<PAGE>
As filed with the Securities and Exchange Commission on June 18, 1999
Registration No. 333-78195
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
----------------
Amendment No. 2
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: [_]
----------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================
Title of Each Class of Proposed Maximum Amount of Registration
Securities to be Registered Aggregate Offering Price (2) Fee (3)
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<S> <C> <C>
Common Stock, $0.001 par
value(1) .................. $92,345,000 $25,672
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
(1) The shares of common stock are not being registered for the purpose of
sales outside the United States.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act.
(3) $16,680 of the registration fee was paid in connection with the initial
filing.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+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 June 18, 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 in New York, New York 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 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 affected 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
platforms 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, Glaxo Wellcome,
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.
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 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.
3
<PAGE>
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 platform 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 the TIB/ActiveEnterprise platform to expand our e-business
infrastructure solutions.
. Pursue a license-driven business strategy. We plan to expand
relationships with systems integrators and professional services firms to
increase the deployment of our products.
. Leverage our vertical market expertise. We plan to expand our presence in
vertical 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 57 for a description of arrangements that will
enable Reuters to exercise influence over our company. We license the
technology underlying some of our TIB/ActiveEnterprise products from Reuters,
and Reuters is our preferred distributor in the financial services market. When
we refer to Reuters in this prospectus, we include Reuters Group PLC and its
consolidated subsidiaries, including TIBCO Finance Technology, Inc. ("TFT"),
but excluding our company, TIBCO Software Inc.
4
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered....................... 7,300,000 shares
Common stock to be outstanding after this
offering.................................. 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
this offering.
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
4,716,159 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
1,168,984 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 the shares of common stock we are offering and the application
of the net proceeds we will receive from such sale.
<TABLE>
<CAPTION>
Eleven Six Months 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) (8,224)
Net loss................ (4,640) (4,663) (12,951) (3,941) (8,231)
Net loss per share:
Basic and diluted..... $ (0.24) $ (0.65) $ (0.20) $ (0.39)
======= ======== ======= =======
Weighted average
shares............... 19,202 20,011 19,720 20,840
======= ======== ======= =======
Pro forma net loss per
share:
Basic and diluted
(unaudited).......... $ (0.28) $ (0.17)
======== =======
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) (25,845) (25,845)
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 59. 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.
6
<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
55 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
7
<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.
8
<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 $39.0 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
9
<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
11
<PAGE>
company and stock issuances and acquisitions in excess of specified thresholds.
Our stock price may be volatile, which could cause investors to lose all or
part of their investments in our stock
The stock market in general, and the stock prices of technology companies in
particular, have recently experienced volatility which has often been unrelated
to the operating performance of any particular company or companies. If market
or industry-based fluctuations continue, our stock price could decline
regardless of our actual operating performance and investors could lose all or
part of their investments.
Future dispositions of our common stock by Reuters could adversely affect the
market price of our common stock
Any sale or distribution by Reuters of a substantial amount of common stock
in the public market or to its stockholders, or the perception that such a sale
or distribution could occur, could have an adverse effect on the market price
of our common stock. Following 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.
COMPANY BACKGROUND
TIBCO Software is the successor to a portion of the business of Teknekron
Software Systems, Inc., which was founded in 1985 by Vivek Ranadive, our
President and Chief Executive Officer. In the late 1980s, Teknekron was 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. In 1992, Teknekron expanded its product and service offerings to
include solutions for companies outside the financial services sector.
Teknekron was acquired by Reuters, the global news and information group, in
March 1994. In 1996, Teknekron changed its name to TIBCO Inc. In January 1997,
TIBCO Software was established as a separate entity from TIBCO Inc. 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.
TIBCO Inc. changed its name to TIBCO Finance Technology, Inc. in 1997. TFT
remains a wholly-owned subsidiary of Reuters and focuses its business on
providing TIB technology-based financial software and custom solutions to the
financial services and insurance industries. Through a license and distribution
agreement with us, Reuters is the preferred distributor of our products in the
financial services market.
Following this offering, Reuters will own approximately 65.5% of our
outstanding shares of common stock, or 64.3% if the underwriters' option to
purchase additional shares is exercised in full. See "Relationship with Reuters
and Certain Transactions" beginning on page 55 for a more detailed description
of our relationship with Reuters.
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 from this offering 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 from 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--100,000,000 shares
authorized, 7,982,000 shares issued and outstanding..... 23 58
Additional paid-in capital............................... 49,765 113,498
Unearned compensation.................................... (6,330) (6,330)
Accumulated deficit...................................... (25,845) (25,845)
-------- --------
Total capitalization..................................... $ 17,640 $ 81,381
======== ========
</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 1,168,984 shares reserved for future grants under our 1996 Stock
Option Plan and our 1998 Director Option Plan. See "Management--Stock Plans"
beginning on page 52 for a description of these plans, and "Description of
Capital Stock" beginning on page 63 and Note 8 of Notes to Financial
Statements beginning on page F-18 for a description of our capital stock.
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 $7.60 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.............. $ 7.60
======
</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 52 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 2,680
------- -------- ------- ------- -------- ------- --------
Total operating
expenses.............. 4,344 27,597 13,798 24,630 39,118 16,060 31,056
------- -------- ------- ------- -------- ------- --------
Loss from operations.... (3,976) (16,261) (3,089) (5,203) (14,043) (4,511) (8,224)
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) $ (8,231)
======= ======== ======= ======= ======== ======= ========
Net loss per share--
basic and diluted...... $ (0.24) $ (0.65) $ (0.20) $ (0.39)
======= ======== ======= ========
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)
Balance Sheet Data: (in thousands)
<S> <C> <C> <C> <C> <C> <C>
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 55 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
18
<PAGE>
connection with our formation, fees from 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 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 55 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 7
--- --- --- ----- -----
Total operating
expenses........... 45 70 75 64 79
--- --- --- ----- -----
Loss from operations.... (10) (15) (27) (18) (21)
Other income (expense),
net.................... (5) 2 2 2 --
--- --- --- ----- -----
Net loss................ (15)% (13)% (25)% (16)% (21)%
=== === === ===== =====
</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 55 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.
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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 of 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 $18.0 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 $1.7 million, $2.4 million, $1.3 million, $0.6 million, $0.2 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 $2.7 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 $3.0 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
$9.4 million or 27% of total revenue in fiscal 1997 to $14.8 million or 28% of
total revenue in
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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 $3.5 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 $1.0 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 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
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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
$1.6 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 1,403 1,277
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 6,218 6,775 7,654 8,406 10,412 12,646 13,997 17,059
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (4) (1,989) (2,416) (2,095) (6,132) (3,400) (3,488) (4,736)
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) $(3,762) $(4,469)
======= ======= ======= ======= ======= ======= ======= =======
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 8 6
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............ 59 69 64 65 96 74 77 81
------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... -- (20) (20) (16) (57) (20) (19) (22)
Other income (expense),
net.................... 2 3 2 2 3 1 (2) 1
------- ------- ------- ------- ------- ------- ------- -------
Net income (loss)....... 2 % (17)% (18)% (14)% (54)% (19)% (21)% (21)%
======= ======= ======= ======= ======= ======= ======= =======
</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 61 for more detail on Cisco's and
Mayfield's equity holdings.
Net cash provided by operating activities in fiscal 1997 was $2.4 million,
resulting primarily
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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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<PAGE>
. Contingency Planning--creating and/or evaluating the needs for
contingency plans to address potential worst-case scenarios.
Our state of readiness and business risks
We have completed an assessment of both our information technology systems
and our non-information technology systems. Based upon our examination, we
believe that our non-information technology systems do not contain any elements
that are susceptible to Year 2000 problems. However, we will modify or replace
some portions of our internal information technology systems as Year 2000-
compliant versions of these systems are released by outside vendors (e.g.
Microsoft releases of Windows NT). If, in the worst case scenario, such
replacement is not made, or is not completed on a timely basis, our operations
could be materially affected.
As part of our Year 2000 program, we have assessed, remediated and certified
all of the standard products we currently market. We are also working with our
customers to ensure that they are aware of our Year 2000 program and have
provided them with information on which current and past products are covered
by our standard Year 2000 product warranty. Despite investigation and testing
by us, there can be no assurances that software products we developed will not
contain undetected errors or defects associated with Year 2000 date functions.
If, in the worst case scenario, our products are affected by date-related
issues, our customers may file claims against us or require us to repair any
damage to their systems caused by our products. In addition, our revenues may
be adversely affected, our maintenance, technical support and management costs
could increase and our reputation could be damaged.
Our operations also rely on third party suppliers of data,
telecommunications, utilities and building services. We have completed
contacting our critical suppliers about the nature and progress of their Year
2000 compliance to determine the extent to which their failure to remedy their
own Year 2000 problems could materially affect us. Our critical information
technology suppliers have generally provided assurances as to their Year 2000
readiness, but it has been difficult to obtain full assurances of Year 2000
compliance from telecommunications infrastructure and utility suppliers which
generally do not provide such assurances. We intend to consider use of
alternative telecommunications and utility suppliers if reasonable assurances
are not provided. Any Year 2000-related failure of any of our critical
suppliers could cause a significant disruption of our business.
Costs
To date, we have spent approximately $200,000 on Year 2000 assessment,
remediation and communication with customers, vendors and partners. This cost
does not include product development expenses, which inherently include costs
related to addressing date sensitivities in our products. Based on our
experience to date and our internal assessment, we do not anticipate that
additional costs associated with remedying our internal systems will be
material.
Contingency plans
We are in the process of creating contingency plans to deal with potential
worst-case scenarios and intend to complete such plans before the fourth
quarter of fiscal 1999. We already have in place as part of our day-to-day
operations plans that can be executed in the event of certain service failures.
These operational plans will form the basis of any Year 2000 contingency plan
after being checked for applicability and enhanced as appropriate.
Recent Accounting Pronouncements
In October 1997, March 1998 and December 1998, the American Institute of
Certified Public Accountants, also known as the AICPA, issued Statements of
Position commonly called SOPs, 97-2, "Software Revenue Recognition", SOP 98-4,
"Deferral of the Effective Date of a Provision of SOP 97-2, "Software Revenue
Recognition''' and 98-9, "Modification of SOP 97-2, "Software Revenue
28
<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.
29
<PAGE>
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 transaction of business, but enterprises will be
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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 products that provides a
software platform for the real-time distribution of information. The
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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, telecommunications and energy companies and
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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 products in the
financial services industry
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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 here is a visual representation of the functionality provided by
our TIB/ActiveEnterprise product suite]
[TIB/AE MODEL GRAPHIC]
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
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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.
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.
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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 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]
[TIB/AE MODEL GRAPHIC]
[Set forth below is a visual representation of our TIB/ActiveEnterprise
products 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.]
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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.
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
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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 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.
<TABLE>
<CAPTION>
Telecom Energy Financial Services
- ------- ------ ------------------
<S> <C> <C>
Ericsson Chevron Cedel Global Services
PageNet Marubeni Fidelity
Telia Mobil First National Bank
Pacific Power of South Africa
Goldman Sachs
High-Tech Manufacturing The Nasdaq Stock Market
- ----------------------- National Westminster
3Com Internet and Other Bank
Compaq ------------------ Unibank
Hyundai Bechtel
Intel Glaxo Wellcome
Lucent Technologies Intuit
Motorola Yahoo!
NEC Electronics
Philips Medical
Taiwan Semiconductor Manufacturing Company
United Microelectronics Corp.
</TABLE>
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 55 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.
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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,
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.
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 55 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 55 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
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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 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
41
<PAGE>
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 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.
42
<PAGE>
Executive Offices and Web Site
Our principal executive office is located at 3165 Porter Drive, Palo Alto,
California 94304, and our telephone number at that address is (650) 846-5000.
We maintain a web site at www.tibco.com. Information contained on our site is
not part of this prospectus.
Facilities
We lease approximately 93,000 square feet in a single office building located
in Palo Alto, California. We also lease office space in Virginia and Australia
and in various cities in the United States and internationally to support our
sales and marketing personnel worldwide. We believe that our existing
facilities are adequate to meet our current and foreseeable requirements, or
that suitable additional space will be available on commercially reasonable
terms.
43
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information with respect to our
executive officers and directors as of the date of this prospectus.
Executive Officers and Directors
<TABLE>
<CAPTION>
Name Age Position(s)
------------------------- --- -----------------------------------------------
<C> <C> <S>
Vivek Y. Ranadive 41 President, Chief Executive Officer and Chairman
of the Board
Paul G. Hansen 49 Executive Vice President, Finance and Chief
Financial Officer
Rajesh U. Mashruwala 47 Executive Vice President, Sales and Marketing
Executive Vice President, General Counsel and
Robert P. Stefanski 37 Secretary
Executive Vice President, Engineering and
Richard M. Tavan 50 Operations
Christopher G. O'Meara 41 Vice President, Finance
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.
44
<PAGE>
Richard M. Tavan has served as Executive Vice President, Engineering and
Operations of TIBCO Software since January 1997. From November 1986 to January
1997, 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.
45
<PAGE>
The service of some of our directors as directors, officers or employees of
Reuters could create or appear to create potential conflicts of interest when
these directors are faced with decisions that could have different implications
for us and Reuters. Such decisions may be required in connection with potential
acquisitions or financing transactions or other corporate opportunities that
may be suitable for both us and Reuters or TFT. None of our significant
corporate stockholders, including Reuters, is prohibited from competing with
us. See "Risk Factors -- Our licensing and distribution relationship with
Reuters places limitations on our ability to conduct our business" beginning on
page 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 57 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 53 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.
46
<PAGE>
Compensation Committee Interlocks and Insider Participation
During fiscal 1998, our compensation committee consisted of Messrs. Listwin
and White and Simon Yencken, one of our former directors. Neither Mr. Listwin
nor Mr. Yencken were our employees or employees of our subsidiaries during
fiscal 1998 or at any time prior to fiscal 1998. Since August 1997, Mr. White
has provided consulting services to us. In connection with these consulting
services, we paid $314,000 to Mr. White and granted him options to purchase
150,000 shares of our common stock in fiscal 1998. In fiscal 1998, we also
granted to Mr. White options to purchase 50,000 shares of common stock for
serving as a director. In fiscal 1997, we paid $79,000 to Mr. White and granted
him options to purchase 200,000 shares of our common stock for consulting
services rendered.
Mr. Listwin is Executive Vice President of Cisco Systems, Inc. Another of our
directors, Mr. Kozel, was an executive officer at Cisco during part of fiscal
1998 and is currently a member of Cisco's board of directors. We have from time
to time in the past entered into technology licensing transactions with Cisco
in the ordinary course of our business, and we expect to continue doing so in
the future. See "Relationship with Reuters and Certain Transactions--Other
Transactions" on page 60 for a more detailed description of these transactions.
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.
47
<PAGE>
Key Employees
The following table sets forth certain information with respect to some of
our key employees as of the date of this prospectus.
<TABLE>
<CAPTION>
Name Position(s)
-------------------- --------------------------------------------------
<C> <S>
Frank J. Bergandi Vice President, Sales--Americas
Tugrul Firatli Vice President, Telecommunications & Networking
Solutions
Thomas W. Jasek Senior Vice President, Business Development
Thomas Joseph Chief Technology Officer
Ginger M. Kelly Vice President, Corporate Controller and
Chief Accounting Officer
John Kirkman Vice President, Systems and Services
Kevin Korpak Vice President, Central Region
Thomas Kucher Vice President, Eastern Region
Julian H. Lloyd Vice President, Professional Services Group
Fredrick G. Meyer Vice President, Product Management
Richard J. O'Donnell Vice President, Corporate Marketing
Dennis R. Page Vice President, TIB Technology
Stephen J. Rom Vice President, Telecommunications Sales--Americas
Jayesh Shah Vice President, Internet Engineering
Darby E. Siempelkamp Vice President, Human Resources
Murat K. Sonmez Vice President and General Manager, EMEA
S. Srinivasan Vice President, Internet Solutions
Vijay N. Tella Vice President, Engineering
</TABLE>
48
<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.............. $375,250(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........... 188,333 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............... 202,404 65,000 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.
49
<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 60.
50
<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....... -- $ -- 3,500,000 732,500 $32,900,000 $6,792,500
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........ -- -- -- 226,000 -- 2,110,000
</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.
51
<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
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
52
<PAGE>
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
director is eligible to participate in the director plan. The director plan
will be adopted by our
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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 57 for a description of this
voting limitation.
Intercompany Agreements
License, Maintenance and Distribution Agreement with Reuters
On December 31,1996, we entered into a license, maintenance and distribution
agreement with Reuters and its wholly-owned subsidiary, TFT. The agreement was
amended in May 1999. The license agreement provides for the license of
technology and proprietary rights from Reuters to us, the license of technology
from us to Reuters, the maintenance of the licensed technology, the right of
Reuters to distribute our products and the related distribution fees and
limitations on our business in the financial services industry, all as further
described below. Please see Note 5 of the Notes to Financial Statements on
pages F-14 through F-17 for a summary of the payments made by us, Reuters and
TFT under the license, maintenance and distribution agreement. Reuters may
exercise its rights under the license agreement through its affiliates.
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.
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%.
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 determined to be invalid by a court, or if after the
expiration of our exclusive distribution
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<PAGE>
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 a fixed
percentage 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
60 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 service levels based on our past practice with
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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. Please see Note 5 of
Notes to Financial Statements for information regarding the amounts we have
paid to TFT for providing intercompany services since our inception on January
1, 1997.
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 the offering
would decrease from 65.5% to 55.6%.
Transactions with Cisco Systems
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.
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.
We have agreed to reimburse Reuters for $2.1 million of expenses incurred by
them in connection with this offering.
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 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.
62
<PAGE>
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% or
more of the voting stock outstanding of the corporation, at any time
within
63
<PAGE>
three years immediately prior to the relevant date, and
. an affiliate or associate of the persons described above.
Section 203 of the Delaware General Corporation Law may make it more difficult
for an "interested stockholder" to effect various business combinations with a
corporation for a three-year period, although the stockholders may, by adopting
an amendment to the corporation's certificate of incorporation or bylaws, elect
for the corporation not to be governed by Section 203, effective 12 months
after adoption. Neither our Certificate of Incorporation nor our Bylaws exempt
us from the restrictions imposed under Section 203. We anticipate that the
provisions of Section 203 may encourage companies interested in acquiring us to
negotiate in advance with our board of directors because the stockholder
approval requirement would be avoided if a majority of the directors then in
office approve either the business combination or the transaction that results
in the stockholder becoming an interested stockholder.
So long as Reuters owns at least 30% of our outstanding voting shares, we
will be required to obtain their consent in order to consummate certain
significant corporate transactions, including equity issuances, mergers,
consolidations, sales of assets or certain acquisitions. See "Relationship with
Reuters and Certain Transactions--Intercompany Agreements--Stockholders
Agreement" beginning on page 57.
Annual meetings of stockholders shall be held to elect our board of directors
and transact such other business as may be properly brought before the meeting.
Special meetings of stockholders may be called by the Chairman, the President,
any vice president or any one member of the board of directors. Our Certificate
of Incorporation and Bylaws provide that any action required or permitted to be
taken by our stockholders may be effected at a duly called annual or special
meeting of the stockholders. In addition, our Certificate of Incorporation and
Bylaws provide for an advance notice procedure for nomination by stockholders
of candidates for election of directors as well as other stockholder proposals
to be considered at annual stockholders' meetings.
Our Certificate of Incorporation may be amended with the approval of a
majority of the board of directors and the holders of a majority of our
outstanding voting securities.
The number of directors shall be fixed by resolution of the board of
directors. The size of the board of directors is currently fixed at nine
members. Following 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 cast by the stockholders entitled to vote generally shall
constitute a quorum for stockholder action at any meeting.
64
<PAGE>
Limitation of Liability; Indemnification
Our Certificate of Incorporation contains provisions permitted under Delaware
law relating to the liability of directors. These provisions eliminate a
director's personal liability for monetary damages resulting from a breach of
fiduciary duty, except in certain circumstances involving certain wrongful
acts, including
. for any breach of the director's duty of loyalty to us or our
stockholders,
. for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law,
. under Section 174 of the Delaware General Corporation Law, or
. for any transaction from which the director derives an improper personal
benefit.
These provisions do not limit or eliminate our rights or any stockholder rights
to seek non-monetary relief, such as an injunction or rescission, in the event
of a breach of a director's fiduciary duty. These provisions will not alter a
director's liability under federal securities laws. Our Bylaws also contain
provisions indemnifying our directors and officers to the fullest extent
permitted by Delaware law. We believe that these provisions are necessary to
attract and retain qualified individuals to serve as directors and officers.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the common stock is BankBoston, N.A.
65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to 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 the 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. 4,716,159 of these shares 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 page 58 under "Relationship with Reuters and Certain
Transactions."
In general, under Rule 144 as currently in effect, holders of restricted
securities who have beneficially owned these securities for at least one year
will be entitled to sell a number of shares of common stock within any three-
month period equal to the greater of (1) 1% of the then outstanding shares of
the common stock, which will be approximately 580,000 shares immediately after
the offering, 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 offering, 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 51 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 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
66
<PAGE>
shares of common stock under the underwriting agreement;
. the issuance by us of options to purchase common stock pursuant to our
existing stock option plan, or the issuance by us of shares of common
stock upon the exercise of any option granted under our existing stock
option plan;
. the provision by Reuters of rights to purchase its shares of our common
stock to employees and consultants of TFT pursuant to a pre-existing
arrangement to provide such rights, and the sale by Reuters of its shares
of common stock pursuant to the exercise of such rights;
. transactions by any person other than us relating to shares of common
stock or other securities acquired in open market transactions after
completion of the offering of the shares of common stock; and
. with respect to individuals, transfers by gift, will or intestate
succession; with respect to partnerships, transfers to partners; with
respect to trusts, transfers to beneficiaries; and with respect to
corporations, transfers to stockholders and majority-owned subsidiaries;
provided that in each case the transferee agrees to be bound by the
agreement imposing the 180-day restriction.
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.
67
<PAGE>
ADDITIONAL INFORMATION
We have filed with the Commission a Registration Statement on Form S-1 under
the Securities Act of 1933 with respect to the shares of common stock offered
hereby. This prospectus does not contain all of the information set forth in
the registration statement and the exhibits and schedules thereto. For further
information with respect to us and the common stock offered hereby, reference
is made to the registration statement and the exhibits and schedules filed
therewith. All contracts that are material to the registrant, and all the
material terms of these contracts, have been disclosed in this prospectus.
However, statements contained in this prospectus as to the contents of any
contract or any other document referred to are not necessarily complete, and,
in each instance, reference is made to the copy of such contract or other
document filed as an exhibit to the registration statement. A copy of the
registration statement, and the exhibits and schedules thereto, may be
inspected without charge at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N. W., Washington, D.C. 20549, and
at the Commission's regional offices located at the Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade
Center, 13th Floor, New York, New York 10048, and copies of all or any part of
the Registration Statement may be obtained from such offices upon the payment
of the fees prescribed by the Commission. The public may obtain information on
the operations of the public reference facilities in Washington, D.C. by
calling the SEC at 1-800-SEC-0330. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the site is http://www.sec.gov.
68
<PAGE>
TIBCO SOFTWARE INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Accountants........................................... F-2
Balance Sheet............................................................... F-3
Statement of Operations..................................................... F-4
Statement of Stockholders' Equity/Owner's Net Investment (Liability)........ F-5
Statement of Cash Flows..................................................... F-6
Notes to Financial Statements............................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of TIBCO Software Inc.
The reverse stock split described in Note 10 to the financial statements has
not been consummated at 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 49,765 49,764
Unearned compensation.............. (4,767) (7,230) (6,330) (6,330)
Accumulated deficit................ (4,663) (17,614) (25,845) (25,845)
------- -------- --------- --------
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 2,680
------- ------- -------- ------- -------
Total operating
expenses............. 13,798 24,630 39,118 16,060 31,056
------- ------- -------- ------- -------
Loss from operations.... (3,089) (5,203) (14,043) (4,511) (8,224)
------- ------- -------- ------- -------
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) $(8,231)
======= ======= ======== ======= =======
Net loss per share:
Basic and diluted..... $ (0.24) $ (0.65) $ (0.20) $ (0.39)
======= ======== ======= =======
Weighted average
shares............... 19,202 20,011 19,720 20,840
======= ======== ======= =======
Pro forma net loss per
share:
Basic and diluted
(unaudited).......... $ (0.28) $ (0.17)
======== =======
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............ -- -- -- 1,079 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)......... -- -- -- -- -- 1,780 900 -- 2,680
Net loss (unaudited).... -- -- -- -- -- -- -- (8,231) (8,231)
-------- ------ ---- ------ ---- -------- ------- -------- --------
Balance at May 31, 1999
(unaudited)............. $ -- 27,226 $ 27 23,456 $ 23 $ 49,765 $(6,330) $(25,845) $ 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) $ (8,231)
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 2,680
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.
However, these allocations and estimates are not necessarily indicative of 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. 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 Statements of Position ("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. 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 66.
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
Bechtel Marubeni
Mobil
Cedel Global Services Motorola
Chevron The Nasdaq Stock Market
Compaq
Ericsson National Westminster Bank
NEC Electronics
Fidelity Pacific Power
PageNet
First National Bank of South Africa Philips Medical
Goldman Sachs Telia
Glaxo Wellcome
Hyundai Taiwan Semiconductor
Manufacturing Company
Intel United Microelectronics Corp.
Intuit Unibank
Lucent Technologies Yahoo!]
<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
Company Background....................................................... 12
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............................................................... 44
Relationship with Reuters and Certain Transactions....................... 55
Principal Stockholders................................................... 61
Description of Capital Stock............................................. 63
Shares Eligible for Future Sale.......................................... 66
Legal Matters............................................................ 67
Experts.................................................................. 67
Additional Information................................................... 68
Index to Financial Statements............................................ F-1
Underwriting............................................................. U-1
</TABLE>
---------------
Through and including , 1999 (the 25th day after the date of this
prospectus), all dealers effecting transactions in these securities, whether or
not participating in 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 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.
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
(b) Financial Statement Schedules
Included in Notes to Financial Statements.
II-2
<PAGE>
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 18th day of June, 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 June 18, 1999
____________________________________ Officer and Chairman of the
Vivek Y. Ranadive Board (Principal Executive
Officer)
/s/ Paul G. Hansen Executive Vice President, June 18, 1999
____________________________________ Finance and Chief Financial
Paul G. Hansen Officer (Principal
Financial Officer)
* Corporate Controller and June 18, 1999
____________________________________ Chief Accounting Officer
Ginger M. Kelly (Principal Accounting
Officer)
* Director June 18, 1999
____________________________________
Yogen K. Dalal
* Director June 18, 1999
____________________________________
Edward R. Kozel
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
* Director June 18, 1999
____________________________________
Donald J. Listwin
* Director June 18, 1999
____________________________________
Larry W. Sonsini
* Director June 18, 1999
____________________________________
David G. Ure
* Director June 18, 1999
____________________________________
Philip Wood
</TABLE>
/s/ Paul G. Hansen
*By: __________________________
Paul G. Hansen
Attorney-in-fact
II-5
<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
June 17, 1999
II-6
<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 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.
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 3.1
-----------
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 (40,000,000) 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 (11,000,000)
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 (6,000,000) 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").
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, out of funds legally available
therefor, dividends in preference to any dividend on the Common Stock at the per
share annual rate of $0.024, $0.108 and $0.118, 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
-2-
<PAGE>
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 $1.93 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 $0.50 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.
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
-3-
<PAGE>
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 $0.30 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 $0.40 by the conversion price
(the "Series A Conversion Price") which shall be initially set at $0.40. 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 $1.80 by the conversion price (the "Series B Conversion Price") which
shall initially be set at $1.80. 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 $1.93 by the conversion price
(the "Series C Conversion Price") which shall initially be set at $1.93. 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.
--------------------
(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 $2.00 per share (as adjusted
for stock splits, stock dividends, combinations, recapitalization and similar
events with respect to the Common Stock), and provided
-4-
<PAGE>
further that 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 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.
-----------------------
(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
-5-
<PAGE>
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.
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:
-6-
<PAGE>
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 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
-7-
<PAGE>
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
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
-8-
<PAGE>
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;
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
-9-
<PAGE>
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
--------------------------------------------------------------
Consolida tion 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 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
-10-
<PAGE>
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;
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,
-11-
<PAGE>
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.
(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:
-12-
<PAGE>
(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 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
-13-
<PAGE>
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.
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
-14-
<PAGE>
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
----------------
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
-15-
<PAGE>
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 3rd day of August, 1998.
TIBCO SOFTWARE INC.,
a Delaware corporation
By: /s/ Vivek Ranadive
----------------------
Vivek Ranadive, President
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<PAGE>
Exhibit 3.2
-----------
BYLAWS
OF
TIBCO SOFTWARE INC.
(A Delaware Corporation)
<PAGE>
BYLAWS
OF
TIBCO SOFTWARE INC.
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 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.
1.2 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
------------------------
2.1 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.
2.2 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. At the meeting, directors shall
be elected and any other proper business may be transacted.
2.3 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
stockholders holding shares in the aggregate entitled to cast not less than ten
percent (10%) of the votes at the meeting.
<PAGE>
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. 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 five (5)
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.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
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 by-laws 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, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 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.
2.6 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, by the certificate of incorporation or
by that certain Shareholders Agreement dated as of May 9, 1997 among the
corporation and the shareholders named therein, as the same may from time to
time be amended (the "Shareholders Agreement"). 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.
-3-
<PAGE>
2.7 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.
2.8 CONDUCT OF BUSINESS
-------------------
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of business.
2.9 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,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.1 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.
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<PAGE>
2.11 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.
2.12 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.
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.
(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.
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(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.
2.13 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder 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. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of a corporation shall prepare
and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open
to the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. Such list shall
presumptively determine the identity of the stockholders entitled to vote at the
meeting and the number of shares held by each of them.
ARTICLE III
DIRECTORS
---------
3.1 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
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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.
3.2 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.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these bylaws, the certificate of
incorporation or the Shareholders Agreement, directors shall be elected at each
annual meeting of stockholders to hold office until the next annual 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.
3.4 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 Shareholders
Agreement and the certificate of incorporation, 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, these bylaws or
the Shareholders Agreement:
(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
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and newly created directorships of such class or classes or series may be filled
by a majority of the 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.
3.5 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.
3.6 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.
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3.7 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.
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.
3.8 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 statute, by the certificate of incorporation or by the
Shareholders Agreement. 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.
3.9 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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3.10 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.
3.11 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.
3.12 APPROVAL OF LOANS TO OFFICERS
-----------------------------
Subject to the provisions of the Shareholders Agreement, the corporation may
lend money to, or guarantee any obligation of, or otherwise assist any officer
or other employee of the corpora tion 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.
3.13 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, and except as otherwise provided by
the certificate of incorporation, these bylaws or the Shareholders Agreement,
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.
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ARTICLE IV
COMMITTEES
----------
4.1 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.
4.2 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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4.3 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 3.5
(place of meetings and meetings by telephone), Section 3.6 (regular meetings),
Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9
(waiver of notice), and Section 3.10 (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
--------
5.1 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.
5.2 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.
5.3 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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5.4 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.
5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by the
board of directors.
5.6 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.
5.7 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.
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5.8 VICE PRESIDENTS
---------------
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.
5.9 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.
5.10 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
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account of all his or her transactions as chief financial officer and of the
financial condition of the 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.
5.11 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.
5.12 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.
5.13 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.
5.14 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.
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5.15 LIMITATION ON AUTHORITY OF OFFICERS, EMPLOYEES AND AGENTS
---------------------------------------------------------
Notwithstanding anything to the contrary in these bylaws, for so long as the
Shareholders Agreement is in effect, no officer, employee or agent of the
corporation shall have the authority to take any action on behalf of the
corporation which would constitute a Fundamental Decision, as that term is
defined in the Shareholders Agreement, unless such Fundamental Decision has been
first submitted and approved as required by the Shareholders Agreement. In
order to provide persons dealing with the corporation an opportunity to
determine whether the authority of an officer, employee or agent is limited as
set forth in this Section 5.15 with respect to any particular action, the
corporation shall provide such person, upon request, a copy of the relevant
portions of the Shareholders Agreement.
ARTICLE VI
INDEMNITY
---------
6.1 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.
6.2 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.
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6.3 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.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 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.
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7.2 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 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 corpora
tion 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.
7.3 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 VII
GENERAL MATTERS
---------------
8.1 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.
8.2 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.
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<PAGE>
8.3 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. 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.
8.4 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.
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8.5 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 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.
8.6 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.
8.7 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.
8.8 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.
8.9 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.
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8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation of
a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement with
any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
-----------------------
The corporation shall be entitled to recognize the exclusive right of a person
registered on its books as the owner of shares to receive dividends and to vote
as such owner, shall be entitled to hold liable for calls and assessments the
person registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of another person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.
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.
ARTICLE X
SHAREHOLDERS AGREEMENT
----------------------
Notwithstanding anything to the contrary in these bylaws, the operation of the
provisions herein with respect to any party to the Shareholders Agreement,
including without limitation the
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<PAGE>
provisions relating to voting rights, shall be subject to the provisions of the
Shareholders Agreement for so long as the Shareholders Agreement is in effect.
-22-
<PAGE>
Exhibit 4.1
===============================================================================
COMMON STOCK [LOGO OF TIBCO] COMMON STOCK
NUMBER SHARES
TIBX
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
THIS CERTIFICATE IS TRANSFERABLE SEE REVERSE FOR CERTAIN
IN BOSTON, MA OR NEW YORK, NY DEFINITIONS AND A STATEMENT
AS TO THE RIGHTS,
PREFERENCES, PRIVILEGES AND
RESTRICTIONS ON SHARES
CUSIP 88632Q 10 3
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK,
$.001 PAR VALUE PER SHARE, OF
TIBCO SOFTWARE INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed. This certificate and the shares represented hereby are issued and
shall be subject to all of the provisions of the Restated Certificate of
Incorporation of the Corporation and its Bylaws, as amended (copies of which are
on file at the office of the Corporation), to all of which the holder by
acceptance hereof assents. This Certificate is not valid until countersigned
by a Transfer Agent and Registrar by a Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
/s/ [CORPORATE SEAL /s/
OF TIBCO SOFTWARE INC.]
SECRETARY PRESIDENT
COUNTERSIGNED AND REGISTERED:
BankBoston, N.A.
TRANSFER AGENT AND REGISTRAR
BY /s/
AUTHORIZED SIGNATURE
================================================================================
<PAGE>
================================================================================
TIBCO SOFTWARE INC.
A statement of the powers, designations, preferences and 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 as established, from time to time, by the Certificate
of Incorporation of the Corporation and by any certificate of designation,
the number of shares constituting each class and series, and the designations
thereof, may be obtained by the holder hereof upon request and without charge
from the Corporation at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-.........Custodian.........
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to
JT TEN - as joint tenants with Minors Act..................
right of survivorship (State)
and not as tenants in UNIF TRF MIN ACT- .....Custodian (until age..)
common (Cust)
......under Uniform Transfer
(Minor)
to Minors Act...............
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________________ hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
_____________________________
_____________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate,
and do hereby irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated ____________________________
X __________________________________
X __________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By_________________________________
THE SIGNATURE(S) MUST BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
[Draft of June 18, 1999]
EXHIBIT 10.3
THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
This THIRD AMENDED AND RESTATED STOCKHOLDERS AGREEMENT (this "Agreement"),
is made as of the ___ day of June 1999, by and among Reuters Limited, a company
organized under the laws of England and Wales ("Reuters"), Cisco Systems, Inc.,
a California corporation ("Cisco"), Mayfield IX, a Delaware limited partnership
and Mayfield Associates & Fund III, a California limited partnership (each a
"Mayfield Entity" and together, the "Mayfield Entities"), Reuters Nederland
B.V., a company organized under the laws of the Netherlands ("Reuters B.V."),
Vivek Ranadive ("Ranadive"), the persons listed on Annex 1 hereto (such persons
and each of Cisco, the Mayfield Entities, Reuters B.V. and Ranadive, a
"Stockholder"), and TIBCO Software Inc., a Delaware corporation (the "Company").
Additional Persons may be added to this Agreement as "Stockholders" if they, the
Company and Reuters so consent. The consent of any such additional Person shall
be evidenced by execution of a signature page hereto or other written
acknowledgment that such person agrees to be bound by certain provisions of this
or any predecessor agreement.
RECITALS
A. The Company is a subsidiary of Reuters B.V., which is a subsidiary of
Reuters. As of the date hereof, Ranadive is a director and officer of the
Company.
B. In connection with the initial public offering of the Company's common
stock, the parties hereto desire to amend and restate herein the Second Amended
and Restated Shareholders Agreement dated December 31, 1997 by and among
Reuters, Cisco, the Mayfield Entities, Reuters B.V., Ranadive, the Company and
certain equity holders of the Company (the "Prior Agreement").
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements herein set forth, the parties hereto hereby agree as follows:
1. Effectiveness of Agreement. This Agreement shall become effective
immediately following an Initial Public Offering. The date upon which this
Agreement becomes effective is referred to herein as (the "Effective Date").
2. Certain Definitions. In addition to those terms defined elsewhere in
this Agreement, the following terms shall have the respective meanings set forth
below:
"Affiliate" shall mean, with respect to any Person, any other Person
that directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as applied to
any Person, means the possession, directly or indirectly of the power to vote
forty percent (40%) or more of the securities having voting power for the
election of directors of such Person or otherwise to direct or cause the
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<PAGE>
direction of the management and policies of that Person, whether through the
ownership of voting securities, by contract or otherwise.
"Affiliated Transferee" shall mean (a) with respect to Reuters B.V.,
Reuters, Reuters Holdings PLC or any direct or indirect subsidiary of Reuters
Holdings PLC, (b) with respect to Reuters, Reuters Holdings PLC or any direct or
indirect subsidiary of Reuters Holdings PLC, (c) with respect to Cisco, any
direct or indirect subsidiary of Cisco, (d) with respect to the Mayfield
Entities, any affiliated partnership or partners of the Mayfield Entities, and
(e) with respect to other individual Stockholders, (i) a spouse, parent or
direct descendent of such Stockholder (such individuals, with respect to a
Stockholder, "Family Members"), or (ii) a trust, the settlor of which is such
Stockholder, the beneficiaries of which consist exclusively of such Stockholder,
or Family Members of such Stockholder, and the trustees of which that exercise
voting authority over equity securities in such trust consist exclusively of any
or all of such Family Members, and such other trustees as Reuters B.V. or
Reuters may approve in writing.
"Commission" shall mean the U.S. Securities and Exchange Commission.
"Common Stock" shall mean the Common Stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Fundamental Decision" shall have the meaning set forth in Section
3.1.
"Indebtedness for Borrowed Money" shall mean (i) obligations for
borrowed money (whether secured or unsecured), (ii) obligations representing the
deferred purchase price of property other than accounts payable arising in
connection with the purchase of inventory in the ordinary course of business,
(iii) obligations in respect of operating or finance (capital) leases, whether
or not such obligations would be required to be shown as a liability on a
balance sheet under generally accepted accounting principles (as applied in the
United States of America), and (iv) any guarantee in respect of any obligations
referred to in clauses (i), (ii) or (iii).
"Initial Public Offering" shall mean the first bona fide, firm
commitment underwritten public offering of Common Stock pursuant to a
registration statement on Form S-1 declared effective under the Securities Act.
"Initial Public Offering Date" shall mean the date of closing of the
Initial Public Offering (i.e. the date of payment for shares following
effectiveness of the registration statement relating to the Initial Public
Offering).
"Party" shall mean the Company, Reuters, Cisco, each of the Mayfield
Entities, Reuters B.V. or a Stockholder, as the context requires.
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<PAGE>
"Person" means a corporation, association, partnership, joint venture,
organization, business, individual, trust, or any other entity or organization,
including a government or any subdivision or agency thereof.
"Public Offering" shall mean any bona fide offering of the Company's
equity securities pursuant to a registration statement declared effective under
the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Shares" shall mean (a) (i) all shares of Common Stock held by the
Stockholders as of the Effective Date, and (ii) any shares of Common Stock
issued after the Effective Date to any of the Stockholders pursuant to any
incentive stock option plan or employee stock purchase plan of the Company in
effect from time to time, together with (b) any shares of the capital stock of
the Company issued to a Stockholder subsequent to the Effective Date on account
of such Common Stock or subsequently issued shares, by virtue of any stock
splits, dividends payable in the capital stock of the Company or
reclassifications or conversions with respect to any such Common Stock.
"Stockholders" shall have the meaning set forth in the first paragraph
of this Agreement.
"Total Voting Power of the Company" shall mean the total number of
votes which may be cast in matters submitted to the vote of (a) all holders of
Common Stock and (b) all holders of other classes of the Company's capital stock
entitled to vote generally with the holders of the Common Stock.
3. Corporate Governance--Restatement of Investor Rights and Obligations.
The Parties hereto intend that this Agreement govern the ongoing relationship
among the Parties with respect to their respective ownership interests in the
Company. To that end, to the extent that provisions conflict, it is understood
and agreed that this Agreement supersedes all other instruments, including
without limitation, the Amended and Restated Certificate of Incorporation and
Bylaws of the Company, with respect to all matters contemplated herein.
4. Certain Governance Matters.
4.1 Definition of Fundamental Decision. For purposes of this
Agreement, a "Fundamental Decision" shall mean a decision of the Company with
respect to any of the following actions:
(a) The issuance of equity securities or securities convertible into,
exchangeable for, or options or rights to acquire any equity securities (except
for securities issued pursuant to the Company's 1996 Stock Option Plan, as
amended, or the Company's 1999 Director Stock Option Plan, or in a transaction
covered by Section 4.1(c)) (i) in any calendar year in excess of 5% of the
outstanding capital stock of the Company on December 31 of the prior year or
(ii) in any three-year period in excess of 10% of the outstanding capital stock
of the Company at the beginning of the period;
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<PAGE>
(b) Participation of the Company in any merger, consolidation, or
share exchange, or any sale, lease, exchange or other dissolution of all or any
substantial part of the assets of the Company; or
(c) Any acquisition by the Company, whether by merger, stock
purchase, asset purchase or otherwise, of any business or entity where the
consideration to be paid by the Company in the acquisition is in excess of
either (i) 15% of the market capitalization of the Company (averaged over the
thirty-day period ending five days prior to the announcement of the acquisition)
or (ii) 15% of the total revenues of the Company in the last four completed
fiscal quarters; provided that in each case such amount exceeds $75,000,000.
4.2 Corporate Action Regarding Fundamental Decisions.
(a) Each of the Stockholders agrees for the benefit of Reuters that
he or it shall use his or its best efforts to (i) not permit the Board of
Directors of the Company to approve any Fundamental Decision, (ii) not vote or
cause to be voted his or her Shares to approve any Fundamental Decision that may
be submitted to the stockholders of the Company for approval, and (iii) not to
permit the Company to act in any way upon a Fundamental Decision, in each case
unless such Fundamental Decision has been first submitted to Reuters and
approved in writing by Reuters as discussed in Section 4.2(c) below.
(b) Each of the Stockholders agrees for the benefit of Reuters that
he or it shall use his or its best efforts as a stockholder of the Company to
maintain in effect at all times provisions in the Company's Bylaws, and in any
Company operating policies, guidelines or procedures that may exist from time to
time, that limit the authority of all officers, employees and agents of the
Company so that no such person will have authority to take any action on behalf
of the Company which would constitute a Fundamental Decision without the
Company's first obtaining the written approval of Reuters as discussed in
Section 4.2(c) below.
(c) Any request for Reuters' approval of a Fundamental Decision shall
be submitted to the Reuters Directors (as defined in Section 4.3). The Reuters
Directors shall use their best efforts to respond to such request as
expeditiously as possible, but in any event within ten days after such request.
The Company shall provide the Reuters Directors with such information as they
shall reasonably request in order to evaluate any such request for approval.
Such request will only be deemed approved by Reuters upon the earlier of (i)
explicit written confirmation from Reuters of such approval which may be
withheld at Reuters' sole discretion, or (ii) the expiration of the
aforementioned ten-day period if Reuters shall not have responded to such
request prior to the expiration of such period.
(d) The provisions of this Section 4.2 shall terminate and be of no
further force or effect at such time as Reuters (together with Reuters B.V.)
ceases to own shares of the Company's stock having at least 30% of the Total
Voting Power of the Company.
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<PAGE>
4.3 Seats on Board of Directors.
(a) The Company shall be governed by a Board of Directors consisting
of at least nine members. The number of directors may not be decreased.
(b) Subject to the other provisions of this Agreement, at any
election of directors of the Company, (i) so long as Reuters owns shares of the
Company's stock having at least 40% of the Total Voting Power of the Company,
Reuters shall have the right to nominate three directors of the Company, (ii) so
long as Reuters owns shares of the Company's stock having at least 25% but less
than 40% of the Total Voting Power of the Company, Reuters shall have the right
to nominate two directors of the Company and (iii) so long as Reuters owns
shares of the Company's stock having at least 10% but less than 25% of the Total
Voting Power of the Company, Reuters shall have the right to nominate one
director of the Company (each director nominated by Reuters pursuant hereto, a
"Reuters Director"). Notwithstanding the foregoing, prior to the nomination of
any person as a Reuters Director, such person shall be approved by the Chief
Executive Officer of Reuters and by the Chief Executive Officer of the Company.
If a vacancy occurs or exists on the Board of Directors at any time, including
but not limited to a vacancy because of the death, disability, retirement,
resignation or removal of any director for cause or otherwise, and the vacant
position was held by a Reuters Director, then Reuters (in accordance with the
previous sentence) shall have the sole right to nominate an individual to fill
such vacancy. The Parties agree to take all necessary action to cause the
individuals nominated pursuant to this Section 4.3 to become members of the
Board of Directors of the Company.
(c) If the total number of directors of the Company is increased
above nine, the number of Reuters Directors shall be increased so that the
adjusted ratio of Reuters Directors to total directors is not less than the
ratio of Reuters Directors (determined immediately prior to such increase in
accordance with Section 3.5(b)) to nine.
(d) The members of the Board of Directors nominated as described in
this Agreement shall be duly elected by the vote of a majority of the issued and
outstanding shares entitled to vote thereon.
(e) Any Reuters Director may be removed from office only (a) for
cause by the vote of stockholders representing not less than a majority of the
issued and outstanding shares entitled to vote upon the election of directors,
or (b) upon Reuters' determination that the Reuters Director should no longer
serve as such, and upon such determination, the Stockholders shall vote their
voting stock to remove such Reuters Director.
(f) The provisions of this Section 4.3 shall terminate and be of no
further force or effect at such time as Reuters (together with Reuters B.V.)
ceases to own shares of the Company's stock having at least 10% of the Total
Voting Power of the Company.
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<PAGE>
4.4 Voting of Reuters Shares.
(a) Until such time as Reuters (together with Reuters B.V.) ceases to
own shares of the Company's stock having at least 49% of the Total Voting Power
of the Company, on any matter submitted to a vote of the stockholders of the
Company, a number of shares (the "Reuters Voting Number") of the Company's stock
owned by Reuters (together with Reuters B.V.) shall be automatically voted by
the Company for, against or in abstention in the same proportion as all shares
of the Company's stock held by holders other than Reuters and Reuters B.V. and
entitled to vote upon such matter are cast for, against or in abstention
(whether in a meeting or by written consent). The Reuters Voting Number shall
be equal, at any given time, to the number of shares owned by Reuters (together
with Reuters B.V.) at such time less a number of shares having voting power
equal to 49% of the Total Voting Power of the Company at such time.
(b) The provisions of this Section 4.4 shall terminate and be of no
further force or effect at such time as Reuters (together with Reuters B.V.)
ceases to own shares of the Company's stock having at least 49% of the Total
Voting Power of the Company.
5. Registration Rights.
5.1 General Request for Registration.
(a) Definitions. As used in this Section 5:
(i) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement;
(ii) The term "Registrable Securities" shall mean (i) the
Common Stock held by the Stockholders as of the Effective Date and (ii) any
Common Stock issued as (or issuable upon the conversion or exercise of any
warrant, right, or other security which is issued as) a dividend or other
distribution with respect to, or in exchange for or in replacement of, such
Common Stock, excluding in all cases, however, (A) any Registrable Securities
sold by a person in a transaction in which such Person's rights under Section 5
hereof are not assigned, (B) Common Stock or other securities that have been
disposed of pursuant to a registration statement with respect to the sale of
such securities which shall have become effective under the Securities Act, or
(C) Common Stock or other securities that shall have ceased to be outstanding.
(iii) The term "Holder" means any either of Reuters,
Reuters B.V., Cisco or an Affiliated Transferee thereof, holding Registrable
Securities; for the purposes of Sections 5.2, 5.5, 5.6, 5.7, 5.8, 5.9, 5.10 and
5.11 only, the term shall also include Ranadive and each of the Mayfield
Entities.
(iv) The term "Initiating Holders" means any Holder or
Holders making a request for registration pursuant to, and in compliance with,
the provisions of Section 5.1(b).
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<PAGE>
(b) Request for Registration. In case at any time after the
earlier to occur of (i) the date nine months from the Initial Public Offering
Date and (ii) January 1, 2002, (x) the Company shall receive from the Holders
of, in the aggregate, at least fifty percent (50%) of the Registrable Securities
then outstanding a written request that the Company effect any registration with
respect to all or a part of the Registrable Securities (but not in any case,
within nine months following the effective date of a registration of the Common
Stock), provided that the number of shares of Registrable Securities of such
requesting Holders designated to be included in such registration would result
in an anticipated aggregate offering price of at least $10,000,000, net of
underwriter discounts and commissions or (y) the Company shall receive from
Reuters a written request that the Company effect any registration with respect
to all or a part of the Registrable Securities then held by Reuters or Reuters
B.V. (but not in any case, within six months following the effective date of a
registration of the Common Stock), provided that the number of shares of
Registrable Securities designated to be included in such registration would
result in an anticipated aggregate offering price of at least $25,000,000, net
of underwriter discounts and commissions, the Company will:
(i) promptly give written notice of the proposed
registration to all other Holders; and
(ii) as soon as practicable, use its best efforts to
effect such registration (including, without limitation, the execution of an
undertaking to file pre-effective and post-effective amendments and supplements,
appropriate qualification under the applicable blue sky or other state
securities laws and appropriate compliance with exemptive regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Holder's or Holders' Registrable
Securities as are specified in such request, together with (A) all or such
portion of the Registrable Securities of any other Holder or Holders joining in
such request as are specified in a written notice given by any such other
Holders to the Company within thirty (30) days after receipt by such other
Holders of such written notice from the Company; and (B) such securities of the
Company which the Company elects to register and offer for its own account as
part of such registration ("Company Securities"); provided that the Company
shall not be obligated to take any action to effect any such registration
pursuant to this Section 5.1(b)(x) after the Company has effected two
registrations pursuant to requests under Section 5.1(b)(x) on Form S-1, SB-1 or
S-3; and provided further that the Company shall not be obligated to take any
action to effect any such registration pursuant to Section 5.1(b)(y) after the
Company has effected six registrations pursuant to requests under Section
5.1(b)(y). A registration proceeding begun pursuant to this Section 5.1 which is
subsequently withdrawn and the expenses of which are borne by the Holders of
securities requesting or causing such withdrawal pursuant to Section 5.4(a)
shall not be considered an effected registration, qualification or compliance
for purposes of this Section 5.1.
Subject to the foregoing provisions, the Company shall file a
registration statement covering the Registrable Securities and Company
Securities (if any) so requested or otherwise elected to be registered as soon
as practicable, but in any event within ninety (90) days, after receipt of the
request or requests of the Initiating Holder(s), provided that the Company shall
have the right to defer such registration for a period of up to seventy-five
(75) days in any twelve month period following the
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receipt of such a request if in the good faith opinion of the Board of Directors
of the Company, it would be seriously detrimental to the Company and the
Stockholders for a registration statement to be filed.
(c) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as a part of their request made
pursuant to Section 5.1(b) and the Company shall include such information in the
written notice referred to in Section 5.1(b)(i). In such event, the right of any
Holder or the Company to registration pursuant to Section 5.1 shall be
conditioned upon the participation of such Holder or the Company, as the case
may be, in such underwriting and the inclusion of such Holder's Registrable
Securities (or the Company Securities of the Company) in the underwriting to the
extent provided herein. The Company shall (together with all Holders proposing
to distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 5.1, if the
managing underwriter advises the Initiating Holders in writing that marketing
factors indicate that an underwriting of Registrable Securities would not be
successful at such time or require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise the Company and all
Holders of Registrable Securities which would otherwise be registered and
underwritten pursuant hereto, and the number of shares included in the
registration and underwriting, if any, shall be allocated, first by reducing
(and finally eliminating, if necessary) the Company Securities to be included in
such underwriting, and second, by allocating among the Holders of Registrable
Securities requesting registration in proportion, as nearly as practicable, to
the total number of Registrable Securities held by such Holders at the time of
filing of the registration statement; provided that the Company shall not
proceed with any registration pursuant to this Section 5.1 of fewer than the
minimum number of Registrable Securities required to commence such registration
pursuant to Section 5.1(b), and provided further that no registration so
discontinued shall diminish the number of registrations to which the Holders are
entitled pursuant to this Section 5.1. If any Holder or the Company disapproves
of the terms of the underwriting, it may elect to withdraw therefrom by written
notice to the Company (in the case of a withdrawal by a Holder), the
underwriters and the Initiating Holders. The Registrable Securities so withdrawn
shall also be withdrawn from registration.
5.2 Company Registration.
(a) Notice of Registration. If at any time or from time to time
after the Initial Public Offering Date, the Company shall determine to register
any of its securities in connection with the public offering of such securities
for cash, for its own account (other than a registration relating solely to
employee stock option or purchase plans or relating solely to a Rule 145
transaction), the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within thirty (30) days after receipt of such written notice
from the Company, by any Holder or Holders, except as set forth in Section
5.2(b) below.
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(b) Underwriting. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 5.2(a)(i). In such event the right of any Holder to
registration pursuant to Section 5.2 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 5.2, if the
managing underwriter determines that marketing factors require a limitation of
the number of shares to be underwritten, the underwriter may limit the number of
Registrable Securities to be included in the registration and underwriting on a
pro rata basis based on the total number of the Registrable Securities entitled
to registration held by the Holders, provided that no such reduction shall be
made with respect to securities being offered by the Company for its own
account; provided further that all other shares of Common Stock held by all
parties, other than the Holders, shall be excluded before the exclusion of any
shares of Registrable Securities held by the Holders who desire to have their
shares included in the registration and offering. The Company shall advise all
Holders of Registrable Securities which would otherwise be registered and
underwritten pursuant hereto of any such limitations, and the number of shares
of Registrable Securities that may be included in the registration. If any
Holder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Registrable Securities excluded or withdrawn from such underwriting shall not be
included in such registration.
(c) Notwithstanding anything to the contrary in this Section 5.2, the
Company shall not be obligated to effect any registration of Registrable
Securities under this Section 5.2 pursuant to a registration statement covering
any of its securities to be issued in connection with mergers, acquisitions,
exchange offers, dividend reinvestment plans or stock option or other employee
benefit plans.
5.3 S-3 Registrations. If, at any time or from time to time after
the first underwritten public offering pursuant to a registration statement
filed under the Securities Act, the Company is requested in writing by the
Holders of, in the aggregate, at least fifty percent (50%) of the Registerable
Securities then outstanding (and qualifies under applicable Commission rules) to
undertake an S-3 or equivalent short-form registration of its securities by the
Holders of Registrable Securities, the Company shall promptly give notice of
such proposed registration to all Holders of Registrable Securities and the
Company shall, as expeditiously as possible, use its best efforts to effect the
registration on Form S-3 of the Registrable Securities which the Company has
been requested to register (a) in each request and (b) in any response given
within twenty (20) days of the receipt of the notice from the Company pursuant
to this Section 5.3, provided that the Company shall not be obligated to take
any action to effect more than one such registration pursuant to this Section
5.3 in any twelve month period, and provided further that the Company shall have
the right to defer such registration for a period of up to seventy-five (75)
days following the receipt of such a request if in the opinion of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
the Stockholders for a registration statement to be filed. Notwithstanding the
foregoing, however, the Company shall not be required to effect any
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registration hereunder unless the number of shares of Registrable Securities
which Holders have requested to be included in such registration would result in
an anticipated aggregate offering price of more than $5,000,000 (net of
underwriting discounts and commissions). The Company may include in the
registration under this Section 5.3 any other shares of Common Stock so long as
the inclusion in such registration of such shares will not, in the opinion of
the managing underwriter, interfere with the successful marketing in accordance
with the intended method of sale or other disposition of all the shares of
Registrable Securities sought to be registered by the Holder or Holders of
Registrable Securities pursuant to this Section 5.3. If it is determined as
provided above that there will be such interference, the other shares of Common
Stock sought to be included by the Company shall be excluded to the extent
deemed appropriate by the managing underwriter, and all other shares of Common
Stock held by other parties shall be excluded before the exclusion of any shares
of Registrable Securities held by the Holders who desire to have their shares
included in the registration and offering. If, as contemplated above, and after
excluding all other shares of Common Stock held by parties other than the
Holders, shares of the Registrable Securities of the Holders shall be included
in such underwriting, up to the total number deemed advisable by the managing
underwriter, by allocating among the Holders of Registrable Securities
requesting registration in proportion, as nearly as practicable, to the total
number of Registrable Securities held by such Holders at the time of filing of
the registration statement.
5.4 Expenses of Registration.
(a) All expenses incurred in connection with any registration
pursuant to the two registrations under Section 5.1(b)(x), the first four
registrations under Section 5.1(b)(y), any registrations under Section 5.2 and
the first two registrations pursuant to Section 5.3, including, without
limitation, all registration, filing and qualification fees, printing expenses,
reasonable fees and disbursements of counsel for the Company, expenses of
complying with state securities or Blue Sky laws (including fees of counsel for
the Company and counsel for the underwriters), accountants' fees and expenses
incident to or required by any such registration, expenses incident to the
listing of securities on any exchange in which the Registrable Securities have
been listed, expenses of any special audits incidental to or required by such
registration and the fees and disbursements of one counsel retained by the
Holders of Registrable Securities covered by such registration shall be borne by
the Company, provided, however:
The Company shall not be required to pay for expenses of any registration
proceeding begun pursuant to Section 5.1, the request of which has been
subsequently withdrawn by the Initiating Holders, in which case, such expenses
shall be borne by the Holders of securities (including Registrable Securities)
requesting or causing such withdrawal; provided that such Holders shall not be
required to pay (a) for the cost of normal audits of the Company that would have
been performed in any event, and (b) for the time of any executives or other
personnel of the Company involved in the preparation of the registration
statement; and provided further, however, that if at the time of such
withdrawal, the Holders have learned of a material adverse change in the
condition, business, or prospects of the Company from those known to the Holders
at the time of their request, then the Holders shall not be required to pay any
of such expenses and shall retain their rights pursuant to Sections 5.1; and
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(b) All expenses incurred in connection with the fifth or subsequent
registration(s) pursuant to Section 5.1(b)(y) and the third or subsequent
registration(s) pursuant to Section 5.3, including all expenses of the types
specified in (a), above, shall be borne by the Holders of Registrable Securities
so registered. Such expenses shall be borne by such Holders pro rata in
proportion to the number of shares of Registrable Securities of each such Holder
so registered;
(c) Notwithstanding anything to the contrary elsewhere in this
Agreement, all underwriters' discounts, commissions, or applicable stock
transfer and documentary stamp taxes (if any) relating to any particular sale of
Registrable Securities shall be borne by the seller of such Registrable
Securities in all cases.
5.5 Registration Procedures.
(a) In the case of each registration effected by the Company
pursuant to this Section 5, the Company will keep each Holder participating
therein advised in writing as to the initiation of each registration and as to
the completion thereof. At its expense (except as otherwise provided in Section
5.6 below) the Company will:
(i) subject to paragraph 5.5(b), keep such registration
pursuant to Section 5.1, 5.2, or 5.3 effective for a period of 120 days to the
extent such registration is made pursuant to Form S-3 (or any successor Form)
and for a period of forty-five days otherwise, or until the Holder or Holders
have completed the distribution described in the registration statement relating
thereto, whichever first occurs;
(ii) furnish such number of prospectuses and other documents
incident thereto as a Holder from time to time may reasonably request; and
(iii) notify each Holder, (A) when a prospectus or any
prospectus supplement or post-effective amendment has been filed, and, with
respect to the registration statement or any post-effective amendment, when the
same has become effective; (B) of any request by the Commission or any other
federal or state governmental authority during the period of effectiveness of
the registration statement for amendments or supplements to the registration
statement or related prospectus or for additional information relating to the
registration statement, (C) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of the registration statement or the initiation of any proceedings
for that purpose, (D) of the receipt by the Company of any notification with
respect to the suspension of the qualification or exemption from qualification
of any of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose; or (E) of the happening of any
event which makes any statement made in the registration statement or related
prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in the registration statement or prospectus so that, in the case of the
registration statement, it will not contain any untrue statement of a
material fact or omit to state any
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material fact or omit to state any 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.
(b) The Company may, upon the happening of any event (x) of the kind
described in clauses (B), (C), (D), or (E) of Section 5.5(a)(iii) or (y) that,
in the judgment of the Company's Board of Directors, renders it advisable to
suspend use of the prospectus due to pending corporate developments, public
filings with the Commission or similar events, suspend use of the prospectus on
written notice to each Holder for no more than sixty (60) days in the aggregate
in any six (6) month period of time, in which case each Holder shall discontinue
disposition of Registrable Securities covered by the registration statement or
prospectus until copies of a supplemented or amended prospectus are distributed
to the Holders or until the Holders are advised in writing by the Company that
the use of the applicable prospectus may be resumed. The Company shall use its
reasonable efforts to ensure that the use of the prospectus may be resumed as
soon as practicable. The Company shall use every reasonable effort to obtain
the withdrawal of any order suspending the effectiveness of the registration
statement, or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the securities for sale in any jurisdiction, at
the earliest practicable moment. As is practicable, the Company shall prepare a
supplement or post-effective amendment to the registration statement or a
supplement to the related prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Securities being sold thereunder, such
prospectus will not 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, in light of the circumstances under which they were made,
not misleading.
5.6 Indemnification.
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder of Registrable Securities, each of its officers and
directors, and each person controlling such Holder, with respect to which a
registration has been effected pursuant to this Section 4 and each underwriter,
if any, and each person who controls any underwriter of the Registrable
Securities held by or issuable-to such Holder, against all claims, losses,
damages, costs, expenses and liabilities whatsoever (or actions in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
preliminary or final prospectus contained therein or any amendment or supplement
thereto, offering circular or other documents (including any related
registration statement, notification or the like) incident to any such
registration, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any state securities law or of any rule or regulation promulgated under the
Securities Act or any state securities law applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, and will reimburse each such Holder, each of its officers and
directors, and each person controlling such Holder, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, cost, expense, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, cost, expense, or liability arises out of or is based on any
untrue statement or omission
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based upon written information furnished to the Company in writing by any Holder
or underwriter and stated to be specifically for use therein.
(b) To the extent, but only to the extent, that there is an untrue
statement or omission made in a registration statement, prospectus, offering
circular or other document in reliance upon and in conformity with written
information furnished to the Company in writing by a Holder and stated to be
specifically for use therein, such Holder will, if Registrable Securities held
by or issuable to such Holder are included in the securities as to which such
registration is being effected, indemnify and hold harmless the Company, each of
its directors and officers who sign such registration statement, each
underwriter, if any, of the Company's securities covered by such registration
statement, each person who controls the Company within the meaning of the
Securities Act, and each other Holder, each of such other Holder's officers and
directors and each person controlling such other Holder, against all claims,
losses, damages, costs, expenses and liabilities whatsoever (or actions in
respect thereof) arising out of or based on any such untrue statement of a
material fact contained in any such registration statement, preliminary or final
prospectus contained therein or any amendment or supplement thereto, offering
circular or other documents (including any related registration statement,
notification or the like) incident to any such registration, or based on any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Company, such other Holders, such directors, officers, persons or underwriters
for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, cost, expense,
liability or action; provided, however, that the foregoing indemnity agreement
is subject to the condition that, insofar as it relates to any such untrue
statement or omission made in the preliminary prospectus but eliminated or
remedied in the amended prospectus on file with the Commission at the time the
registration statement becomes effective or the amended prospectus filed with
the Commission pursuant to the Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of the Company, any
underwriter or any Holder, if there is no underwriter, if a copy of the Final
Prospectus was not furnished to the person or entity asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
(c) Each party entitled to indemnification under this Section 5.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation. If any such Indemnified Party shall have been advised by counsel
chosen by it that there may be one or more legal defenses available to such
Indemnified Party which are different from or additional to those available to
the Indemnifying Party, the Indemnifying Party shall not have the right to
assume the defense of such action on behalf of such Indemnified Party and will
promptly reimburse such Indemnified Party and any
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person controlling such Indemnified Party for the reasonable fees and expenses
of any counsel retained by the Indemnified Party, it being understood that the
Indemnifying Party shall not, in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys for such Indemnified Party
or controlling person, which firm shall be designated in writing by the
Indemnified Party to the Indemnifying Party.
5.7 Contribution. If the indemnification provided for in Section 5.6
is unavailable or insufficient to hold harmless an Indemnified Party thereunder,
then each Indemnifying Party thereunder shall contribute to the account paid or
payable by such Indemnified Party as a result of the losses, claims, damages,
costs, expenses, liabilities or actions referred to in Section 5.6(a) or (b) in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and the Indemnified Party on the other in
connection with statements or omissions which resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable considerations.
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 Indemnifying Party or the Indemnified Party and the Parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statements or omission. The Parties hereto agree that it
would not be just and equitable if contributions pursuant to this Section 5.7
were to be determined by pro rata or per capita allocation or by any other
method of allocation which does not take account of the equitable considerations
referred to in the first sentence of this Section 5.7. The amount paid by an
Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in the first sentence of this Section 5.7 shall be deemed to include
any legal or other expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any action or claim which is the
subject of this Section 5.7. Promptly after receipt by an Indemnified Party of
notice of the commencement of any action against such party in respect of which
a claim for contribution may be made against an Indemnifying Party under this
Section 5.7, such Indemnified Party shall notify the Indemnifying Party in
writing of the commencement thereof if the notice specified in Section 5.6(c)
has not been given with respect to such action; provided that the omission so to
notify the Indemnifying Party shall not relieve the Indemnifying Party from any
liability which it may have to any Indemnified Party otherwise under this
Section 5.7, except to the extent that the Indemnifying Party is actually
prejudiced by such failure to give notice. The Company and each Stockholder
agree with each other and shall agree with the underwriters of the Registrable
Securities, if requested by such underwriters, that (a) the underwriters'
portion of such contribution shall not exceed the underwriting discount,
commission and other compensation and (b) except for the Company, the amount of
such contribution shall not exceed an amount equal to the proceeds received by
such Indemnifying Party from the sale of securities in the offering to which the
losses, claims, damages or liabilities of the indemnified parties relate. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
5.8 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and as
shall be required in connection with any registration referred to in this
Section 5.
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5.9 Rule 144 Reporting. With a view to making available to the
Holders the benefits of certain rules and regulations of the Commission which
may permit the sale of Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
ninety (90) days after the effective date of the first registration filed by the
Company which involves a sale of securities of the Company to the general
public;
(b) file with the Commission in a timely manner all reports and other
documents required of the Company under the Securities Act and the Exchange Act;
and
(c) furnish to any Holder so long as such Holder owns any Registrable
Securities forthwith upon request a written statement by the Company that it has
compiled with the reporting requirements of said Rule 144 (at any time after
ninety (90) days after the effective date of said first registration statement
filed by the Company), and of the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), a copy of the
most recent annual or quarterly report of the Company, and such other reports
and documents so files by the Company as may be reasonably requested in availing
any Holder of any rule or regulation of the Commission permitting the selling of
any such securities without registration.
5.10 Transfer of Registration Rights. Any registration rights granted
by the Company under this Section 5 directly to a Holder of Registrable
Securities may be assigned by such Holder to one or more of its Affiliated
Transferees. In addition, any registration rights granted by the Company under
this Section 5 to Reuters B.V. or Cisco may be assigned by Reuters B.V. or
Cisco, as the case may be, to any Person who would, after such transfer, be the
holder of twenty percent (20%) or more of the shares of Common Stock issued upon
the conversion of the shares of the Company's Series A Preferred Stock or Series
B Preferred Stock.
5.11 Termination of Registration Rights. All registration rights
provided hereunder shall terminate upon the earlier to occur of (a) the tenth
anniversary of the Initial Public Offering Date and (b) with respect to any
Holder, such time as such Holder is able to sell all of its Registrable
Securities under Rule 144 during any one three-month period (treating for these
purposes a Holder and its Affiliated Transferees as one Holder).
5.12 Amendment of Registration Rights. The provisions of this
Section 5 may be amended with the written consent of the Company and the Holders
then holding fifty-one (51%) or more of the Registrable Securities outstanding
at the time of such amendment, provided that no amendment adversely affecting
the rights of Reuters B.V., Reuters, Cisco, the Mayfield Entities or Ranadive
hereunder shall be effective without Reuters B.V.'s, Reuters,' Cisco's, the
Mayfield Entities' or Ranadive's, as the case may be, prior written consent.
5.13 Future Grants of Registration Rights. The Company agrees for
the benefit of the Holders that it will not grant registration rights with
respect to any of its securities upon terms more
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favorable to the holders of such securities than those contained herein or that
conflict with the preferences provided to the Holders in the case of limitations
by the underwriter on the number of securities included in a registration
pursuant to Sections 5.2 and 5.3.
6. Information Rights. Until such time as Reuters (together with Reuters
B.V.) ceases to own shares of the Company's stock having at least 20% of the
Total Voting Power of the Company:
6.1 Financial Statements and Reports. The Company shall deliver to
Reuters:
(a) As soon as available, but in any event within fifteen (15) days
after the end of each fiscal month and each fiscal quarter (provided, that the
Company shall use its best efforts to deliver the monthly financial information
for June of each year within ten (10) calendar days after the end of June), a
consolidated balance sheet of the Company and its consolidated subsidiaries as
of the end of such fiscal month or such fiscal quarter, as the case may be, and
the related statements of earnings, stockholder' equity and changes in financial
position for such fiscal month or such fiscal quarter, as the case may be, and
for the year to date, setting forth, in each case, in comparative form the
figures for the corresponding period a year earlier, all in reasonable detail,
including commentary on key features and on variances from the current Annual
Business Plan and Budget, and certified by the chief financial officer of the
Company as (i) accurately setting out and fairly describing the financial
condition and operating results of the Company, subject only to changes
resulting from normal year-end audit adjustments which are neither individually
nor in the aggregate material, and (ii) having been prepared in accordance with
generally accepted accounting principles (except for the omission of footnotes),
applied on a consistent basis throughout the periods indicated;
(b) As soon as available, but in any event within thirty (30) days
after the end of each fiscal year of the Company, a consolidated balance sheet
of the Company and its consolidated subsidiaries as of the end of such fiscal
year and the related statements of earnings, stockholder' equity and changes in
financial position for such year, setting forth, in each case, in comparative
form the figures for the previous fiscal year, all in reasonable detail for
audit clearance within Reuters. The Company will use best efforts within sixty
(60) days after the end of each fiscal year of the Company to deliver such
materials accompanied by the report thereon of the Company's auditors, which
report shall state that such financial statements present fairly the financial
condition and results of operations of the Company and its consolidated
subsidiaries as of the close of such fiscal year in conformity with generally
accepted accounting principles consistently applied.
(c) All written reports, analyses or studies relating to the business
or financial condition of the Company as the Company shall deliver to any holder
of Common Stock (in his capacity as a stockholder and not as an officer or
director of the Company), simultaneously with its delivery to such holder.
6.2 Annual Business Plan and Budget. The Company will, (a) at least
one month prior to the commencement of each fiscal year, prepare and submit to
the Board of Directors for approval and to Reuters a budget and operating plan
for the upcoming fiscal year, including projections or forecasts of capital and
operating expenses, cash flow, and profits and losses (the "Annual Business Plan
and
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<PAGE>
Budget"), all itemized in reasonable detail; and (b) at least one month prior to
the commencement of each fiscal quarter, prepare and submit to the Board of
Directors projections or forecasts of capital and operating expenses, cash flow,
and profits and losses for the remainder of the fiscal year together with profit
projections for the following fiscal year. Before the Company takes any action
which would materially deviate from an approved Annual Business Plan and Budget,
the Board of Directors of the Company shall approve such action.
6.3 Inspection and Audit Rights. The Company agrees to permit the
authorized representatives of Reuters to visit and inspect any of the properties
of the Company, including its books of account, and to take extracts therefrom,
and to discuss its affairs, finances and accounts with its officers and
independent accountants, all at such times and as often as may be reasonably
requested, and to make such other inspections as may be necessary to permit
Reuters, to review any of the financial statements of the Company delivered to
Reuters, pursuant hereto, provided, however, that such representatives shall
agree to take reasonable precautions to hold in confidence all non-public
information so provided and so designated by the Company (except that such
representatives may disclose such information to officers of Reuters, to its
counsel, to its independent accountants and as required by law). In addition,
the Company shall use its best efforts to allow the independent accountants of
Reuters to audit the working papers of and to assist in any review undertaken by
the Company's independent accountants, and if such access is denied, the Company
shall reimburse Reuters for the costs of any extra audit work undertaken by
Reuters as a result of such denial.
7. Sales of Securities.
7.1 Restrictive Legend. Each certificate representing Shares held by
the Parties hereto shall be stamped or otherwise imprinted with a legend
substantially in the following form (unless no longer required in the opinion of
counsel for the Company):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO UNLESS AN
EXEMPTION UNDER SUCH ACT IS THEN AVAILABLE.
THE CORPORATION IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF STOCK. THE
CORPORATION WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS
A CERTIFICATE DESCRIBING THE POWERS, DESIGNATIONS, PREFERENCES AND
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.
THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS OF THE SHAREHOLDER AGREEMENT
AMONG CERTAIN STOCKHOLDERS OF THE COMPANY. A COPY OF
-17-
<PAGE>
THE ABOVE-REFERENCED AGREEMENT IS ON FILE AT THE OFFICES OF THE
CORPORATION.
8. Representations and Warranties of Reuters, Reuters B.V., Cisco and
Each of the Mayfield Entities.
8.1 Reuters represents and warrants as follows:
(a) Status and Authority. Reuters is a company duly organized and
validly existing and under the laws of England and Wales. The execution and
delivery by Reuters of this Agreement and the performance of its obligations
hereunder have been duly authorized by all necessary corporate action on the
part of Reuters, and this Agreement has been duly executed and delivered by the
duly authorized officers of Reuters and constitutes the valid, legal and binding
obligation of Reuters.
(b) No Conflicts.
(i) The execution, delivery and performance of this Agreement
by Reuters will not result in (A) any conflict with the charter documents of
Reuters, (B) any material breach or violation of or default under any statute,
law, rule, regulation, judgment, decree, order or any material mortgage, deed of
trust, indenture, agreement or any other instrument to which Reuters is a party
or by which any of its material properties or assets is bound, or (C) the
creation or imposition of any lien, charge, pledge or encumbrance thereon,
except for such breaches, violations or defaults and such liens, charges,
pledges or encumbrances as would not, individually or in the aggregate, have a
material adverse effect on Reuters's business or adversely affect the ability of
Reuters to perform its obligations hereunder.
(ii) No consent, approval or authorization of or filing with
any governmental authority is required with respect to Reuters in connection
with the execution and delivery of this Agreement, and the performance by
Reuters of its obligations hereunder.
(c) No Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or to the best knowledge of Reuters,
threatened, which question the validity of this Agreement or any action taken or
to be taken by Reuters in connection herewith.
8.2 Reuters B.V. represents and warrants as follows:
(a) Status and Authority. Reuters B.V. is a corporation duly
organized, validly existing and in good standing under the laws of the
Netherlands. The execution and delivery by Reuters B.V. of this Agreement and
the performance of its obligations hereunder have been duly authorized by all
necessary corporate action on the part of Reuters B.V., and this Agreement has
been duly executed and delivered by the duly authorized officers of Reuters B.V.
and constitutes the valid, legal and binding obligation of Reuters B.V.
(b) No Conflicts.
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<PAGE>
(i) The execution, delivery and performance of this Agreement by
Reuters B.V. will not result in (A) any conflict with the charter documents of
Reuters B.V., (B) any material breach or violation of or default under any
statute, law, rule, regulation, judgment, decree, order or any material
mortgage, deed of trust, indenture, agreement or any other instrument to which
Reuters B.V. is a party or by which any of its material properties or assets is
bound, or (C) the creation or imposition of any lien, charge, pledge or
encumbrance thereon, except for such breaches, violations or defaults and such
liens, charges, pledges or encumbrances as would not, individually or in the
aggregate, have a material adverse effect on Reuters B.V.'s business or
adversely affect the ability of Reuters B.V. to perform its obligations
hereunder.
(ii) No consent, approval or authorization of or filing with
any governmental authority is required with respect to Reuters B.V. in
connection with the execution and delivery of this Agreement, and the
performance by Reuters B.V. of its obligations hereunder.
(c) No Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or to the best knowledge of Reuters B.V.,
threatened, which question the validity of this Agreement or any action taken or
to be taken by Reuters B.V. in connection herewith.
8.3 Cisco represents and warrants as follows:
(a) Status and Authority. Cisco is a corporation duly organized,
validly existing and in good standing under the laws of California. The
execution and delivery by Cisco of this Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary corporate
action on the part of Cisco, and this Agreement has been duly executed and
delivered by the duly authorized officers of Cisco and constitutes the valid,
legal and binding obligation of Cisco.
(b) No Conflicts.
(i) The execution, delivery and performance of this Agreement by
Cisco will not result in (A) any conflict with the charter documents of Cisco,
(B) any material breach or violation of or default under any statute, law, rule,
regulation, judgment, decree, order or any material mortgage, deed of trust,
indenture, agreement or any other instrument to which Cisco is a party or by
which any of its material properties or assets is bound, or (C) the creation or
imposition of any lien, charge, pledge or encumbrance thereon, except for such
breaches, violations or defaults and such liens, charges, pledges or
encumbrances as would not, individually or in the aggregate, have a material
adverse effect on Cisco's business or adversely affect the ability of Cisco to
perform its obligations hereunder.
(ii) No consent, approval or authorization of or filing with
any governmental authority is required with respect to Cisco in connection with
the execution and delivery of this Agreement, and the performance by Cisco of
its obligations hereunder.
(c) No Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or to the best knowledge of Cisco,
threatened, which question the validity of this Agreement or any action taken or
to be taken by Cisco in connection herewith.
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<PAGE>
8.4 Each of the Mayfield Entities represents and warrants as follows:
(a) Status and Authority. Mayfield IX is a Delaware limited
partnership and Mayfield Associates & Fund III is a California limited
partnership, and each is duly organized, validly existing and in good standing
under the laws of Delaware and California, respectively. The execution and
delivery by such Mayfield Entity of this Agreement and the performance of its
obligations hereunder have been duly authorized by all necessary corporate
action on the part of such Mayfield Entity, and this Agreement has been duly
executed and delivered by the duly authorized officers of such Mayfield Entity
and constitutes the valid, legal and binding obligation of such Mayfield Entity.
(b) No Conflicts.
(i) The execution, delivery and performance of this Agreement by
such Mayfield Entity will not result in (A) any conflict with the charter
documents of such Mayfield Entity, (B) any material breach or violation of or
default under any statute, law, rule, regulation, judgment, decree, order or any
material mortgage, deed of trust, indenture, agreement or any other instrument
to which such Mayfield Entity is a party or by which any of its material
properties or assets is bound, or (C) the creation or imposition of any lien,
charge, pledge or encumbrance thereon, except for such breaches, violations or
defaults and such liens, charges, pledges or encumbrances as would not,
individually or in the aggregate, have a material adverse effect on such
Mayfield Entity's business or adversely affect the ability of such Mayfield
Entity to perform its obligations hereunder.
(ii) No consent, approval or authorization of or filing with
any governmental authority is required with respect to such Mayfield Entity in
connection with the execution and delivery of this Agreement, and the
performance by such Mayfield Entity of its obligations hereunder.
(c) No Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or to the best knowledge of such Mayfield
Entity, threatened, which question the validity of this Agreement or any action
taken or to be taken by such Mayfield Entity in connection herewith.
9. Representations and Warranties of the Stockholders. Each of the
Stockholders represents and warrants as follows:
9.1 Status and Authority. This Agreement has been duly executed and
delivered by such Stockholder and constitutes the valid, legal and binding
obligation of such Stockholder.
9.2 No Conflicts.
(a) The execution, delivery and performance of this Agreement by such
Stockholder will not result in (i) any material breach or violation of or
default under any statute, law, rule, regulation, judgment, decree, order or any
material mortgage, deed of trust, indenture, agreement or any other instrument
to which such Stockholder is a party or by which any of his material properties
or assets is bound, or (ii) the creation or imposition of any lien, charge,
pledge or encumbrance on any of the assets
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<PAGE>
or properties of such Stockholder, except for such breaches, violations or
defaults and such liens, charges, pledges or encumbrances as would not,
individually or in the aggregate, have a material adverse effect on such
Stockholder's financial condition or adversely affect the ability of such
Stockholder to perform its obligations hereunder.
(b) No consent, approval or authorization of or filing with any
governmental authority is required with respect to such Stockholder in
connection with the execution and delivery of this Agreement, and the
performance by such Stockholder of its obligations hereunder.
9.3 No Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or to the best knowledge of such
Stockholder, threatened, which question the validity of this Agreement or any
action taken or to be taken by such Stockholder in connection herewith.
10. Representations and Warranties of the Company. The Company represents
and warrants as follows:
10.1 Status and Authority. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. The execution and delivery of this Agreement and the performance of
its obligations hereunder have been duly authorized by all necessary corporate
action on the part of the Company, and this Agreement has been duly executed and
delivered by the duly authorized officers of the Company and constitutes the
valid, legal and binding obligation of the Company.
10.2 No Conflicts.
(a) The execution, delivery and performance of this Agreement by the
Company will not result in (i) any conflict with the Certificate of
Incorporation or the Bylaws of the Company, (ii) any material breach or
violation of or default under any statute, law, rule, regulation, judgment,
decree, order or any material mortgage, deed of trust, indenture, agreement or
any other instrument to which the Company is a party or by which any of its
material properties or assets is bound, or (iii) the creation or imposition of
any lien, charge, pledge or encumbrance thereon, except for such breaches,
violations or defaults and such liens, charges, pledges or encumbrances as would
not, individually or in the aggregate, have a material adverse effect on the
Company's business or adversely affect the ability of the Company to perform its
obligations hereunder.
(b) No consent, approval or authorization of or filing with any
governmental authority is required with respect to the Company in connection
with the execution and delivery of this Agreement, and the performance by the
Company of its obligations hereunder.
10.3 No Litigation. There are no judicial or administrative actions,
proceedings or investigations pending or to the knowledge of the Company,
threatened, which question the validity of this Agreement or any action taken or
to be taken by the Company in connection herewith.
11. Miscellaneous Provisions.
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<PAGE>
11.1 No Waiver of Rights. No failure or delay on the part of any
party in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
power, right or privilege. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
11.2 Assignment. Unless otherwise provided hereunder, neither this
Agreement nor any right or obligation hereunder is assignable in whole or in
part by any party without the prior written consent of Reuters, and the Company.
11.3 Entire Agreement; Amendment.
(a) This Agreement, constitutes the full and entire agreement and
understanding among the parties hereto with regard to the subjects hereof and
merge all prior agreements and discussions among the parties hereto with respect
to the subjects hereof. No amendment to this Agreement that is binding to all
parties hereto shall be effective unless in writing and executed by all of the
parties hereto (other than Reuters B.V., for which Reuters shall act), it being
understood that a waiver by any party of any of its rights hereunder need only
be executed by such party (other than Reuters B.V., for which Reuters shall
act), and it being further understood that only the consent of Stockholders
holding a majority of the voting power of the Company not held by Reuters B.V.,
Cisco or the Mayfield Entities or their Affiliated Transferees is needed to bind
all Stockholders (other than Reuters B.V., Cisco, the Mayfield Entities and
their Affiliated Transferees).
(b) Notwithstanding the foregoing, (i) the provisions of Section 4
(other than Sections 4.3 and 4.4) may be amended without the consent of Reuters
at any time after Reuters ceases to own shares of the Company's stock having at
least 20% of the Total Voting Power of the Company, (ii) the provisions of
Section 4.3 may be amended without the consent of Reuters at any time after
Reuters ceases to own shares of the Company's stock having at least 10% of the
Total Voting Power of the Company and (iii) the provisions of Section 4.4 may
not be amended until such time as Reuters ceases to own shares of the Company's
stock having at least 49% of the Total Voting Power of the Company, after which
Section 4.4 may be amended without the consent of Reuters. For purposes of this
Section 11.3(b), shares owned by Reuters B.V. shall be deemed owned by Reuters.
11.4 Severability. If any one or more of the provisions contained in
this Agreement or any document executed in connection herewith shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions contained herein (except
any which are direct quid pro quos for the invalid provision) shall not in any
way be affected or impaired.
11.5 Notices. Any notices and other communication required or
permitted hereunder shall be in writing and shall be delivered by hand or mailed
by first class mail, postage prepaid, addressed as follows:
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<PAGE>
(a) If to Reuters or Reuters B.V., addressed to:
c/o Reuters Limited
85 Fleet Street
London, England
EC4B 4AJ
Attention: General Counsel
Tel: 011-44171-250-1122
Fax: 011-44171-542-5896
with copies to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Tel: 650-493-9300
Fax: 650-493-6811
(b) If to Cisco, addressed to:
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134
Attention: Vice President Business Development
Tel: 408-526-4000
Fax: 408-526-4100
with copies to:
Brobeck Phleger & Harrison
Two Embarcadero Place
2200 Geng Road
Palo Alto, California 94303
Attention: Edward M. Leonard, Esq.
Tel: (650) 424-0160
Fax: (650) 496-2921
(c) If to any Mayfield Entity, addressed to:
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<PAGE>
Mayfield Fund
2800 Sand Hill Road
Menlo Park, CA 94125
Attention: Yogen Dalal
Tel: (650) 854-5560
Fax: (650) 854-5712
with copies to:
Latham & Watkins
75 Willow Road
Menlo Park, CA 94025
Attention: Allen Morgan
Tel: (650) 328-4600
Fax: (650) 463-2600
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<PAGE>
(d) If to the Company, addressed to:
c/o TIBCO Software Inc.
3165 Porter Drive
Palo Alto, California 94304
Attention: CFO
Tel: 650-846-5000
Fax: 650-846-1229
with copies to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
Tel: 650-493-9300
Fax: 650-493-6811
(e) If to Ranadive or any other Stockholder, addressed to:
c/o TIBCO Software Inc.
3165 Porter Drive
Palo Alto, California 94304
Attention: CFO
Tel: 650-846-5000
Fax: 650-846-1229
or at such other addresses as any Party shall have furnished to the other
Parties in writing.
11.6 Further Action. The Parties in a timely manner take all further
measures reasonably within their control which are necessary or appropriate to
cause the Company and its Board of Directors to implement the provisions of this
Agreement and the transactions contemplated hereby, and the parties hereto shall
at all times act in good faith with respect to the obligations incurred by them
hereunder.
11.7 Termination. Except as otherwise expressly provided herein this
Agreement shall terminate and be of no further force or effect upon the
dissolution of the Company. Notwithstanding the foregoing, no termination of
any provision of this Agreement shall release any Party from any liability to
any other Party which at the time of such termination has already accrued, nor
affect in any way the survival of any right, duty or obligation of any Party
which is expressly stated elsewhere in this Agreement to survive expiration or
termination hereof.
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<PAGE>
11.8 Injunctive Relief. Each of the Parties hereby acknowledges that
in the event of a breach by any of them of any material provision of this
Agreement, the aggrieved party may be without an adequate remedy at law. Each
of the Parties therefore agrees that in the event of a breach of any material
provision of this Agreement the aggrieved Party may elect to institute and
prosecute proceedings in any court of competent jurisdiction to enforce specific
performance or to enjoin the continuing breach of such provision, as well as to
obtain damages for breach of this Agreement. By seeking or obtaining any such
relief, the aggrieved Party will not be precluded from seeking or obtaining any
other relief to which it may be entitled.
11.9 Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
11.10 Headings. The inserted headings are for convenience of
reference only and shall not be used to construe or interpret this Agreement.
11.11 Governing Law; Waiver of Jury Trial. This Agreement shall be
governed by, and construed in accordance with, the laws of the State of
California applicable to contracts negotiated, executed and wholly performed in
that State. The Parties hereto agree that in the event of litigation between
them with respect to this Agreement, they each hereby consent to trial by a
judge in a Federal court in the Northern District of California without a jury.
11.12 Termination of Prior Agreement. The parties to the Prior
Agreement hereby agree that the Prior Agreement is hereby terminated and of no
further force or effect.
* * * *
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above-written.
MAYFIELD IX
a Delaware Limited Partnership
By: Mayfield IX Management, L.L.C. a Delaware Limited Liability Company
Its: General Partner
By: ___________________________
Name: _________________________
Title: ________________________
MAYFIELD ASSOCIATES FUND III
a California Limited Partnership
By: Mayfield VIII Management, L.L.C. a Delaware Limited Liability Company
Its: General Partner
By: ___________________________
Name: _________________________
Title: ________________________
Signature page to THIRD AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
as of the date first above written.
REUTERS LIMITED REUTERS NEDERLAND B.V.
By:_____________________________ By:________________________________
Name: Name:
Title Title:
CISCO SYSTEMS, INC. VIVEK RANADIVE
By:_____________________________ ___________________________________
Name:
Title
TIBCO SOFTWARE INC.
________________________________
Vivek Ranadive
President
Signature page to THIRD AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
-28-
<PAGE>
Exhibit 10.7
TIBCO INC.
RANADIVE EMPLOYMENT AGREEMENT
This agreement is made by and between TIBCO Inc., a Delaware corporation
(the "Company"), Reuters Limited, a company organized under the laws of England
and Wales ("Reuters"), and Vivek Ranadive ("Executive").
1. Duties and Scope of Employment
------------------------------
(a) Position: Employment Commencement Date. The Company shall
--------------------------------------
employ the Executive as the President and Chief Executive Officer of the Company
reporting only to the Board of Directors of the Company (the "Board").
Additionally, Executive shall serve as Chairman of the Board during the period
of his employment hereunder. As Chairman, President and Chief Executive Officer
of the Company, Executive shall have the duties and responsibilities customarily
associated with such positions. Executive shall not receive any additional
compensation for his service as Chairman of the Board while he remains an
employee of the Company.
(b) Obligations. Executive shall devote the time reasonably necessary
-----------
to discharge his duties to the Company. Except with respect to his duties as
President, Chief Executive Officer and Chairman of the Board of TIB
Applications, Inc., Executive agrees not to actively engage in any other
employment, occupation or consulting activity for any direct or indirect
remuneration without the prior approval of the Board; provided, however, that
Executive may serve in any capacity with any civic, educational or charitable
organization without the approval of the Board, so long as such activities do
not interfere with his duties and obligations under this Agreement.
2. Employee Benefits. During his employment hereunder, Executive shall be
-----------------
eligible to participate in the employee benefit plans maintained by the Company.
3. Two Year Initial Employment Term Followed By At-Will Employment.
---------------------------------------------------------------
Executive's employment with the Company pursuant to this Agreement shall
commence on the date set forth on the signature page hereto (the "Effective
Date") and shall continue for two years thereafter (the "Initial Employment
Term") subject to the terms and conditions herein set forth. During the Initial
Employment Term, the Company shall be entitled to terminate Executive's
employment hereunder at any time, either for Cause (as defined below) or without
Cause, at Reuter's direction and discretion. During the Initial Employment
Term, Executive shall not voluntarily terminate his employment with the Company
(subject to the last sentence of the second paragraph of Section 6 hereof),
except that Executive may terminate such employment voluntarily if Executive's
employment with TIB Applications, Inc. is terminated with Cause at the direction
of Reuter's or at the direction of TIB Applications, Inc. following a Change of
Control or Initial Public Offering (as defined in the Employment Agreement of
even date herewith between TIB Applications, Inc. and Executive) of TIB
Applications, Inc. Executive and the Company understand and acknowledge that
Executive's employment with the Company following Initial Employment Term
constitutes "at-will" employment that may be terminated at any time, with or
without good cause or for any or no cause, at option either of the Company or
Executive upon 120 days prior written notice. The period
<PAGE>
covering the Initial Employment Term and the period, if any, that Executive is
employed by the Company thereafter is referred to herein as the "Employment
Term."
4. Compensation and Bonus Rights
-----------------------------
(a) Base Salary. During the Employment Term, the Company
-----------
Shall pay the Executive as compensation for his services a base salary at the
annualized rate of two hundred thousand dollars ($200, 000) (the "Base Salary");
provided, however that if at any time during the Employment Term Executive no
longer serves as the President, Chief Executive Officer and Chairman of the
Board of TIB Applications, Inc. such Base Salary shall be four hundred thousand
dollars ($400, 000), less any severance to which Executive may otherwise be
entitled from TIB Applications, Inc. Such salary shall be paid periodically in
accordance with normal Company payroll practices and subject to the usual,
required withholding. Executive's salary shall be reviewed yearly for possible
raises in light of Executive's performance of his duties, as determined by the
Board. Executive understands and agrees that neither his positive job
performance nor promotions, commendations, bonuses or the like from the Company
give rise to or in any way serve as the basis for modifications, amendment, or
extension, by implication or otherwise, of this Agreement.
(b) Annual Target Bonus. A bonus target of at least $100,000 per year
-------------------
for Executive shall be established by the Board following good faith
consultation with the Executive, which bonus shall be based on the Company's
bonus plan implemented in accordance with the Company's prior practice;
provided, however, that if at any time during the Employment Term Executive no
longer serves as the President, Chief Executive Officer and Chairman of the
Board of TIB Applications, Inc. such bonus target shall be at least $200, 000.
(c) Employee Bonus Rights.
---------------------
(1) Promptly following adoption of the TIBCO 1996 Employee Bonus
Plan (as contemplated by the Agreement of Organization, dated as of November
14, 1996, to which the parties hereto are parties), Executive shall be granted
rights thereunder in an amount equal to 150% of the next highest amount of
such rights initially granted to any other employee of the Company (it being
understood that the grant of any rights under such new Employee Bonus Plan
will be subject to Reuter's consent). Rights will vest in accordance with the
terms of such new Plan, and shall not be subject to any acceleration of
vesting.
(2) Current Employee Bonus Plan. All of Executive's Bonus Rights
---------------------------
under the current TIBCO Inc. Employee Bonus Plan (as opposed to the 1996
Employee Bonus Plan to be adopted by TIBCO Inc.) shall continue to vest during
the Employment Term in accordance with the terms of such Employee Bonus Plan
and the vesting provisions as currently in effect (i.e. 200,000 rights to
become Vested Rights on January 1, 1997, 200,000 additional rights to become
Vested Rights on January 1, 1998, and 100,000 additional rights to become
Vested Rights on January 1, 1999, al in accordance with and subject to the
terms of such employee Bonus Plan); provided, however, that in the event of an
initial public offering of the Company's Common Stock, a Change of Control of
the Company, the occurrence of a Reuters Control Event, or a termination by
the
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<PAGE>
Company of Executive's employment without Cause at Reuter's direction (each
defined herein), then all of Executive's Bonus Rights shall be considered
Vested Rights under the terms of such Employee Bonus Plan. In such
circumstance, the initial Fair Market Value of the relevant Company Stock,
which is so vested, shall be based upon the Net Earnings Per Share in the
later of (x) the most recent completed financial year of TIBCO Inc., and (y)
the 1997 full financial year of TIBCO Inc. If such Bonus Rights become Vested
Rights prior to December 31, 1997, Executive may not exercise such Vested
Rights prior to the date that the auditors of TIBCO Inc. have performed the
calculation of Net Earnings Per Share and Fully Diluted Shares for the full
1997 financial year of TIBCO Inc., and notwithstanding the terms of such Bonus
Rights such Vested Rights shall be exercisable at least through the ninety-day
period following written notice to Executive of such final calculation.
For the purpose of this Agreement, a "Change of Control" is defined as:
(A) Any "person", as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (other than a group
consisting of the Company's stockholders as of the Effective Date and their
"parents and subsidiaries," as such terms are defined in Internal Revenue Code
Section 424) becomes the "beneficial owner" (as defined in Rule 13d-3 under
said Act), directly or indirectly, of securities of the Company representing
50% or more of the total voting poser represented by the Company's then
outstanding voting securities; or
(B) The consummation of a merger, consolidation,
reorganization or similar transaction in which the Company's shareholders
before such transaction own less than 50% of the voting stock on voting power
of the surviving entity immediately after such transaction; or
(C) The consummation of the sale or disposition by the
Company of all or substantially all of the Company's assets.
For the purpose of this Agreement, a "Reuters Control Event" is defined as:
(1) the termination by Reuters of the Management Agreement to which Reuters,
the Company and Executive are parties which results in the appointment to the
Company's Board of Directors by a majority of the members of such Board or (2)
the appointment to the Company's Board of Directors by Reuters of a majority
of the members of such Board pursuant to Section 2.2(e) or 3.1 of such
Management Agreement.
5. Expenses. The Company will pay or reimburse Executive for reasonable
--------
travel or other expenses incurred by Executive in connection with the
performance of Executive's duties hereunder in accordance with the Company's
established policies. Executive shall furnish the Company with evidence of such
expenses within a reasonable period of time from the date that they were
incurred.
6. Severance Benefits. If Executive's employment with the Company
------------------
terminates other than voluntarily or for Cause, then if such termination occurs
prior to the end of the Initial Employment Term, Executive shall be entitled to
receive continuing payments of severance pay (less
-3-
<PAGE>
applicable withholding taxes) at a rate equal to his base salary rate plus
target bonus amount, as then in effect (but not less than $300,000 per year)
until the end of the Initial Employment Term.
For the purpose of this agreement, "Cause" is defined as (i) a material
act of dishonesty made by Executive in connection with Executive's
responsibilities as an employee and intended to result in Executive's personal
enrichment, (ii) Executive's conviction of, or plea of nolo contendere to, a
---------------
felony, (iii) Executive's gross misconduct, (iv) Executive's repeated material
failure to substantially perform his employment duties after Executive has
received a written demand for performance from the Company which specifically
sets forth the factual basis for the Company's belief that Executive has
repeatedly materially failed to substantially perform his duties, or (v) a
material breach by Executive of his obligations under this Agreement (including,
without limitation, voluntary termination by Executive of his employment during
the Initial Employment Term, except as permitted in Section 3 above and subject
to the next sentence). For the purpose of this Agreement, if elected by
Executive, the Company shall be deemed to have terminated Executive's employment
without Cause if (a) he is required to perform his regular duties (other than
normal business travel) away from the Company's headquarters, which shall be
located in the Silicon Valley area in California or (b) if following a Reuters
Control Event Executive is relieved of a material portion of his
responsibilities.
7. Total Disability of Executive. Upon Executive's becoming totally
-----------------------------
disabled during the term of this Agreement, employment hereunder shall
automatically terminate and Executive shall be entitled only to severance
benefits pursuant to Section 6 hereof. Executive shall be deemed to be "totally
disabled" ninety (90) days following written notice by the company to Executive
of such determination by an independent physician acceptable to the Board,
Reuters and Executive (which acceptance will not be unreasonably withheld),
provided, however, that if Executive resumes work on a regular basis prior to
the end of such 90 day period, Executive shall not be deemed to be "totally
disabled."
8. Death of Executive. If Executive dies during the term of this
------------------
Agreement, this Agreement shall terminate immediately and Executive's estate
shall be entitled only to severance benefits pursuant to Section 6 hereof.
9. Enforcement. In the event of any action to enforce the terms of
------------
this Agreement, the prevailing party in such action shall be entitled to such
party's reasonable costs and expenses of enforcement including, without
limitation, reasonable attorneys' fees.
10. Competition. As a material inducement to Reuters to enter into this
-----------
Agreement and the Agreement of Organization, dated as of November 14, 1996 to
which the parties hereto are parties, Executive hereby agrees that the following
provisions of this Section 10 shall not apply if Executive's employment with
either the Company or TIB Applications, Inc. is terminated without Cause at the
direction of Reuters or at the direction of the Company or TIB Applications,
Inc., as the case may be, following a Change of Control of such entity or an
initial public offering of such entity (as such terms may be defined herein with
respect to the
-4-
<PAGE>
Company or in the Employment Agreement of even date herewith between TIB
Applications, Inc. and Executive, with respect to TIB Applications, Inc.) of
the company or TIB Applications, Inc.
(i) No Competition. Employee will not own, operate, manage, or
--------------
provide consulting services to, or be an employee of, or own more than a 5%
interest in, any business engaged in the Protected Business (as defined below)
in competition with Company or TIB Applications, Inc. in the geographic area
compromising the United States of America, each country (or political
subdivision thereof) in Europe and the country of Japan (the "Protected
Territory"), other than TIB Applications, Inc. The term "Protected Business"
shall mean the business of providing software and related services that are
directly competitive with the software and services provided by the Company or
TIB Applications, Inc. (in each case, as of the last day of employment of
Executive with such company).
The parties intend that the covenants contained in the preceding
paragraph shall be construed as a series of separate covenants, one for each
country, city and state or other political subdivision of the Protected
Territory. If, in any judicial proceeding a court shall refuse to enforce any
of the separate covenants (or any part hereof) deemed included in said
paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced.
(ii) Breach of Conditions. Executive acknowledges that upon the breach of
--------------------
any of the provisions of this Agreement, the company and Reuters would sustain
irreparable harm, and, therefore, Executive agrees that in addition to any other
remedies which the Company or Reuters may have under this Agreement or
otherwise, the Company and Reuters shall be entitled to obtain equitable relief
from committing or continuing any such violation of this Agreement.
11. Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of (a) the parties hereto (b) the heirs, executors and legal
representatives of Executive upon Executive's death and (c) any successor the
Company or Reuters. Any such successor of the company or Reuters shall be
deemed substituted for the Company or Reuters, as the case may be, under the
terms of this Agreement for all purposes. As used herein, "successor" shall
include any person, firm, corporation or other business entity which at any
time, whether by purchase, merger, or otherwise, directly or indirectly acquires
all or substantially all of the assets or business of the Company. None of the
rights of Executive to receive any form of compensation payable pursuant to this
Agreement shall be assignable or transferable except through a testamentary
disposition or by the laws of descent and distribution upon the death of
Executive. Any attempted assignment, transfer, conveyance or other disposition
(other than as aforesaid) of any interest in the rights of Executive to receive
any form of compensation hereunder shall be null and void.
12. Notices. All notices, requests, demands and other communications
-------
called for hereunder shall be in writing and shall be deemed given if delivered
personally or one (1) day after sending by express mail or other overnight
service, or three (3) days after being mailed by
-5-
<PAGE>
registered or certified mail, return receipt requested, prepaid and addressed
to the parties or their successors in interest at the following addresses, or
at such other addresses as the parties may designate by written notice in the
manner aforesaid:
If to the Company: TIBCO Inc.
3165 Porter Drive, Palo Alto, CA 94304
If to Executive: Vivek Ranadive
At the last residential address known by the Company
13. Severability. In the event that any provision hereof becomes or
------------
is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
14. Entire Agreement. Except as expressly set forth herein, this
----------------
Agreement and the Proprietary Information Agreement of even date herewith
together with the Agreement of Organization to which Executive is a party as
well as the TIBCO Employee Bonus Plan, represent the entire agreement and
understanding between the Company and Executive concerning Executive's
employment relationship with the Company, supersedes and replaces any and all
prior agreements and understandings concerning Executive's Employment Agreement
dated March 10, 1994 between RTSS Merger Sub, Inc. and the Executive.
15. No Oral Modification, Cancellation or Discharge. This Agreement
-----------------------------------------------
may only be amended, canceled or discharged in writing signed by Executive and
the Company.
16. Governing Law. This Agreement shall be governed by the laws of
-------------
the State of Delaware, without giving effect to the conflicts of laws principles
thereof.
17. Acknowledgement. Executive acknowledges that he has had the
---------------
opportunity to discuss this matter with and obtain advice from his private
attorney, has had sufficient time to, and has carefully read and fully
understands all the provisions of this Agreement, and is knowingly and
voluntarily entering into this Agreement.
18. Indemnification. The Company agrees to indemnify Executive as an
---------------
officer and director of the Company to the fullest extent permitted under
applicable Delaware corporate law. Executive also shall have the right to enter
into with the Company an indemnification agreement in customary form.
-6-
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
respective dates set forth below.
TIBCO INC.
By: /s/ Vivek Ranadive
-----------------------
Title:
----------------------
Date: December 31, 1996
----------------------
REUTERS LIMITED
By: /s/
----------------------
Title: Executive Director
----------------------
Date: December 31, 1996
----------------------
VIVEK RANADIVE
Signature: /s/ Vivek Ranadive
----------------------
Date: December 31, 1996
----------------------
***RANADIVE TIBCO EMPLOYMENT AGREEMENT***
-7-
<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 16th day of March 1998, by
and between Robert P. Stefanski, (the "EMPLOYEE") and TIBCO Software Inc. (the
"EMPLOYER").
I. EMPLOYMENT
EMPLOYER employs EMPLOYEE, and EMPLOYEE accepts employment with EMPLOYER, on the
terms and conditions set forth in this Agreement.
II. TERMS OF EMPLOYMENT
The employment relationship between EMPLOYEE and EMPLOYER may be terminated as
set forth in offer letter dated October 28, 1997.
III. DUTIES
EMPLOYEE shall perform such tasks and duties as may be assigned by EMPLOYER from
time to time. At all times EMPLOYEE shall follow all of EMPLOYER's legal
instructions and directions and shall abide by all of EMPLOYER's rules and
procedures in force from time to time while employed. EMPLOYEE shall devote his
full time, attention, skill and efforts to the tasks and duties assigned by
EMPLOYER. Without the prior written consent of EMPLOYER, EMPLOYEE shall not
provide services, for compensation, to any other person or business entity while
employed by EMPLOYER.
IV. COMPENSATION
As compensation for all services to be rendered by EMPLOYEE to EMPLOYER,
EMPLOYEE shall be paid a salary at the annual rate of [See offer letter of
10/28/97] ($____________). Said salary shall be payable in accordance with
EMPLOYER's
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<PAGE>
standard procedures. EMPLOYER shall withhold from any amounts payable as
compensation all federal, state, municipal or other taxes as are required by any
law, regulation or ruling.
(A) EMPLOYEE understands and agrees that EMPLOYEE's salary may be adjusted by
EMPLOYER prospectively, and at its sole discretion from time to time,
without affecting the remaining terms of this Agreement.
(B) EMPLOYEE understands and agrees that any other compensation that may be
paid to EMPLOYEE for services rendered, or to be rendered, (whether by way
of any incentive payment, opportunity to acquire stock or any other form of
additional compensation) shall rest in the sole discretion of EMPLOYER.
V. PROPERTY RIGHTS; DUTY TO DISCLOSE
EMPLOYEE hereby acknowledges and agrees to be bound by the provisions of the
EMPLOYER's "Non-Disclosure/Assignment Agreement" attached hereto as Exhibit A
and made a part hereof by this reference as though set forth in full herein.
The provisions of Exhibit A shall survive any termination of this Agreement.
VI. NONSOLICITATION OF EMPLOYEES
EMPLOYEE specifically agrees that during the term of this Agreement and for a
period of one (1) year thereafter, EMPLOYEE shall not, directly or indirectly,
either for himself or for any other person, firm, corporation or other legal
entity, solicit any then employee of EMPLOYER to leave the employment of
EMPLOYER.
VII. NO ASSIGNMENT
This Agreement may not be assigned by EMPLOYEE without the written consent of
EMPLOYER. This Agreement shall be binding on the heirs, executors,
administrators, personal representatives, successors and assigns of EMPLOYEE and
EMPLOYER.
VIII. GOVERNING LAW
This Agreement shall be governed by and construed and enforced in accordance
with and subject to the laws of the State where the EMPLOYEE was principally
rendering services for EMPLOYER.
IX. NOTICES
All notices or other communications provided for by this Agreement shall be made
in writing and shall be deemed properly delivered when (i) delivered personally
or (ii) by the mailing of such notice by registered or certified mail, postage
prepaid, to the parties at the addresses set forth on the signature page of this
Agreement (or to such other address as one party designates to the other in
writing).
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<PAGE>
X. ENTIRE AGREEMENT AND WAIVER
This Agreement is the entire agreement between the parties relating to
EMPLOYEE's employment. It supersedes all prior agreements, arrangements,
negotiations and understandings related thereto. No waiver of any term,
provision or condition of this Agreement shall be deemed to be, or shall
constitute, a waiver of any other term, provision or condition herein, whether
or not similar. No such waiver shall be binding unless in writing and signed by
the waiving party.
XI. AMENDMENTS
No supplement, modification or amendment of any term, provision or condition of
this Agreement shall be binding or enforceable unless evidenced in writing
executed by the parties hereto.
XII. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
XIII. REFORMATION/SEVERABILITY
If any provision of this Agreement is declared invalid by any tribunal, then
such provision shall be deemed automatically adjusted to the minimum extent
necessary to conform to the requirements for validity as declared at such time
and, as so adjusted, shall be deemed a provision of this Agreement as though
originally included herein. In the event that the provision invalidated is of
such a nature that it cannot be so adjusted, the provision shall be deemed
deleted from this Agreement as though such provision had never been included
herein. In either case, the remaining provisions of this Agreement shall remain
in effect.
After carefully reading and considering the foregoing provisions and Exhibit A,
EMPLOYEE has voluntarily signed this Agreement on as of the date first above
written.
EMPLOYER: EMPLOYEE:
TIBCO Software Inc. /s/ Robert P. Stefanski
- ------------------- -----------------------
Name of EMPLOYER EMPLOYEE Signature
3165 Porter Drive 2333 South Court
- ------------------- -----------------------
Address Address
Palo Alto, CA 94304 Palo Alto, CA 94301
- ------------------- -----------------------
City, State Zip City, State Zip
By: /s/ Christine M. Davis 650-233-0224
---------------------- -----------------------
3
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Telephone
Its Corporate Controller
--------------------
4
<PAGE>
EXHIBIT A
NON-DISCLOSURE/ASSIGNEMTN AGREEMENT
Robert P. Stefanski ("EMPLOYEE") is employed, or is being hired, by TIBCO
Software Inc. ("the COMPANY") and may learn, or has learned, information which
the COMPANY keeps secret from its competitors and others. As a condition of
employment or continued employment, EMPLOYEE agrees to the terms of this
Agreement.
I. PROPRIETARY INFORMATION DEFINED
The Term "Proprietary Information" means the following classes of information
relating to the COMPANY's business:
(A) Trade secrets and other proprietary and confidential information which are
owned by the COMPANY and which have to do with:
(1) the operation of the COMPANY's business, consisting, for example,
and not intending to be inclusive, of its lists or other
identifications of clients or prospective clients of the COMPANY
(and key individuals employed or engaged by such clients or
prospective clients), the nature and type of services rendered to
such clients (or proposed to be rendered to prospective clients),
fees charged or to be charged, proposals, inventions, methodologies,
algorithms, formulae, processes, compilations of information, form
and content of data bases, designs, drawings, models, equipment,
results of research proposals, job notes, reports, records,
specifications, software, firmware and procedures used in, or
related to, the COMPANY's products; and
(2) the COMPANY's relations with its employees, including without
limitation, salaries, job classifications and skill levels;
(B) Financial, sales and marketing data compiled by the COMPANY as well as the
COMPANY's financial, sales and marketing plans and strategies, customer
lists and non-public pricing;
(C) All ideas, concepts, information and written material about a client
disclosed to EMPLOYEE by the COMPANY, or acquired from a client of the
COMPANY, and all financial, accounting, statistical, personnel and business
data and plans of clients, are and shall remain the sole and exclusive
property and proprietary information of the COMPANY, or said client;
(D) Any other information designated by the COMPANY to be confidential, secret
and/or proprietary.
5
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II. OBLIGATION TO KEEP CONFIDENTIAL
EMPLOYEE acknowledges and agrees that all Proprietary Information that comes
into EMPLOYEE's possession (including any information originated or developed by
EMPLOYEE while employed by the COMPANY) is secret and is the exclusive property
of the COMPANY. EMPLOYEE agrees to use the Proprietary Information only in
connection with EMPLOYEE's work for the COMPANY. EMPLOYEE agrees, while
-----
employed with the COMPANY and thereafter, to hold the Proprietary Information in
- ----------------------------------------
confidence and agrees not to disclose or reveal, in any matter, any Proprietary
Information to any person or entity.
III. RETURN OF INFORMATION
EMPLOYEE agrees, upon request of the COMPANY or upon leaving the employ of the
COMPANY, to return promptly to the COMPANY the original and all copies of any
documents, reports, notes or other materials incorporating or reflecting, in any
way, any Proprietary Information in the possession or under the control of
EMPLOYEE.
IV. INVENTION BELONGS TO THE COMPANY
EMPLOYEE acknowledges and agrees that any inventions, discoveries or
improvements which EMPLOYEE has conceived or made or may conceive or make during
EMPLOYEE's employment with the COMPANY, whether made individually or jointly
with others, which:
(1) relate or pertain to, or are in any way connected with, the systems,
products, apparatus or methods utilized, or are the subject of
research or development (actual or anticipated) by the COMPANY: or
(2) utilize equipment, supplies, facilities or Proprietary Information
belonging to the COMPANY (collectively the "Inventions") shall be
the sole exclusive property of the COMPANY and the Inventions shall
be deemed to be works for hire.
(A) EMPLOYEE agrees to make prompt and full disclosure to the COMPANY of all
inventions, discoveries or improvements made by EMPLOYEE during the term of
the Agreement, solely or jointly with others, whether or not such
invention, discovery or improvement will actually become the property of
the COMPANY pursuant to this Agreement. EMPLOYEE agrees to make such
disclosures with the understanding and the agreement of the COMPANY that,
as to any invention, discovery or improvement to which the COMPANY is not
entitled, the COMPANY and that such disclosed will be received and held
strictly in confidence by the COMPANY and that such disclosure is for the
sole purpose of determining whether or not rights to such invention,
discovery or improvement is the property of the COMPANY.
6
<PAGE>
(B) To the extent EMPLOYEE would be deemed to be an owner of any of the rights
in the Invention, EMPLOYEE hereby assigns to the COMPANY all such rights in
the Inventions. EMPLOYEE hereby agrees to execute and sign any and all
applications, assignments or other instruments which the COMPANY may deem
necessary in order to enable it, at its expense, to apply for, prosecute
and obtain Letters of Patent, trademarks, copyright or other legal
protections in the United States or foreign countries for the Intentions,
or in order to assign or convey to or vest in the COMPANY the sole and
exclusive right, title and interest in and to the Inventions.
(C) The obligations contained in this Paragraph 4, except for the requirements
as to disclosure, do not apply to any rights EMPLOYEE may have acquired in
connection with an invention, discovery or improvement for which no
equipment, supplies, facility or trade secret information of the COMPANY
was used and which was developed entirely on the EMPLOYEE's own time, and
provided that such invention, discovery or improvement does not: (i) relate
directly or indirectly to the business of the COMPANY or to the COMPANY's
actual or demonstrable anticipated research or development; and (ii) result
from any work performed by EMPLOYEE for, or on behalf of, the COMPANY.
V. INJUNCTIVE RELIEF
EMPLOYEE acknowledges and agrees that, because any use or disclosure of the
COMPANY's Proprietary Information other than for the COMPANY's benefit and
without the COMPANY's prior written consent would cause irreparable injury to
the COMPANY, in addition to any other remedies available, will be entitled to
obtain an injunction to enforce the provisions of this Agreement.
VI. REFORMATION/SEVERABILITY
If any provision of this agreement is declared invalid by any tribunal, then
such provision shall be deemed automatically adjusted to the minimum extent
necessary to conform to the requirements for validity as declared at such time
and, as so adjusted, shall be deemed a provision of this Agreement as though
originally included herein. In the event that the provision invalidated is of
such a nature that it cannot be so adjusted, the provision shall be deemed
deleted from this Agreement as though such provision had never been included
herein. In either case, the remaining provisions of this Agreement shall remain
in effect.
NOTE: POLICY STATEMENT AGAINST THE USE OF TRADE SECRETS OF OTHERS.
It is the practice and policy of COMPANY not to use the trade secrets of others.
Thus, EMPLOYEE should not use any information which any prior employer
identified specifically as a trade secret or as Proprietary Information.
However, EMPLOYEE is not required to maintain the confidentiality of any
information which is:
7
<PAGE>
(1) known to EMPLOYEE prior to the disclosure by the prior employer; or
(2) known, or becomes known, to third parties knowledgeable in the
industry without the fault or negligence of EMPLOYEE; or
(3) subsequently rightly received from a third party without restrictions
regarding the secrecy or confidentiality; or
(4) independently developed by EMPLOOYEE or by EMPLOYE without recourse to
the "trade secret" of another; or
(5) furnished by a prior employer to a third party without restriction or
obligation to maintain the secrecy or the confidentiality of such
information; or
(6) approved for release by the owner of the "trade secret" information.
I acknowledge that I have read and understood the above terms and conditions and
agree to be bound thereby. In addition, I acknowledge a receipt of a copy of
this Agreement.
Date: March 16, 1998
----------------------------------
Signature: /s/ Robert P. Stefanski
-------------------------------------------
Name (printed): Robert P. Stefanski
---------------------------------------
Mailing Address: 2333 South Court, Palo Alto CA 94301
------------------------------------
Phone Number: 650-233-0224
--------------------------------
8
<PAGE>
Exhibit 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the 7th day of July 1998, by and
between Paul G. Hansen, (the "EMPLOYEE") and TIBCO Software Inc. (the
--------------
"EMPLOYER").
I. EMPLOYMENT
EMPLOYER employs EMPLOYEE, and EMPLOYEE accepts employment with EMPLOYER, on the
terms and conditions set forth in this Agreement.
II. TERMS OF EMPLOYMENT
The employment relationship between EMPLOYEE and EMPLOYER may be terminated as
follows:
(A) During the first ninety (90) days of employment, either party may terminate
without prior notice and for any reason whatsoever, or for no reason and
without cause; or
(B) After the first ninety (90) days of employment, either party may terminate
for any reason whatsoever, or for no reason and without cause, upon the
giving of (i) two weeks' written notice to the other party or (ii) pay
equal to two (2) weeks of EMPLOYEE's salary in lieu of such notice; or
(C) At any time, EMPLOYER may terminate EMPLOYEE without prior notice if
EMPLOYEE materially fails to perform any obligation or duty owed to
EMPLOYER.
III. DUTIES
EMPLOYEE shall perform such tasks and duties as may be assigned by EMPLOYER from
time to time. At all times EMPLOYEE shall follow all of EMPLOYER's legal
instructions and directions and shall abide by all of EMPLOYER's rules and
procedures in force from time to time while employed. EMPLOYEE shall devote his
full time, attention, skill and efforts to the tasks and duties assigned by
EMPLOYER. Without the prior written consent of EMPLOYER, EMPLOYEE shall not
provide services, for compensation, to any other person or business entity while
employed by EMPLOYER.
IV. COMPENSATION
As compensation for all services to be rendered by EMPLOYEE to EMPLOYER,
EMPLOYEE shall be paid a salary at the annual rate of $250,000.00. Said salary
-----------
shall be payable in accordance with EMPLOYER's standard procedures. EMPLOYER
shall withhold from any amounts payable as compensation all federal, state,
municipal or other taxes as are required by any law, regulation or ruling.
(A) EMPLOYEE understands and agrees that EMPLOYEE's salary may be adjusted by
EMPLOYER prospectively, and at its sole discretion from time to time,
without affecting the remaining terms of this Agreement.
1
<PAGE>
(B) EMPLOYEE understands and agrees that any other compensation that may be
paid to EMPLOYEE for services rendered, or to be rendered, (whether by way
of any incentive payment, opportunity to acquire stock or any other form of
additional compensation) shall rest in the sole discretion of EMPLOYER.
V. PROPERTY RIGHTS; DUTY TO DISCLOSE
EMPLOYEE hereby acknowledges and agrees to be bound by the provisions of the
EMPLOYER's "Non-Disclosure/Assignment Agreement" attached hereto as Exhibit A
and made a part hereof by this reference as though set forth in full herein.
The provisions of Exhibit A shall survive any termination of this Agreement.
VI. NONSOLICITATION OF EMPLOYEES
EMPLOYEE specifically agrees that during the term of this Agreement and for a
period of one (1) year thereafter, EMPLOYEE shall not, directly or indirectly,
either for himself or for any other person, firm, corporation or other legal
entity, solicit any then employee of EMPLOYER to leave the employment of
EMPLOYER.
VII. NO ASSIGNMENT
This Agreement may not be assigned by EMPLOYEE without the written consent of
EMPLOYER. This Agreement shall be binding on the heirs, executors,
administrators, personal representatives, successors and assigns of EMPLOYEE and
EMPLOYER.
VIII. GOVERNING LAW
This Agreement shall be governed by and construed and enforced in accordance
with and subject to the laws of the State where the EMPLOYEE was principally
rendering services for EMPLOYER.
IX. NOTICES
All notices or other communications provided for by this Agreement shall be made
in writing and shall be deemed properly delivered when (i) delivered personally
or (ii) by the mailing of such notice by registered or certified mail, postage
prepaid, to the parties at the addresses set forth on the signature page of this
Agreement (or to such other address as one party designates to the other in
writing).
X. ENTIRE AGREEMENT AND WAIVER
This Agreement is the entire agreement between the parties relating to
EMPLOYEE's employment. It supersedes all prior agreements, arrangements,
negotiations and understandings related thereto. No waiver of any term,
provision or condition of this Agreement shall be deemed to be, or shall
constitute, a waiver of any other term, provision or condition herein, whether
or not similar. No such waiver shall be binding unless in writing and signed by
the waiving party.
XI. AMENDMENTS
No supplement, modification or amendment of any term, provision or condition of
this Agreement shall be binding or enforceable unless evidenced in writing
executed by the parties hereto.
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<PAGE>
XII. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument.
XIII. REFORMATION/SEVERABILITY
If any provision of this Agreement is declared invalid by any tribunal, then
such provision shall be deemed automatically adjusted to the minimum extent
necessary to conform to the requirements for validity as declared at such time
and, as so adjusted, shall be deemed a provision of this Agreement as though
originally included herein. In the event that the provision invalidated is of
such a nature that it cannot be so adjusted, the provision shall be deemed
deleted from this Agreement as though such provision had never been included
herein. In either case, the remaining provisions of this Agreement shall remain
in effect.
After carefully reading and considering the foregoing provisions and Exhibit A,
EMPLOYEE has voluntarily signed this Agreement on as of the date first above
written.
EMPLOYER: EMPLOYEE:
TIBCO Software Inc. /s/ Paul G. Hansen
- ------------------- ----------------------------
Name of EMPLOYER EMPLOYEE Signature
3165 Porter Drive 15 Twelve Oaks Dr.
- ----------------- ----------------------------
Address Address
Palo Alto, CA 94304 Pleasanton, CA 94588
- ------------------- ----------------------------
City, State Zip City, State Zip
By: 925-461-8444 or 925-461-0545
-------------------- ----------------------------
Telephone
Its
--------------------
3
<PAGE>
EXHIBIT A
NON-DISCLOSURE/ASSIGNMENT AGREEMENT
Paul G. Hansen ("EMPLOYEE") is employed, or is being hired, by TIBCO Software
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Inc. ("the COMPANY") and may learn, or has learned, information which the
COMPANY keeps secret from its competitors and others. As a condition of
employment or continued employment, EMPLOYEE agrees to the terms of this
Agreement.
I. PROPRIETARY INFORMATION DEFINED
The Term "Proprietary Information" means the following classes of information
relating to the COMPANY's business:
(A) Trade secrets and other proprietary and confidential information which are
owned by the COMPANY and which have to do with:
(1) the operation of the COMPANY's business, consisting, for example,
and not intending to be inclusive, of its lists or other
identifications of clients or prospective clients of the COMPANY
(and key individuals employed or engaged by such clients or
prospective clients), the nature and type of services rendered to
such clients (or proposed to be rendered to prospective clients),
fees charged or to be charged, proposals, inventions, methodologies,
algorithms, formulae, processes, compilations of information, form
and content of data bases, designs, drawings, models, equipment,
results of research proposals, job notes, reports, records,
specifications, software, firmware and procedures used in, or
related to, the COMPANY's products; and
(2) the COMPANY's relations with its employees, including without
limitation, salaries, job classifications and skill levels;
(B) Financial, sales and marketing data compiled by the COMPANY as well as the
COMPANY's financial, sales and marketing plans and strategies, customer
lists and non-public pricing;
(C) All ideas, concepts, information and written material about a client
disclosed to EMPLOYEE by the COMPANY, or acquired from a client of the
COMPANY, and all financial, accounting, statistical, personnel and business
data and plans of clients, are and shall remain the sole and exclusive
property and proprietary information of the COMPANY, or said client;
(D) Any other information designated by the COMPANY to be confidential, secret
and/or proprietary.
II. OBLIGATION TO KEEP CONFIDENTIAL
EMPLOYEE acknowledges and agrees that all Proprietary Information that comes
into EMPLOYEE's possession (including any information originated or developed by
EMPLOYEE while employed by the COMPANY) is secret and is the exclusive property
of the COMPANY. EMPLOYEE agrees to use the Proprietary Information only in
connection with EMPLOYEE's work for the COMPANY. EMPLOYEE agrees, while
-----
employed with the COMPANY and thereafter, to hold the Proprietary Information in
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confidence and agrees not to disclose or reveal, in any matter, any Proprietary
Information to any person or entity.
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III. RETURN OF INFORMATION
EMPLOYEE agrees, upon request of the COMPANY or upon leaving the employ of the
COMPANY, to return promptly to the COMPANY the original and all copies of any
documents, reports, notes or other materials incorporating or reflecting, in any
way, any Proprietary Information in the possession or under the control of
EMPLOYEE.
IV. INVENTION BELONGS TO THE COMPANY
EMPLOYEE acknowledges and agrees that any inventions, discoveries or
improvements which EMPLOYEE has conceived or made or may conceive or make during
EMPLOYEE's employment with the COMPANY, whether made individually or jointly
with others, which:
(1) relate or pertain to, or are in any way connected with, the systems,
products, apparatus or methods utilized, or are the subject of
research or development (actual or anticipated) by the COMPANY: or
(2) utilize equipment, supplies, facilities or Proprietary Information
belonging to the COMPANY (collectively the "Inventions") shall be
the sole exclusive property of the COMPANY and the Inventions shall
be deemed to be works for hire.
(A) EMPLOYEE agrees to make prompt and full disclosure to the COMPANY of all
inventions, discoveries or improvements made by EMPLOYEE during the term of
the Agreement, solely or jointly with others, whether or not such
invention, discovery or improvement will actually become the property of
the COMPANY pursuant to this Agreement. EMPLOYEE agrees to make such
disclosures with the understanding and the agreement of the COMPANY that,
as to any invention, discovery or improvement to which the COMPANY is not
entitled, the COMPANY and that such disclosed will be received and held
strictly in confidence by the COMPANY and that such disclosure is for the
sole purpose of determining whether or not rights to such invention,
discovery or improvement is the property of the COMPANY.
(B) To the extent EMPLOYEE would be deemed to be an owner of any of the rights
in the Invention, EMPLOYEE hereby assigns to the COMPANY all such rights in
the Inventions. EMPLOYEE hereby agrees to execute and sign any and all
applications, assignments or other instruments which the COMPANY may deem
necessary in order to enable it, at its expense, to apply for, prosecute
and obtain Letters of Patent, trademarks, copyright or other legal
protections in the United States or foreign countries for the Intentions,
or in order to assign or convey to or vest in the COMPANY the sole and
exclusive right, title and interest in and to the Inventions.
(C) The obligations contained in this Paragraph 4, except for the requirements
as to disclosure, do not apply to any rights EMPLOYEE may have acquired in
connection with an invention, discovery or improvement for which no
equipment, supplies, facility or trade secret information of the COMPANY
was used and which was developed entirely on the EMPLOYEE's own time, and
provided that such invention, discovery or improvement does not: (i) relate
directly or indirectly to the business of the COMPANY or to the COMPANY's
actual or demonstrable anticipated research or development; and (ii) result
from any work performed by EMPLOYEE for, or on behalf of, the COMPANY.
V. INJUNCTIVE RELIEF
EMPLOYEE acknowledges and agrees that, because any use or disclosure of the
COMPANY's Proprietary Information other than for the COMPANY's benefit and
without the COMPANY's prior written consent would
5
<PAGE>
cause irreparable injury to the COMPANY, in addition to any other remedies
available, will be entitled to obtain an injunction to enforce the provisions
of this Agreement.
VI. REFORMATION/SEVERABILITY
If any provision of this agreement is declared invalid by any tribunal, then
such provision shall be deemed automatically adjusted to the minimum extent
necessary to conform to the requirements for validity as declared at such time
and, as so adjusted, shall be deemed a provision of this Agreement as though
originally included herein. In the event that the provision invalidated is of
such a nature that it cannot be so adjusted, the provision shall be deemed
deleted from this Agreement as though such provision had never been included
herein. In either case, the remaining provisions of this Agreement shall remain
in effect.
NOTE: POLICY STATEMENT AGAINST THE USE OF TRADE SECRETS OF OTHERS.
It is the practice and policy of COMPANY not to use the trade secrets of others.
Thus, EMPLOYEE should not use any information which any prior employer
identified specifically as a trade secret or as Proprietary Information.
However, EMPLOYEE is not required to maintain the confidentiality of any
information which is:
(1) known to EMPLOYEE prior to the disclosure by the prior employer; or
(2) known, or becomes known, to third parties knowledgeable in the
industry without the fault or negligence of EMPLOYEE; or
(3) subsequently rightly received from a third party without restrictions
regarding the secrecy or confidentiality; or
(4) independently developed by EMPLOYEE or by EMPLOYEE without recourse
to the "trade secret" of another; or
(5) furnished by a prior employer to a third party without restriction
or obligation to maintain the secrecy or the confidentiality of such
information; or
(6) approved for release by the owner of the "trade secret" information.
I acknowledge that I have read and understood the above terms and conditions and
agree to be bound thereby. In addition, I acknowledge a receipt of a copy of
this Agreement.
Date: July 7, 1998
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Signature: /s/ Paul G. Hansen
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Name (printed): Paul G. Hansen
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Mailing Address: 15 Twelve Oaks Drive, Pleasanton, CA 94588
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Phone Number: 925-461-8444 or 925-461-0545
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6
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27
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