruptcy. If this Lease is assigned to any person or
entity pursuant to the provisions of the Bankruptcy Code, 11 U.S.C. 101 et seq.,
or such similar laws or amendments thereto which may be enacted from time to
time (the "Bankruptcy Code"), any and all monies or other considerations payable
---------------
or otherwise to be delivered in connection with such assignment shall be paid or
delivered to Landlord, shall be and remain the exclusive property of Landlord
and shall not constitute property of Tenant or of the estate of Tenant within
the meaning of the Bankruptcy Code. Any and all monies or other considerations
constituting Landlord's property under the preceding sentence not paid or
delivered to Landlord shall be held in trust for the benefit of Landlord and be
promptly paid or delivered to Landlord. If Tenant proposes to assign this Lease
pursuant to the provisions of the Bankruptcy Code to any person or entity who
shall have made a bona fide offer to accept an assignment of this Lease on terms
acceptable to the Tenant, then notice of such proposed assignment setting forth
(i) the name and address of such person; (ii) all of the terms and conditions of
such offer; and (iii) the adequate assurance to be provided by Tenant to assure
such person's future performance under this Lease, including, without
limitation, the assurances referred to in the Bankruptcy Code, or any such
successor or substitute legislation or rule thereto, shall be given to Landlord
by Tenant no later than twenty (20) days after receipt by Tenant, but in any
event no later than ten (10) days prior to the date that Tenant shall make
application to a court of competent jurisdiction for authority and approval to
enter into such assignment and assumption. Landlord shall thereupon have the
prior right and option, to be exercised by notice to Tenant given at any time
prior to the effective date of such proposed assignment, to accept an assignment
of this Lease upon the same terms and conditions and for the same consideration,
if any, as the bona fide offer made by such person, less any brokerage
commissions which may be payable out of the consideration to be paid by such
person for the assignment of this Lease. Any person or entity to which this
Lease is assigned pursuant to the provisions of the Bankruptcy Code shall be
deemed without further act or deed to have assumed all of the obligations
arising under this Lease on and after the date of such assignment. Any such
assignee shall upon demand execute and deliver to Landlord an instrument
confirming such assumption.
15.7 Transfer by landlord. Landlord and its successors in interest shall
have the right to transfer their interest in this Lease, the Premises and the
Ground Lease at any time and to any person or entity, provided that any such
transferee shall assume all obligations of Landlord in writing. In the event of
any such transfer, the landlord o originally named herein (and, in the case of
any subsequent transfer, the transferror) from the date of such transfer, shall
be automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord hereunder
which may accrue after the date of such transfer. After the date of any such
transfer, the term "Landlord" as used herein shall mean the transferee of such
interest in the Premises.
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16. DEFAULT AND REMEDIES.
16.1 Events of Tenant's Default. Tenant shall be in default of its
obligations under this Lease if any of the following events occurs (an "Event of
Tenant's Default"):
(a) Tenant shall have failed to pay Base Rent or Additional Rent
when due, and such failure is not cured within three (3) days after delivery of
written notice from Landlord specifying such failure to pay, or
(b) Tenant shall have failed to perform any term, covenant, or
condition of this Lease except those requiring the payment of Base Rent or
Additional Rent, and Tenant shall have failed to cure such breach within thirty
(30) days after written notice from Landlord specifying the nature of such
breach where such breach could reasonably be cured within said thirty (30) day
period, or if such breach could not be reasonably cured within said thirty (30)
day period, Tenant shall have failed to commence such cure within said thirty
(30) day period and thereafter continue with due diligence to prosecute such
cure to completion within such time period as is reasonably needed but not to
exceed one hundred twenty (120) days from the date of Landlord's notice; or
(c) Tenant shall have sublet the Premises or assigned its interest
in the Lease in violation of the provisions contained in Section 15; or
(d) Tenant shall have abandoned the Premises or left the Premises
substantially vacant; or
(e) The occurrence of the following: (i) the making by Tenant of
any general arrangements or assignments for the benefit of creditors; (ii)
Tenant becomes a "debtor" as defined in 11 USC (S)101 or any successor statute
thereto (unless in the case of a petition filed against Tenant, the same is
dismissed within 60 days); (iii) 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 (iv) 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; provided, however, in the event that any provision of
this Section 16.1 (e) is contrary to any applicable Law, such provision shall be
of no force or effect; or
(f) Tenant shall have failed to deliver documents required of Tenant
pursuant to Section 19.1, 19.3 or Section 19.4 within the time periods specified
therein.
The grace periods provided for in this Section 16.1 are intended to satisfy any
and all notice requirements imposed on Landlord by law and are not in addition
to any such requirements.
16.2 Landlord's Remedies. If an Event of Tenant's Default occurs, Landlord
shall have the following remedies, in addition to all other rights and remedies
provided by any Law or otherwise provided in this Lease, to which landlord may
resort cumulatively or in the alternative:
(a) Landlord may keep this, Lease in effect and enforce by an action
at law or in equity all of its rights and remedies under this Lease, including
(i) the right to recover the Rent and other sums as they become due by
appropriate legal action; (ii) the right to make payments required of Tenant or
perform Tenant's obligations and be reimbursed by Tenant for the cost thereof
with interest at the Interest Rate from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant; and (iii) the remedies of injunctive
relief and specific performance to compel Tenant to perform its obligations
under this Lease. Notwithstanding anything contained in this Lease, in the event
of a breach of an obligation by Tenant which results in a condition which poses
an imminent danger to safety of persons or damage to property, an unsightly
condition visible from the exterior of the Building, or a threat to insurance
coverage, then if Tenant does not cure such breach within three (3) days after
delivery to it of written notice from Landlord identifying the breach, Landlord
may cure the breach of Tenant and be reimbursed
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by Tenant for the cost thereof with interest at the Interest Rate from the date
the sum is paid by Landlord until Landlord is reimbursed by Tenant.
(b) Landlord may enter the Premises and re-lease them to third
parties for Tenant's account for any period, whether shorter or longer than the
remaining Term. Tenant shall be liable immediately to Landlord for all costs
Landlord incurs in releasing the Premises, including brokers' commissions, and
expenses of altering and preparing the Premises required by the releasing.
Tenant shall pay to Landlord the Rent and other sums due under this Lease on the
date the rent is due, less the Rent and other sums Landlord received from any
releasing. No act by Landlord allowed by this subparagraph shall terminate this
Lease unless Landlord notifies Tenant in writing that Landlord elects to
terminate this Lease. Notwithstanding any releasing without termination,
Landlord may later elect to terminate this Lease because of the default by
Tenant.
(c) Landlord may terminate this Lease by giving Tenant written
notice of termination, in which event this Lease shall terminate on the date set
forth for termination in such notice. Any termination under this Section 16.2(c)
shall not relieve Tenant from its obligation to pay sums then due Landlord or
from any claim against Tenant for damages or Rent previously accrued or then
accruing. In no event shall any one or more of the following actions by
landlord, in the absence of a written election by Landlord to terminate this
Lease, constitute a termination of this Lease: (i) appointment of a receiver or
keeper in order to protect Landlord's interest hereunder; (ii) consent to any
subletting of the Premises or assignment of this Lease by Tenant, whether
pursuant to the provisions hereof or otherwise; or (iii) any other action by
Landlord or landlord's Parties intended to mitigate the adverse effects of any
breach of this Lease by Tenant, including without limitation any action taken to
maintain and preserve the Premises or any action taken to relet the Premises or
any portions thereof to the extent such actions do not affect a termination of
Tenant's right to possession of the Premises.
(d) In the event Tenant breaches this Lease and abandons the
Premises, this Lease shall not terminate unless Landlord gives Tenant written
notice of its election to so terminate this Lease. No act by or on behalf of
Landlord intended to mitigate the adverse effect of such breach, including those
described by Section 16.2(c), shall constitute a termination of Tenant's right
to possession unless Landlord gives Tenant written notice of termination. Should
Landlord not terminate this Lease by giving Tenant written notice, Landlord may
enforce all its rights and remedies under this Lease, including the right to
recover the Rent as it becomes due under the Lease as provided in California
Civil Code Section 1951.4.
(e) In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to damages in an amount as set forth in
California Civil Code Section 1951.2 as in effect on the Effective Date. For
purposes of computing damages pursuant to California Civil Code Section 1951.2,
an interest rate equal to the Interest Rate shall be used where permitted. Such
damages shall include:
(1) 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,
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%); and
(2) Any other amount necessary to compensate Landlord for all
detriment proximately 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, including the following: (i) expenses for cleaning, repairing
or restoring the Premises; (ii) expenses for altering, remodeling or otherwise
improving the Premises for the purpose of reletting, including installation of
leasehold improvements (whether such installation be funded by a reduction of
rent, direct payment or allowance to a new tenant, or otherwise); (iii) broker's
fees, advertising costs and other expenses of reletting the Premises; (iv) costs
of carrying the Premises, such as taxes, insurance premiums, utilities and
security precautions; (v) expenses in retaking possession of the Premises; and
(vi) attorneys' fees and court costs incurred by
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Landlord in retaking possession of the Premises and in releasing the Premises or
otherwise incurred as a result of Tenant's default.
(f) Nothing in this Section 16.2 shall limit Landlord's right to
indemnification from Tenant as provided in Sections 6.6.6, 9.5, 12.3, 18.1 and
20.23. Any notice given by Landlord in order to satisfy the requirements of this
Section 16.2 shall also satisfy the notice requirements of California Code of
Civil Procedure Section 1161 regarding unlawful detainer proceedings.
16.3 Limitation on Exercise of Rights. At any time that an Event of
Tenant's Default has occurred and remains uncured, (i) Landlord may deny or
withhold any consent or approval requested of it by Tenant which Landlord would
otherwise be obligated to give; and (ii) Tenant may not exercise any option to
extend, right to terminate this Lease, or other right granted to it by this
Lease which would otherwise be available to it.
16.4 Waiver by Tenant of Certain Remedies. Tenant waives the provisions of
Section 1932(1), 1941 and 1942 of the California Civil Code and any similar or
successor law regarding Tenant's right to terminate this Lease or to make
repairs and deduct the expenses of such repairs from the rent due under this
Lease. Tenant hereby waives any right of redemption or relief from forfeiture
under the laws of the State of California, or under any other present or future
law, including the provisions of Sections 1174 and 1179 of the California Code
of Civil Procedure.
16.5 Remedies Cumulative. All rights, privileges and remedies of the
parties are cumulative and not alternative or exclusive to the extent permitted
by law except as otherwise provided herein.
17. TENANT'S REMEDIES.
17.1 Landlord's Default. Landlord shall not be in default under this Lease
unless Landlord fails to perform obligations required of Landlord within a
reasonable period of time, but not more than sixty (60) days after written
notice by registered mail is delivered by Tenant to Landlord, Master Lessor,
Ground Lessor and to the holder of any mortgages or deeds of trust
(collectively, "Lender") covering the Premises whose name and address shall have
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theretofore been furnished to Tenant in writing, specifying the obligation which
Landlord has failed to perform; provided, however, that if the nature of
Landlord's obligation is such that more than sixty (60) days are required for
performance, then Landlord shall not be in default if Landlord or Lender
commences performance within such sixty (60) day period and thereafter
diligently prosecutes the same to completion. All obligations of Landlord
hereunder will be construed as covenants, not conditions. Tenant will accept
performance by any one or more of the parties to whom notice is required to be
given, and with the same force and effect as though performed by landlord
hereunder.
17.2 Tenant's Remedies. Except as provided below, in the event of any
default by Landlord, Tenant's exclusive remedies shall be an action for specific
performance or action for damages. Tenant hereby waives the benefit of any laws
granting it the right to perform Landlord's obligation, a lien upon the property
of Landlord and/or upon Rent due Landlord, or the right to terminate this Lease
or withhold Rent on account of any Landlord default. If Landlord fails to
perform any of its obligations under this Lease and fails to cure such default
within thirty (30) days after written notice from Tenant specifying the nature
of such default or, where such default could not reasonably be cured within said
thirty (30) day period, fails to cure such cure within said thirty (30) day
period and thereafter continuously with due diligence prosecute such cure to
completion, then, in addition to all other remedies which Tenant may have at law
or in equity, Tenant may cure Landlord's default and recover from Landlord all
costs incurred in connection with such cure, together with interest thereon at
the Interest Rate from the date so incurred until repaid.
18. SURRENDER AND HOLDING OVER.
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18.1 Surrender of the Premises. Upon the expiration or sooner termination
of this Lease, Tenant shall vacate and surrender the Premises to Landlord in the
same condition as existed at the Commencement Date, except for (i) reasonable
wear and tear, (ii) damage caused by any peril or condemnation, and (iii)
Hazardous Materials which are not the express obligation of Tenant hereunder. In
this regard, normal wear and tear shall be construed to mean wear and tear
caused to the Premises by the natural aging process which occurs in spite of
prudent application of the best standards for maintenance, repair and janitorial
practices, and does not include items of neglected or deferred maintenance. In
any event, Tenant shall cause the following to be done prior to the expiration
or the sooner termination of this Lease: (a) all interior walls shall be painted
or cleaned so that they appear freshly painted; (b) all tiled floors shall be
cleaned and waxed; (c) all carpets shall be cleaned and shampooed; (d) all
broken, marred, stained or nonconforming acoustical ceiling tiles shall be
replaced; (e) all windows shall be washed; (f) the HVAC system shall be serviced
by a reputable and licensed service firm and left in good operating condition
and repair as so certified by such firm; and (g) the plumbing and electrical
systems and lighting shall be placed in good order and repair (including
replacement of any burned out, discolored or broken light bulbs, ballasts, or
lenses). If Landlord so requests, Tenant shall, prior to the expiration or
sooner termination of this Lease, (1) remove any Tenant's Alterations which
Tenant is required to remove pursuant to Section 9 and repair all damage caused
by such removal; and (2) return the Premises or any part thereof to its original
configuration exiting as of the time the Premises were delivered to Tenant. If
the Premises are not so surrendered at the termination of this Lease, Tenant
shall be liable to Landlord for all costs incurred by Landlord in returning the
Premises to the required condition, plus interest on all costs incurred at the
Interest Rate. Tenant shall indemnify, defend by counsel satisfactory to
Landlord, protect and hold Landlord harmless against loss or liability resulting
from delay by Tenant in so surrendering the Premises, including, without
limitation, any claims made by any succeeding tenant or losses to Landlord due
to lost opportunities to lease to succeeding tenants.
18.2 Holding Over. This Lease shall terminate without further notice at
the expiration of the Term. Any holding over by Tenant after expiration of the
Term shall not constitute a renewal or extension of the Lease or give Tenant any
rights in or to the Premises except as expressly provided in this Lease. Any
holding over after such expiration with the written consent of Landlord shall be
construed to be a tenancy from month to month on the same terms and conditions
herein specified insofar as applicable except that Base Rent shall be increased
to an amount equal to 150% of the Base Rent payable during the last full
calendar month of the Term.
18.3 Entry at End of Term. If during the last month of the Term hereof
Tenant shall have removed substantially all of Tenant's property and personnel
from the Premises, Landlord may enter the Premises and repair, alter and
redecorate the same, without abatement of Rent and without liability to Tenant,
and such acts shall have no effect on this Lease. Tenant shall give written
notice to Landlord at least thirty (30) days prior to vacating the Premises and
shall arrange to meet with Landlord for a joint inspection of the Premises prior
to vacating. In the event of Tenant's failure to give such notice or arrange
such joint inspection, Landlord's inspection at or after Tenant's vacation of
the Premises shall be conclusively deemed correct for purposes of determining
Tenant's responsibility for repairs and restoration.
19. MORTGAGES.
19.1 Subordination. The following provisions shall govern the relationship
of this Lease to any underlying lease, mortgage or deed of trust, including but
not limited to the Master Lease and Ground Lease which now or hereafter affects
the Premises, and any renewal, modification, consolidation, replacement or
extension thereof (collectively, a "Security Instrument").
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(a) The Lease is subject and subordinate to all Security Instruments
existing as of the Effective Date. However, if any Lender so requires, this
Lease shall become prior and superior to any such Security Instrument.
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(b) At Landlord's election, this Lease shall become subject and
subordinate to any Security Instrument created after the Effective Date.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed so long as Tenant is not in default and performs
all of its obligations under this Lease, unless this Lease is otherwise
terminated pursuant to its terms.
(c) Tenant shall upon request execute any document or instrument
reasonably required by any Lender to make this Lease either prior or subordinate
to a Security Instrument, which may include but are not limited to such other
matters as the Lender customarily and reasonably requires in connection with
such agreements, including but not limited to provisions that the Lender not be
liable for (i) the return of any security deposit not received by the Lender,
and (ii) any defaults on the part of Landlord occurring prior to the time the
Lender takes possession of the Premises as a result of the enforcement of its
Security Instrument. Tenant's failure to execute any such document or instrument
within ten (10) days after written demand therefor shall constitute an Event of
Tenant's Default.
19.2 Modifications of Lease. Tenant shall execute, acknowledge and deliver
to Landlord, within thirty (30) days after request by Landlord, an instrument
amending this Lease in such respects as may be required by Master Lessor, Ground
Lessor or any Lender or prospective Lender, provided that such amendment does
not materially alter or impair Tenant's rights or remedies under this Lease, or
in any other manner impose additional Rent obligations on Tenant.
19.3 Mortgagee Protection and Attornment. In the event of any default on
the part of the Landlord, Tenant will give notice by registered mail to Master
Lessor or Ground Lessor or any Lender whose name has been provided to Tenant and
shall offer Master Lessor or Ground Lessor or such Lender a reasonable
opportunity (taking into account such time as shall be reasonably required to
institute and complete any foreclosure proceedings) to cure the default,
including time to obtain possession of the Premises by power of sale or judicial
foreclosure or other appropriate legal proceedings, if such should prove
necessary to effect a cure. Tenant will accept performance of any provision of
this Lease by such Lender as performance by, and with the same force and effect
as though performed by, Landlord hereunder. Tenant shall attorn to any purchaser
of the Premises at any foreclosure sale or private sale conducted pursuant to
any Security Instrument encumbering the Premises, or to any grantee or
transferee designated in any deed given in lieu of foreclosure.
19.4 Estoppel Certificates and Financial Statements. At all times during
the Term, each party agrees, following any request by the other party, promptly
to execute and deliver to the requesting party within fifteen (15) days
following delivery of such request an estoppel certificate: (i) certifying that
this Lease is unmodified and in full force and effect or, if modified, stating
the nature of such modification and certifying that this Lease, as so modified,
is in full force and effect; (ii) stating the date to which the Rent and other
charges are paid in advance, if any, (iii) acknowledging that there are not, to
the certifying party's knowledge, any uncured defaults on the part of any party
hereunder or, if there are uncured defaults, specifying the nature of such
defaults; and (iv) certifying such other information about the Lease as may be
reasonably required by the requesting party. A failure to deliver an estoppel
certificate within fifteen (15) days after delivery of a request therefor shall
be a conclusive admission that, as of the date of the request for such
statement: (a) this Lease is unmodified except as may be represented by the
requesting party in said request and is in full force and effect, (b) there are
no uncured defaults in the requesting party's performance, and (c) no rent has
been paid more than thirty (30) days in advance. At any time during the Term
Tenant shall, upon fifteen (15) days' prior written notice from Landlord,
provide Tenant's most recent financial statement and financial statements
covering the 24-month period prior to the date of such most recent financial
statement to any existing Lender or to any potential Lender or buyer of the
Premises. Such statements shall be prepared in accordance with generally
accepted accounting principles and, if such is the normal practice of Tenant,
shall be audited by an independent certified public accountant.
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20. GENERAL PROVISIONS.
20.1 Construction of Meaning. Words of any gender used in this Lease shall
be held and construed to include any other gender, and words in the singular
number shall be held to include the plural, unless the context otherwise
requires. The language in all parts of this Lease shall in all cases be
construed as a whole according to its fair meaning, and not strictly for or
against either Landlord or Tenant.
20.2 Interest on Past-Due Obligations. Except as expressly herein
provided, any amount due to Landlord not paid when due shall bear interest at a
rate (the "Interest Rate") equal to the lesser of (i) five percent (5%) in
excess of the discount rate established by the Federal Reserve Bank of San
Francisco as it may be adjusted from time to time; or (ii) the maximum interest
rate permitted by Law. Payment of such interest shall not excuse or cure any
default by Tenant under this Lease, provided, however, that interest shall not
be payable on late charges incurred by Tenant.
20.3 Time of Essence. Time is of the essence with respect to all of the
terms and conditions of this Lease.
20.4 Binding Effect. The terms, provisions and covenants and conditions
contained in this Lease shall apply to, inure to the benefit of, and be binding
upon, the parties hereto and upon their respective heirs, legal representatives,
successors and permitted assigns, except as otherwise herein expressly provided.
20.5 Choice of Law. This Lease shall be governed by the laws of the State
of California.
20.6 Captions. The captions inserted in this Lease are for convenience
only and in no way define, limit or otherwise describe the scope or intent of
this Lease, or any provision hereof, or in any way affect the interpretation of
this Lease.
20.7 Amendments. This Lease may not be altered, changed or amended except
by an instrument in writing signed and dated by both parties hereto.
20.8 Waivers. The waiver by Landlord of any term, covenant, agreement or
condition herein contained shall not be deemed to be a waiver of any subsequent
breach of the same or any other term, covenant, agreement or condition herein
contained, nor shall any custom or practice which may grow up between the
parties in the administration of this Lease be construed to waive or lessen the
right of Landlord to insist upon the performance by Tenant in strict accordance
with all of the provisions of this Lease. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any provisions, covenant, agreement 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 proceeding breach at the time of
acceptance of such Rent.
20.9 Fees and Expenses. All sums reasonably incurred by Landlord in
connection with any Event of Tenant Default or holding over of possession by
Tenant after the expiration or earlier termination of this Lease, including
without limitation all costs, expenses and actual accountants, appraisers,
attorneys and other professional fees, and any collection agency or other
collection charges, shall be due and payable by Tenant to Landlord on demand,
and shall bear interest thereon at the Interest Rate. If either Landlord or
Tenant commences or engages in, or threatens to commence or engage in an action
by or against the other party arising out of or in connection with this Lease or
the Premises, including but not limited to any action for recovery of Rent due
and unpaid, to recover possession or for damages for breach of this Lease, the
prevailing party shall be entitled to have and recover from the losing party
reasonable attorneys' fees and other costs incurred in connection with the
action, preparation for such action, any appeals relating thereto and enforcing
any judgments rendered in connection therewith. If Landlord becomes involved in
any action, threatened or actual, by or against anyone not a party to this
Lease, but arising by reason of or related to any act or omission of Tenant or
Tenant's Parties, Tenant agrees to pay landlord's reasonable
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attorneys' fees and other costs incurred in connection with the action,
preparation for such action, any appeals relating thereto and enforcing any
judgments rendered in connection therewith.
20.10 Merger. The voluntary or other surrender of this Lease by Tenant or
a mutual cancellation hereof shall not constitute a merger. Such event shall at
the option of Landlord, either terminate all or any existing subtenancies or
operate as an assignment to Landlord of any or all of such subtenancies.
20.11 Severability. If any clause or provision, of this Lease is illegal,
invalid or unenforceable under present or future laws effective during the Term
of this Lease, then and in that event, it is the intention of the parties hereto
that the remainder of this Lease shall not be affected thereby, and it is also
the intention of the parties to this Lease that in lieu of each clause or
provision of this Lease that is illegal, invalid or unenforceable, there be
added as a part of this Lease a clause or provision as similar in terms to such
illegal, invalid or unenforceable clause or provision as may be possible and be
legal, valid and enforceable.
20.12 Security Measures. Tenant hereby acknowledges that the Rent payable
to Landlord hereunder does not include the cost of guard service or other
security measures, and that Landlord shall have no obligation whatsoever to
provide same. Tenant assumes all responsibility for the protection of Tenant,
Tenants' Parties and their property from acts of third parties.
20.13 Easements. Landlord reserves to itself the right, from time to time,
to grant such easements, rights and dedications that Landlord deems necessary or
desirable, and to cause the recordation of parcel maps, easement agreements and
covenants, conditions and restrictions, so long as such easements, rights,
dedications, maps and covenants, conditions and restrictions do not unreasonably
interfere with the Permitted Uses of the Premises by Tenant. Tenant shall sign
any of the aforementioned documents upon request of Landlord and failure to do
so shall constitute a material breach of this Lease.
20.14 Performance Under Protest. If at any time a dispute shall arise as
to any amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment under protest and such payment
shall not be regarded as a voluntary payment, and there shall survive the right
on the part of said party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said party
to pay such sum or any part thereof, said party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay under the
provisions of this Lease.
20.15 Conflict. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
20.16 No Third Party Beneficiaries. This Lease is not intended by either
party to confer any benefit on any third party, including without limitations
any broker, finder, or brokerage firm.
20.17 Effective Date/Nonbinding Offer. Submission of this Lease for
examination or signature by Tenant does not constitute an offer or option for
lease, and it is not effective as a lease or otherwise until executed and
delivered by both landlord and Tenant.
20.18 Water, Oil and Mineral Rights. Landlord reserves all right, title or
interest in water, oil, gas or other hydrocarbons, other mineral rights and air
and development rights, together with the sole and exclude right of Landlord to
sell, lease, assign or otherwise transfer the same, but without any right of
Landlord or any such transferee to enter upon the Premises during the Term
except as otherwise provided herein.
20.19 Confidentiality. This Lease document, the terms of this Lease, and
the covenants, obligations, and conditions contained in this Lease shall remain
strictly confidential. Tenant agrees to keep such terms, covenants,
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obligations and conditions strictly confidential and not to disclose such
matters to any other landlord, tenant, prospective tenant, or broker; provided,
however, Tenant may provide a copy of this Lease to a non-party solely in
conjunction with Tenant's reasonable and good faith effort to secure an assignee
or sublessee for the Premises.
20.20 Notices. Any notice required or desired to be given regarding this
Lease shall be in writing and may be given by personal delivery, by facsimile
telecopy, by courier service, or by mail. A notice shall be deemed to have been
given (i) on the third business day after mailing if such notice was deposited
in the United States mail, certified or registered, postage prepaid, addressed
to the party to be served at its Address for Notices specified in Items 3 and 5
of the Basic Provisions (as applicable); (ii) when delivered if given by
personal delivery; and (iii) in all other cases when actually received at the
party's Address for Notices. Either party may change its address by giving
notice of the same in accordance with this Section 20.20.
20.21 Corporate Authority. If Tenant is a corporation (or partnership),
each individual executing this Lease on behalf of Tenant represents and warrants
that he is duly authorized to execute and deliver this Lease on behalf of such
corporation in accordance with the by-laws of such corporation (or partnership
in accordance with the partnership agreement of such partnership) and that this
Lease is binding upon such corporation (or partnership) in accordance with its
terms. Each of the persons executing this Lease on behalf of a corporation does
hereby covenant and warrant that the party for whom it is executing this Lease
has full right and authority to enter into this Lease.
20.22 Successors and Assigns. This Lease shall, subject to the provisions
regarding Transfers, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant.
20.23 Brokerage Commissions. Each party hereto (i) represents and
warrants to the other that it has not had any dealings with any real estate
brokers, leasing agents or salesmen, or incurred any obligations for the payment
of real estate brokerage commissions or finder's fees which would be earned or
due and payable by reason of the execution of this Lease, other than to the
Broker described in Item 11 of the Basic Provisions; and (ii) agrees to
indemnify, defend, and hold harmless the other party from any claim for any such
commission or fees which result from the actions of the indemnifying party.
Landlord shall be responsible for the payment of any commission owed to the
Broker pursuant to a separate written commission agreement between landlord and
the Broker.
20.24 Entire Agreement. This Lease constitutes the entire agreement
between the parties, and there are no binding agreements or representations
between the parties except as expressed herein. Tenant acknowledges that neither
Landlord nor landlord's Agents has made any legally binding representation or
warranty as to any matter except those expressly set forth herein, including any
warranty as to (i) whether the Premises may be used for Tenant's intended use
under exiting Law; (ii) the suitability of the Premises for the conduct of
Tenant's business; or (iii) the condition of any improvements. There are no oral
agreements between Landlord and Tenant affecting this Lease, and this Lease
supersedes and cancels any and all previous negotiations, arrangements,
brochures, agreements and understandings, if any, between Landlord and Tenant or
displayed by Landlord to Tenant with respect to the subject matter of this
Lease.
20.25 Joint and Several Liability. If more than one person or entity is
named as tenant, the obligations imposed upon each shall be joint and several
and the act of or notice from, or notice or refund to, or the signature of, any
one or more of them shall be binding on all of them with respect to the tenancy
of this Lease, including, but not limited to, any renewal, extension,
termination or modification of this Lease.
20.26 Quiet Enjoyment. Upon the observance and performance of all the
covenants, terms and conditions on Tenant's part to be observed and performed,
and subject to the other provisions of this Lease, Tenant shall peaceably and
quietly hold and enjoy the Premises for the Term without hindrance or
interruption by Landlord or any other person claiming by or through Landlord.
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20.27 Survival. All covenants of Landlord or Tenant which reasonably would
be intended to survive the expiration or sooner termination of this Lease,
including without limitation any warranty or indemnity hereunder, shall so
survive and continue to be binding upon and inure to the benefit of the
respective parties and their successors and assigns.
20.28 Recording. Tenant shall not record this Lease without the prior
written consent of Landlord. Tenant, upon the request of Landlord, shall execute
and acknowledge a "short form" memorandum of this Lease for recording purposes.
20.29 Counterparts. This Lease may be executed in one or more
counterparts, each of which shall constitute an original and all of which shall
be one and the same agreement.
20.30 Agency, Partnership or Joint Venture. Nothing contained herein shall
be deemed or construed by the parties hereto, nor by any third party, as
creating the relationship of principal and agent or of partnership or of joint
venture by the parties hereto, it being understood and agreed that no provision
contained in this Lease or any acts of the parties hereto shall be deemed to
create any relationship other than the relationship of landlord and tenant.
20.31 Merger. The voluntary or other surrender of this Lease by Tenant or
a mutual cancellation thereof or a termination by Landlord shall not work a
merger and shall, at the option of Landlord, terminate all or any existing
subtenancies or may, at the option of Landlord, operate as an assignment to
Landlord of any or all of such subtenancies.
20.32 Required Consents. This Lease is conditioned upon written approval
hereto from Ground Lessor and Master Lessor within thirty (30) days after the
Effective Date. If Master Lessor and/or Ground Lessor refuses to consent to this
Lease, or if the thirty (30) day consent period expires, this Lease shall
terminate and neither party shall have any continuing obligation to the other
with respect to the Premises.
20.33 Conditions Subsequent. The obligations of the parties are
conditioned on the following:
20.33.1 The receipt within thirty (30) days of the Effective Date
of this Lease of the written consent of Ground Lessor and Master Lessor of the
transaction contemplated by this Lease. This condition is for the benefit of
Landlord and Tenant and, if this condition is not satisfied or waived by the
date noted, either Landlord or Tenant may terminate this Lease effective as of
the delivery of written notice to the other at any time before such consent is
received.
Landlord shall act in good faith to obtain, no later than thirty
(30) days after the Effective Date, (i) from Master Lessor, a Recognition and
Attornment Agreement substantially in the form of Exhibit H attached hereto,
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duly executed by Master Lessor, and (ii) from Ground Lessor, a Recognition and
Attornment Agreement substantially in the form of Exhibit I attached hereto,
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duly executed by Ground Lessor, provided that Landlord shall not be liable to
Tenant for landlord's failure to provide Tenant such agreement(s), and such
failure shall in no event provide Tenant the grounds on which to terminate this
Lease or otherwise modify Tenant's obligations hereunder.
If either party properly terminates this Lease pursuant to this Section
20.33, this Lease shall terminate immediately upon receipt of written notice to
that effect, and the parties shall have no further obligations hereunder, except
that Landlord shall return to Tenant any pre-paid rent or other sums paid to
Landlord and not properly applied pursuant to the terms of this Lease.
20.34 Landlord's Representations, Warranties and Covenants.
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20.34.1 Landlord hereby represents and warrants to Tenant and any
assignee or sub-sublessee of the Tenant that (i) the Master Lease is in full
force and effect and neither Landlord nor, to the best of Landlord's knowledge,
Master Lessor is in default under the Master Lease; (ii) Landlord knows of no
claims or defenses or circumstances which, with the passage of time, would lead
to claims or defenses by Master Lessor against Landlord as tenant under the
Master Lease; (iii) the document attached hereto as the Master Lease is a true,
correct and complete copy of such documents and that the Master Lease represents
the entire agreement between Landlord and Master Lessor with respect to the
Master Lease; (iv) Landlord has not assigned, encumbered or otherwise
transferred any interest of Tenant under the Master Lease, (iv) the scheduled
expiration date of the Master Lease is May 31, 2013; and (v) to the best of
Landlord's knowledge, without investigation, inquiry or research of any kind,
the Ground Lease is in full force and effect and neither Master Lessor nor
Ground Lessor has been given a notice of any default thereunder.
20.34.2 During the term of this Lease, Landlord: (i) shall perform all
obligations of the Tenant under the Master Lease, except to the extent such
obligations are required to be performed by Tenant pursuant hereto, (ii) shall
not terminate the Master Lease without the express written consent of Tenant,
and (iii) shall not amend, modify or alter any terms or conditions of the Master
Lease, without the consent of Tenant.
20.34.3 Landlord, upon written notice by Tenant, shall diligently
enforce all obligations of Landlord under the Master Lease. If, after receipt of
written request from Tenant, Landlord shall fail or refuse to take action for
the enforcement of Landlord's rights against Master Lessor ("Action"), Tenant
shall have the right to take such Action in its own name, and for that purpose
and only to such extent, all of the rights of Landlord as tenant under the
Master Lease are hereby conferred upon and assigned to Tenant, and Tenant shall
be subrogated to such rights to the extent that the same shall apply to the
portion of the Premises then occupied by Tenant. If any Action against Landlord
in Landlord's name shall be barred by reason of lack of privity, non-
assignability or otherwise, Tenant may take such Action in Landlord's name;
provided that Tenant has obtained the prior written consent of Landlord, which
consent shall not be unreasonably withheld; and provided, further, that Tenant
shall indemnify, protect, defend by counsel reasonably satisfactory to Landlord
and hold Landlord harmless from and against any and all claims, demands,
actions, suits, proceedings, liabilities, obligations, losses, damages,
judgments, costs and expenses (including, without limitation, reasonable
attorneys' fees) which landlord may incur or suffer by reason of such Action,
except to the extent incurred or suffered by reason of Landlord's negligent acts
or omissions. Landlord hereby agrees to perform its obligations as tenant under
the Master Lease if and to the extent those obligations are not assumed by
Tenant pursuant to the terms of this Lease.
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IN WITNESS WHEREOF, the parties have executed this Lease on the date set
forth below, effective as of the day and year first above written.
"Landlord"
PORTER DRIVE ASSOCIATES, LLC, A California limited liability
company
By: /s/ Charles R. Schrech
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Name: President/ Charles R. Schrech
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Title:_____________________________________________________
By: /s/ Steven R. Brown
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Name: STEVEN R. BROWN
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Title: SEC.
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"Tenant"
TEKNEKRON SOFTWARE SYSTEMS (DELAWARE), INC.
A Delaware corporation
By: /S/ D W Rice
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Name: David W. Rice
Title: Chief Financial Officer and Secretary
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Exhibit 24.2
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Vivek
Ranadive and Paul G. Hansen, and each of them, as attorneys-in-fact, each with
the power of substitution, for him in any and all capacities, to sign
Registration Statement No. 333-78195 of TIBCO Software Inc. and any amendment
to such Registration Statement (including post-effective amendments and
registration statements filed pursuant to Rule 462 and otherwise), and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting to said attorneys-in-
fact, 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 connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Doug M. Atkin Director July 12, 1999
____________________________________
Doug M. Atkin
/s/ John G. Taysom Director July 12, 1999
____________________________________
John G. Taysom
</TABLE>
