<PAGE>
As filed with the Securities and Exchange Commission on July 1, 1999
Registration No. 333-78195
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------
Amendment No. 3
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>
<S> <C> <C>
Delaware 7372 77-0449727
(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: [_]
----------------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 1, 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.
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 $9.00 and $11.00. The common stock has been approved for quotation
on the Nasdaq National Market under the symbol "TIBX".
See "Risk Factors" beginning on page 6 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 this
offering 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 to the underwriters upon their exercise of a 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 this offering;
(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 this offering; and (4) reflects a 1-for-2 reverse split of our
outstanding capital stock which will be effected prior to this offering.
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
management and employee productivity, create manufacturing efficiencies and
improve customer service. We believe that many traditional
3
<PAGE>
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.
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 information, processes and
applications in diverse industries outside the financial services market.
Following this offering, 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 56 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.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered....................... 7,300,000 shares
Common stock to be outstanding after the
offerings................................. 57,981,852 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 13 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 this offering 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.
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
this offering. The "As Adjusted" column under Balance Sheet Data gives effect
to the sale of shares of common stock we are offering 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
----------------- ---------------------
1997 1998 Actual As Adjusted
------- -------- -------- -----------
Balance Sheet Data: (unaudited)
<S> <C> <C> <C> <C>
Cash, cash equivalents and deposits
held by Reuters..................... $18,318 $ 15,970 $ 5,754 $69,494
Working capital...................... 15,168 18,301 13,695 77,435
Total assets......................... 31,046 36,289 33,878 97,618
Accumulated deficit.................. (4,663) (17,614) (26,573) (26,573)
Stockholders' equity................. 17,167 21,704 17,640 81,380
</TABLE>
5
<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 this offering, Reuters has no obligation
to assist us except as described in "Relationship with Reuters and Certain
Transactions--Intercompany Agreements--Intercompany Services" on page 57. 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.
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<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 this offering, 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
53 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
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<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 from using the TIB technology we license from Reuters to develop
products specifically for use by financial services 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.
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<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
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<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
10
<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 this Offering
After this offering 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 this offering, Reuters will own 65.5% of our common stock,
and the investors in this offering will own only 12.6% of our common stock.
Reuters has agreed that following this offering 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
this offering 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 company and stock issuances and acquisitions in excess
of specified thresholds.
11
<PAGE>
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 this offering, Reuters will own approximately
65.5 % 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 this offering 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.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by us from the sale of common stock in this
offering, 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 $63.7 million, or approximately $73.9 million if the underwriters
exercise their option to purchase additional shares in full, assuming an
initial public offering price of $10.00 per share. The principal purposes of
this offering 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 this offering 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 of this offering 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.
13
<PAGE>
CAPITALIZATION
The following table sets forth:
. our actual capitalization as of May 31, 1999, and
. 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 hereby, assuming an initial
public offering price of $10.00 per share, and the receipt of the
estimated net proceeds therefrom, after deducting underwriting discounts
and commissions and estimated offering expenses.
<TABLE>
<CAPTION>
May 31, 1999
---------------------
Pro Forma
Actual As Adjusted
-------- -----------
(in thousands,
except share data)
<S> <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--300,000,000
shares authorized, 57,982,000 shares issued and
outstanding............................................. 23 58
Additional paid-in capital............................... 53,277 117,009
Unearned compensation.................................... (9,114) (9,114)
Accumulated deficit...................................... (26,573) (26,573)
-------- --------
Total capitalization..................................... $ 17,640 $ 81,380
======== ========
</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 50 for a description of these plans, and "Description of
Capital Stock" beginning on page 62 and Note 8 of Notes to Financial
Statements beginning on page F-18 for a description of our capital stock.
14
<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 by us of the shares of common stock offered hereby at
an assumed initial public offering price of $10.00 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 $81.4 million or $1.40 per share. This
represents an immediate increase in pro forma net tangible book value to
existing stockholders of $1.05 per share and an immediate dilution to new
investors of $8.60 per share. Accordingly, after this offering 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 this
offering. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share of common stock.. $10.00
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................................... 1.05
----- ------
Pro forma net tangible book value per share of common stock after
the offering.................................................... 1.40
------
Dilution per share of common stock to new investors.............. $ 8.60
======
</TABLE>
Investors in this offering 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 assuming an initial public offering price
of $10.00 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 87.4% $ 43,485 37.3% $0.86
New investors........................ 7,300 12.6 73,000 62.7 10.00
------ ---- -------- ----
Total............................... 57,982 100% $116,485 100%
====== ==== ======== ====
</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 50 for a description of the plan under which these options were granted.
15
<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 3,480
------- -------- ------- ------- -------- ------- --------
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>
16
<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>
17
<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 53 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
18
<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 53 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.
19
<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 53 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.
20
<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
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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
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$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
royalties paid to Reuters based on a percentage of our revenue derived from
sales of products incorporating the TIB technology. These royalty payments
ceased in January 1997 when Reuters granted to us a royalty-free
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license to the TIB technology in return for a one-time payment. Excluding such
royalties 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.
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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>
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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 6 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 60 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
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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.
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. 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
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<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 7.5% of
our common stock after this offering. 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 portals for our
customers, such as the financial information portal 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 53 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 53 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 53 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
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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
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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.
42
<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
Yogen K. Dalal 49 Director
Edward R. Kozel 43 Director
Donald J. Listwin 40 Director
Larry W. Sonsini 58 Director
David G. Ure 51 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,
43
<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.
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.
David Ure has been a director of TIBCO Software since March 1997. Since 1968,
Mr. Ure has been employed by Reuters and is currently Executive Director at
Reuters. Mr. Ure currently serves on the boards of directors of Reuters and
Woolwich, a publicly-traded provider of diversified personal financial services
in the United Kingdom. Mr. Ure received his B.A. in history from Merton
College, Oxford 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 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.
Pursuant to a stockholders' agreement among us, Reuters and certain of our
other stockholders, Messrs. Ure 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
44
<PAGE>
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 7 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 this offering, 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 56 for a more detailed
description of these arrangements. There is currently one vacancy on our board
of directors. Reuters intends to nominate a director to fill the vacancy prior
to the consummation of this offering.
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 51 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. Following this offering, Reuters will have 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.
Compensation Committee Interlocks and Insider Participation
During fiscal 1998, our compensation committee consisted of Messrs. Listwin
and
45
<PAGE>
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 64 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.
46
<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.
47
<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 $10.00 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 $3,554,680 $5,797,951
Paul G. Hansen.......... 450,000(1) 10.3 2.60 7/27/08 6,160,026 10,501,841
Rajesh U. Mashruwala.... 62,500 1.4 1.00 4/01/08 955,559 1,558,589
Robert P. Stefanski..... 18,000(2) 0.4 1.00 4/01/08 275,201 448,874
Richard M. Tavan........ 36,000 0.8 1.00 4/01/08 550,402 897,747
</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 58.
48
<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 $10.00 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 $27,677,775 $8,098,056
Paul G. Hansen.......... 38,461 284,611 -- 411,538 -- 3,045,381
Rajesh U. Mashruwala.... -- -- 48,333 189,167 454,330 1,753,169
Robert P. Stefanski..... 40,000 376,000 5,000 123,000 47,000 1,293,000
Richard M. Tavan........ -- -- -- 36,000 -- 324,000
</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.
49
<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 this offering. 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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<PAGE>
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 this 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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<PAGE>
director is eligible to participate in the director plan. The director plan
will be adopted by our board of directors and stockholders prior to this
offering. 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, each of the three
representatives of Reuters will be granted an initial option to purchase 50,000
shares of common stock prior to this offering.
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 transferrable by
the director, except to the stockholder that nominated the director, if any.
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.
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 this offering, Reuters will own approximately 65.5% of our
outstanding shares of common stock, but has agreed to limit its voting rights.
See "--Stockholders Agreement" beginning on page 56 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 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 and maintenance for our products, it must pay us product
fees based on a percentage of its revenue from such sales, except with respect
to products embedded in Reuters or TFT products. 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 by 12.5%. 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 restrictions or exclusive
distribution terms are
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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 by 25%. 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 a significant percentage 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 this
offering, 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
this offering, 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 this offering, 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
58 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 this offering. 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 5,726,096 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 5,726,096 shares of our common stock were exercised, Reuters'
percentage ownership of our common stock immediately following this offering
would decrease from 65.5% to 55.6%.
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 this offering.
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 shares of our common stock offered hereby,
. 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 Offering Offering
---- ------------ ---------- ----------
<S> <C> <C> <C>
Reuters Group PLC and related
entities (1)
85 Fleet Street
London, EC4P 4AJ.................... 37,976,096 75.8% 65.5%
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, CA 95134.................. 4,365,000 8.6 7.5
Mayfield Fund (2)
2800 Sand Hill Road
Menlo Park, CA 94025................ 2,861,316 5.6 4.9
Vivek Ranadive (3)................... 4,058,125 7.5 6.6
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 * *
Yogen K. Dalal (9)................... 2,877,933 5.7 4.9
Edward Kozel (10).................... 4,398,333 8.7 7.5
Donald J. Listwin (11)............... 4,365,000 8.6 7.5
Larry W. Sonsini (12)................ 33,333 * *
David Ure............................ -- -- --
Phillip White (13)................... 135,832 * *
Philip Wood ......................... -- -- --
All directors and executive officers
as a group (13 persons) (14)........ 16,396,525 29.9 26.4
</TABLE>
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- --------
*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. 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 4,158,519 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.
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DESCRIPTION OF CAPITAL STOCK
Pursuant to our Certificate of Incorporation to be effective upon
consummation of this offering, 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 this offering 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 this offering will be fully paid and
nonassessable.
Preferred Stock
Upon consummation of this offering, 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%
62
<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 56.
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 this offering, 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
63
<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.
64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, 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 this offering, we will have 57,981,852 shares of common
stock outstanding, or 59,076,852 shares if the underwriters' exercise their
option to purchase additional shares in full. Of the shares outstanding after
the offering, the 7,300,000 shares of common stock sold in this 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 56 and 57 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 580,000 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. 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. Shares of common stock registered under such registration statement 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 50 for a
description of this plan and its vesting restrictions.
In connection with this offering, each of TIBCO Software, Cisco, Mayfield,
Reuters and its affiliates, and the executive officers, directors and certain
employees of our company and of TFT, 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 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.
The above 180-day restriction does not apply to the following:
. the sale to the underwriters of the shares of common stock under the
underwriting agreement;
65
<PAGE>
. 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 the 180-day restriction.
66
<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 this 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.
67
<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 June 17, 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) $(8,231)
======= ======== ======= =======
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) $ (0.39)
======= ======== ======= =======
</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
$1.4 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 for the offering named below have entered
into an underwriting agreement with respect to the shares being offered in this
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 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 and the
executive officers, directors and certain employees of both our company and of
TFT, 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. This agreement does not apply to
certain transfers of securities as described under "Shares Eligible for Future
Sale" beginning on page 65.
Prior to this offering, 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
U-1
<PAGE>
the above factors in relation to market valuation of companies in related
businesses.
The common stock is expected to be quoted on the Nasdaq National Market under
the symbol "TIBX".
In connection with the 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 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 this offering, including liabilities under the
Securities Act.
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 to 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............................................................. 6
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Financial Data.................................................. 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 30
Management............................................................... 43
Relationship with Reuters and Certain Transactions....................... 53
Principal Stockholders................................................... 60
Description of Capital Stock............................................. 62
Shares Eligible for Future Sale.......................................... 65
Legal Matters............................................................ 67
Experts.................................................................. 67
Additional Information................................................... 67
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 this 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>
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............................................. $ 25,672
NASD filing fee.................................................. 9,735
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............................................... 49,593
----------
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 this 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 to be filed with
the Secretary of State of Delaware.
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) 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-6).
24.1** Power of Attorney.
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
** Previously filed
+ Confidential treatment requested 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 1st 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 1, 1999
____________________________________ Officer and Chairman of the
Vivek Y. Ranadive Board (Principal Executive
Officer)
/s/ Paul G. Hansen Executive Vice President, July 1, 1999
____________________________________ Finance and Chief Financial
Paul G. Hansen Officer (Principal
Financial Officer)
* Corporate Controller and July 1, 1999
____________________________________ Chief Accounting Officer
Ginger M. Kelly (Principal Accounting
Officer)
* Director July 1, 1999
____________________________________
Yogen K. Dalal
* Director July 1, 1999
____________________________________
Edward R. Kozel
* Director July 1, 1999
____________________________________
Donald J. Listwin
* Director July 1, 1999
____________________________________
Larry W. Sonsini
* Director July 1, 1999
____________________________________
David G. Ure
* Director July 1, 1999
____________________________________
Philip 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 1, 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 to be filed with
the Secretary of the State of Delaware.
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-6).
24.1** Power of Attorney.
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment
** Previously filed
+ Confidential treatment requested
<PAGE>
EXHIBIT 1.1
TIBCO Software Inc.
Common Stock
------------
Underwriting Agreement
----------------------
[.], 1999
Goldman, Sachs & Co.
Deutsche Bank Securities Inc.
Bear Stearns & Co. Inc.
As representatives of the several Underwriters
named in Schedule I hereto
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
TIBCO Software Inc., a Delaware corporation (the "Company"), proposes,
subject to the terms and conditions stated herein, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") an aggregate of
7,300,000 shares (the "Firm Shares") and, at the election of the Underwriters,
up to 1,095,000 additional shares (the "Optional Shares") of Common Stock, par
value $0.001 per share (the "Stock"), of the Company (the Firm Shares and the
Optional Shares that the Underwriters elect to purchase pursuant to Section 2
hereof being collectively called the "Shares").
1. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-1 (File No. 333-78195) (the
"Initial Registration Statement") in respect of the Shares has been filed
with the Securities and Exchange Commission (the "Commission"); the Initial
Registration Statement and any post-effective amendment thereto, each in
the form heretofore delivered to you, and, excluding exhibits thereto, to
you for each of the other Underwriters, have been declared effective by the
Commission in such form; other than a registration statement, if any,
increasing the size of the offering (a "Rule 462(b) Registration
Statement"), filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended (the "Act"), which became or will hereafter become
effective upon filing, no other document with respect to the Initial
Registration Statement has heretofore been filed with the Commission; and
no stop order
<PAGE>
2
suspending the effectiveness of the Initial Registration Statement, any
post-effective amendment thereto or the Rule 462(b) Registration
Statement, if any, has been issued and no proceeding for that purpose has
been initiated or to the Company's knowledge, threatened by the
Commission (any preliminary prospectus included in the Initial
Registration Statement or filed with the Commission pursuant to Rule
424(a) of the rules and regulations of the Commission under the Act is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto and including the
information contained in the form of final prospectus filed with the
Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof and deemed by virtue of Rule 430A under the Act to be
part of the Initial Registration Statement at the time it was declared
effective, each as amended at the time such part of the Initial
Registration Statement became effective or such part of the Rule 462(b)
Registration Statement, if any, became or hereafter becomes effective,
are hereinafter collectively called the "Registration Statement"; such
final prospectus, in the form first filed pursuant to Rule 424(b) under
the Act, is hereinafter called the "Prospectus");
(b) No order preventing or suspending the use of any Preliminary
Prospectus has been issued by the Commission, and each Preliminary
Prospectus, at the time of filing thereof, conformed in all material
respects to the requirements of the Act and the rules and regulations of
the Commission thereunder, and did not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter through
Goldman, Sachs & Co. expressly for use therein;
(c) The Registration Statement conforms, and the Prospectus and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements of
the Act and the rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to the
Registration Statement and any amendment thereto, and as of the applicable
filing date as to the Prospectus and any amendment or supplement thereto,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and
warranty shall not apply to any statements or omissions made in reliance
upon and in conformity with information furnished in writing to the Company
by an Underwriter through Goldman, Sachs & Co. expressly for use therein;
<PAGE>
3
(d) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included in the
Prospectus any material loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by insurance, or
from any labor dispute or court or governmental action, order or decree,
other than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the capital
stock or any material change in the long-term debt of the Company or any of
its subsidiaries or any material adverse change, or any development
involving a prospective material adverse change, in or affecting the
general affairs, management, financial position, stockholders' equity or
results of operations of the Company and its subsidiaries considered as one
enterprise, other than as set forth or contemplated in the Prospectus;
(e) The Company and its subsidiaries have good and marketable
title in fee simple to all real property and good and marketable title to
all personal property owned by them, in each case free and clear of all
liens, encumbrances and defects except such as are described in the
Prospectus or such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be made of such
property by the Company and its subsidiaries; and any real property and
buildings held under lease by the Company and its subsidiaries are held
by them under valid, subsisting and enforceable leases with such
exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company and its
subsidiaries;
(f) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each other
jurisdiction in which it owns or leases properties or conducts any
business so as to require such qualification, or is subject to no
material liability or disability by reason of the failure to be so
qualified or in good standing in any such jurisdiction; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(g) The Company has an authorized capitalization as set forth in the
Prospectus, and all of the issued and outstanding shares of capital stock
of the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and conform to the description of the Stock
contained in the Prospectus; at or prior to the First Time of Delivery (as
defined below), all of the issued and outstanding shares of the Company's
Series A preferred stock, Series B preferred stock and Series C preferred
stock (collectively, the "Preferred Stock") shall be converted into shares
of Stock on a one-for-one basis; and all of
<PAGE>
4
the issued and outstanding shares of capital stock of each subsidiary of
the Company have been duly and validly authorized and issued, are fully
paid and non-assessable and (except for directors' qualifying shares) are
owned directly or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
(h) The Shares to be issued and sold by the Company to the
Underwriters hereunder have been duly and validly authorized and, when
issued and delivered against payment therefor as provided herein, will be
duly and validly issued and fully paid and non-assessable and will conform
to the description of the Stock contained in the Prospectus;
(i) The issue and sale of the Shares by the Company and the
compliance by the Company with all of the provisions of this Agreement
and the consummation of the transactions herein contemplated will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture, mortgage,
deed of trust, loan agreement or other agreement or instrument that is
material to the Company and its subsidiaries considered as one enterprise
to which the Company or any of its subsidiaries is a party or by which
the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject,
nor will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any statute or
any order, rule or regulation of any court or governmental agency or body
having jurisdiction over the Company or any of its subsidiaries or any of
their properties; and no consent, approval, authorization, order,
registration or qualification of or with any such court or governmental
agency or body is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares and such
consents, approvals, authorizations, registrations or qualifications as
may be required under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the Underwriters;
(j) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in default in
the performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which it
is a party or by which it or any of its properties may be bound;
(k) The statements set forth in the Prospectus under the caption
"Description of Capital Stock", insofar as they purport to constitute a
summary of the terms of the Stock, under the captions, "Certain
Transactions and Relationship with Reuters" and "Underwriting", insofar as
they purport to describe the provisions of the laws and documents referred
to therein, are accurate, complete and fair;
<PAGE>
5
(l) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the current or future consolidated
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries considered as one enterprise; and, to the
Company's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(m) The Company is not and, after giving effect to the offering and
sale of the Shares, will not be an "investment company", as such term is
defined in the Investment Company Act of 1940, as amended (the "Investment
Company Act");
(n) PricewaterhouseCoopers LLP, who have certified certain financial
statements of the Company and its subsidiaries, are independent public
accountants as required by the Act and the rules and regulations of the
Commission thereunder;
(o) The financial statements and schedules of the Company included
in the Registration Statement and the Prospectus were prepared in
accordance with generally accepted accounting principles consistently
applied throughout the periods involved and present fairly the financial
condition of the Company as of the dates indicated therein and the
results of operations of the Company for the periods indicated therein;
(p) The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences;
(q) The Company has reviewed its operations and that of its
subsidiaries and has made inquiries of third parties with which the Company
or any of its subsidiaries has a material relationship to evaluate the
extent to which the business or operations of the Company or any of its
subsidiaries will be affected by the Year 2000 Problem. As a result of
such review and inquiry, and except as described in the Prospectus, the
Company has no reason to believe, and does not believe, that the Year 2000
Problem will have a material adverse effect on the general affairs,
management, the current or future consolidated financial position, business
prospects, stockholders' equity or results of operations of the Company and
its subsidiaries considered as one enterprise or result in any material
loss or interference
<PAGE>
6
with the Company's business or operations. The "Year 2000 Problem" as
used herein means any significant risk that computer hardware or software
used in the receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind will not, in
the case of dates or time periods occurring after December 31, 1999,
function at least as effectively as in the case of dates or time periods
occurring prior to January 1, 2000;
(r) The Company owns, or possesses adequate rights to use, all
material trademarks, service marks, trade mark registrations, service mark
registrations, domain names, copyrights, licenses, inventions and know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), necessary
for the conduct of its business as described in the Prospectus, and, except
as set forth in the Prospectus, the Company has no reason to believe that
the conduct of its business will conflict with, and has not received any
notice of any claim of conflict with, any such rights of others, except as
would not have a material adverse effect on the business, financial
condition, results of operations or prospects of the Company; and, to the
Company's knowledge, neither the Company nor any of its subsidiaries have
infringed or are infringing any trademarks, service marks, trade mark
registrations, service mark registrations, domain names or copyrights,
which infringement could reasonably be expected to results in a material
adverse change in or affecting the general affairs, financial position,
stockholder's equity or results of operations of the Company and its
subsidiaries;
(s) The Company possesses adequate rights to use all material
patents necessary for the conduct of its business; to the Company's
knowledge, no valid United States patent is or would be infringed by the
activities of the Company, except as would not have a material adverse
effect on the business, financial condition, results of operations or
prospects of the Company; there are no actions, suits or proceedings
pending relating to patents or proprietary information to which the
Company or any of its subsidiaries is a party or of which any property of
the Company or any of its subsidiaries is subject and, to the Company's
knowledge, no such actions, suits or proceedings are threatened by
governmental authorities or others; the Company is not aware of any claim
by others that the Company is infringing or otherwise violating the
patents or other intellectual property of others and, except as set forth
in the Prospectus, is not aware of any rights of third parties to any of
the Company's licensed patents or licenses which could materially affect
the use thereof by the Company;
(t) No material labor dispute with the employees of the Company
exists, or, to the knowledge of the Company, is imminent;
(u) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are
prudent and customary in the
<PAGE>
7
business in which it is engaged; the Company has not been refused any
insurance coverage sought or applied for; and the Company has no reason
to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage
from similar insurers as may be necessary to continue its business at a
cost that would not have a material adverse effect on the Company;
(v) Each of (i) the First Amended and Restated License, Maintenance
and Distribution Agreement dated as of May 28, 1999 by and between Reuters
Limited ("Reuters"), TIBCO Finance Technology, Inc. ("TFT") and the Company
(the "License Agreement"); (ii) the Third Amended and Restated
Stockholders' Agreement dated as of ______, 1999 among Reuters Nederland
B.V., Reuters, Cisco Systems, Inc., Mayfield IX, Mayfield Associates Fund
III, Vivek Ranadive and the Company (the "Stockholders Agreement"), (iii)
the Assignment and Assumption of Lease Agreement between TFT and the
Company, and (iv) the Master Services Agreement among the Company, TFT and
Reuters, (the agreements referred to in clauses (i), (ii), (iii) and (iv),
taken together, the "Intercompany Agreements"), have been duly and validly
authorized, executed and delivered by the Company, are in full force and
effect, and constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms
and, to the knowledge of the Company, is a valid and binding obligation of
each other party thereto, enforceable against each party in accordance with
its terms; and
(w) Any certificate signed by any officer of the Company delivered
to the Underwriters or to counsel for the Underwriters shall be deemed a
representation and warranty by the Company to the Underwriters as to the
matters covered thereby.
2. Subject to the terms and conditions herein set forth, (a) the Company
agrees to issue and sell to each of the Underwriters, and each of the
Underwriters agrees, severally and not jointly, to purchase from the Company, at
a purchase price per share of $[.], the number of Firm Shares set forth opposite
the name of such Underwriter in Schedule I hereto and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Shares as provided below, the Company agrees to issue and sell to each
of the Underwriters, and each of the Underwriters agrees, severally and not
jointly, to purchase from the Company, at the purchase price per share set forth
in clause (a) of this Section 2, that portion of the number of Optional Shares
as to which such election shall have been exercised (to be adjusted by you so as
to eliminate fractional shares) determined by multiplying such number of
Optional Shares by a fraction, the numerator of which is the maximum number of
Optional Shares which such Underwriter is entitled to purchase as set forth
opposite the name of such Underwriter in Schedule I hereto and the denominator
of which is the maximum number of Optional Shares that all of the Underwriters
are entitled to purchase hereunder.
<PAGE>
8
The Company hereby grants to the Underwriters the right to purchase at
their election up to 1,095,000 Optional Shares, at the purchase price per share
set forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election to purchase
Optional Shares may be exercised only by written notice from you to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as determined by you but
in no event earlier than the First Time of Delivery (as defined in Section 4
hereof) or, unless you and the Company otherwise agree in writing, earlier than
two or later than ten business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm Shares, the
several Underwriters propose to offer the Firm Shares for sale upon the terms
and conditions set forth in the Prospectus.
4. (a) The Shares to be purchased by each Underwriter hereunder, in
definitive form, and in such authorized denominations and registered in such
names as Goldman, Sachs & Co. may request upon at least forty-eight hours' prior
notice to the Company shall be delivered by or on behalf of the Company to
Goldman, Sachs & Co., through the facilities of the Depository Trust Company
("DTC"), for the account of such Underwriter, against payment by or on behalf of
such Underwriter of the purchase price therefor by wire transfer of Federal
(same-day) funds to the account specified by the Company to Goldman, Sachs & Co.
at least forty-eight hours in advance. The Company will cause the certificates
representing the Shares to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery (as defined below) with respect
thereto at the office of DTC or its designated custodian (the "Designated
Office"). The time and date of such delivery and payment shall be, with respect
to the Firm Shares, 9:30 a.m., New York City time, on [.], 1999 or such other
time and date as Goldman, Sachs & Co. and the Company may agree upon in writing,
and, with respect to the Optional Shares, 9:30 a.m., New York time, on the date
specified by Goldman, Sachs & Co. in the written notice given by Goldman, Sachs
& Co. of the Underwriters' election to purchase such Optional Shares, or such
other time and date as Goldman, Sachs & Co. and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is herein called
the "First Time of Delivery", such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the "Second Time of
Delivery", and each such time and date for delivery is herein called a "Time of
Delivery".
(b) The documents to be delivered at each Time of Delivery by or on
behalf of the parties hereto pursuant to Section 7 hereof, including the cross
receipt for the Shares and any additional documents requested by the
Underwriters pursuant to Section 7(m) hereof, will be delivered at the offices
of Shearman & Sterling, 1550 El Camino Real, Menlo Park, California, 94025 (the
"Closing Location"), and the Shares will be delivered at the Designated Office,
all at such Time of Delivery. A meeting will be held at the Closing Location at
12 p.m., San Francisco time, on the New York Business Day next preceding such
Time of Delivery, at which meeting the final
<PAGE>
9
drafts of the documents to be delivered pursuant to the preceding sentence
will be available for review by the parties hereto. For the purposes of this
Section 4, "New York Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in New
York are generally authorized or obligated by law or executive order to close.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and to file
such Prospectus pursuant to Rule 424(b) under the Act not later than the
Commission's close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier or
later time as may be required by Rule 430A(a)(3) under the Act; to make no
further amendment or any supplement to the Registration Statement or Prospectus
which shall be disapproved by you promptly after reasonable notice thereof; to
advise you, promptly after it receives notice thereof, of the time when any
amendment to the Registration Statement has been filed or becomes effective or
any supplement to the Prospectus or any amended Prospectus has been filed and to
furnish you with copies thereof; to advise you, promptly after it receives
notice thereof, of the issuance by the Commission of any stop order or of any
order preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares for offering or
sale in any jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending or
supplementing of the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or prospectus or
suspending any such qualification, promptly to use its best efforts to obtain
the withdrawal of such order;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Shares for offering and sale under the
securities laws of such jurisdictions as you may request and to comply with such
laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) Prior to 3:00 P.M., New York City time, on the New York Business
Day next succeeding the date of this Agreement and from time to time, to furnish
the Underwriters with copies of the Prospectus in New York City in such
quantities as you may reasonably request, and, if the delivery of a prospectus
is required at any time prior to the expiration of nine months after the time of
issue of the Prospectus in connection with the offering or sale of the Shares
and if at such time any event shall have occurred as a result of which the
Prospectus as then amended or supplemented would include an untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made
<PAGE>
10
when such Prospectus is delivered, not misleading, or, if for any other reason
it shall be necessary during such period to amend or supplement the Prospectus
in order to comply with the Act, to notify you and upon your request to
prepare and furnish without charge to each Underwriter and to any dealer in
securities as many copies as you may from time to time reasonably request of
an amended prospectus or a supplement to the Prospectus which will correct
such statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection with sales of
any of the Shares at any time nine months or more after the time of issue of
the Prospectus, upon your request but at the expense of such Underwriter, to
prepare and deliver to such Underwriter as many copies as you may request of
an amended or supplemented prospectus complying with Section 10(a)(3) of the
Act;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the effective
date of the Registration Statement, an earnings statement (as defined in Rule
158(c) under the Act) of the Company and its subsidiaries (which need not be
audited) complying with Section 11(a) of the Act and the rules and regulations
thereunder (including, at the option of the Company, Rule 158);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 days after the date of the
Prospectus, not to offer, sell, contract to sell or otherwise dispose of,
except as provided hereunder any shares of Stock or other securities of the
Company that are substantially similar to the Shares, including but not
limited to any securities that are convertible into or exchangeable for, or
that represent the right to receive, Stock or any such substantially similar
securities (other than pursuant to employee stock option or purchase plans
(including option exercises) existing on, or upon the conversion or exchange
of convertible or exchangeable securities outstanding as of, the date of this
Agreement), without your prior written consent;
(f) During the period beginning from the date hereof and
continuing to and including the date 90 days after the date of the Prospectus,
not to file any registration statement (whether on Form S-8 or otherwise)
covering shares of Stock issued or issuable pursuant to any employee stock
option or purchase plans, without your prior written consent;
(g) To furnish to its stockholders as soon as practicable after the
end of each fiscal year an annual report (including a balance sheet and
statements of income, stockholders' equity and cash flows of the Company and its
consolidated subsidiaries certified by independent public accountants) and, as
soon as practicable after the end of each of the first three quarters of each
fiscal year (beginning with the fiscal quarter ending after the effective date
of the Registration Statement), to make available to its stockholders
consolidated summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail;
<PAGE>
11
(h) During a period of five years from the effective date of the
Registration Statement, to furnish to you copies of all reports or other
communications (financial or other) furnished to stockholders, and to deliver to
you (i) as soon as they are available, copies of any reports and financial
statements furnished to or filed with the Commission or any national securities
exchange on which any class of securities of the Company is listed; and (ii)
such additional information concerning the business and financial condition of
the Company as you may from time to time reasonably request (such financial
statements to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports furnished to its
stockholders generally or to the Commission);
(i) To use the net proceeds received by it from the sale of the
Shares pursuant to this Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds";
(j) To use its best efforts to list for quotation the Shares on the
Nasdaq National Market ("NASDAQ");
(k) To file with the Commission such information on Form 10-Q or
Form 10-K as may be required by Rule 463 under the Act; and
(l) If the Company elects to rely upon Rule 462(b), the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) by 10:00 P.M., Washington, D.C. time, on the date
of this Agreement, and the Company shall at the time of filing either pay to
the Commission the filing fee for the Rule 462(b) Registration Statement or
give irrevocable instructions for the payment of such fee pursuant to Rule
111(b) under the Act.
6. The Company covenants and agrees with the several Underwriters that
the Company will pay or cause to be paid the following: (i) the fees,
disbursements and expenses of the Company's counsel and accountants in
connection with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the Prospectus and
amendments and supplements thereto and the mailing and delivering of copies
thereof to the Underwriters and dealers; (ii) the cost, if any, of printing any
Agreement among Underwriters, this Agreement, the Blue Sky Memorandum, closing
documents (including any compilations thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Shares; (iii)
all expenses in connection with the qualification of the Shares for offering and
sale under state securities laws as provided in Section 5(b) hereof, including
the fees and disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky survey; (iv) all fees and
expenses in connection with listing the Shares on the NASDAQ; (v) the filing
fees incident to, and the fees and disbursements of counsel for the Underwriters
in connection with, securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the Shares; (vi) the cost
of preparing stock certificates; (vii) the cost and charges of any transfer
agent or registrar; and (viii) all other costs and expenses of or incurred on
behalf of the Company incident to the
<PAGE>
12
performance of its obligations hereunder which are not otherwise specifically
provided for in this Section. It is understood, however, that, except as
provided in this Section, and Sections 8 and 11 hereof, the Underwriters will
pay all of their own costs and expenses, including the fees of their counsel,
expenses incurred by them and as agreed with the Company in connection with
any road show, stock transfer taxes on resale of any of the Shares by them,
and any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the Shares to be
delivered at each Time of Delivery, shall be subject, in their discretion, to
the condition that all representations and warranties and other statements of
the Company herein are, at and as of such Time of Delivery, true and correct,
the condition that the Company shall have performed all of its obligations
hereunder theretofore to be performed, and the following additional conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for such
filing by the rules and regulations under the Act and in accordance with
Section 5(a) hereof; if the Company has elected to rely upon Rule 462(b), the
Rule 462(b) Registration Statement shall have become effective by 10:00 P.M.,
Washington, D.C. time, on the date of this Agreement; no stop order suspending
the effectiveness of the Registration Statement or any part thereof shall have
been issued and no proceeding for that purpose shall have been initiated or
threatened by the Commission; and all requests for additional information on
the part of the Commission shall have been complied with to your reasonable
satisfaction;
(b) Shearman & Sterling, counsel for the Underwriters, shall have
furnished to you such written opinion or opinions (a draft of each such opinion
is attached as Annex II(a) hereto), dated such Time of Delivery, with respect to
certain matters covered in paragraphs (i), (ii), (vi), (x) and (xiii) of
subsection (c) below as well as such other related matters as you may reasonably
request, and such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such matters;
(c) Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel for the Company, shall have furnished to you their written opinion (a
draft of such opinion is attached as Annex II(b) hereto), dated such Time of
Delivery, in form and substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Prospectus;
<PAGE>
13
(ii) The Company has an authorized capitalization as set
forth in the Prospectus, and all of the issued and outstanding shares of
capital stock of the Company (including the Shares being delivered at
such Time of Delivery and the shares of Stock issued upon conversion of
the shares of Preferred Stock) have been duly and validly authorized and
issued and are fully paid and non-assessable; and the Shares conform to
the description of the Stock contained in the Prospectus;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing under
the laws of each other jurisdiction in which it owns or leases properties
or conducts any business so as to require such qualification or in which
the failure to be so qualified or be in good standing would not subject it
to any material liability or disability (such counsel being entitled to
rely in respect of the opinion in this clause upon opinions of local
counsel, certificates of public officials and in respect of matters of fact
upon certificates of officers of the Company, provided that such counsel
shall state that they believe that both you and they are justified in
relying upon such opinions and certificates);
(iv) Each subsidiary of the Company named in Schedule II
hereto (each a "Principal Subsidiary") has been duly incorporated and is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation; and all of the issued shares of capital
stock of each such subsidiary have been duly and validly authorized and
issued, are fully paid and non-assessable, and (except for directors'
qualifying shares) are owned directly or indirectly by the Company, free
and clear of all liens, encumbrances, equities or claims (such counsel
being entitled to rely in respect of the opinion in this clause upon
opinions of local counsel, certificates of public officials and in
respect to matters of fact upon certificates of officers of the Company
or its subsidiaries, provided that such counsel shall state that they
believe that both you and they are justified in relying upon such
opinions and certificates);
(v) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or governmental
proceedings pending to which the Company or any of its subsidiaries is a
party or of which any property of the Company or any of its subsidiaries
is the subject which, if determined adversely to the Company or any of
its subsidiaries, would individually or in the aggregate have a material
adverse effect on the current or future consolidated financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries considered as one enterprise; and, to the best of such
counsel's knowledge, no such proceedings are threatened or contemplated
by governmental authorities or threatened by others;
(vi) This Agreement has been duly authorized, executed and
delivered by the Company;
<PAGE>
14
(vii) The issue and sale of the Shares being delivered at such
Time of Delivery by the Company and the compliance by the Company with all
of the provisions of this Agreement and the consummation of the
transactions herein contemplated will not conflict with or result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel that is material to the
Company and its subsidiaries considered as one enterprise to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries is bound or to which any of the property or assets
of the Company or any of its subsidiaries is subject, nor will such action
result in any violation of the provisions of the Certificate of
Incorporation or By-laws of the Company or any statute or any order, rule
or regulation known to such counsel of any court or governmental agency or
body having jurisdiction over the Company or any of its Principal
Subsidiaries or any of their properties;
(viii) No consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or any of their
properties is required for the issue and sale of the Shares or the
consummation by the Company of the transactions contemplated by this
Agreement, except the registration under the Act of the Shares, and such
consents, approvals, authorizations, registrations or qualifications as may
be required under state securities or Blue Sky laws in connection with the
purchase and distribution of the Shares by the Underwriters;
(ix) To such counsel's knowledge, the Company is not in
violation of its Certificate of Incorporation or By-laws;
(x) The statements set forth in the Prospectus under the
caption "Description of Capital Stock", insofar as they purport to
constitute a summary of the terms of the Stock, under the caption,
"Certain Transactions and Relationship with Reuters" and "Underwriting",
insofar as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(xi) (A) The License Agreement has been duly and validly
authorized, executed and delivered by the Company; and (B) the Stockholders
Agreement has been duly and validly authorized, executed and delivered by
the Company, is in full force and effect, and constitutes a valid and
binding obligation of the Company, enforceable against the Company in
accordance with its terms;
(xii) The Company is not an "investment company", as such term
is defined in the Investment Company Act; and
<PAGE>
15
(xiii) The Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein and other financial and statistical data derived
therefrom, as to which such counsel need express no opinion) comply as to
form in all material respects with the requirements of the Act and the
rules and regulations thereunder; although they do not assume any
responsibility for the accuracy, completeness or fairness of the statements
contained in the Registration Statement or the Prospectus, except for those
referred to in the opinion in subsection (x) of this section 7(c), they
have no reason to believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein and other financial data derived therefrom, as to which
such counsel need express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or that,
as of its date, the Prospectus or any further amendment or supplement
thereto made by the Company prior to such Time of Delivery (other than the
financial statements and related schedules therein and other financial data
derived therefrom, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading or that, as of
such Time of Delivery, either the Registration Statement or the Prospectus
or any further amendment or supplement thereto made by the Company prior to
such Time of Delivery (other than the financial statements and related
schedules therein and other financial data derived therefrom, as to which
such counsel need express no opinion) contains an untrue statement of a
material fact or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and they do not know of any amendment to the
Registration Statement required to be filed or of any contracts or other
documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration
Statement or the Prospectus which are not filed or described as required;
(d) Sullivan & Cromwell, special counsel for Reuters and TFT, shall
have furnished to you a written opinion (a draft of such opinion is attached as
Annex II(c) hereto), dated such Time of Delivery, in form and substance
satisfactory to you, to the effect that (A) the Stockholders Agreement
constitutes a valid and binding obligation of Reuters and each affiliate of
Reuters that is a party thereto (other than the Company), enforceable against
Reuters and each such affiliate in accordance with its terms; and (B) the
License Agreement has been duly and validly authorized, executed and delivered
by TFT;
(e) Slaughter & May, special counsel for Reuters, shall have
furnished to you a written opinion (a draft of such opinion is attached as
Annex II(d) hereto), dated such Time of
<PAGE>
16
Delivery, in form and substance satisfactory to you, to the effect that each
of the Stockholders Agreement and the License Agreement has been duly and
validly authorized, executed and delivered by Reuters;
(f) On the date of the Prospectus at a time prior to the execution
of this Agreement, at 9:30 a.m., New York City time, on the effective date of
any post-effective amendment to the Registration Statement filed subsequent to
the date of this Agreement and also at each Time of Delivery,
PricewaterhouseCoopers LLP shall have furnished to you a letter or letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto (the executed
copy of the letter delivered prior to the execution of this Agreement is
attached as Annex I(a) hereto and a draft of the form of letter to be
delivered on the effective date of any post-effective amendment to the
Registration Statement and as of each Time of Delivery is attached as Annex
I(b) hereto);
(g) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included in
the Prospectus any loss or interference with its business from fire, explosion,
flood or other calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, other than as set
forth or contemplated in the Prospectus, and (ii) since the respective dates as
of which information is given in the Prospectus there shall not have been any
change in the capital stock or long-term debt of the Company or any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and its
subsidiaries considered as on enterprise, other than as set forth or
contemplated in the Prospectus, the effect of which, in any such case described
in clause (i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such Time of Delivery
on the terms and in the manner contemplated in the Prospectus;
(h) On or after the date hereof there shall not have occurred any of
the following: (i) a suspension or material limitation in trading in securities
generally on the New York Stock Exchange or on NASDAQ; (ii) a suspension or
material limitation in trading in the Company's securities on NASDAQ; (iii) a
general moratorium on commercial banking activities declared by either Federal
or New York or California State authorities; or (iv) the outbreak or escalation
of hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event specified
in this clause (iv) in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the delivery
of the Shares being delivered at such Time of Delivery on the terms and in the
manner contemplated in the Prospectus;
(i) The Shares to be sold at such Time of Delivery shall have been
duly listed for quotation on NASDAQ;
<PAGE>
17
(j) The Company shall have obtained and delivered to the
Underwriters executed copies of an agreement from Reuters, each affiliate of
Reuters (other than the Company) that beneficially owns any shares of Stock as
of the date hereof, Cisco Systems, Inc. and the Mayfield Fund and from the
officers, directors and employees of the Company and TFT listed in Schedule
III hereto, substantially to the effect set forth in Subsection 5(e) hereof,
in form and substance satisfactory to you;
(k) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New York
Business Day next succeeding the date of this Agreement;
(l) Each of the Company, Reuters and TFT shall have duly executed
and delivered each of the Intercompany Agreements to which it is a party, such
agreements shall be in full force and effect in substantially the form
provided to the Underwriters and all actions required under such agreements to
be taken by the Company, Reuters and TFT on or before the First Time of
Delivery shall have been performed; and
(m) The Company shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and warranties
of the Company herein at and as of such Time of Delivery, as to the
performance by the Company of all of its obligations hereunder to be performed
at or prior to such Time of Delivery, as to the matters set forth in
subsections (a) and (g) of this Section and as to such other matters as you
may reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse each Underwriter for any legal or
other expenses reasonably incurred by such Underwriter in connection with
investigating or defending any such action or claim as such expenses are
incurred; provided, however, that the Company shall not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the Registration Statement
or the Prospectus or any such amendment or supplement in reliance upon and in
conformity with written information furnished to the Company by any Underwriter
through Goldman, Sachs & Co. expressly for use therein.
<PAGE>
18
(b) Each Underwriter will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company may
become subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration Statement or the
Prospectus, or any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, the Registration Statement or the Prospectus or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through Goldman, Sachs
& Co. expressly for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection with
investigating or defending any such action or claim as such expenses are
incurred.
(c) Promptly after receipt by an indemnified party under subsection
(a) or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
any indemnified party otherwise than under such subsection. In case any such
action shall be brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall not,
except with the consent of the indemnified party, be counsel to the indemnifying
party), and, after notice from the indemnifying party to such indemnified party
of its election so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party is an
actual or potential party to such action or claim) unless such settlement,
compromise or judgment (i) includes an unconditional release of the indemnified
party from all liability arising out of such action or claim and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
<PAGE>
19
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (or
actions in respect thereof) in such proportion as is appropriate to reflect the
relative benefits received by the Company on the one hand and the Underwriters
on the other from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law or if the indemnified party failed to give the notice required under
subsection (c) above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions in respect thereof), as well as any
other relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Underwriters on the other shall be deemed to be
in the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company bear to the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover page of the Prospectus. The relative fault
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company on the
one hand or the Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company and the Underwriters agree that it would not
be just and equitable if contributions pursuant to this subsection (d) were
determined by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at which
the Shares underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such Underwriter has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this subsection (d) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and
<PAGE>
20
conditions, to each officer and director of the Company (including any person
who, with his or her consent, is named in the Registration Statement as about
to become a director of the Company) and to each person, if any, who controls
the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Shares which it has agreed to purchase hereunder at a Time of Delivery, you
may in your discretion arrange for you or another party or other parties to
purchase such Shares on the terms contained herein. If within thirty-six hours
after such default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further period of thirty-
six hours within which to procure another party or other parties satisfactory to
you to purchase such Shares on such terms. In the event that, within the
respective prescribed periods, you notify the Company that you have so arranged
for the purchase of such Shares, or the Company notifies you that it has so
arranged for the purchase of such Shares, you or the Company shall have the
right to postpone such Time of Delivery for a period of not more than seven
days, in order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion may thereby be
made necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person had
originally been a party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased does not exceed one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number of
shares which such Underwriter agreed to purchase hereunder at such Time of
Delivery and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which such
Underwriter agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not been made; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
(c) If, after giving effect to any arrangements for the purchase of
the Shares of a defaulting Underwriter or Underwriters by you and the Company as
provided in subsection (a) above, the aggregate number of such Shares which
remains unpurchased exceeds one-eleventh of the aggregate number of all the
Shares to be purchased at such Time of Delivery, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Shares of a defaulting Underwriter or Underwriters,
then this Agreement (or, with respect to the Second Time of Delivery, the
obligations of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company
<PAGE>
21
and the Underwriters as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein shall relieve
a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties
and other statements of the Company and the several Underwriters, as set forth
in this Agreement or made by or on behalf of them, respectively, pursuant to
this Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Shares.
11. If this Agreement shall be terminated pursuant to Section 9 hereof,
the Company shall not then be under any liability to any Underwriter except as
provided in Sections 6 and 8 hereof; but, if for any other reason, any Shares
are not delivered by or on behalf of the Company as provided herein, the Company
will reimburse the Underwriters through you for all out-of-pocket expenses
approved in writing by you, including fees and disbursements of counsel,
reasonably incurred by the Underwriters in making preparations for the purchase,
sale and delivery of the Shares not so delivered, but the Company shall then be
under no further liability to any Underwriter except as provided in Sections 6
and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of the
Underwriters, and the parties hereto shall be entitled to act and rely upon any
statement, request, notice or agreement on behalf of any Underwriter made or
given by you jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to you as the representatives in care of Goldman, Sachs &
Co., 32 Old Slip, 9th Floor, New York, New York 10005, Attention: Registration
Department; and if to the Company shall be delivered or sent by mail to the
address of the Company set forth in the Registration Statement, Attention:
General Counsel; provided, however, that any notice to an Underwriter pursuant
to Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the benefit
of, the Underwriters, the Company and, to the extent provided in Sections 8 and
10 hereof, the officers and directors of the Company and each person who
controls the Company or any Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall acquire
<PAGE>
22
or have any right under or by virtue of this Agreement. No purchaser of any of
the Shares from any Underwriter shall be deemed a successor or assign by
reason merely of such purchase.
14. Time shall be of the essence of this Agreement. As used herein, the
term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York.
16. This Agreement may be executed by any one or more of the parties
hereto in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
<PAGE>
23
If the foregoing is in accordance with your understanding, please sign and
return to us one for the Company and each of the Representatives plus one for
each counsel counterparts hereof, and upon the acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement between each of the Underwriters and the Company.
It is understood that your acceptance of this letter on behalf of each of the
Underwriters is pursuant to the authority set forth in a form of Agreement among
Underwriters, the form of which shall be submitted to the Company for
examination upon request, but without warranty on your part as to the authority
of the signers thereof.
Very truly yours,
TIBCO Software Inc.
By: _____________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
Deutsche Bank Securities Inc.
Bear Stearns & Co. Inc.
By: _____________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
<PAGE>
SCHEDULE I
__________________ __________________
Underwriter Total Number of Number of
- ----------- Firm Shares to be Optional Shares
Purchased to be Purchased if
Maximum Option
Exercised
Goldman, Sachs & Co. ............ [.] [.]
Deutsche Bank Securities Inc. ... [.] [.]
Bear Stearns & Co. Inc. ......... [.] [.]
------------------ ------------------
Total ....... [.] [.]
<PAGE>
SCHEDULE II
Principal Subsidiaries
----------------------
None
<PAGE>
SCHEDULE III
Employees to Execute Lock-Up Agreements
---------------------------------------
[Subject to change/confirmation]
TIBCO Software Inc.
- -------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Aggarwal, Suneeta Antzoulis, Nick Armes, Richard Bender, Michael
Bergandi, Frank Berman, Terry Bhargavan, Krish Boudreaux, Jeffrey
Bowles, Mark Bressler, David Burke, James Chan, Arvola
Chin, Philip Chu, Diana Collison, Derek Crutcher, Laurence
Dalal, Yogen Darrow, Dorothy Dart, Jon Davis, Christine
Debnath, Amlan Dinitz, Richard Farmer, Kathleen Ferris, Dakin
Firatli, Tugrul Hansen, Paul Hiltner, Karl Hosack, Steven
Hull, Andrew Hwang, Michael Iyer, Shankar Jasek, Tom
Jespersen, Hans Johnson, Adrian Jones, Marian Joseph, Thomas
Joshi, Nandan Jow, Collin Kelly, Ginger Kemper, Dave
Kirkman, John Kozel, Ed Kuo, Gene Kutter, Robert
Kyryliuk, Bob Lambert, Mark Lee, Bob Leshchiner, Dan
Listwin , Don Lobianco, Wanderly Luthi, Martin MacDonald, Angus
Martha, Christopher Mashruwala, Raj Mathon, John McElrea, Charles
Merolla, Richard Messinger, Eli Meyer, Fred Moreira, Mara
Naik, Uday Neumann, Larry Nordin, Paul O'Donnell, Richard
O'Keefe, Kevin O'Meara, Chris Ohler, Peter Page, Dennis
Pfluegl, Manfred Ramanujam, Mohana Ramasubramanian, R. Ranadive, Vivek
Risberg, Jeffrey Rode, Murray Rosenberg, Mark Sakamoto, Hideko
Samdarshi, Shivajee Sastri, Anuradha Schaffner, Heinz Seimplekamp, Darby
Selph, Russell Shah, Jayesh Sheth, Unmesh Simmins, Antony
Sonmez, Murat Sonsini, Larry Srinivasan, Sundararajan Stefanski, Robert
Tan, Fiona Tavan, Rick Tebbenhoff, Peter Tella, Vijaykumar
Tombroff, Michel Townsend, Trevor van der Rijn, Danny Viswanathan, Gautham
Wang, Michael Weingram, Howard Welch, Randy Whateley, Brendon
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
White, Phillip Williams, Alan
</TABLE>
TIBCO Finance Technology, Inc.
- ------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Adelman, Derek Ashburner, David Bell, David Belyaev, Leonid
Brackett, Gregory Cain, Michael Campbell, Michael Campbell, Matthew
Castellano, William Chandramouli, G. Cheng, Jessie (Tsieh-Yu) Clarke, Crispin
Clift, Carl Duran, Randy Fahmy, Mark Felton, Gregory
Ferrucci, Vincenzo Fitsimmons, Eileen Focken, Richard Fong, Deborah
Freeland, Leslie Fukuda, Brian Mark Palmer Graham, Keith
Harrison, Tammra Hashimoto, Teruhide Horna, Luis Jing, Lin
Jones, Glenn Karasek, Randall Kershaw, Ian Knourek, Robert
Koike, Richard Lambert, Jonathan MacFarquhar, Roderick Mar, Derrick
Martin, Michael McKeever, Megan Mehta, Shamik Moore, Alan
Narasimhan, Rajagopal Obuchi, Masaaki Olson, Richard Page, John
Powell, Robert Powell, James Puskas, Randy Riffert, William
Rollins, Robert Sinha, Arvind Solis, Leonard Sun, Haw-Chang
Taguchi, Akira Tanaka, Yoshiyuki Todd, Allistair Tomlins, Tony
Tsui, Waiman Wilhelm, Steven Wootton, Jeffrey Yencken, Simon
</TABLE>
<PAGE>
ANNEX I
DESCRIPTION OF COMFORT LETTER
Pursuant to Section 7(f) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the Company and its subsidiaries within the meaning of the Act and the
applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial forecasts
and/or pro forma financial information) examined by them and included in the
Prospectus or the Registration Statement comply as to form in all material
respects with the applicable accounting requirements of the Act and the related
published rules and regulations thereunder; and, if applicable, they have made a
review in accordance with standards established by the American Institute of
Certified Public Accountants of the unaudited consolidated interim financial
statements, selected financial data, pro forma financial information, financial
forecasts and/or condensed financial statements derived from audited financial
statements of the Company for the periods specified in such letter, as indicated
in their reports thereon, copies of which have been separately furnished to the
representatives of the Underwriters (the "Representatives") and are attached
hereto;
(iii) They have made a review in accordance with standards established
by the American Institute of Certified Public Accountants of the unaudited
condensed consolidated statements of income, consolidated balance sheets and
consolidated statements of cash flows included in the Prospectus as indicated in
their reports thereon copies of which have been separately furnished to the
Representatives and are attached hereto and on the basis of specified procedures
including inquiries of officials of the Company who have responsibility for
financial and accounting matters regarding whether the unaudited condensed
consolidated financial statements referred to in paragraph (vi)(A)(i) below
comply as to form in all material respects with the applicable accounting
requirements of the Act and the related published rules and regulations, nothing
came to their attention that cause them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the related
published rules and regulations;
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the Company for the
five most recent fiscal years included in the Prospectus agrees with the
corresponding amounts (after restatements where applicable) in the audited
consolidated financial statements for such five fiscal years which were included
or incorporated by reference in the Company's Annual Reports on Form 10-K for
such fiscal years;
<PAGE>
(v) They have compared the information in the Prospectus under selected
captions with the disclosure requirements of Regulation S-K and on the basis of
limited procedures specified in such letter nothing came to their attention as a
result of the foregoing procedures that caused them to believe that this
information does not conform in all material respects with the disclosure
requirements of Items 301, 302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an examination
in accordance with generally accepted auditing standards, consisting of a
reading of the unaudited financial statements and other information referred to
below, a reading of the latest available interim financial statements of the
Company and its subsidiaries, inspection of the minute books of the Company and
its subsidiaries since the date of the latest audited financial statements
included in the Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, nothing came to
their attention that caused them to believe that:
(A) (i) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
related published rules and regulations, or (ii) any material modifications
should be made to the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated statements of cash
flows included in the Prospectus for them to be in conformity with
generally accepted accounting principles;
(B) any other unaudited income statement data and balance sheet
items included in the Prospectus do not agree with the corresponding items
in the unaudited consolidated financial statements from which such data and
items were derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis for the
corresponding amounts in the audited consolidated financial statements
included in the Prospectus;
(C) the unaudited financial statements which were not included in
the Prospectus but from which were derived any unaudited condensed
financial statements referred to in clause (A) and any unaudited income
statement data and balance sheet items included in the Prospectus and
referred to in clause (B) were not determined on a basis substantially
consistent with the basis for the audited consolidated financial statements
included in the Prospectus;
(D) any unaudited pro forma consolidated condensed financial
statements included in the Prospectus do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the published rules and regulations thereunder or the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of those statements;
<PAGE>
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the consolidated
capital stock (other than issuances of capital stock upon exercise of
options and stock appreciation rights, upon earn-outs of performance shares
and upon conversions of convertible securities, in each case which were
outstanding on the date of the latest financial statements included in the
Prospectus) or any increase in the consolidated long-term debt of the
Company and its subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by the
Representatives, or any increases in any items specified by the
Representatives, in each case as compared with amounts shown in the latest
balance sheet included in the Prospectus, except in each case for changes,
increases or decreases which the Prospectus discloses have occurred or may
occur or which are described in such letter; and
(F) for the period from the date of the latest financial statements
included in the Prospectus to the specified date referred to in clause (E)
there were any decreases in consolidated net revenues or operating profit
or the total or per share amounts of consolidated net income or other items
specified by the Representatives, or any increases in any items specified
by the Representatives, in each case as compared with the comparable period
of the preceding year and with any other period of corresponding length
specified by the Representatives, except in each case for decreases or
increases which the Prospectus discloses have occurred or may occur or
which are described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included in the Prospectus and the limited procedures, inspection of minute
books, inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting an
examination in accordance with generally accepted auditing standards, with
respect to certain amounts, percentages and financial information specified by
the Representatives, which are derived from the general accounting records of
the Company and its subsidiaries, which appear in the Prospectus, or in Part II
of, or in exhibits and schedules to, the Registration Statement specified by the
Representatives, and have compared certain of such amounts, percentages and
financial information with the accounting records of the Company and its
subsidiaries and have found them to be in agreement.
<PAGE>
ANNEX II(a)
[Form of Opinion of Shearman & Sterling]
<PAGE>
ANNEX II(b)
[Form of Opinion of Wilson Sonsini Goodrich & Rosati]
<PAGE>
ANNEX II(c)
[Form of Opinion of Sullivan & Cromwell]
<PAGE>
ANNEX II(d)
[Form of Opinion of Slaughter & May]
<PAGE>
Exhibit 3.1(b)
FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
TIBCO SOFTWARE INC.
TIBCO Software Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of Delaware, does hereby certify as
follows:
FIRST: That the Corporation was originally incorporated on November 13,
-----
1996 under the name TIB Applications, Inc., pursuant to General Corporation Law.
SECOND: That the Corporation's Certificate of Incorporation is hereby
------
amended and restated to read in its entirety as follows:
"ARTICLE ONE
-----------
The name of this corporation is TIBCO Software Inc. (the "Corporation").
ARTICLE TWO
-----------
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
ARTICLE THREE
-------------
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE FOUR
------------
This Corporation is authorized to issue two classes of shares to be
designated respectively preferred stock and common stock. The total number of
shares of this Corporation shall have the authority to issue is three hundred
fifty million (350,000,000) shares. Two hundred million (200,000,000) shares
shall be designated common stock (the "Common Stock"), and shall have a par
value of $0.001 per share. One hundred and fifty million (150,000,000) shares
shall be preferred stock, and shall have a par value of $0.001 per share.
<PAGE>
Forty million (20,000,000) shares of such preferred stock shall be
designated Series A Preferred Stock (the "Series A Preferred Stock"), each of
which shall have a par value of $0.001 per share; eleven million (5,500,000)
shares of the Preferred Stock shall be designated Series B Preferred Stock (the
"Series B Preferred Stock"), each of which shall have a par value of $0.001 per
share; and six million (3,000,000) shares of the Preferred Stock shall be
designated Series C Preferred Stock (the "Series C Preferred Stock"), each of
which shall have a par value of $0.001 per share (the Series A Preferred Stock,
Series B Preferred Stock and the Series C Preferred Stock, together, the
"Preferred Stock").
Upon filing of this Amended and Restated Certificate of Incorporation,
there shall be effected a 1 for 2 reverse stock split with respect to the
Capital Stock of the Company, pursuant to which each outstanding share of Common
Stock is converted into one-half (1/2) of a share of Common Stock and each
outstanding share of Preferred Stock is converted into one-half (1/2) of a share
of Preferred Stock.
Any of this Corporation's preferred stock not previously designated as to
series may be issued from time to time in one or more series pursuant to a
resolution or resolutions providing for such issue duly adopted by the Board of
Directors (authority to do so being hereby expressly vested in the Board), and
such resolution or resolutions shall also set forth the voting powers, full or
limited or none, of each such series of preferred stock and shall fix the
designations, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions of each such series of
preferred stock. The Board of Directors is authorized to alter the designation,
rights, preferences, privileges and restrictions granted to or imposed upon any
wholly unissued series of preferred stock and, within the limits and
restrictions stated in any resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any series of preferred
stock, to increase or decrease (but not below the number of shares of any such
series then outstanding) the number of shares of any such series subsequent to
the issue of shares of that series.
Each share of preferred stock issued by the Corporation, if reacquired by
the Corporation (whether by redemption, repurchase, conversion to Common Stock
or other means), shall upon such reacquisition resume the status of authorized
and unissued shares of preferred stock, undesignated as to series and available
for designation and issuance by the Corporation in accordance with the
immediately preceding paragraph.
The Corporation shall from time to time in accordance with the laws of the
State of Delaware increase the authorized amount of its Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance shall not be sufficient to permit conversion of the Preferred Stock.
Subject to the foregoing, the rights, preferences, restrictions and other
matters relating to the stock of this Corporation are as follows:
1. Dividends. The holders of the Series A Preferred Stock, Series B
---------
Preferred Stock and Series C Preferred Stock shall be entitled to receive, when
and as declared by the Board of Directors,
2
<PAGE>
out of funds legally available therefor, dividends in preference to any dividend
on the Common Stock at the per share annual rate of $0.048, $0.216 and $0.236,
respectively. Such dividend shall not be cumulative and no right to such
dividends shall accrue to the holders of the Preferred Stock unless declared by
the Board of Directors.
2. Liquidation Preference. In the event of (i) any voluntary or
----------------------
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, (ii) the merger, consolidation, reorganization or similar
transaction in which the Corporation's shareholders before such transaction own
less than 50% of the voting stock or voting power of the surviving entity
immediately after such transaction, or (iii) the sale of all or substantially
all of the Corporation's assets (each of the immediately forgoing constituting a
"Liquidation"), distributions to the shareholders of the Corporation shall be
made in the following manner:
(a) Preferred Stock. In the event of a Liquidation, holders of
---------------
each share of Series C Preferred Stock shall be entitled to be paid out of the
Corporation's assets available for distribution to holders of the Corporation's
capital stock of all classes, whether such assets are capital, surplus, or
earnings (or, if the Liquidation is a merger, consolidation, reorganization or
similar transaction, such holders shall be entitled to be paid out of the merger
or other consideration), prior and in preference to any sums paid or any assets
distributed to, or set aside for, the holders of shares of Common Stock, an
amount equal to $3.86 per share (subject to adjustment for all splits,
dividends, combinations and the like applicable to the Series C Preferred Stock
as described herein).
In the event of a Liquidation, holders of each share of Series B Preferred
Stock shall be entitled to be paid out of the Corporation's assets available for
distribution to holders of the Corporation's capital stock of all classes,
whether such assets are capital, surplus, or earnings (or, if the Liquidation is
a merger, consolidation, reorganization or similar transaction, such holders
shall be entitled to be paid out of the merger or other consideration), prior
and in preference to any sums paid or any assets distributed to, or set aside
for, the holders of shares of Common Stock, an amount equal to $1.80 per share
(subject to adjustment for all splits, dividends, combinations and the like
applicable to the Series B Preferred Stock as described herein).
In the event of a Liquidation, holders of each share of Series A Preferred
Stock shall be entitled to be paid out of the Corporation's assets available for
distribution to holders of the Corporation's capital stock of all classes,
whether such assets are capital, surplus, or earnings (or, if the Liquidation is
a merger, consolidation, reorganization or similar transaction, such holders
shall be entitled to be paid out of the merger or other consideration), prior
and in preference to any sums paid or any assets distributed to, or set aside
for, the holders of shares of Common Stock, an amount equal to $0.75 per share
(subject to adjustment for all splits, dividends, combinations and the like
applicable to the Series A Preferred Stock as described herein) in the event any
such Liquidation shall occur on or before December 31, 1997, and an amount equal
to $1.00 per share (subject to adjustment for all splits, dividends,
combinations and the like applicable to the Series A Preferred Stock as
described herein) in the event any such Liquidation shall occur after December
31, 1997.
3
<PAGE>
If the assets of the Corporation shall be insufficient to permit the
payment in full to the holders of the Preferred Stock as set forth herein, then
the entire assets of the Corporation available for distribution shall be
distributed ratably among the holders of the Preferred Stock in such a manner
that the amount to be distributed to each holder of Preferred Stock shall equal
the amount obtained by multiplying the entire assets and funds of the
Corporation legally available for distribution hereunder by a fraction, the
numerator of which shall be the sum of the products obtained by multiplying the
number of shares of Preferred Stock then held by such holder by the respective
applicable liquidation preference per share of each such series of Preferred
Stock, and the denominator of which shall be the sum of the products obtained by
multiplying the total then outstanding number of shares of Preferred Stock by
the respective applicable liquidation preference per share of each such series
of Preferred Stock.
(b) Common Stock. Upon Liquidation and after full payment has been
------------
made to the holders of the Preferred Stock as set forth above, then any
remaining assets available for distribution shall be distributed ratably among
the holders of the Series B Preferred Stock and the Common Stock in proportion
to the number of shares of Common Stock held by them or issuable to them upon a
conversion of their shares of Series B Preferred Stock, provided that the
--------
participation in such distribution (in addition to the distribution described in
Section 2(a) above) in respect of shares of Series B Preferred Stock shall in no
event be for an amount greater than $0.60 per share of Series B Preferred Stock
(subject to adjustment for all splits, dividends, combinations and the like
applicable to the Series B Preferred Stock as described herein).
3. Conversion Rights. The holders of the Preferred Stock shall have
-----------------
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert into Common Stock. Each share of the Preferred
----------------------------------
Stock shall be convertible, without the payment of any additional consideration
by the holder thereof, at the option of the holder thereof, at any time after
the date of issuance of such share, at the office of the Corporation or any
transfer agent for the Series A Preferred Stock, Series B Preferred Stock or
Series C Preferred Stock, respectively, into a certain number of fully paid and
nonassessable shares of the Common Stock. That number of shares of Common Stock
each share of the Series A Preferred Stock may be exchanged for (the "Series A
Conversion Rate") shall be calculated by dividing $0.80 by the conversion price
(the "Series A Conversion Price") which shall be initially set at $0.80. That
number of shares of Common Stock each share of the Series B Preferred Stock may
be exchanged for (the "Series B Conversion Rate") shall be calculated by
dividing $3.60 by the conversion price (the "Series B Conversion Price") which
shall initially be set at $3.60. That number of shares of Common Stock each
share of the Series C Preferred Stock may be exchanged for (the "Series C
Conversion Rate") shall be calculated by dividing $3.86 by the conversion price
(the "Series C Conversion Price") which shall initially be set at $3.86. The
Series A Conversion Price, the Series B Conversion Price and the Series C
Conversion Price shall be subject to appropriate adjustment in the event of any
stock split or combination, stock dividend or similar event as well as other
provisions set forth herein.
(b) Automatic Conversion.
--------------------
4
<PAGE>
(i) Each share of the Preferred Stock shall automatically be
converted into shares of the Common Stock at the then effective Series A
Conversion Rate, Series B Conversion Rate or Series C Conversion Rate,
respectively, upon the occurrence of an initial bona fide, firm commitment
---- ----
underwritten public offering of the Common Stock pursuant to a registration
statement on Form S-1 declared effective under the Securities Act of 1933, as
amended (the "Securities Act") (other than a registration relating solely to a
transaction under Rule 145 under the Securities Act, or any successor thereto,
or to an employee benefit plan of the Corporation), provided that such offering
results in a public offering price of not less than $4.00 per share (as adjusted
for stock splits, stock dividends, combinations, recapitalization and similar
events with respect to the Common Stock), and provided further that at least 10%
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 and shares of
Common Stock are listed on a national securities exchange or the Nasdaq National
Market (a "Qualified Public Offering"). In the event of a Qualified Public
Offering, the person(s) entitled to receive the Common Stock issuable upon such
conversion of the Preferred Stock shall not be deemed to have converted that
Preferred Stock until immediately prior to the closing of such Qualified Public
Offering;
(ii) Each share of the Series A Preferred Stock shall
automatically be converted into shares of the Common Stock at the then effective
Series A Conversion Rate upon the receipt by the Corporation of (A) the
affirmative election at a duly noticed meeting of the holders of more than one-
half ( 1/2) of the then outstanding shares of the Series A Preferred Stock, or
(B) a duly executed written election of the holders of more than one-half ( 1/2)
of the then outstanding shares of the Series A Preferred Stock, in each case in
favor of the conversion of all of the shares of the Series A Preferred Stock
into Common Stock; or
(iii) Each share of the Series B Preferred Stock shall
automatically be converted into shares of the Common Stock at the then effective
Series B Conversion Rate upon the receipt by the Corporation of (A) the
affirmative election at a duly noticed meeting of the holders of more than one-
half (1/2) of the then outstanding shares of the Series B Preferred Stock, or
(B) a duly executed written election of the holders of more than one-half (1/2)
of the then outstanding shares of the Series B Preferred Stock, in each case in
favor of the conversion of all of the shares of the Series B Preferred Stock
into Common Stock.
(iv) Each share of the Series C Preferred Stock shall
automatically be converted into shares of the Common Stock at the then effective
Series C Conversion Rate upon the receipt by the Corporation of (A) the
affirmative election at a duly noticed meeting of the holders of more than one-
half ( 1/2) of the then outstanding shares of the Series C Preferred Stock, or
(B) a duly executed written election of the holders of more than one-half ( 1/2)
of the then outstanding shares of the Series C Preferred Stock, in each case in
favor of the conversion of all of the shares of the Series C Preferred Stock
into Common Stock.
(c) Mechanics of Conversion.
-----------------------
5
<PAGE>
(i) No fractional share of Common Stock shall be issued upon
conversion of the Preferred Stock. In lieu of any fractional shares to which
the holder would otherwise be entitled, after aggregating all shares of Common
Stock (including fractional shares thereof) issuable upon the conversion of all
shares of Preferred Stock held by the holder which are to be converted, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of a share of Common Stock at the time (as determined in good faith by the
Board of Directors).
(ii) Before any holder of Preferred Stock shall be entitled to
convert the same into shares of Common Stock, and before the Corporation shall
be obligated to issue certificates for shares of Common Stock upon the automatic
conversion of the Preferred Stock as set forth in Section 3(b) hereof, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Series A
Preferred Stock, Series B Preferred Stock or the Series C Preferred Stock,
respectively, and shall give written notice to the Corporation at such office
that such holder elects to convert the same and shall state therein the name or
names in which such holder wishes the certificate or certificates for shares of
Common Stock to be issued (except that no such written notice of intent to
convert shall be necessary in the event of an automatic conversion pursuant to
Section 3(b) hereof).
(iii) Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Preferred Stock to be converted (except that in the case of an
automatic conversion pursuant to Section 3(b) hereof, such conversion shall be
deemed to have been made immediately prior to the closing of the Qualified
Public Offering or as specified in the affirmative vote or written consent) and
the person or persons entitled to receive the shares of Common Stock, issuable
upon such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(iv) In the event of the loss, theft or destruction of the
holder's certificate or certificates, the holder shall notify the Corporation or
its transfer agent that such certificate or certificates have been lost, stolen
or destroyed and shall execute an agreement satisfactory to the Corporation to
indemnify the Corporation from any loss incurred by it in connection with such
certificate or certificates. The Corporation shall, as soon as practicable after
such delivery, or, in the case of a lost, stolen or destroyed certificate, the
execution and delivery of the agreement and indemnity, issue and deliver at such
office to such holder of Preferred Stock, or to such holder's nominee or
nominees, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid together with cash in lieu
of any fraction of a share.
(d) Adjustments to Conversion Price for Certain Diluting Issues.
-----------------------------------------------------------
(i) Special Definitions. For purposes of this Section 3(d),
-------------------
the following definitions apply:
1) "Options" shall mean rights, options, or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
6
<PAGE>
2) "Original Issue Date" shall mean the date of the filing
of this Amended and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware.
3) "Convertible Securities" shall mean any evidence of
indebtedness, shares (other than Common Stock) or other securities convertible
into or exchangeable for Common Stock.
4) "Additional Shares of Common Stock" shall mean all
shares of Common Stock issued (or, pursuant to Section 3(d)(iii), deemed to be
issued) by the Corporation after the Original Issue Date, other than shares of
Common Stock issued, issuable or, pursuant to Section 3(d)(iii), deemed to be
issued:
a) upon conversion of any shares of Preferred Stock;
b) to employees, directors or consultants pursuant to
a stock grant, option or purchase plan or other employee stock incentive program
or arrangement approved by the Board of Directors;
c) as a dividend or distribution on any Preferred
Stock; and
d) in connection with any transaction for which
adjustment is made pursuant to Section 3(e) hereof.
(ii) No Adjustment of Conversion Price. No adjustment in the
---------------------------------
Series A Conversion Price, Series B Conversion Price or Series C Conversion
Price shall be made in respect of the issuance of Additional Shares of Common
Stock unless the consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the Series A
Conversion Price, Series B Conversion Price or Series C Conversion Price,
respectively, in effect on the date of, and immediately prior to, such issuance.
(iii) Options and Convertible Securities. In the event that the
----------------------------------
Corporation at any time or from time to time after the Original Issue Date shall
issue any Options or Convertible Securities or shall fix a record date for the
determination of holders of any class of securities then entitled to receive any
such Options or Convertible Securities, then the maximum number of shares (as
set forth in the instrument relating thereto without regard to any provision
contained therein designed to protect against dilution) of Common Stock issuable
upon the exercise of such Options or, in the case of Convertible Securities and
Options therefor, the conversion or exchange of such Convertible Securities,
shall be deemed to be Additional Shares of Common Stock issued as of the time of
such issue or, in case such a record date shall have been fixed, as of the close
of business on such record date, provided that Additional Shares of Common Stock
shall not be deemed to have been issued with regard to adjustments to the Series
A Conversion Price, the Series B Conversion Price or the Series C Conversion
Price hereunder unless the consideration per share (determined pursuant to
Section 3(d)(v) hereof) of such Additional Shares of Common Stock would be less
than the applicable
7
<PAGE>
Series A Conversion Price, Series B Conversion Price or Series C Conversion
Price, respectively, in effect on the date of and immediately prior to such
issue, or such record date, as the case may be, and provided further that in any
such case in which Additional Shares of Common Stock are deemed to be issued:
1) no further adjustment in the Series A Conversion Price,
Series B Conversion Price or Series C Conversion Price shall be made upon the
subsequent issue of Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such Convertible
Securities;
2) if such Options or Convertible Securities by their
terms provide, with the passage of time or otherwise, for any increase or
decrease in the consideration payable to the Corporation, or increase or
decrease in the number of shares of Common Stock issuable upon the exercise,
conversion or exchange thereof, the applicable Series A Conversion Price, Series
B Conversion Price or Series C Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities;
3) upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Series A Conversion Price, Series B Conversion Price or
Series C Conversion Price computed upon the original issue thereof (or upon the
occurrence of a record date with respect thereto), and any subsequent
adjustments based thereon, shall, upon such expiration, be recomputed as if:
a) in the case of Convertible Securities or Options
for Common Stock, the only Additional Shares of Common Stock issued were the
shares of Common Stock, if any, actually issued upon the exercise of such
Options or the conversion or exchange of such Convertible Securities and the
consideration received therefor was the consideration actually received by the
Corporation for the issue of all such exercised Options, plus the consideration
actually received by the Corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
b) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of Common Stock deemed to
have been then issued was the consideration actually received by the Corporation
for the issue of such exercised Options, plus the consideration deemed to have
been received by the Corporation (determined pursuant to Section 3(d)(v)) upon
the issue of the Convertible Securities with respect to which such Options were
actually exercised; and
8
<PAGE>
4) no readjustment pursuant to clauses (2) or (3) above
shall (A) have the effect of increasing the Series A Conversion Price, Series B
Conversion Price or Series C Conversion Price to an amount which exceeds the
lower of (i) the Series A Conversion Price, Series B Conversion Price or Series
C Conversion Price, respectively, on the original adjustment date relating to
such Additional Shares or (ii) the Series A Conversion Price, Series B
Conversion Price or Series C Conversion Price, respectively, that would have
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date or (B) affect any shares of
Common Stock previously issued upon conversion of Preferred Stock.
(iv) Adjustment of Conversion Price Upon Issuance of Additional
----------------------------------------------------------
Shares of Common Stock. In the event that this Corporation shall issue
- ----------------------
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 3(d)(iii)) without consideration or for
a consideration per share less than the Series A Conversion Price, Series B
Conversion Price or Series C Conversion Price, as the case may be, in effect on
the date of and immediately prior to such issue, then and in such event, the
Series A Conversion Price, the Series B Conversion Price and/or the Series C
Conversion Price (in each case, only if greater than such consideration per
share) shall be reduced, concurrently with such issue, to a price (calculated to
the nearest cent) determined by multiplying the Series A Conversion Price,
Series B Conversion Price or Series C Conversion Price, respectively, by a
fraction, the numerator of which shall be the sum of the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of
shares of Common Stock which the aggregate consideration received by the
Corporation for the total number of Additional Shares of Common Stock so issued
would purchase at the Series A Conversion Price, Series B Conversion Price or
Series C Conversion Price, respectively; and the denominator of which shall be
the sum of the number of shares of Common Stock outstanding immediately prior to
such issue plus the number of such Additional Shares of Common Stock so issued;
provided that, for purposes of calculating the number of shares of Common Stock
outstanding for this Section 3(d)(iv), only shares of Common Stock issuable upon
conversion of outstanding Preferred Stock and shares of Common Stock then
outstanding shall be deemed to be outstanding and no shares of Common Stock
issuable upon the exercise of any Options or conversion or exchange of any
Convertible Securities shall be included in such calculation.
(v) Determination of Consideration. For purposes of this
------------------------------
Section 3(d), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
1) Cash and Property. Such consideration shall:
-----------------
a) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
9
<PAGE>
b) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
c) in the event that Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both cash and property, be the
proportion of such consideration so received, computed as provided in clauses
(a) and (b) above, as determined in good faith by the Board of Directors.
2) Options and Convertible Securities: The consideration
----------------------------------
per share received by the Corporation for Additional Shares of Common Stock
deemed to have been issued pursuant to Section 3(d)(iii), relating to Options
and Convertible Securities, shall be determined by dividing:
a) the total amount, if any, received or receivable
by the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) payable to the
Corporation upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities, by
b) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein designed to protect against dilution) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(e) Adjustments for Subdivisions, Stock Dividends, Combinations
-----------------------------------------------------------
or Consolidation of Common Stock. In the event that the Corporation at any
- --------------------------------
time or from time to time declares or pays, without consideration, any dividend
on Common Stock payable in Common Stock or in any right to acquire Common Stock
for no consideration, or effects a subdivision or combination of its outstanding
shares of Common Stock into a greater or smaller number of shares without a
proportionate and corresponding subdivision or combination of the outstanding
shares of Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock, then and in each such event the Series A Conversion Price,
Series B Conversion Price or Series C Conversion Price, respectively, shall be
appropriately increased or decreased proportionally.
(f) Adjustments for Other Dividends and Distributions. In
-------------------------------------------------
the event that the Corporation at any time or from time to time makes, or fixes
a record date for the determination of holders of Common Stock entitled to
receive, any distribution payable in securities of the Corporation other than
shares of Common Stock and other than as otherwise adjusted in this Section 3,
then and in each such event provision shall be made so that the holders of
Preferred Stock shall receive upon conversion thereof, in addition to the number
of shares of Common Stock receivable thereupon, the
10
<PAGE>
amount of securities of the Corporation which they would have received had their
shares of Preferred Stock been converted into Common Stock on the date of such
event and had they thereafter, during the period from the date of such event to
and including the date of conversion, retained such securities receivable by
them as aforesaid during such period, subject to all other adjustments called
for during such period under this Section 3 with respect to the rights of the
holders of the Preferred Stock.
(g) No Impairment. Except as provided in Section 6 below, the
-------------
Corporation will not, by amendment of its Certificate of Incorporation or
through any reorganization, recapitalization, transfer of assets, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of the Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Series A Conversion Price, Series B Conversion
Price or Series C Conversion Price pursuant to this Section 3, the Corporation
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Preferred Stock, respectively, a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Series A Conversion Price, Series B Conversion Price or Series C
Conversion Price as the case may be, at the time in effect, and (iii) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of such holder's shares of Preferred
Stock.
(i) Notices of Record Date. In the event that the Corporation
----------------------
shall propose at any time:
a) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
b) to offer for subscription pro rata to the holders of
any class or series of its stock any additional shares of stock of any class or
series or other rights;
c) to effect any reclassification or recapitalization of
its Common Stock outstanding involving a change in the Common Stock; or
d) to effect a transaction of a type similar to those
described in Section 2 above;
11
<PAGE>
then, in connection with each such event, the Corporation shall send to the
holders of the Preferred Stock:
i) at least 20 days' prior written notice of the date
on which a record shall be taken for such dividend, distribution or subscription
rights (and specifying the date on which the holders of Common Stock shall be
entitled thereto) or for determining rights to vote in respect of the matters
referred to in (c) or (d) above; and
ii) in the case of the matters referred to in (c)
above, at least 20 days' prior written notice of the date when the same shall
take place (and specifying the date on which the holders of Common Stock shall
be entitled to exchange their Common Stock for securities or other property
deliverable upon the occurrence of such event).
(j) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Preferred Stock such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all then outstanding shares of the Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Preferred Stock,
the Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(k) Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Preferred Stock shall be
deemed given three days after deposit in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on the
books of the Corporation. Notice to holders located outside the United States
shall be given by telex or telecopy; provided, however, that such purchaser
shall give the Corporation its telex or telecopy number.
(l) Adjustments. Subject to Section 2 above, in case of any
-----------
reorganization or any reclassification of the capital stock of the Corporation
(other than a subdivision or combination of shares provided for above), any
merger of the Corporation with or into another corporation or corporations, or
the conveyance of all or substantially all of the assets of the Corporation to
another corporation, each share of Preferred Stock shall thereafter be
convertible into the number of shares of stock or other securities or property
(including cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of Preferred Stock would have been
entitled upon the record date of (or date of, if no record date is fixed) such
reorganization reclassification, merger or conveyance; and, in any case,
appropriate adjustment (as determined by the Board of Directors) shall be made
in the application of the provisions herein set forth with respect to the rights
and interests thereafter of the holders of the Preferred Stock, to the end that
the provisions set forth herein shall thereafter be applicable, as nearly as
equivalent as is practicable, in relation to any shares of stock or the
securities or property (including cash) thereafter deliverable upon the
conversion of the shares of the Preferred Stock.
12
<PAGE>
(m) Issue Taxes. The Corporation shall pay any and all issue and
-----------
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Preferred Stock pursuant hereto;
provided, however, that the Corporation shall not be obligated to pay any
transfer taxes resulting from any transfer requested by any holder in connection
with any such conversion.
4. Redemption Rights. The Corporation shall have no redemption rights
-----------------
with regard to the Preferred Stock.
5. Voting Rights. Except as otherwise provided herein, or as required by
-------------
law, each issued and outstanding share of the Common Stock shall entitle its
holder to one vote on all matters. Except as required by law or by the
provisions hereof, the holders of the Preferred Stock shall be entitled to vote
on all matters with the holders of the Common Stock on an as-converted to Common
Stock basis.
6. Covenants. So long as three-quarters (3/4) of the aggregate of
---------
initially authorized Series A Preferred Stock and the initially authorized
Series B Preferred Stock and the initially authorized Series C Preferred Stock
shall be outstanding, the Corporation shall not, without first obtaining the
affirmative vote or written consent of at least a majority of the holders of
such outstanding shares of the Preferred Stock voting together as a single
class:
(a) create or issue any other class or classes of stock or series
of preferred stock senior to or on parity with the Series A Preferred Stock,
Series B Preferred Stock or the Series C Preferred Stock with respect to
dividends, liquidation, blocking rights, voting rights or conversion;
(b) merge or consolidate with or into any other corporation (except
where a majority of the outstanding equity securities of the surviving or
resulting corporation immediately after the merger or consolidation is held by
persons who were stockholders of this corporation immediately prior to the
merger or consolidation), or sell or otherwise transfer in a single transaction
or a series of related transactions all or substantially all of the
Corporation's assets; or
(c) effect the redemption, retirement, purchase or other
acquisition directly or indirectly, through subsidiaries or otherwise, of any
shares of the Preferred Stock, the Common Stock, or any other series of its
capital stock (or derivative instrument therefor) except from employees of, or
consultants to, the Corporation under stock repurchase agreements approved by
the Board of Directors.
So long as three-quarters (3/4) of the initially authorized Series A
Preferred Stock shall be outstanding, the Corporation shall not, without first
obtaining the affirmative vote or written consent of at least a majority of the
holders of such outstanding shares of the Series A Preferred Stock voting
together as a class, alter or change the rights, preferences or privileges of
the Series A Preferred Stock in a manner that is adverse to the holders of the
Series A Preferred Stock.
So long as three-quarters (3/4) of the initially authorized Series B
Preferred Stock shall be outstanding, the Corporation shall not, without first
obtaining the affirmative vote or written consent of
13
<PAGE>
at least a majority of the holders of such outstanding shares of the Series B
Preferred Stock voting together as a class, (i) alter or change the rights,
preferences or privileges of the Series B Preferred Stock in a manner that is
adverse to the holders of the Series B Preferred Stock; (h) merge or consolidate
with or into any other corporation (except where a majority of the outstanding
equity securities of the surviving or resulting corporation immediately after
the merger or consolidation is held by persons who were stockholders of this
corporation immediately prior to the merger or consolidation), (iii) sell or
otherwise transfer in a single transaction or a series of related transactions
all or substantially all of the Corporation's assets; or (iv) create or issue
any other class or classes of stock or series of Preferred Stock senior to or on
parity with the Series B Preferred Stock with respect to dividends, liquidation,
blocking rights, voting rights or conversion. The rights of the holders of
Series B Preferred Stock referred to in clauses (h) and (iii) above shall
terminate and be of no further force or effect with respect to a proposed
transaction (or series of related transactions) after 20 days have elapsed
following delivery of the Notice for such transaction (or series of related
transactions), if any, as may be required by Section 7.4(b) of that certain
First Amended and Restated Shareholders Agreement by and among Reuters Limited,
Cisco Systems, Inc., Reuters Nederland B.V. and the corporation and others; and
in any event such rights shall terminate and be of no further force or effect
upon the termination of the requirements of such Section 7.4(b), as set forth in
Section 7.4(c) of said Shareholders Agreement.
So long as three-quarters (3/4) of the initially authorized Series C
Preferred Stock shall be outstanding, the Corporation shall not, without first
obtaining the affirmative vote or written consent of at least a majority of the
holders of such outstanding shares of the Series C Preferred Stock voting
together as a class, alter or change the rights, preferences or privileges of
the Series C Preferred Stock in a manner that is adverse to the holders of the
Series C Preferred Stock.
ARTICLE FIVE
------------
The Corporation is to have perpetual existence.
ARTICLE SIX
-----------
Elections of directors need not be by written ballot unless a stockholder
demands election by written ballot at the meeting and before voting begins or
unless the Bylaws of the Corporation shall so provide.
ARTICLE SEVEN
-------------
The number of Directors which constitute the whole Board of Directors of
the Corporation and the manner of their election shall be designated in the
Bylaws of the Corporation.
14
<PAGE>
ARTICLE EIGHT
-------------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
ARTICLE NINE
------------
(a) To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(b) The Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer, employee or
agent of the Corporation or any predecessor of the Corporation or serves or
served at any other enterprise as a director, officer, employee or agent at the
request of the Corporation or any predecessor to the Corporation.
(c) Neither any amendment nor repeal of this Article Nine, nor the
adoption of any provision of this Corporation's Certificate of Incorporation
inconsistent with this Article Nine, shall eliminate or reduce the effect of
this Article Nine, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article Nine, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
ARTICLE TEN
-----------
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE ELEVEN
--------------
Vacancies created by newly created directorships, created in accordance
with the Bylaws of this Corporation, may be filled by the vote of a majority,
although less than a quorum, of the directors then in office, or by a sole
remaining director.
ARTICLE TWELVE
--------------
15
<PAGE>
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Corporation.
ARTICLE THIRTEEN
----------------
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation."
THIRD: The foregoing amendment and restatement of the Certificate of
-----
Incorporation has been duly adopted by resolutions adopted by the Board of
Directors of the Corporation in accordance with the provisions of Section
242(b)(1) of the General Corporation Law of Delaware.
FOURTH: The foregoing amendment and restatement of the Certificate of
------
Incorporation has been duly adopted by the written consent of the holders of a
majority of the outstanding Common Stock, a majority of the outstanding Series A
Preferred Stock and a majority of the outstanding Series B Preferred Stock, in
accordance with the provisions of Section 228 of the General Corporation Law of
Delaware.
FIFTH: The foregoing amendment and restatement of the Certificate of
-----
Incorporation has been duly adopted in accordance with Section 245 of the
General Corporation Law of Delaware.
IN WITNESS WHEREOF, TIBCO Software Inc. has caused this certificate to be
executed by Vivek Ranadive, its President, this ______ day of __________ 1999.
TIBCO SOFTWARE INC.,
a Delaware corporation
By:
-------------------------------
Vivek Ranadive, President
16
<PAGE>
Exhibit 3.1(c)
FORM OF AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
TIBCO SOFTWARE INC.
TIBCO Software Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of Delaware, does hereby certify as
follows:
FIRST: That the Corporation was originally incorporated on November 13,
-----
1996 under the name TIB Applications, Inc., pursuant to General Corporation Law.
SECOND: That the Corporation's Certificate of Incorporation is hereby
------
amended and restated to read in its entirety as follows:
ARTICLE ONE
-----------
The name of this corporation is TIBCO Software Inc. (the "Corporation").
ARTICLE TWO
-----------
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, Wilmington, Delaware 19801, County of New Castle. The
name of its registered agent at such address is The Corporation Trust Company.
ARTICLE THREE
-------------
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
ARTICLE FOUR
------------
This Corporation is authorized to issue two classes of shares to be
designated respectively preferred stock and common stock. The total number of
shares of this Corporation shall have the authority to issue is three hundred
twenty-five million (325,000,000) shares. Three hundred million (300,000,000)
shares shall be designated common stock (the "Common Stock"), and shall have a
par value of $0.001 per share. Twenty-five million (25,000,000) shares shall be
preferred stock, and shall have a par value of $0.001 per share.
<PAGE>
The Preferred Stock may be issued from time to time in one or more series.
The Board of Directors is hereby authorized subject to limitations prescribed by
law, to fix by resolution or resolutions the designations, powers, preferences
and rights, and the qualifications, limitations or restrictions thereof, of each
such series of Preferred Stock, including without limitation authority to fix by
resolution or resolutions, the dividend rights, dividend rate, conversion
rights, voting rights, rights and terms of redemption (including sinking fund
provisions), redemption price or prices, and liquidation preferences of any
wholly unissued series of Preferred Stock, and the number of shares constituting
any such series and the designation thereof, or any of the foregoing.
The Board of Directors is further authorized to increase (but not above the
total number of authorized shares of the class) or decrease (but not below the
number of shares of any such series then outstanding) the number of shares of
any series, the number of which was fixed by it, subsequent to the issue of
shares of such series then outstanding, subject to the powers, preferences and
rights, and the qualifications, limitations and restrictions thereof stated in
the resolution of the Board of Directors originally fixing the number of shares
of such series. If the number of shares of any series is so decreased, then the
shares constituting such decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing the number of shares of such
series.
ARTICLE FIVE
------------
The Corporation is to have perpetual existence.
ARTICLE SIX
-----------
Elections of directors need not be by written ballot unless a stockholder
demands election by written ballot at the meeting and before voting begins or
unless the Bylaws of the Corporation shall so provide.
ARTICLE SEVEN
-------------
The number of Directors which constitute the whole Board of Directors of
the Corporation and the manner of their election shall be designated in the
Bylaws of the Corporation.
ARTICLE EIGHT
-------------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Corporation.
2
<PAGE>
ARTICLE NINE
------------
(a) To the fullest extent permitted by the Delaware General Corporation
Law as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(b) The Corporation may indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer, employee or
agent of the Corporation or any predecessor of the Corporation or serves or
served at any other enterprise as a director, officer, employee or agent at the
request of the Corporation or any predecessor to the Corporation.
(c) Neither any amendment nor repeal of this Article Nine, nor the
adoption of any provision of this Corporation's Certificate of Incorporation
inconsistent with this Article Nine, shall eliminate or reduce the effect of
this Article Nine, in respect of any matter occurring, or any action or
proceeding accruing or arising or that, but for this Article Nine, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision.
ARTICLE TEN
-----------
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE ELEVEN
--------------
Vacancies created by newly created directorships, created in accordance
with the Bylaws of this Corporation, may be filled by the vote of a majority,
although less than a quorum, of the directors then in office, or by a sole
remaining director.
ARTICLE TWELVE
--------------
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Corporation.
ARTICLE THIRTEEN
----------------
3
<PAGE>
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
THIRD: The foregoing amendment and restatement of the Certificate of
-----
Incorporation has been duly adopted by resolutions adopted by the Board of
Directors of the Corporation in accordance with the provisions of Section
242(b)(1) of the General Corporation Law of Delaware.
FOURTH: The foregoing amendment and restatement of the Certificate of
------
Incorporation has been duly adopted by the written consent of the holders of a
majority of the outstanding Common Stock, in accordance with the provisions of
Section 228 of the General Corporation Law of Delaware.
FIFTH: The foregoing amendment and restatement of the Certificate of
-----
Incorporation has been duly adopted in accordance with Section 245 of the
General Corporation Law of Delaware.
IN WITNESS WHEREOF, TIBCO Software Inc. has caused this certificate to be
executed by Vivek Ranadive, its President, this ______ day of __________ 1999.
TIBCO SOFTWARE INC.,
a Delaware corporation
By:
-------------------------------
Vivek Ranadive, President
4
<PAGE>
Exhibit 3.2(b)
FORM OF BYLAWS
OF
TIBCO SOFTWARE INC.
(A Delaware Corporation)
<PAGE>
BYLAWS
OF
TIBCO SOFTWARE INC.
ARTICLE I
CORPORATE OFFICES
-----------------
I.1 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
I.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
II.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
II.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such designation,
the annual meeting of stockholders shall be held on the third Thursday in May of
each year at 10:00 a.m. However, if such day falls on a legal holiday, then the
meeting shall be held at the same time and place on the next succeeding full
business day. At the meeting, directors shall be elected, and any other proper
business may be transacted.
<PAGE>
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (A) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the board of directors, (B) otherwise properly brought before the meeting by
or at the direction of the board of directors, or (C) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the secretary of the corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than 120 calendar days
in advance of the date specified in the corporation's proxy statement released
to stockholders in connection with the previous year's annual meeting of
stockholders; provided, however, that in the event that no annual meeting was
held in the previous year or the date of the annual meeting has been changed by
more than 30 days from the date contemplated at the time of the previous year's
proxy statement, notice by the stockholder to be timely must be so received a
reasonable time before the solicitation is made. A stockholder's notice to the
secretary shall set forth as to each matter the stockholder proposes to bring
before the annual meeting: (i) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (ii) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business and
(v) any other information that is required to be provided by the stockholder
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act"), in his or her capacity as a proponent of a stockholder
proposal. Notwithstanding the foregoing, in order to include information with
respect to a stockholder proposal in the proxy statement and form of proxy for a
stockholder's meeting, a stockholder must provide notice as required by the
regulations promulgated under the 1934 Act. Notwithstanding anything in these
Bylaws to the contrary, no business shall be conducted at any annual meeting
except in accordance with the procedures set forth in this paragraph (b). The
chairman of the annual meeting shall, if the facts warrant, determine and
declare at the meeting that business was not properly brought before the meeting
and in accordance with the provisions of this paragraph (b), and, if he or she
should so determine, he or she shall so declare at the meeting that any such
business not properly brought before the meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the
procedures set forth in this paragraph (c) shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
corporation may be made at a meeting of stockholders by or at the direction of
the board of directors or by any stockholder of the corporation entitled to vote
in the election of directors at the meeting who complies with the notice
procedures set forth in this paragraph (c). Such nominations, other than those
made by or at the direction of the board of directors, shall be made pursuant to
timely notice in writing to the secretary of the corporation in accordance with
the provisions of paragraph (b) of this Section 2.2. Such stockholder's notice
shall set forth (i) as to each person, if any, whom the stockholder proposes to
nominate for election or re-election as a director: (A) the name, age, business
address and residence address of such person,
2
<PAGE>
(B) the principal occupation or employment of such person, (C) the class and
number of shares of the corporation which are beneficially owned by such person,
(D) a description of all arrangements or understandings between the stockholder
and each nominee and any other person or persons (naming such person or persons)
pursuant to which the nominations are being made by the stockholder, and (E) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for elections of directors, or is otherwise required,
in each case pursuant to Regulation 14A under the 1934 Act (including without
limitation such person's written consent to being named in the proxy statement,
if any, as a nominee and to serving as a director if elected); and (ii) as to
such stockholder giving notice, the information required to be provided pursuant
to paragraph (b) of this Section 2.2. At the request of the board of directors,
any person nominated by a stockholder for election as a director shall furnish
to the secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrants, determine and declare at the
meeting that a nomination was not made in accordance with the procedures
prescribed by these Bylaws, and if he or she should so determine, he or she
shall so declare at the meeting, and the defective nomination shall be
disregarded.
II.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the
board of directors, the chairman of the board, the president or one or more
affiliated stockholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at the meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. No business may be transacted at such special
meeting otherwise than specified in such notice. The officer receiving the
request shall cause notice to be promptly given to the stockholders entitled to
vote, in accordance with the provisions of Sections 2.4 and 2.5 of these bylaws,
that a meeting will be held at the time requested by the person or persons
calling the meeting so long as that time is not less than fifteen (15) nor more
than sixty (60) days after the receipt of the request. If the notice is not
given within twenty (20) days after receipt of the request, then the person or
persons in this paragraph of this Section 2.3 shall be construed as limiting,
fixing or affecting the time when a meeting of stockholders called by action of
the board of directors may be held.
II.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
3
<PAGE>
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and (i) in the case of a special meeting,
the general nature of the business to be transacted (no business other than that
specified in the notice may be transacted) or (ii) in the case of the annual
meeting, those matters which the board of directors, at the time of giving the
notice, intends to present for action by the stockholders (but any proper matter
may be presented at the meeting for such action). The notice of any meeting at
which directors are to be elected shall include the name of any nominee or
nominees who, at the time of the notice, the board intends to present for
election.
II.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
II.6 QUORUM
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stock holders for the transaction of business
except as otherwise provided by statute. If, however, such quorum is not
present or represented at any meeting of the stockholders, then the stockholders
entitled to vote thereat, present in person or represented by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum is present or represented. At such
adjourned meeting at which a quorum is present or represented, any business may
be transacted that might have been transacted at the meeting as originally
noticed.
II.7 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than forty-five (45) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
II.8 CONDUCT OF BUSINESS
-------------------
4
<PAGE>
Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his or her absence by the vice chairman of the board, if
any, or in his or her absence by the chief executive officer, if any, or in his
or her absence by the president, if any, or in his or her absence a vice
president, or in the absence of the foregoing persons by a chairman designated
by the board of directors, or in the absence of such designation by a chairman
chosen at the meeting. The secretary shall act as secretary of the meeting, but
in his or her absence the chairman of the meeting may appoint any person to act
as secretary of the meeting.
II.9 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.12 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
the Stockholders Agreement, each stockholder shall be entitled to one vote for
each share of capital stock held by such stockholder.
Any stockholder entitled to vote on any matter may vote part of the shares
in favor of the proposal and refrain from voting the remaining shares or, except
when the matter is the election of directors, may vote them against the
proposal; but if the stockholder fails to specify the number of shares which the
stockholder is voting affirmatively, it will be conclusively presumed that the
stock holder's approving vote is with respect to all shares which the
stockholder is entitled to vote.
If a quorum is present, the affirmative vote of at least a majority of the
voting power of the shares represented, in person or by proxy, and voting at a
duly held meeting (which shares voting affirmatively also constitute at least a
majority of the voting power of the required quorum) shall be the act of the
stockholders, unless the vote of a greater number or a vote by classes is
required by law or by the Certificate of Incorporation
II.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
5
<PAGE>
II.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Unless otherwise provided in the certificate of incorporation, any action
required by this chapter to be taken at any annual or special meeting of
stockholders of a corporation, or any action that may be taken at any annual or
special meeting of such stockholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which all shares entitled to vote thereon were
present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stock holders
at a meeting thereof, then the certificate filed under such section shall state,
in lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
II.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corporate action in writing without a meeting,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action, and in such
event only stockholders of record on the date so fixed are entitled to notice
and to vote or to give consents, as the case may be, notwithstanding any
transfer of any shares on the books of the corporation after the record date.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
6
<PAGE>
(ii) The record date for determining stockholders entitled to
express consent to corporate action in writing without a meeting, when no prior
action by the board of directors is necessary, shall be the day on which the
first written consent is expressed.
(iii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
II.13 PROXIES
-------
Every person entitled to vote for Directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the Secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. A duly executed proxy shall
be irrevocable if it states that it is irrevocable and if, and only as long as,
it is coupled with an interest sufficient in law to support an irrevocable
power. A stockholder may revoke any proxy which is not irrevocable by attending
the meeting and voting in person or by filing an instrument in writing revoking
the proxy or another duly executed proxy bearing a later date with the secretary
of the corporation.
II.14 INSPECTORS OF ELECTION
----------------------
Before any meeting of stockholders, the board of directors may appoint an
inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any stockholder or a stockholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The
number of inspectors shall be either one or three. If inspectors are appointed
at a meeting pursuant to the request of one or more stockholders or proxies,
then the holders of a majority of the voting power of shares or their proxies
present at the meeting shall determine whether one or three inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, then the chairman of the meeting may, and upon the request of
any stockholder or a stockholder's proxy shall, appoint a person to fill that
vacancy.
Such inspectors shall:
7
<PAGE>
(i) determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(ii) receive votes, ballots or consents;
(iii) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(iv) count and tabulate all votes or consents;
(v) determine when the polls shall close;
(vi) determine the result; and
(vii) do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
---------
III.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
III.2 NUMBER OF DIRECTORS
-------------------
The number of directors which constitute the whole Board of Directors shall
be fixed exclusively by one or more resolutions adopted from time to time by the
Board of Directors.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
III.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these bylaws or the certificate of
incorporation, directors shall be elected at each annual meeting of stockholders
to hold office until the next annual
8
<PAGE>
meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
III.4 BOARD REPRESENTATION
--------------------
If the corporation has nine (9) or less directors, the corporation shall
cause the election of the following individuals to the board of directors: (i)
so long as Reuters (or any affiliate of Reuters) holds capital stock
representing forty percent (40%) or more of the issued and outstanding voting
securities of the Corporation (Voting Shares), three directors selected by
Reuters, (ii) so long as Reuters (or any affiliate of Reuters) holds less than
forty percent (40%) but at least twenty-five percent (25%) of the issued and
outstanding Voting Shares, two directors selected by Reuters, (iii) so long as
Reuters (or any affiliate of Reuters) holds less than twenty-five percent (25%)
but at least fifteen percent (15%) of the issued and outstanding Voting Shares,
one director selected by Reuters.
If the total number of directors is increased above nine (9), the
corporation will cause the election of additional Reuters-selected directors so
that the adjusted ratio of Reuters-selected directors to total directors is not
less than ratio set forth above.
III.5 RESIGNATION AND VACANCIES
-------------------------
Any director may resign at any time upon written notice to the attention of
the Secretary of the corporation. Subject to the provisions of the certificate
of incorporation and section 3.4 of these bylaws, when one or more directors so
resigns and the resignation is effective at a future date, a majority of the
directors then in office, including those who have so resigned, shall have power
to fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the
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directors elected by such class or classes or series thereof then in office, or
by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
III.6 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
III.7 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
III.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any one director.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
III.9 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by the certificate of incorporation or by
applicable law. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
III.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
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III.11 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
III.12 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
III.13 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
III.14 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, and except as otherwise provided by
the certificate of incorporation or these bylaws, any director or the entire
board of directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of directors;
provided, however, that, if and so long as stockholders of the corporation are
entitled to cumulative voting, if less than the entire board is to be removed,
no director may be removed without cause if the votes cast against his or her
removal would be sufficient to elect such director if then cumulatively voted at
an election of the entire board of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
ARTICLE IV
COMMITTEES
----------
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IV.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not such
member or members constitute a quorum, may unanimously appoint another member of
the board of directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the board of directors or in the bylaws of the corporation, shall
have and may exercise all the powers and authority of the board of directors in
the management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers that may require it; but
no such committee shall have the power or authority to (i) amend the certificate
of incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix the designations and any of the preferences or
rights of such shares relating to dividends, redemption, dissolution, any
distribution of assets of the corporation or the conversion into, or the
exchange of such shares for, shares of any other class or classes or any other
series of the same or any other class or classes of stock of the corporation or
fix the number of shares of any series of stock or authorize the increase or
decrease of the shares of any series), (ii) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (iii) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the by-laws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
IV.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
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IV.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.6
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.8 (quorum), Section 3.10
(waiver of notice), and Section 3.11 (action without a meeting), with such
changes in the context of those bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may be determined
either by resolution of the board of directors or by resolution of the
committee, that special meetings of committees may also be called by resolution
of the board of directors and that notice of special meetings of committees
shall also be given to all alternate members, who shall have the right to attend
all meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
OFFICERS
--------
V.1 OFFICERS
--------
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, one or more vice presidents, one or
more assistant vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and any such other officers as may be appointed in
accordance with the provisions of Section 5.3 of these bylaws. Any number of
offices may be held by the same person.
V.2 APPOINTMENT OF OFFICERS
-----------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be appointed by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
V.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or empower the chief executive officer
of the corporation to appoint, such other officers and agents as the business of
the corporation may require, each of whom shall hold office for such period,
have such authority, and perform such duties as are provided in these bylaws or
as the board of directors may from time to time determine.
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V.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
V.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
V.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected and unless
otherwise designated by the board of directors, shall, if present, preside at
meetings of the board of directors. In addition, such officer shall exercise and
perform such other powers and duties as may from time to time be assigned to him
by the board of directors or as may be prescribed by these bylaws. If so
designated by the board of directors, then the chairman of the board shall also
be the chief executive officer of the corporation and shall have the powers and
duties prescribed in Section 5.7 of these bylaws.
V.7 PRESIDENT
---------
Subject to such powers and duties, if any, as may be given by the board of
directors to the chairman of the board or any vice chairman, if there be such an
officer, the president shall be the chief executive officer of the corporation
and shall, subject to the control of the board of directors, have general
supervision, direction, and control of the business and the officers of the
corporation. The president shall preside at all meetings of the stockholders
and, in the absence or nonexistence of a chairman of the board or if otherwise
designated by the board of directors, at all meetings of the board of directors.
The president shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
V.8 VICE PRESIDENTS
---------------
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In the absence or disability of the chairman of the board, any vice
chairman and the president, the vice presidents, if any, in order of their rank
as fixed by the board of directors or, if not ranked, a vice president
designated by the board of directors, shall perform all the duties of the
president and when so acting shall have all the powers of, and be subject to all
the restrictions upon, the president. The vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed for
them respectively by the board of directors, these bylaws, the president or the
chairman of the board.
V.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. The secretary shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the board of directors or by these bylaws.
V.10 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. The chief financial officer shall disburse
the funds of the corporation as may be ordered by the board of directors, shall
render to the chief executive officer and directors, whenever they request it,
an account of all his or her transactions as chief financial officer and of the
financial condition of the
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corporation, and shall have other powers and perform such other duties as may be
prescribed by the board of directors or these bylaws.
The chief financial officer shall be the treasurer of the corporation
unless otherwise designated by the board of directors.
V.11 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as may be
prescribed by the board of directors or these bylaws.
V.12 ASSISTANT TREASURER
-------------------
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the chief financial officer or in the event of his or
her inability or refusal to act, perform the duties and exercise the powers of
the chief financial officer and shall perform such other duties and have such
other powers as may be prescribed by the board of directors or these bylaws.
V.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
V.14 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
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INDEMNITY
---------
VI.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation that was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
VI.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorney's fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
VI.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
6.4 EXPENSES
--------
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The corporation shall advance to any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that he or she is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise, prior to the final disposition of the proceeding, promptly
following request therefor, all expenses incurred by such person in connection
with such proceeding upon receipt of an undertaking by or on behalf of such
person to repay said amounts if it should be determined ultimately that such
person is not entitled to be indemnified under this Article VI or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
Section 6.5, no advance shall be made by the corporation to an officer of the
corporation (except by reason of the fact that such officer is or was a director
of the corporation in which event this paragraph shall not apply) in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, if
a determination is reasonably and promptly made by the board of directors (i) by
a majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, if
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, that the facts known to the determining party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe either to be
in or not to be opposed to the best interests of the corporation.
VI.5 NON-EXCLUSIVITY OF RIGHTS
-------------------------
The rights conferred on any person by this Bylaw shall not be exclusive of
any other right which such person may have or hereafter acquire under any
statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote
of stockholders or disinterested directors or otherwise, either as to action in
his or her official capacity or as to action in any other capacity while holding
office. The corporation is specifically authorized to enter into individual
contracts with any or all of its directors, officers, employees and agents
respecting indemnification and advances to the fullest extent not prohibited by
the General Corporation Law of Delaware.
VI.6 SURVIVAL OF RIGHTS
------------------
The rights conferred on any person by this Bylaw shall continue as to a
person who has ceased to be a director, officer, employee or other agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
VI.5 AMENDMENTS
----------
Any repeal or modification of this Bylaw shall have prospective effect
only, and shall not affect the rights of any person under this Bylaw as in
effect at the time of an alleged action or
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omission to act giving rise to a proceeding against such person, if such alleged
action or omission occurred prior to the repeal or modification of this Bylaw.
ARTICLE VII
RECORDS AND REPORTS
-------------------
VII.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive officer or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent so to act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, showing the address of each stockholder and the number of
shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
VII.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a
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director. The Court of Chancery is hereby vested with the exclusive jurisdiction
to determine whether a director is entitled to the inspection sought. The Court
may summarily order the corporation to permit the director to inspect any and
all books and records, the stock ledger, and the stock list and to make copies
or extracts therefrom. The Court may, in its discretion, prescribe any
limitations or conditions with reference to the inspection, or award such other
and further relief as the Court may deem just and proper.
VII.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
ARTICLE VIII
GENERAL MATTERS
---------------
VIII.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
VIII.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
VIII.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of the corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation.
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Notwithstanding the adoption of such a resolution by the board of directors,
every holder of stock represented by certificates and upon request every holder
of uncertificated shares shall be entitled to have a certificate signed by, or
in the name of the corporation by the chairman or vice-chairman of the board of
directors, or the president or vice-president, and by the chief financial
officer or an assistant treasurer, or the secretary or an assistant secretary of
such corporation representing the number of shares registered in certificate
form. Any or all of the signatures on the certificate may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate has ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the corporation with the same effect as if the person were such officer,
transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
VIII.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
VIII.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be
22
<PAGE>
made against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
VIII.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
VIII.7 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
(i) the General Corporation Law of Delaware or (ii) the certificate of
incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
VIII.8 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
VIII.9 SEAL
----
The corporation may adopt a corporate seal, which shall be adopted and
which may be altered by the board of directors, and may use the same by causing
it or a facsimile thereof to be impressed or affixed or in any other manner
reproduced.
VIII.10 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
-----------------------------------------------------
For purposes of determining the stockholders entitled to receive payment of
any dividend or other distribution or allotment of any rights, or for purposes
of determining the stockholders entitled to exercise any rights in respect of
any other lawful action (other than action by stockholders by written consent
without a meeting), the board of directors may fix, in advance, a record date,
which shall not be more than 60 days before any such action. In that case, only
stockholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
23
<PAGE>
shares on the books of the corporation after the record date so fixed, except as
otherwise provided by law.
If the board of directors does not so fix a record date, then the record
date for determining stockholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution, or the
60th day before the date of that action, whichever is later.
ARTICLE IX
AMENDMENTS
----------
Subject to any voting requirements set forth in the corporation's
certificate of incorporation, the bylaws of the corporation may be adopted,
amended or repealed by the stockholders entitled to vote; provided, however,
that the corporation may, in its certificate of incorporation, confer the power
to adopt, amend or repeal bylaws upon the directors. The fact that such power
has been so conferred upon the directors shall not divest the stockholders of
the power, nor limit their power to adopt, amend or repeal bylaws. Provided that
so long as Reuters and its affiliates own at least twenty percent (20%) of the
outstanding voting securities of the company, sections 2.3, 2.11, and 3.8 of
these bylaws cannot be amended by either the directors or the stockholders of
the corporation without the express written consent of Reuters; and provided
further that so long as Reuters holds ten percent (10%) of the outstanding
voting securities of the corporation, section 3.4 cannot be amended by either
the directors or the stockholders of the corporation without the express written
consent of Reuters.
ARTICLE X
DISSOLUTION
-----------
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation be dissolved, the board, after the
adoption of a resolution to that effect by a majority of the whole board at any
meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the voting power of the outstanding stock of the
corporation entitled to vote thereon votes for the proposed dissolution, then a
certificate stating that the dissolution has been authorized in accordance with
the provisions of Section 275 of the General Corporation Law of Delaware and
setting forth the
24
<PAGE>
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
---------
XI.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(a) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(b) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(c) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
25
<PAGE>
XI.2 DUTIES OF CUSTODIAN
-------------------
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
26
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0
27
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