<PAGE>
As filed with the Securities and Exchange Commission on September 9, 1999.
Registration No. 333-84041
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 1
TO
FORM S-1 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Viador Inc.
(Exact Name of Registrant as Specified in its Certificate of Incorporation)
<TABLE>
<CAPTION>
Delaware 7372 94-3234636
<S> <C> <C>
(State or Other Jurisdiction
of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
167 Second Avenue
San Mateo, CA 94401
(650) 685-3000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
the Registrant's Principal Executive Offices)
STAN X. WANG
President and Chief Executive Officer
VIADOR INC.
167 Second Avenue
San Mateo, CA 94401
(650) 685-3000
(Name and Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent for Service)
Copies to:
<TABLE>
<S> <C>
CURTIS L. MO, ESQ. GREGORY K. MILLER, ESQ.
RICHARD C. LESKA, ESQ. ANDREW S. WILLIAMSON, ESQ.
J. OMAR MAHMUD, ESQ. LATHAM & WATKINS
BROBECK, PHLEGER & HARRISON LLP 505 Montgomery Street
Two Embarcadero Place Suite 1900
2200 Geng Road San Francisco, California 94111
Palo Alto, California 94303-0913 (415) 391-0600
(650) 424-0160 Fax (415) 395-8095
Fax (650) 496-2885
</TABLE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration 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,
check the following box. [_]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that 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 such Section
8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and we are not soliciting an offer to buy +
+these securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1999
PRELIMINARY PROSPECTUS
Shares
[LOGO OF VIADOR]
Common Stock
-----------
This is an initial public offering of shares of our common stock. We are
selling all of the shares of common stock offered under this prospectus.
There is currently no public market for our shares. We have applied to have our
common stock approved for listing on the Nasdaq National Market under the
symbol "VIAD."
See "Risk Factors" beginning on page 5 to read about certain risks that you
should consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory body
has approved or disapproved of these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
-----------
<TABLE>
<CAPTION>
Per
Share Total
------ ------
<S> <C> <C>
Public offering price............................................ $ $
Underwriting discounts and commissions........................... $ $
Proceeds, before expenses, to us................................. $ $
</TABLE>
-----------
The underwriters may purchase up to an additional shares of common
stock from us at the initial public offering price less the underwriting
discount, solely to cover over-allotments.
The underwriters are severally underwriting the shares being offered.
-----------
Bear, Stearns & Co. Inc.
CIBC World Markets
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 1999
<PAGE>
[Inside cover page]
[A graphic depicting the components of the Viador E-Portal Suite and how they
work together.]
<PAGE>
PROSPECTUS SUMMARY
VIADOR INC.
Our Business
We develop and market internet software that enables businesses to create
enterprise information portals. An enterprise information portal gives users a
quick and easy way to organize, search for and access up-to-the-minute
information from a variety of data sources. This is similar to popular consumer
internet portals that provide access to the world wide web. Our software is
specifically designed for the web and works with a customer's existing hardware
and software systems, without the need for additional technology expenditures.
It provides a highly adaptable platform for the categorization, management and
sharing of information on a secure and cost-effective basis that can
accommodate significant increases in the number of users and amount of
information. In addition, our software enables users to securely deliver
information over the internet to facilitate e-business. E-business is the use
of the internet and emerging technologies to replace or supplement traditional
business channels and practices.
Our Market Opportunity
In today's highly competitive environment, business decision makers need
quick access to relevant information. However, the large and growing quantity
of information makes it difficult to identify and utilize relevant information.
In addition, there is a rapidly growing variety of technologies used for
creating, storing and organizing information. These include many different
types of computer hardware and software, many of which were developed
independently and do not easily work together. As a result, it is increasingly
difficult and time consuming for users to gain access to all relevant
information for decisionmaking.
To address these problems, we have developed the Viador E-Portal Suite,
which offers the following benefits:
. Single Access Point for All Enterprise Information. Our software
provides a single access point to data from multiple sources within and
outside the company, eliminating the need for users to search multiple
systems.
. Adaptable Web-Based Architecture. In contrast to existing solutions, our
software architecture is designed for the internet and can accommodate
significant increases in the number of users and amount of information.
. Customized and Personalized Information. We address the information
overload problem by helping users locate and retrieve the most pertinent
business information. This capability increases the efficiency of
information use by our customers' employees.
. Combines Ease of Use with Sophisticated Functions. Our interface, which
is accessed through a web browser, offers the ease of use of popular
consumer internet portals, while providing users with the ability to
search for specific information and analyze data.
. Builds upon Customers' Existing Investments in Information
Technology. Because most businesses use different types of computer
hardware and software, our products are designed to interact with and
access a broad range of hardware and software.
. Ease of Implementation. The Viador E-Portal Suite is designed to be
implemented rapidly over internal company networks and the internet
using our customers' existing information technology.
. Secure and Selective Access. Our security features permit customers to
share confidential information rapidly over the internet with a large
number of geographically distributed offices, employees, customers,
suppliers and partners.
1
<PAGE>
Our Strategy
Our strategy is to be the leading provider of enterprise information portal
software solutions. We believe that the most effective way to achieve our goal
is to continue to improve our products and to significantly grow our direct
sales organization to expand coverage and penetration of large enterprise
opportunities. As a complement to our internal sales, marketing and development
efforts, we intend to continue to develop strategic relationships with
companies that are at the forefront of e-business technology.
2
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock being offered................. shares
Common stock outstanding after this shares
offering..................................
Use of proceeds............................ We plan to use the net proceeds from this
offering to fund operating losses, working
capital needs and capital expenditures
expected to be incurred in connection with
our operations.
Proposed Nasdaq National Market symbol..... VIAD
</TABLE>
The common stock outstanding after this offering, assuming conversion of all
outstanding shares of our preferred stock into common stock, is based on the
number of shares outstanding as of June 30, 1999, and excludes:
. 3,287,063 shares of common stock issuable upon exercise of outstanding
options with a weighted average exercise price of $0.74 per share;
. 7,000,000 shares reserved for issuance under our 1999 Stock Incentive
Plan; and
. 300,000 shares reserved for issuance under our 1999 Employee Stock
Purchase Plan.
The Company
We were incorporated in the State of California as Infospace, Inc. on
December 4, 1995 and changed our name to Viador Inc. in 1999. Our principal
headquarters are located at 167 Second Avenue, San Mateo, California 94401, and
our telephone number is (650) 685-3000. Information contained on our web site
is not a part of this prospectus.
Viador E-Portal Suite(TM) and the Viador name and logo and the names of
products and services offered by Viador (including those referred to in
"Business") are trademarks, registered trademarks, service marks or registered
service marks of Viador. This prospectus also includes product names, trade
names and trademarks of other companies.
----------------
Unless we indicate otherwise, all information in this prospectus assumes:
. the reincorporation of Viador in Delaware at or prior to the
consummation of this offering;
. the conversion of each outstanding share of our convertible preferred
stock into common stock immediately prior to the consummation of this
offering;
. the exercise of outstanding warrants to purchase 75,001 shares of our
common stock at an exercise price of $0.72 per share, the exercise of
outstanding warrants to purchase 5,834 shares of our common stock at an
exercise price of $0.24 per share and the exercise of outstanding
warrants to purchase 9,615 shares of our Series C Preferred Stock at an
exercise price of $2.434 per share, upon the consummation of this
offering;
. no exercise of the underwriters' over-allotment option; and
. a 1 for 2.4 reverse stock split of all our outstanding shares of capital
stock to be effected immediately prior to the completion of this
offering.
3
<PAGE>
SUMMARY FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
------------------------------ ----------------
1995 1996 1997 1998 1998 1999
----- ------ ------- ------- ------- -------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue...................... $ 80 $ 997 $ 1,582 $ 3,825 $ 1,754 $ 3,290
Cost of revenue.............. 10 314 903 1,387 640 874
----- ------ ------- ------- ------- -------
Gross profit................. 70 683 679 2,438 1,114 2,416
Operating expenses........... 34 847 4,089 8,586 3,381 7,793
----- ------ ------- ------- ------- -------
Operating income (loss)...... 36 (164) (3,410) (6,148) (2,267) (5,377)
Interest income (expense),
net......................... -- 10 62 (63) (2) 116
----- ------ ------- ------- ------- -------
Net income (loss)............ $ 36 $ (154) $(3,348) $(6,211) $(2,269) $(5,261)
===== ====== ======= ======= ======= =======
Basic and diluted net income
(loss) per share............ $0.02 $(0.08) $ (1.34) $ (1.82) $ (0.71) $ (1.28)
===== ====== ======= ======= ======= =======
Weighted average shares used
in computing basic and
diluted net income (loss)
per share................... 1,563 1,993 2,495 3,416 3,177 4,126
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
-------------------
Pro Forma
Actual As Adjusted
------- -----------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents................................... $14,259 $
Working capital............................................. 12,169
Total assets................................................ 18,869
Total stockholders' equity ................................. 13,284
</TABLE>
The above balance sheet data is set forth:
. on an actual basis; and
. on a pro forma as adjusted basis assuming the conversion of all
outstanding shares of convertible preferred stock into common stock and
the exercise of outstanding warrants to purchase 75,001 shares of common
stock at an exercise price of $0.72 per share, the exercise of
outstanding warrants to purchase 5,834 shares of common stock at an
exercise price of $0.24 per share and the exercise of outstanding
warrants to purchase 9,615 shares of Series C Preferred Stock at an
exercise price of $2.434 per share upon the consummation of this
offering, as adjusted to reflect the sale of shares of common
stock by Viador at an assumed initial public offering price of $
per share and after deducting the underwriting discounts and commissions
and estimated offering expenses.
4
<PAGE>
RISK FACTORS
An investment in our shares is extremely risky. This section describes some
of the risk factors involved in purchasing our common stock. You should
carefully consider the following factors, in addition to the other information
presented in this prospectus, in evaluating us and our business. Any of the
following risks could seriously harm our business and cause the trading price
of our common stock to decline, which could cause you to lose all or part of
your investment.
Risks Related to Viador
We cannot predict whether we will be successful because we have a short
operating and sales history.
We were founded in 1995, and began offering software products in the third
quarter of 1996. Our primary product, the Viador E-Portal Suite, was first
shipped in the first quarter of 1999. The revenue and income potential of our
business and market is unproven, and our limited operating history makes it
difficult to evaluate us and our prospects.
We anticipate making significant investments in our sales and marketing
programs, personnel recruitment, product development and infrastructure.
Therefore, we believe that we will continue to experience significant losses on
a quarterly and annual basis for the foreseeable future. You must consider us
and our prospects in light of the risks and difficulties encountered by
companies in the early stage of development, particularly companies in new and
rapidly evolving markets. Our ability to address these risks depends on a
number of factors, which include our ability to:
. provide software that is reliable, cost-effective and able to
accommodate significant increases in the number of users and amount of
information;
. market the Viador E-Portal Suite, our other products and the Viador
brand name effectively;
. continue to grow our infrastructure to accommodate new developments in
the enterprise information portal software market and increased sales;
. hire, retain and motivate qualified personnel; and
. respond to competition.
We may not be successful in meeting these challenges and addressing these
risks and uncertainties. If we are unable to do so, our business will not be
successful and your investment in our capital stock will decline in value.
Our business currently depends on revenue related to the Viador E-Portal Suite,
and it is uncertain whether the market will increasingly accept this product.
We generate most of our revenue from licenses and services related to the
products comprising the Viador E-Portal Suite. We expect that these products,
and future upgraded versions of these products, will continue to account for a
large portion of our revenue for the foreseeable future. Our future financial
performance will depend on increasing acceptance of our current products and on
the successful development, introduction and customer acceptance of new and
enhanced versions of our products. Our business could be harmed if we fail to
deliver the enhancements to our products that customers want.
Our services consist of maintenance, support, consulting and implementation.
Service revenue represented 47% and 40% of total revenue for 1997 and 1998,
respectively, and 35% of total revenue for the six months ended June 30, 1998
and June 30, 1999. We anticipate that service revenue will continue to
represent a significant percentage of total revenue. Our ability to increase
our service revenue will depend in large part on our ability to increase sales
of the Viador E-Portal Suite and to increase the size of our service
organization, including our ability to recruit and train a sufficient number of
qualified service representatives. If service revenue is less than anticipated,
our fixed costs of providing services will exceed our service revenue and our
operating results could be materially adversely affected.
5
<PAGE>
We have a history of losses and may not be able to achieve profitability in the
future.
Since our inception, we have experienced operating losses, negative cash
flows from operations and net losses in each quarterly and annual period. As of
June 30, 1999, we had an accumulated net deficit of approximately $14.9
million. Revenue from our software and related services may not be sufficient
to make us profitable in the future. If we do achieve profitability, we cannot
be certain that we can sustain or increase profitability on a quarterly or
annual basis, particularly to the extent that we face significant competition.
In addition, we expect to significantly increase our sales and marketing,
product development, engineering and administrative expenses as we grow. As a
result, we will need to generate significant revenue increases to achieve and
maintain profitability.
If we do not expand our customer base, we may never become profitable and our
stock price will likely decline.
The market for enterprise information portal software is newly emerging and
there can be no assurance that customers will adopt our products. Accordingly,
we cannot accurately estimate the potential demand for our products and
services. We believe that market acceptance of our products and services
depends principally on our ability to:
. effectively market the Viador E-Portal Suite, our other products and our
services;
. hire, train and retain a sufficient number of qualified sales and
marketing personnel;
. provide high-quality and reliable customer support for our products;
. distribute and price our products and services in a manner that is more
appealing to customers than that of our competitors;
. develop for Viador a favorable reputation among our customers, potential
customers and participants in the software industry; and
. withstand downturns in general economic conditions or conditions that
would slow corporate spending on software products.
Some of the foregoing factors are beyond our control. If our customer base
does not expand, we may never become profitable and our stock price will likely
decline.
Our operating results in one or more future periods are likely to fluctuate
significantly and may fail to meet or exceed the expectations of securities
analysts or investors, causing our stock price to fall.
We expect to experience significant fluctuations in our future results of
operations due to a variety of factors, many of which are outside of our
control, including:
. demand for and market acceptance of our products and services;
. our expansion into international markets;
. introduction of products and services or enhancements by us and our
competitors;
. competitive factors that affect our pricing;
. the mix of products and services we sell;
. the timing and magnitude of our capital expenditures, including costs
relating to the expansion of our operations;
. the size and timing of customer orders, particularly large orders, some
of which represent more than 10% of total revenue during a particular
quarter;
6
<PAGE>
. the hiring and retention of key personnel;
. conditions specific to the enterprise information portal market and
other general economic factors;
. changes in generally accepted accounting policies, especially those
related to the recognition of software revenue; and
. new government legislation or regulation.
We typically receive 50% to 70% of our orders in the last month of each
fiscal quarter because our customers often delay purchases of products until
the end of the quarter and our sales organization and our individual sales
representatives strive to meet quarterly sales targets. Because a substantial
portion of our costs are relatively fixed and based on anticipated revenue, a
failure to book an expected order in a given quarter will likely not be offset
by a corresponding reduction in costs and, therefore, could adversely affect
our operating results for that quarter. Due to these factors, we believe that
quarter-to-quarter comparisons of our operating results are not a good
indication of our future performance. In future quarters, our operating results
may be below the expectations of public market analysts and investors. In this
event, the price of our common stock may fall significantly.
If our customers defer technology purchases because of year 2000 concerns, our
growth and results of operations for the remainder of 1999 and early 2000 may
suffer.
We may experience reduced revenue from sales of products and services as
customers and potential customers put a priority on correcting year 2000
problems and therefore defer purchases of our products and services until later
in 2000. Our potential customers may have a limited annual budget to spend on
information technology. To the extent that those customers spend their budget
on year 2000 matters, they may not have sufficient budgeted funds to purchase
our software or services. In addition, potential customers may be unwilling to
add complexity to their information technology systems by installing our
software until the year 2000 risk has passed, which would cause them to delay
purchases of our products and services. We believe that during the fourth
quarter of 1999 and the first quarter of 2000, our customers' information
technology personnel will be focused on resolving potential year 2000 issues
and may elect to delay the purchase of our products and services. Accordingly,
demand for our products and services may be particularly volatile, be
unpredictable or may decline for the remainder of 1999 and early 2000. As a
consequence, our results of operations for the quarters ended December 31, 1999
and March 31, 2000 may be adversely impacted by a reduction in demand for our
products and services due to our customers' year 2000 concerns.
Because our customers' orders vary substantially in size, our quarterly
operating results are difficult to forecast and may fluctuate.
Customer orders during a particular quarter typically vary considerably in
size, from as low as several thousand dollars to over $500,000. For example,
during the quarter ended June 30, 1999, we recognized 18.5% of our revenue for
the quarter from a single customer. Similarly, for each of the quarters ended
September 30, 1998 and December 31, 1998, we had a single customer that
accounted for over 20% of our revenue for that quarter. In addition, we expect
to recognize revenue from one or more customers during the quarter ending
September 30, 1999 that exceeds 10% of our total revenue for the quarter.
Because of the large size of some individual customer orders relative to total
orders during a quarter, our revenue may fluctuate significantly from one
quarter to the next. If a customer who places a large order cancels or reduces
the order, or if we are unable to fulfill the order in a timely fashion or are
otherwise unable to recognize revenue for the order in the quarter in which it
is anticipated, it could result in increased volatility in our revenue and
stock price.
7
<PAGE>
We plan to increase our operating expenses to bring about and support higher
sales of the Viador E-Portal Suite, which will result in larger net losses if
our revenue does not grow accordingly.
We plan to significantly increase our operating expenses to expand our sales
and marketing operations and consulting and training programs, broaden our
customer support capabilities and fund greater levels of research and
development. Our operating expenses, which include research and development,
sales and marketing, and general and administrative expenses, are based on our
expectations of future revenue and are relatively fixed in the short term. If
revenue falls below our expectations in any quarter and we are not able to
quickly reduce our spending in response, our operating results will be
adversely affected and our stock price may fall.
Since our sales cycle is long, unpredictable and subject to seasonal
fluctuations, it is difficult to accurately forecast our revenue; if we fail to
achieve our forecasted revenue, our operating results will suffer and our stock
price may decline.
The typical sales cycle of our products is long and unpredictable and
requires both a significant capital investment decision by our customers and
our education of potential customers regarding the use and benefits of our
products. Our sales cycle is generally between three and nine months. A
successful sales cycle typically includes presentations to both business and
technical decision makers. The implementation of our products involves a
significant commitment of resources by prospective customers. Accordingly, a
purchase decision for a potential customer typically requires the approval of
several senior decision makers. Our sales cycle is also affected by the
business conditions of each prospective customer. Due to the relative
importance of many of our individual product sales, a lost or delayed sale
could adversely affect our quarterly operating results. Our sales cycle is also
affected by seasonal fluctuations as a result of our customers' fiscal year
budgeting cycles and slow summer purchasing patterns overseas. Also, we expect
revenue to be higher in the fourth quarter than in other quarters of the year
since many customers strive to spend unused budgeted dollars before the end of
the year.
We may lose customers or experience reduced market acceptance of our products
and we could be exposed to product-related liabilities if our software contains
errors.
Our software products are inherently complex and may contain defects and
errors that are detected only when the products are in use. In addition, some
of our customers require or may require enhanced customization of our software
for their specific needs, and these modifications may increase the likelihood
of undetected defects or errors. Further, we often render implementation,
consulting and other technical services, the performance of which typically
involves working with sophisticated software, computing and networking systems,
and we could fail to meet customer expectations as a result of any defects or
errors. As a result, we may lose customers, customers may fail to implement our
products more broadly within their organization and we may experience reduced
market acceptance of our products. Our products are designed to facilitate the
secure transmission of sensitive business information to specified parties
outside the business over the internet. As a result, the reputation of our
software products for providing good security is vital to their acceptance by
customers. Our products may be vulnerable to break-ins, theft or other improper
activity that could jeopardize the security of information for which we are
responsible. Problems caused by product defects, failure to meet project
milestones for services or security breaches could result in loss of or delay
in revenue, loss of market share, failure to achieve market acceptance,
diversion of research and development resources, harm to our reputation,
increased insurance costs or increased service and warranty costs. To address
these problems, we may need to expend significant capital resources that may
not have been budgeted.
Our license agreements with customers typically contain provisions designed
to limit our exposure to potential product liability claims. All domestic and
international jurisdictions may not enforce these limitations. Although we have
not experienced any product liability claims to date, we may encounter this
type of claim in the future. Product liability claims brought against us,
whether or not successful, could divert the attention of our management and key
personnel and could be expensive to defend.
8
<PAGE>
We may be unable to maintain or grow our international operations, which could
slow or undermine our overall growth.
During 1996, 1997 and 1998, we derived 0%, 14% and 12%, respectively, of our
total revenue from sales outside the United States. During the past eighteen
months, we have derived revenue from sales in Canada, Japan, Venezuela, Brazil,
the United Kingdom, Singapore and other foreign countries, the majority of
which has come from Canada and Japan. We intend to expand our international
operations and anticipate that in the foreseeable future a significant portion
of our revenue may be derived from sources outside the United States. If we are
unable to maintain or grow our international operations, it could slow or
undermine our overall growth.
We have not identified any material risk associated with doing business in
Canada, other than risk associated with foreign currency fluctuations. In
Japan, we have an exclusive distribution relationship with Mitsui, which
expires in June 2000. To the extent we are unable to favorably renew our
distribution agreement or make alternative arrangements, we may have decreased
revenue in Japan. We also face country-specific risks in Japan, such as
fluctuation in currency, general economic conditions in Japan and regulatory
uncertainties associated with being a foreign company doing business in Japan.
We also expect to commit additional resources to customizing our products
for selected international markets, including German, French and Spanish-
speaking markets, among others, and developing international sales and support
organizations. In addition, even if we successfully expand our international
operations and successfully customize our products, there can be no assurance
that we will be able to maintain or increase international market demand for
our products.
Our international operations are subject to a number of risks, including:
. costs of customizing our products for foreign countries;
. protectionist laws and business practices favoring local competition;
. dependence on the performance of local resellers and other strategic
partners;
. adoption of general internet technologies in each international market;
. compliance with multiple, conflicting and changing governmental laws and
regulations;
. longer sales and payment cycles;
. import and export restrictions and tariffs;
. difficulties in staffing and managing international operations;
. greater difficulty or delay in accounts receivable collection;
. foreign currency exchange rate fluctuations;
. multiple and conflicting tax laws and regulations; and
. political and economic instability.
If our plan to sell the Viador E-Portal Suite directly to customers is not
successful, we may not be able to grow our revenue and our stock price may
suffer.
We sell our products primarily through our domestic direct sales
organization and we support our customers with our technical and customer
support staff in several field offices. Our ability to achieve revenue growth
in the future will depend on our ability to recruit and train sufficient
technical, customer and direct sales personnel. We have in the past and may in
the future experience difficulty in recruiting qualified sales, technical and
support personnel. Our inability to rapidly and effectively expand our direct
sales force and our technical and support staff could reduce or eliminate our
growth and cause our stock price to fall.
9
<PAGE>
Our failure to manage growth could adversely affect us.
The planned expansion of our operations will place a significant strain on
our management, financial controls, operations systems, personnel and other
resources. Our ability to manage our future growth, should it occur, will
depend in large part upon a number of factors including our ability to rapidly:
. build and train our sales and marketing staff to create an expanding
presence in the evolving enterprise information portal market, and keep
them fully informed over time regarding the technical features, issues
and key selling points of our products;
. develop our customer support capacity as sales of our products grow, so
that we can provide customer support without diverting engineering
resources from product development efforts; and
. significantly expand our internal management and financial controls, so
that we can maintain control over our operations and provide support to
other functional areas within Viador as the number of our personnel and
size of our organization increases.
We hired our Chief Financial Officer, Raja H. Venkatesh, in June 1999. We do
not currently have a corporate controller. While we have commenced a search for
a controller and additional financial and accounting personnel, we have not yet
filled these positions. Once hired, these people will need time to familiarize
themselves with Viador and our accounting and sales practices. In addition, we
anticipate switching from our current accounting software to a more
sophisticated accounting and financial information software system in the near
future. If we are unable to successfully hire and integrate additional
financial and accounting personnel or successfully transition to new accounting
software, our business and prospects will suffer.
We also plan to hire additional personnel to establish and implement
corporate security processes and policies in light of our planned expansion of
our operations. If we are unable to implement these measures in advance of our
planned future growth, our business and prospects could suffer.
We expect that our customers increasingly will demand additional information
and reports with respect to the services we provide. To meet these demands, we
must develop and implement an automated customer service system to enable
future sales growth. In addition, if we are successful in implementing our
marketing strategy, we also expect the demands on our technical support
resources to grow rapidly, and we may experience difficulties in responding to
customer demand for our services and providing technical support in accordance
with our customers' expectations. We expect that these demands will require not
only the addition of new management personnel, but also the development of
additional expertise by existing management personnel and the establishment of
long-term relationships with third-party service vendors. We may not be able to
keep pace with any growth, successfully implement and maintain our operational
and financial systems or successfully obtain, integrate and utilize the
employees, facilities, third-party vendors and equipment, or management,
operational and financial resources necessary to manage a developing and
expanding business in our evolving and increasingly competitive industry. If we
are unable to address these customer demands in connection with our growth, our
business and prospects will suffer.
We depend on technology licensed from third parties and, if we do not maintain
those license arrangements, this could result in delays in shipping our
products and services, which could harm our business.
We license our search engine technology, which is integrated into the Viador
E-Portal Suite, from Infoseek. This technology provides users of our products
with the ability to search and classify information. We also license software
from On Display that facilitates the retrieval of frequently changing real-time
data. This software may not continue to be available on commercially reasonable
terms, or at all. Our loss of or inability to maintain either of these
technology licenses could result in delays in the sale of our products and
services until equivalent technology, if available, is identified, licensed and
integrated, which could harm our business.
10
<PAGE>
In addition, we license various Java-related software from Sun Microsystems,
which is the core technology upon which our products are based. In the event
that Sun were to discontinue or significantly alter its Java product, it would
impair our ability to provide product upgrades and develop new products.
We will need significant additional funds, which we may be unable to obtain on
terms acceptable to us or at all.
The expansion and development of our business will require significant
capital to fund our operating losses, working capital needs and capital
expenditures. During the next twelve months, we expect to meet our cash
requirements with existing cash and cash equivalents and short-term
investments, the net proceeds from this offering, cash flow from sales of our
services and proceeds from existing and future working capital lines of credit
and other borrowings. Our failure to generate sufficient cash flows from sales
of services or to raise sufficient funds may require us to delay or abandon
some or all of our development and expansion plans or otherwise forego market
opportunities.
Future equity or debt financing may not be available to us on favorable
terms or at all. In addition, our credit agreements contain certain covenants
restricting our ability to incur further indebtedness and we have pledged some
of our assets as security for any borrowings thereunder. Future borrowing
instruments such as credit facilities and lease agreements are also likely to
contain similar or more restrictive covenants and will likely require us to
pledge assets as security for borrowings under those future arrangements. Our
inability to obtain additional capital on satisfactory terms may delay or
prevent the expansion of our business, which could cause our business and
prospects to suffer.
If our plan to sell software services over the internet as a substitute for
licensing our software fails, it could harm our business.
In addition to licensing our software, we plan to sell software services to
customers over the internet. We would price these services on a per-transaction
basis or on a subscription basis to companies seeking to avoid the upfront cost
of licensing software. This business model is unproven and represents a
significant departure from the strategies traditionally employed by us and
other software vendors. Our efforts to develop this business may require
significant management time and attention. In connection with this new business
model, we will contract with third-party service providers to perform many of
the necessary services, and we will be responsible for monitoring their
performance. If any service provider delivers inadequate support or service to
our customers, our reputation could be harmed.
Even if our strategy of selling software services over the internet is
successful in attracting customers, some of those internet customers may
otherwise have bought our software and services through our traditional
licensing arrangements. Any shift in potential license revenue to our new
business model, which is unproven and potentially less profitable, could harm
our business.
If we are unable to integrate new personnel, it will disrupt our operations and
impair our growth.
We have recently hired a number of key employees and officers, including our
Chief Financial Officer, who has been with us for less than three months. We
have grown from 17 employees at December 31, 1996 to 61 employees at December
31, 1997 to 83 employees at December 31, 1998 to 108 employees at June 30,
1999, and we expect to continue to hire additional employees in order to grow
our business. The integration of new personnel has resulted and will continue
to result in some disruption to our ongoing operations. Our failure to complete
this integration in an efficient manner could harm our business and prospects.
We may not be able to recruit and retain the personnel we need, which would
impair our growth.
We are highly dependent on certain members of our management and engineering
staff, including, without limitation, our Chief Executive Officer, our Senior
Vice President of North American Operations and our Chief Financial Officer.
The loss of one or more of these officers might impede the achievement of our
business
11
<PAGE>
objectives. Furthermore, recruiting and retaining qualified financial and
technical personnel is critical to our success. If our business grows, we will
also need to recruit a significant number of management, technical and other
personnel for our business. Competition for employees in our industry is
intense. We may not be able to continue to attract and retain skilled and
experienced personnel on acceptable terms.
If we are unable to effectively protect our proprietary rights, our competitors
may be able to copy important aspects of our products or product presentation,
which would undermine the relative appeal of our products to customers and
reduce our sales.
We believe that proprietary rights are important to our business. We
principally rely upon a combination of patent, copyright, trademark and trade
secret laws as well as contractual restrictions to protect our proprietary
technology.
We have filed applications seeking U.S. patents on two inventions. However,
patents for these inventions may not issue and it is possible that these and
any other patents issued to us may be circumvented by our competitors or
otherwise may not provide significant proprietary protection or commercial
advantage to us. Similarly, our trademark, service mark and copyright rights
may not provide significant proprietary protection or commercial advantage to
us, and the measures we take to maintain the confidentiality of our trade
secrets may be ineffective. If we are unable to effectively protect our
proprietary rights, our competitors may be able to copy important aspects of
our products or product message, which would undermine the relative appeal of
our products to customers and thus reduce our sales. For additional discussion
of our proprietary rights, see "Business--Intellectual Property Rights"
beginning on page 41.
If our products infringe upon the proprietary rights of others, we may be
forced to pay high prices to license new technology or stop selling our
products.
Our commercial success will also depend in part on our not infringing the
proprietary rights of others and not breaching technology licenses that cover
technology used in our products. It is uncertain whether any third-party
proprietary rights will require us to develop alternative technology or to
alter our products or processes, obtain licenses or cease certain activities.
If any licenses of that type are required, we may not be able to obtain those
licenses on commercially favorable terms, if at all. Our failure to obtain a
license to any technology that we may require to commercialize our products and
services could cause our business and prospects to suffer. Litigation, which
could result in substantial cost to us, may also be necessary to enforce any
patents issued or licensed to us or to determine the scope and validity of
third-party proprietary rights.
Our failure and the failure of third parties to be year 2000 compliant could
negatively impact our business.
Many currently installed computer systems and software products store dates
using only the last two digits of the calendar year. As a result, those systems
may not be able to distinguish whether "00" means 1900 or 2000, which may cause
those systems to fail or produce erroneous results. Year 2000 problems could
subject us to liability claims or disrupt our business, either of which could
harm our business.
Based upon our assessment to date, we believe that our software products are
capable of adequately distinguishing 21st century dates from 20th century
dates. The worst case year 2000 scenario for us is if customers using our
products experience product failure on or after January 1, 2000. If our
products do have year 2000 problems, we have a limited number of personnel who
are technically experienced with our year 2000 compliance procedures and, in
the event our systems were to fail as a result of year 2000 problems, these
employees would likely be unable to timely comply with several customers'
requests for year 2000 remediation. Any such delay could impair our business or
prospects or relationships with those customers. The total cost of year 2000
compliance and remediation may be material and may harm our business.
Furthermore, we may in the future be required to defend our products or
services in litigation or arbitration proceedings, or to negotiate resolutions
of claims based upon year 2000 issues. Defending and resolving year 2000
disputes, regardless of the merits of those disputes, and any liability we have
for year 2000-related damages, including
12
<PAGE>
consequential damages, could be expensive to us. In addition, if our internal
computer or other systems or our suppliers experience year 2000 problems, it
would disrupt our operations. For more information regarding the year 2000
risks that we face, see "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Year 2000 Compliance" beginning on page
28.
If our strategic relationships are discontinued, it may be more difficult for
us to maintain certain features of our products or reach particular customers
or markets.
We have strategic relationships with IBM, Mitsui and Infoseek. Our strategic
relationship with IBM provides us with marketing assistance. Our strategic
relationship with Mitsui provides us with distribution, marketing and sales
assistance in Japan. Our strategic relationship with Infoseek provides us
access to technology and joint marketing. Although our strategic relationships
are a key factor in our overall business strategy, our strategic partners may
not view their relationships with us as significant to their own businesses.
There is a risk that these parties may not perform their obligations as agreed.
Our arrangements with strategic partners generally do not establish minimum
performance requirements but instead rely on the voluntary efforts of our
partners. In addition, most of our agreements with strategic partners may be
terminated by either party with little notice. If our strategic relationships
are discontinued, it may be more difficult for us to maintain certain features
of our products or reach particular customers or markets.
Risks Related to Our Industry
The markets in which we compete are highly competitive and we may not be able
to compete effectively.
The existing enterprise information portal software market is intensely
competitive. There are few substantial barriers to entry and we expect that we
will face additional competition from existing competitors in the future.
Moreover, if our approach is successful, it is likely that additional
competitors will enter the market. Some of these additional competitors may
have significantly more resources than we have, and may be able to devote the
resources necessary to independently develop technology that provides
equivalent or superior functionality compared to our products. For example, we
also compete against larger companies providing a suite of products targeting
business internet applications, including Microsoft and Oracle, who we expect
may provide products as part of their suite that compete with ours. To date, we
have faced competition and sales resistance from potential customers that have
developed or may develop in-house systems that may substitute for those we
offer.
We also compete against providers of software products to businesses. These
providers may expand their technologies or acquire other companies to support
greater functionality and capability, particularly in the areas of query
response time and ability to support large numbers of users.
We cannot assure you that we will be able to successfully compete against
current and future competitors, or that competitive pressures we face will not
materially adversely affect our business, prospects, operating results and
financial condition. For a more detailed discussion of the competitive
pressures we face, see "Business--Competition" beginning on page 40.
If we fail to manage technological change or effectively respond to changes in
customer needs, demand for our products and services will drop and our business
will suffer.
The market for enterprise information portals is still in an early stage of
development and is characterized by rapidly changing technology, evolving
industry standards, frequent new service and product introductions and changes
in customer demands. Our future success will depend to a substantial degree on
our ability to offer products and services that incorporate leading technology
and respond to technological advances and emerging industry standards and
practices on a timely and cost-effective basis. You should be aware that:
. our technology or systems may become obsolete upon the introduction of
alternative technologies;
. the technological life cycles of our products are difficult to estimate;
13
<PAGE>
. we may not have sufficient resources to develop or acquire new
technologies or to introduce new services capable of competing with
future technologies or service offerings; and
. the price of the products and services we provide may decline as rapidly
as, or more rapidly than, the cost of any competitive alternatives.
We may not be able to effectively respond to the technological requirements
of the changing market for enterprise information portals. To the extent we
determine that new technologies and equipment are required to remain
competitive, the development, acquisition and implementation of those
technologies and equipment are likely to continue to require significant
capital investment by us. We may not have sufficient capital for this purpose
in the future, and even if it is available, investments in new technologies may
not result in commercially viable technological processes and there may not be
commercial applications for those technologies. If we do not develop and
introduce new products and services and achieve market acceptance in a timely
manner, demand for our products and services will drop and our business will
suffer.
Our future success will depend upon the ability of our products to work with a
large variety of hardware, software, database and networking systems.
We currently serve, and intend to continue to serve, a customer base with a
wide variety of hardware, software, database and networking systems. To gain
broad market acceptance, we believe that we must support an increased number of
systems in the future. We currently develop our products on Microsoft Windows
NT. Therefore, we experience a delay when we adapt our products to be installed
on other major servers. For example, we are contractually obligated to provide
a version of our software that operates on Unix servers in the third fiscal
quarter of 1999. A delay in this or any other rollout of our product onto a new
system could adversely affect our revenues and operating results. There can be
no assurance that we will adequately expand our data source and system coverage
to service potential customers, or that the expansion will be sufficiently
rapid to meet or exceed the system and data source coverage of our competitors.
The success of our products will depend on various factors, including the
ability of our products to integrate and be compatible with customer systems,
particularly hardware systems, operating systems and data sources, as well as
or better than competitive offerings. The success of our products will also
depend on the ability of our existing products to work well with one another,
with new products we are developing and with new software being developed by
third parties. We cannot assure you that we will successfully develop and
market product enhancements or new products that respond to these technological
changes, shifting customer tastes or evolving industry standards, or that we
will not experience difficulties that could delay or prevent the successful
development, introduction and marketing of these products. If we are unable to
develop and introduce new products or enhancements of existing products in a
timely manner or if we experience delays in the commencement of commercial
shipments of new products and enhancements, our business will suffer.
Risks Related to Our Offering
If our stock price is volatile or decreases significantly, you may not be able
to sell your stock at a favorable price at any given time or ever.
Stock prices and trading volumes for many internet-related companies
fluctuate widely for a number of reasons, including some reasons which may be
unrelated to their businesses or results of operations. This market volatility,
as well as general domestic or international economic, market and political
conditions, could materially adversely affect the price of our common stock
without regard to our operating performance. In addition, our operating results
may not meet the expectations of public market analysts and investors. If this
were to occur, the market price of our common stock would likely decrease
significantly. Volatility in our stock price may prevent you from selling our
stock at a favorable price at any given time or knowing the appropriate time to
sell our stock. If our stock price drops, it is possible that you may never be
able to sell our stock at a favorable price.
14
<PAGE>
After the offering, our officers, directors and affiliates may be able to
control all matters submitted for stockholder approval, and you will be subject
to their decisions.
Some of our stockholders own a large enough stake in us to have a
significant influence on the matters presented to stockholders. As a result,
these stockholders may be able to control all matters requiring stockholder
approval, including the election and removal of directors, the approval of
significant corporate transactions, such as any merger, consolidation or sale
of all or substantially all of our assets, and the control of our management
and affairs. Accordingly, that concentration of ownership may delay, defer or
prevent a change in control of Viador, impede a merger, consolidation, takeover
or other business combination involving Viador or discourage a potential
acquirer from making a tender offer or otherwise attempting to obtain control
of Viador, any of which could have a material adverse effect on the market
price of our common stock.
After you purchase our stock in the offering, additional shares of our stock
will become eligible for sale in the open market; if these shares are sold, it
could depress our stock price.
Sales of substantial amounts of our common stock in the public market after
this offering, including shares issued upon the exercise of outstanding options
and warrants, could adversely affect the market price of our common stock.
Those sales also might make it more difficult for us to sell equity-related
securities in the future at a time and price that we deem appropriate. In
addition to the shares of common stock offered hereby, assuming no
exercise of the underwriters' over-allotment option, as of June 30, 1999, there
were 4,915,433 shares of common stock outstanding, all of which are restricted
shares under the Securities Act of 1933, as amended. These restricted shares
will not be immediately eligible for sale in the public market. However,
following the expiration of the 180-day lock-up agreements with the
representatives of the underwriters, restricted shares will be
available for sale in the public market and the remaining restricted shares
will be eligible for sale from time to time thereafter upon expiration of
applicable holding periods under Rule 144, 144(k) or 701 promulgated under the
Securities Act of 1933, as amended. In addition, as of June 30, 1999, there
were options and warrants outstanding to purchase 3,287,155 shares of common
stock, all of which warrants are expected to be exercised on or before the
closing of this offering. However, the shares of common stock underlying such
options and warrants will not be immediately eligible for sale in the public
market since they are subject to a 180-day lock-up period. Bear, Stearns & Co.
Inc. may, in its sole discretion and at any time without notice, release all or
any portion of the securities subject to lock-up agreements. In addition, the
holders of 16,326,863 restricted shares and warrants to purchase 9,615 shares
of our Series C Preferred Stock are entitled to certain rights with respect to
registration of those shares for sale in the public market. If those holders
sell in the public market, those sales could decrease the market price of our
common stock.
If our management does not use the funds raised in this offering effectively,
our stock price may fall.
Our net proceeds from this offering, after deducting underwriting
commissions and expenses payable by us, are estimated to be approximately
$ million. The primary purposes of this offering are to fund capital
expenditures, working capital and operating losses expected to be incurred in
connection with the execution of our business plan, including the expansion of
our operations. A portion of the net proceeds may also be used to repay
currently outstanding or future indebtedness, or to acquire or invest in
complementary businesses or products. Accordingly, our management will retain
broad discretion as to the allocation of most of the proceeds of this offering.
If our management does not use the funds raised in this offering effectively,
our stock price may fall.
We have certain anti-takeover defenses that could prevent an acquisition of our
business that you might favor.
Provisions of our certificate of incorporation and bylaws and the provisions
of Delaware law could have the effect of delaying, deferring or preventing an
acquisition of our business. For example, our board of directors is divided
into three classes to serve staggered three-year terms, we may authorize the
issuance of up
15
<PAGE>
to 10,000,000 shares of "blank check" preferred stock, our stockholders may not
take actions by written consent and our stockholders are limited in their
ability to make proposals at stockholder meetings. See "Description of Capital
Stock" beginning on page 58 for a further discussion of these provisions.
You will pay more for our stock than your pro rata portion of our assets is
worth; if we liquidate our assets and distribute the proceeds, you will likely
receive much less than you paid for our stock.
We expect the initial public offering price to be substantially higher than
the net tangible book value per share of common stock. Therefore, you will
incur immediate dilution in net tangible book value of $ per share,
assuming an initial public offering price of $ per share because you
will pay more than the assets underlying your shares are worth. You may incur
additional dilution if holders of stock options, whether currently outstanding
or subsequently granted, exercise their options or if warrantholders exercise
their warrants to purchase common stock at a price less than book value per
share. For additional information about the dilution you will suffer, see
"Dilution" on page 19.
Relying on forward-looking statements in this prospectus could cause you to
incorrectly assess the risks and uncertainties of investing in our stock
because our actual results may differ materially from what was anticipated in
those statements.
Some of the matters discussed under the captions "Prospectus Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business" and elsewhere in this prospectus include
forward-looking statements. We have based these forward-looking statements on
our current expectations and projections about future events, including, among
other things,
. implementing our business strategy;
. obtaining and expanding market acceptance of the products and services
we offer;
. forecasts of the internet and our market size and growth;
. meeting our requirements under key contracts; and
. competition in our market.
In some cases, you can identify forward-looking statements by terminology
such as "may," "will," "should," "potential," "continue," "expects,"
"anticipates," "intends," "plans," "believes," "estimates" and similar
expressions. These statements are based on our current beliefs, expectations
and assumptions and are subject to a number of risks and uncertainties. Actual
results and events may vary significantly from those discussed in the forward-
looking statements. A description of certain risks that could cause our results
to vary appears under the caption "Risk Factors" and elsewhere in this
prospectus. These forward-looking statements are made as of the date of this
prospectus, and we assume no obligation to update them or to explain the
reasons why actual results may differ. In light of these assumptions, risks and
uncertainties, the forward-looking events discussed in this prospectus might
not occur.
16
<PAGE>
USE OF PROCEEDS
The net proceeds to us from the sale and issuance of the shares of
common stock offered hereby are estimated to be $ million, or approximately
$ million if the underwriters' over-allotment option is exercised in full,
at the initial public offering price of $ per share after deducting the
underwriting discount and estimated offering expenses. We are conducting this
offering primarily to increase our equity capital, create a public market for
our common stock and to facilitate future access by us to public equity
markets. We intend to use a portion of the net proceeds for general corporate
purposes, including working capital, marketing, research and development and
capital expenditures. In addition, we may use a portion of the net proceeds to
acquire or invest in complementary businesses or products or to obtain the
right to use complementary technologies. We have no commitments with respect to
any acquisition or investment, and we are not involved in any negotiations with
respect to any similar transaction. In addition, we have not performed any
studies or made any decisions with our financial advisors or otherwise
regarding the use of proceeds from this offering. Pending these uses, the net
proceeds of this offering will be invested in short-term, interest-bearing,
investment grade securities. See "Risk Factors--If our management does not use
the funds raised in this offering effectively, our stock price may fall" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" beginning on pages 15 and 27,
respectively.
DIVIDEND POLICY
We have not declared or paid any dividends since our inception and do not
intend to pay cash dividends on our capital stock in the foreseeable future. We
anticipate that we will retain all future earnings, if any, for use in our
operations and the expansion of our business. Our credit agreements prohibit us
from declaring or paying any dividends. For additional discussion of these
matters, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" beginning on page 27.
17
<PAGE>
CAPITALIZATION
The following table sets forth, as of June 30, 1999:
. Our actual capitalization;
. Our pro forma capitalization, assuming the exercise of a warrant to
purchase 9,615 shares of Series C preferred stock, the conversion of
outstanding shares of our convertible preferred stock into common stock
and the exercise of warrants to purchase 80,835 shares of our common
stock; and
. Our pro forma capitalization, as adjusted to give effect to the sale of
shares of common stock offered by us in this offering at an
assumed initial public offering price of $ per share, after
deducting the underwriting discounts and commissions and estimated
offering expenses payable by us, and the application of the estimated
net proceeds from this offering.
This information should be read in conjunction with our financial statements
and the notes related thereto appearing elsewhere in this prospectus. See "Use
of Proceeds" on page 17.
<TABLE>
<CAPTION>
June 30, 1999
---------------------------------
(unaudited)
Actual Pro Forma As Adjusted
-------- ----------- -----------
(in thousands except share data)
<S> <C> <C> <C>
Long-term obligations, less current portion.. $ -- $ $
Stockholders' equity:
Convertible preferred stock, $0.001 par
value, 25,000,000 shares authorized,
16,326,863 shares issued and outstanding,
actual; shares authorized, no shares
issued and outstanding, pro forma and as
adjusted.................................. 16
Common stock $0.001 par value, 20,833,333
shares authorized, 4,915,433 shares issued
and outstanding, actual; shares
authorized, shares issued and
outstanding, pro forma, issued and
outstanding, as adjusted.................. 12
Additional paid-in capital................. 30,257
Deferred stock-based compensation.......... (2,029)
Treasury stock............................. (34)
Accumulated deficit........................ (14,938)
-------- ---- ----
Total stockholders' equity............... 13,284
-------- ---- ----
Total capitalization................... $ 13,284 $ $
======== ==== ====
</TABLE>
The table excludes the following shares: 3,287,063 shares of common stock
issuable upon exercise of options outstanding at a weighted average exercise
price of $0.74 per share and 7,000,000 shares reserved for future issuance
under our 1999 Stock Incentive Plan. For additional information about our
option plans, see "Management--Executive Compensation and Other Information--
Employee Benefit Plans" beginning on page 47 and Note 4 of the Notes to
Consolidated Financial Statements beginning on page F-11.
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<PAGE>
DILUTION
Our pro forma net tangible book value as of June 30, 1999 was approximately
$13.3 million, or $ per share of common stock. Pro forma net tangible book
value per share is calculated by subtracting our total liabilities from our
total tangible assets, which equals total assets less intangible assets, and
dividing this amount by the number of shares of common stock outstanding as of
June 30, 1999. Assuming the sale by us of shares of common stock
offered in this offering at an assumed initial public offering price of $
per share and the application of the estimated net proceeds from this offering,
our net tangible book value as of June 30, 1999 would be $ million, or $
per share of common stock. Assuming completion of this offering, there
will be an immediate increase in the net tangible book value of $ per
share to our existing stockholders and an immediate dilution in the net
tangible book value of $ per share to new investors. The following table
illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $
Pro forma net tangible book value per share as of June 30,
1999........................................................... $
Pro forma increase attributable to new investors................ $
-----
Pro forma net tangible book value per share after the offering.... $
------
Pro forma dilution per share to new investors..................... $
======
</TABLE>
The following table summarizes the total number of shares of common stock
purchased from us, the total consideration paid to us and the average price per
share paid by existing stockholders and by new investors, in each case based
upon the number of shares of common stock outstanding as of June 30, 1999.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 11,803,134 % $ % $
New investors.............. % $ % $
---------- --- ----------- ---
Total.................... % $ %
========== === =========== ===
</TABLE>
If the underwriters' over-allotment option is exercised in full, the number
of shares of common stock held by existing stockholders will be reduced to
, or % of the total number of shares of common stock to be
outstanding after this offering, and will increase the number of shares of
common stock held by the new investors to , or % of the total
number of shares of common stock to be outstanding immediately after this
offering. For more information about the holdings of our stock, see "Principal
Stockholders" on page 55.
The tables and calculations above assume no exercise of outstanding options.
At June 30, 1999, there were 3,287,063 shares of common stock issuable upon
exercise of options outstanding with a weighted average exercise price of $0.74
per share and 7,000,000 shares reserved for future issuance under our 1999
Stock Incentive Plan. To the extent that these options are exercised, there
will be further dilution to new investors. For additional information about our
option plans, see "Management--Executive Compensation and Other Information--
Employee Benefit Plans" beginning on page 47.
19
<PAGE>
SELECTED FINANCIAL DATA
The tables that follow present portions of our financial statements and are
not complete. You should read the following selected financial data in
conjunction with our financial statements and related notes thereto and with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 21-31. The statements of operations data for the years
ended December 31, 1996, 1997 and 1998, and the balance sheet data as of
December 31, 1997 and 1998, are derived from our financial statements that have
been audited by KPMG LLP, independent auditors, which are included elsewhere in
this prospectus. The statements of operations data for the year ended December
31, 1995 and the balance sheet data as of December 31, 1995 and 1996 are
derived from audited financial statements that are not included in this
prospectus. The statements of operations data for the six months ended June 30,
1998 and 1999 and the balance sheet data as of June 30, 1999 are derived from
our unaudited financial statements included elsewhere in this prospectus and
include, in the opinion of management, all adjustments, consisting only of
normal recurring adjustments, that we consider necessary for the fair
presentation of our financial position and results of operations for those
periods. The historical results presented below are not necessarily indicative
of the results to be expected for any future fiscal year. For further
information about our historical results, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" beginning on page
21.
<TABLE>
<CAPTION>
Six Months
Years Ended December 31, Ended June 30,
------------------------------ ----------------
1995 1996 1997 1998 1998 1999
----- ------ ------- ------- ------- -------
(unaudited)
(in thousands except per share data)
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue...................... $ 80 $ 997 $ 1,582 $ 3,825 $ 1,754 $ 3,290
Cost of revenue.............. 10 314 903 1,387 640 874
----- ------ ------- ------- ------- -------
Gross profit................. 70 683 679 2,438 1,114 2,416
----- ------ ------- ------- ------- -------
Operating expenses:
Research and development... 15 364 1,351 2,481 1,107 1,871
Sales and marketing........ 11 125 1,802 4,295 1,806 4,397
General and
administrative............ 8 358 936 1,365 374 996
Amortization of stock-based
compensation.............. -- -- -- 445 94 529
----- ------ ------- ------- ------- -------
Total operating expenses..... 34 847 4,089 8,586 3,381 7,793
----- ------ ------- ------- ------- -------
Operating income (loss)...... 36 (164) (3,410) (6,148) (2,267) (5,377)
Interest income (expense),
net......................... -- 10 62 (63) (2) 116
----- ------ ------- ------- ------- -------
Net income (loss)............ $ 36 $ (154) $(3,348) $(6,211) $(2,269) $(5,261)
===== ====== ======= ======= ======= =======
Basic and diluted net income
(loss) per share (1)........ $0.02 $(0.08) $ (1.34) $ (1.82) $ (0.71) $ (1.28)
===== ====== ======= ======= ======= =======
Weighted average shares used
in computing basic and
diluted net income (loss)
per share (1)............... 1,563 1,993 2,495 3,416 3,177 4,126
</TABLE>
<TABLE>
<CAPTION>
December 31,
------------------------- June 30,
1995 1996 1997 1998 1999
---- ---- ------ ------ -----------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents............... $ 42 $290 $1,029 $4,181 $14,259
Working capital......................... 78 (5) (317) 2,771 12,169
Total assets............................ 123 530 2,918 7,185 18,869
Long-term obligations, including current
portion................................ -- 100 -- 20 --
Total stockholders' equity (deficit).... 86 (67) 90 3,371 13,284
</TABLE>
- ----------
(1) See Note 2 of Notes to Financial Statements for the determination of shares
used in computing pro forma basic and diluted net loss per share.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We develop and market internet software that enables businesses to create
enterprise information portals. Our products enable organizations to build
enterprise information portals which permit quick, easy access to all
enterprise information, facilitate the provision of customized and personalized
information and permit the secure sharing of enterprise information both within
the enterprise and with outside partners. We had a net loss of approximately
$6.2 million for the year ended December 31, 1998 and an accumulated deficit of
approximately $9.7 million for the year ended December 31, 1998.
Historically, we have focused our selling efforts in North America and
derived a significant majority of our revenue from North America. However, we
believe that our international sales will increase. We currently have
distribution agreements with partners in Japan and Europe, and we have
delivered our products to customers in Latin America.
We were incorporated in 1995 as Infospace, Inc. and changed our name to
Viador Inc. in 1999. Since our inception, we have developed web-based products
designed to permit our customers to search, analyze and deliver relevant
information to users within and outside the enterprise. We delivered our first
product, Web-Charts, in September 1996. Over the next two years, we introduced
more sophisticated web products and a proprietary web security server product.
In the first quarter of 1999, we first shipped a fully integrated web-based
product suite called the Viador E-Portal Suite, which integrated our prior
product offerings and is now our primary licensed product. Since 1997, revenue
from licenses of our software products has accounted for approximately 60% of
our revenue and we expect this trend to continue in the future.
We derive our revenue from the sale of software product licenses and from
professional consulting, training, maintenance and support services. In
December 1997, we adopted Statement of Position 97-2, Software Revenue
Recognition. SOP 97-2 generally requires revenue earned on software
arrangements involving multiple elements to be allocated to each element based
on its relative fair value. We recognize product license revenue when
persuasive evidence of an agreement exists, the product has been delivered, the
license fee is fixed or determinable and collection of the fee is probable. The
entire fee related to arrangements that require the Company to deliver
specified additional features or upgrades is deferred until delivery of the
feature and/or upgrade has occurred, because the Company does not have
sufficient vendor-specific objective evidence of fair value to allocate revenue
to the various elements in such arrangements. All of the contract software
revenue related to arrangements involving consulting services that are
essential to the functionality of the software at the customer site is deferred
until the consulting services have been completed and customer acceptance has
been obtained using the completed contract method. Contract software revenue
related to arrangements to maintain the compatibility of the Company's software
products with the software products or platforms of the customer or other
vendor is recognized ratably over the term of the arrangement. License revenue
from OEM and VAR arrangements in which the Company earns a royalty based on a
specified percentage of OEM and VAR sales to end users incorporating the
Company's software is recognized upon delivery to the end user. Nonrefundable
prepaid royalty fees received by the Company from OEM and VAR customers are
deferred and recognized as the end user sales are reported to the Company by
the OEM or VAR, unless the Company has an arrangement to maintain the
compatability of its software products with the software products or platforms
of the OEM or VAR. In that case, due to the Company's software compatibility
obligation, the prepaid royalty fees are recognized as the end user sales are
reported to the Company by the OEM or VAR but limited to no more than the fee
that would be recognizable on a cumulative basis if the entire fee was being
recognized ratably over the term of the arrangement.
Service revenue consists of fees from professional services and from
maintenance and support. Professional services include integration of software,
software development, training and software installation. We bill professional
services fees either on a time and materials basis or on a fixed-price
schedule. We
21
<PAGE>
recognize professional services fees generally as the services are performed
except, as descibed above, such services are essential to the functionality of
software sold as part of the arrangement. Our clients typically purchase
maintenance agreements annually, and we price maintenance agreements based on a
percentage of the product license fee. We recognize revenue from maintenance
and support agreements ratably over the term of the agreement, typically one
year. We price telephone support based on differing contracted levels of
support. Customers purchasing maintenance agreements receive future product
upgrades and electronic, web-based technical support and basic ten hours a day,
five days a week telephone support. Customers can also purchase extended
telephone support, available 24 hours a day, seven days a week, for an
additional fee. We record cash receipts from customers and billed amounts due
from customers in excess of revenue recognized as deferred revenue. The timing
and amount of revenue recognized from individual contracts, some of which
represent over 10% of revenue recognized during a particular quarter, can vary
significantly. Furthermore, as discussed above, revenue related to significant
transactions may be recognized over the term of the agreement, which may extend
recognition over a period of 36 to 60 months. This can result in fluctuations
in revenue from one quarter to the next. Furthermore, the timing and amount of
cash receipts from customers can vary significantly depending on specific
contract terms and can therefore have an impact on the amount of accounts
receivable and deferred revenue in any given period.
Our cost of revenue includes salaries and related expenses for our customer
support, implementation and training services organizations and costs of
contracting with third parties to provide consulting services to customers. Our
cost of revenue also includes royalties due to third parties for integrated
technology, the cost of manuals and product documentation, production media
used to deliver our products and shipping costs, including the costs associated
with the electronic transmission of software to new customers and an allocation
of our facilities, communications and depreciation expenses. Cost of license
revenue has been under 1% of our license revenue to date.
Our operating expenses are classified into four general categories: sales
and marketing, research and development, general and administrative and
amortization of deferred stock-based compensation. We classify all charges to
these operating expense categories based on the nature of the expenditures.
Although each category includes expenses that are category specific, each
category includes expenses that are common to the other three, such as
salaries, employee benefits, incentive compensation, bonuses, travel and
entertainment costs, telephone expenses, communication expenses, rent and
facilities costs and third-party professional service fees. The sales and
marketing category of operating expenses includes expenditures specific to the
marketing group, such as sales commissions, public relations and advertising,
trade shows, marketing collateral materials and web seminars. We allocate the
total costs for overhead and facilities to each of the functional areas that
use the overhead and facilities services based on their estimated usage as
measured primarily by employee headcount. These allocated charges include
facility rent for the corporate office, communication charges and depreciation
expense for office furniture and equipment.
Since our inception, we have incurred substantial costs to develop our
technology and products, to recruit and train personnel for our engineering,
sales and marketing and professional services departments and to establish an
administrative organization. As a result, we have incurred net losses in each
fiscal quarter since inception and, as of June 30, 1999, had an accumulated
deficit of $14.9 million. We anticipate that our operating expenses will
increase in future quarters commensurate to or greater than any revenue
increases as we increase sales and marketing operations, develop new
distribution channels, fund greater levels of research and development, broaden
professional services and support, and improve operational and financial
systems. Accordingly, we expect to incur additional losses for the foreseeable
future. In addition, our limited operating history makes it difficult for us to
predict future operating results and, accordingly, we cannot assure you that we
will achieve or sustain revenue growth or profitability.
We had 108 full-time employees at June 30, 1999, up from 83, 61 and 17 at
December 31, 1998, 1997 and 1996, respectively. This rapid growth places a
significant demand on our management and operational resources. In order to
manage growth effectively, we must implement and improve our operational
systems,
22
<PAGE>
procedures and controls on a timely basis. In addition, we expect that future
expansion will continue to challenge our ability to hire, train, motivate and
manage our employees.
In May 1997, we raised $3.5 million in private equity investment from a
group of investors led by Mitsui Ltd. who, at the same time, entered into an
exclusive distribution agreement for our products in Japan under which we
received a prepaid royalty of $200,000. The prepaid royalty received has been
deferred and is being recognized as the end-user sales are reported to us by
Mitsui. In August 1998, we raised an additional $8.5 million in private equity
investment from a group of investors led by Information Technology Ventures. In
May 1999, we raised an additional $14.5 million in private equity investment
from a group of investors led by CDB Venture Management (USA) and Crosslink
Technology Partners.
Results of Operations
The following table sets forth certain statement of operations data as a
percentage of total revenue for the periods indicated:
<TABLE>
<CAPTION>
Six
Months Ended
Years Ended December 31, June 30,
------------------------------ ---------------
1995 1996 1997 1998 1998 1999
----- ----- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
License................... --% 5.6% 53.0% 59.7% 65.1% 64.8%
Service................... 100.0 94.4 47.0 40.3 34.9 35.2
----- ----- ------ ------ ------ ------
Total revenue........... 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ------ ------ ------ ------
Cost of revenue............. 12.5 31.5 57.1 36.3 36.5 26.6
Gross profit................ 87.5 68.5 42.9 63.7 63.5 73.4
----- ----- ------ ------ ------ ------
Operating expenses:
Research and development.. 18.8 36.5 85.4 64.9 63.1 56.9
Sales and marketing....... 13.8 12.6 113.9 112.3 103.0 133.6
General and
administrative........... 10.0 35.9 59.2 35.7 21.3 30.2
Amortization of stock-
based compensation....... -- -- -- 11.6 5.4 16.1
----- ----- ------ ------ ------ ------
Total operating
expenses............... 42.6 85.0 258.5 224.5 192.8 236.8
----- ----- ------ ------ ------ ------
Operating income (loss)..... 44.9 (16.5) (215.6) (160.8) (129.3) (163.4)
Interest income
(expense), net......... -- 1.0 4.0 (1.6) (0.1) 3.5
----- ----- ------ ------ ------ ------
Net income (loss)........... 44.9% (15.5)% (211.6)% (162.4)% (129.4)% (159.9)%
</TABLE>
Six Months Ended June 30, 1999 and 1998
Revenue. Revenue increased to approximately $3.3 million for the six months
ended June 30, 1999 from approximately $1.8 million for the six months ended
June 30, 1998, representing an increase of approximately $1.5 million, or 88%.
The increase in revenue was due to an increase in the number of new customers,
which accounted for 68% of revenue, and increased usage by existing customers.
This increase in revenue was also attributable to a significant increase of
over 65% in the number of employees in sales operations and the introduction of
the Viador E-Portal Suite.
License Revenue. License revenue increased to approximately $2.1 million for
the six months ended June 30, 1999, from approximately $1.1 million for the six
months ended June 30, 1998, representing an increase of approximately 87%. The
increase in license revenue was due to the addition of 26 new customers
resulting from growing market acceptance of the Viador E-Portal Suite, which
first shipped in the first quarter of 1999. These new large customers were
complemented by continuing sales to existing accounts and a diminishing number,
only six in 1999 to date, of smaller new customers with initial sales under
$50,000.
23
<PAGE>
Service Revenue. Service revenue increased to approximately $1.2 million for
the six months ended June 30, 1999, from $612,000 for the six months ended June
30, 1998, representing an increase of approximately $588,000, or 89%. This
increase was a result of an increase in services provided in connection with
increasing license sales. This increase included $305,000 in additional
consulting revenue, $165,000 in additional customer technical support fees and
$118,000 in additional customer training revenue. The increase in training
revenue reflects the opening of our San Mateo training center in the second
quarter of 1998.
Cost of Revenue. Cost of revenue increased to $874,000 for the six months
ended June 30, 1999 from $640,000 for the six months ended June 30, 1998,
representing an increase of $234,000, or 37%. Ninety-one percent of these
expenses were related to on-site consulting and training services,
approximately two-thirds of which costs were payroll-related and were incurred
in the six-month period ended June 30, 1999. Cost of revenue decreased to 27%
of total revenue for the six months ended June 30, 1999 from 37% for the six
months ended June 30, 1998. This change resulted from the increased proportion
of revenue derived from license revenue for which the related cost of license
revenue was insignificant. We anticipate that our cost of revenue will grow in
future periods in order to accommodate planned increases in the number of
customers and greater utilization of products by existing customers.
Research and Development. Research and development expenses consist
primarily of costs associated with new product introductions and product
improvements. Research and development expenses increased to approximately $1.9
million for the six-month period ended June 30, 1999 from approximately $1.1
million for the six-month period ended June 30, 1998, representing an increase
of approximately $800,000, or 69%. Approximately $400,000 of this increase was
due to payroll cost and benefit increases related to a staffing increase of
24%, hired earlier in 1999. $150,000 of the remaining cost increase was
attributable to facility expenses, $47,000 to recruiting fees and the remainder
to new computer and equipment expenses.
Sales and Marketing. Sales and marketing expenses increased to approximately
$4.4 million for the six months ended June 30, 1999 from approximately $1.8
million during the six months ended June 30, 1998, representing an increase of
$2.6 million, or 143%. Approximately $2.0 million of this increase was
attributable to increased selling expenses, $1.1 million of which were salary,
commissions and bonuses paid to salespeople. Commissions and bonus payments
accounted for approximately 25% of these expenses in both periods. Marketing
expenses increased 89% during the six months ended June 30, 1999 over the same
period last year, reflecting advertising campaigns launched for the Viador E-
Portal Suite in the first half of 1999.
General and Administrative. General and administrative expenses increased to
$996,000 for the six months ended June 30, 1999 from $374,000 during the six
months ended June 30, 1998, representing an increase of $622,000, or 166%.
$280,000 of the increase in total expenses was attributable to increases in
professional services fees, primarily legal and accounting fees related to
increased business activities. The remaining expense increases were due
primarily to increases in office space.
Interest Income, Net. Interest income, net, includes interest income from
our cash and cash equivalents, and investments. Interest expense relates to our
financing obligations, including bank borrowings. Interest expense, net,
increased to $116,000 of interest income for the six months ended June 30,
1999, up from $2,000 of interest expense for the six months ended June 30,
1998, representing an increase of $118,000. This increase was primarily due to
a higher average cash balance as a result of the proceeds from the issuance of
shares of our preferred stock in August 1998 and May 1999.
Years Ended December 31, 1998, 1997 and 1996
Revenue. Revenue was approximately $1.0 million, $1.6 million and $3.8
million in 1996, 1997 and 1998, respectively, representing increases of
$585,000, or 59%, from 1996 to 1997 and approximately $2.2 million, or 142%,
from 1997 to 1998. The increase in revenue from 1996 to 1997 was due to an
increase in product license sales in 1997, as over 95% of 1996 revenue
consisted of service revenue. The increase in revenue from 1997 to 1998 was due
to increased license revenue as the availability of new software products
attracted new large customers.
24
<PAGE>
License revenue. License revenue was $56,000, $839,000 and approximately
$2.3 million in 1996, 1997 and 1998, respectively. Revenue for product sales in
1996 was low as we shipped our first product only in September of that year.
License revenue increased from 1996 to 1997 in large part because we introduced
two new web-based products which accounted for the majority of the $839,000 new
license revenue. License revenue increased 172% from 1997 to 1998 as our
products gained market acceptance.
Service revenue. Service revenue was $941,000, $743,000 and approximately
$1.5 million in 1996, 1997, and 1998, respectively. Our first full year of
operation was 1996, and much of that year was focused on providing customer
database consulting services to confirm the accuracy of the product plan and
direction. In 1997, service revenue dropped by 21% from 1996 because we shifted
our focus to developing and supporting our new software product lines. Service
revenue climbed by 108% in 1998 compared to 1997 due to our expansion of the
services to include customer maintenance and support services as well as
consulting in support of our licensed product sales.
Cost of Revenue. Cost of revenue was $314,000, $903,000 and approximately
$1.4 million in 1996, 1997 and 1998, respectively, representing increases of
$589,000, or 187%, from 1996 to 1997 and $484,000, or 54%, from 1997 to 1998.
These increases were due to staffing increases for support and consulting,
approximately two-thirds of which expenses were payroll-related, and a new
training facility that opened in 1998. Cost of revenue as a percentage of total
revenue decreased to 36% for the year ended December 31, 1998, from 57% for the
year ended December 31, 1997, due to the increased proportion of revenue
derived from license revenue for which the related cost of license revenue has
been insignificant.
Research and Development. Research and development expenses were $364,000,
approximately $1.4 million and $2.5 million in 1996, 1997 and 1998,
respectively, representing increases of approximately $1.0 million, or 271%,
from 1996 to 1997 and approximately $1.1 million, or 84%, from 1997 to 1998.
These increases were due to increased personnel costs of $800,000, as an
increased number of engineers were in place for all twelve months of 1998,
$225,000 of expenses associated with the launch of a new quality assurance
program in 1997, and an increase in facility-related expenses of $50,000
associated with our move to our new headquarters.
Sales and Marketing. Sales and marketing expenses increased from $125,000 in
1996 to approximately $1.8 million in 1997 and approximately $4.3 million in
1998, representing increases of over 1300% and 138%, respectively. In 1996,
selling expenses only started in the fourth quarter, and marketing was largely
related to trade shows. This trend continued in 1997, as the first commissions
were paid late in the year, and trade show and related expenses were $241,000
and comprised 38% of sales and marketing expenses. The growth in 1998 over 1997
was attributable to selling commissions of $2.1 million and an additional
$287,000 of travel expenses for sales personnel.
General and Administrative. General and administrative expenses increased
from $358,000 in 1996 to $936,000 in 1997 and approximately $1.4 million in
1998, representing year-to-year increases of 161% and 46%, respectively. In
1997, we used the proceeds of the first round of external financing to hire a
small administrative staff and to expand to a second office. Facility expenses
increased in 1998 as our San Mateo offices were consolidated and new field
offices were opened. Professional expenses for legal and accounting support
increased from $75,000 in 1997 to over $350,000 in 1998, reflecting increased
business activity and support requirements. Depreciation expenses for new
office equipment and amortization of improvements to our San Mateo offices over
two-year leases largely account for the remainder of the increase.
Interest Income, Net. Interest income, net, was $10,000, $62,000 and an
expense of $63,000 in 1996, 1997 and 1998, respectively, representing an
increase of $52,000 from 1996 to 1997 and a decrease of $125,000 from 1997 to
1998. The increase from 1996 to 1997 was due to a higher average cash balance
as a result of the proceeds from the issuance of shares of our preferred stock
and the decrease from 1997 to 1998 was due to the use of cash for operations
and the payment of interest on a $2.0 million bridge loan obligation starting
in the second quarter.
25
<PAGE>
Quarterly Results of Operations
The following tables set forth certain unaudited statements of operations
data for the six quarters ended June 30, 1999, as well as the percentages of
our revenues represented by each item. This data has been derived from the
unaudited interim financial statements prepared on the same basis as the
audited financial statements contained herein and, in the opinion of
management, include all adjustments consisting only of normal recurring
adjustments that we consider necessary for a fair presentation of such
information when read in conjunction with the financial statements and notes
thereto appearing elsewhere in this prospectus. The operating results for any
quarter should not be considered indicative of results of any future period.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------
Mar. June Sept. Dec. Mar. June
31, 30, 30, 31, 31, 30,
1998 1998 1998 1998 1999 1999
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations (unaudited, dollars in thousands except per
Data: share data)
Revenue................. $ 725 $ 1,029 $ 669 $ 1,402 $ 1,228 $ 2,062
Cost of revenue......... 312 328 391 356 353 521
------- ------- ------- ------- ------- -------
Gross profit............ 413 701 278 1,046 875 1,541
------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 521 586 654 720 820 1,051
Sales and marketing... 836 970 1,214 1,275 1,968 2,429
General and
administrative....... 166 208 529 462 305 691
Amortization of stock-
based compensation... -- 94 158 193 253 276
------- ------- ------- ------- ------- -------
Total operating
expenses............... 1,523 1,858 2,555 2,650 3,346 4,447
------- ------- ------- ------- ------- -------
Operating loss.......... (1,110) (1,157) (2,277) (1,604) (2,471) (2,906)
Interest income
(expense), net......... (11) 10 198 (260) 35 81
======= ======= ======= ======= ======= =======
Net loss................ $(1,121) $(1,147) $(2,079) $(1,864) $(2,436) $(2,825)
======= ======= ======= ======= ======= =======
Basic and diluted net
loss per share......... $ (0.35) $ (0.33) $ (0.56) $ (0.48) $ (0.59) $ (0.62)
======= ======= ======= ======= ======= =======
Weighted average shares
used in basic and
diluted net loss per
share.................. 3,219 3,467 3,690 3,900 4,121 4,568
======= ======= ======= ======= ======= =======
As a Percent of Total
Revenue:
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 43.0 31.9 58.4 25.4 28.7 25.3
------- ------- ------- ------- ------- -------
Gross profit............ 57.0 68.1 41.6 74.6 71.3 74.7
Operating expenses:
Research and
development.......... 71.9 56.9 97.8 51.4 66.8 50.9
Sales and marketing... 115.3 94.3 181.5 90.9 160.3 117.8
General and
administrative....... 22.9 20.2 79.1 32.9 24.8 33.5
Amortization of stock-
based compensation... -- 9.1 23.6 13.8 20.6 13.4
------- ------- ------- ------- ------- -------
Total operating
expenses............... 210.1 180.5 382.0 189.0 272.5 215.6
------- ------- ------- ------- ------- -------
Operating loss.......... (153.1) (112.4) (340.4) (114.4) (201.2) (140.9)
Interest income
(expense), net......... (1.5) 1.0 29.6 (18.5) 2.9 3.9
------- ------- ------- ------- ------- -------
Net loss................ (154.6)% (111.4)% (310.8)% (132.9)% (198.3)% (137.0)%
</TABLE>
We expect to experience significant fluctuations in our future results of
operations due to a variety of factors, many of which are outside of our
control, including:
. demand for and market acceptance of our products and services;
. our expansion into international markets;
26
<PAGE>
. introduction of products and services or enhancements by us and our
competitors;
. competitive factors that affect our pricing;
. the timing of customer installations;
. the mix of products and services we sell;
. the timing and magnitude of our capital expenditures, including costs
relating to the expansion of our operations;
. the size and timing of customer orders, particularly large orders, some
of which represent more than 10% of total revenue during a particular
quarter;
. the hiring and retention of key personnel;
. conditions specific to the enterprise information portal market and
other general economic factors;
. changes in generally accepted accounting policies, especially those
related to the recognition of software revenue; and
. new government legislation or regulation.
In addition, over 85% of our expenses are fixed in the short-term,
particularly with respect to depreciation, real estate and personnel costs, and
therefore our results of operations are particularly sensitive to fluctuations
in revenue. Due to these factors, we believe that period-to-period comparisons
of our operating results are not necessarily meaningful and that such
comparisons cannot be relied upon as indicators of our future performance.
Liquidity and Capital Resources
From our inception through June 30, 1999, we financed our operations through
private equity placements totaling approximately $26.6 million and drawdowns
from a revolving facility of up to $500,000. At June 30, 1999, we had an
accumulated deficit of approximately $14.9 million and cash and cash
equivalents of approximately $14.3 million.
Net cash used in our operating activities for the six months ended June 30,
1999 was approximately $3.9 million. The net cash used by operations was
primarily due to working capital requirements and net losses, offset by
increases in accounts payable and accrued expenses. Net cash used in investing
activities was $588,000 for the six-month period ended June 30, 1999, which is
comprised of property and equipment purchases. Net cash provided by financing
activities was approximately $14.6 million.
We have a $2.5 million line of credit with a commercial bank for the purpose
of financing working capital requirements and equipment purchases. As of June
30, 1999, no amount was outstanding thereunder. The loan contains certain
standard covenants, is based on a percentage of qualified outstanding accounts
receivables and is secured by a security interest in certain of our
intellectual property. Interest on borrowings thereunder accrues at the rate of
1% over prime rate for the revolver and 1.5% over prime rate for an equipment
note.
We believe that the estimated net proceeds from this offering, together with
our existing cash and funds available under our existing credit facilities,
will be sufficient to fund our capital expenditures, cash needs and operating
losses for at least the next 12 months. The execution of our business plan will
require substantial additional capital to fund our operating losses, sales and
marketing expenses, capital expenditures, lease payments and working capital
requirements thereafter. We intend to continue to consider our future financing
alternatives, which may include the incurrence of indebtedness, additional
public or private equity offerings or an equity investment by a strategic
partner. Actual capital requirements may vary based upon the timing and success
of the expansion of our operations. Our capital requirements may change based
upon technological and competitive developments. In addition, several factors
may affect our capital requirements, including:
. demand for our products and services or our anticipated cash flow from
operations being less than expected;
27
<PAGE>
. our development plans or projections proving to be inaccurate; or
. our engaging in acquisitions or other strategic transactions.
Other than our $2.5 million line of credit, we have no present commitments
or arrangements assuring us of any future equity or debt financing, and we
cannot assure you that any such equity or debt financing will be available to
us on favorable terms, or at all.
Deferred Stock-based Compensation
Certain options granted and common stock issued during the 18 months ended
June 30, 1999 have been considered to be compensation. Total deferred stock-
based compensation associated with these equity transactions for the year ended
December 31, 1998 and for the six months ended June 30, 1999 were approximately
$1.6 million and $1.4 million, respectively. These amounts are being amortized
over the vesting periods of the options. Of the total stock compensation
expense, $445,000 was amortized in the 12 months ended December 31, 1998 and
$529,000 was amortized in the six months ended June 30, 1999. We expect
amortization of approximately $1.1 million and $805,000 in the years ended
December 31, 1999 and 2000, respectively.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities. SFAS No. 133
establishes accounting and reporting standards for derivative financial
instruments and hedging activities related to those instruments, as well as
other hedging activities. Because we do not currently hold any derivative
instruments and do not engage in hedging activities, we expect that the
adoption of SFAS No. 133 will not have a material impact on our financial
condition, results of operations or cash flows. We will be required to adopt
SFAS No. 133 in fiscal 2000.
In December 1998, the American Institute of Certified Public Accountants
issued SOP 98-9, Software Revenue Recognition with Respect to Certain
Arrangements, which requires recognition of revenue using the "residual method"
in a multiple element arrangement when fair value does not exist for one or
more of the delivered elements in the arrangement. Under the "residual method,"
the total fair value of the undelivered elements is deferred and subsequently
recognized in accordance with SOP 97-2. We did not have a material change to
our accounting for revenue as a result of the provisions of SOP 98-9.
Year 2000 Compliance
Background of Year 2000 Issues
Many currently installed computer systems and software products are unable
to distinguish between twentieth century dates and twenty-first century dates
because these systems were developed using two digits rather than four to
determine the applicable year. For example, computer programs that have date-
sensitive software may recognize a date using "00" as the year 1900 rather than
the year 2000. This error could result in system failures or miscalculations
causing disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices or engage in similar normal
business activities. As a result, many companies' software and computer systems
may need to be upgraded or replaced to comply with these year 2000
requirements.
Viador and Year 2000
We are in the process of assessing the year 2000 readiness of our products
and business operations. We do not expect to be materially adversely affected
by year 2000-related issues. We have established a year 2000 task force
composed of management and information systems consultants, whose mission is to
evaluate and certify our readiness by closely directing and documenting
internal analysis, remediation, testing and contingency planning. The target
date for completing the assessment of our mission-critical systems is
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September 30, 1999; the target date for completing the assessment of our non-
mission-critical systems is October 31, 1999. We believe we are presently on
schedule to resolve all issues by these target dates.
The scope of Year 2000 issues within Viador
Our business is dependent on the operation of numerous systems that could
potentially be affected by year 2000-related problems. These systems include,
among others:
. hardware and software systems we use to deliver products and services
to our customers, including our proprietary software systems as well
as software supplied by third parties;
. communications networks such as the internet and internal company
networks;
. the internal systems of our customers and suppliers;
. software products sold to our customers;
. the hardware and software systems we use internally to manage our
business; and
. non-information technology systems and services, such as power,
telephone systems and building systems.
What measures are we taking to ensure compliance?
We have reviewed our internal management information and other systems in
order to identify any products, services or systems that are not year 2000
compliant in order to take corrective action. To date, we have not encountered
any material year 2000 problems with our computer systems or any other
equipment that might be subject to such problems. We are evaluating vendor
compliance statements, using diagnostics software to scan desktops and servers,
and are formally documenting the results of both processes. We have also
inventoried and assessed internal applications and have determined that most
applications are supplied by third-party vendors. Few of these applications are
mission-critical and will be tested and remediated by September 30, 1999. We
have not yet completed an assessment of embedded technology; however, these are
predominantly non-mission-critical and we do not expect significant impact from
the state of their year 2000 compliance. Embedded technology is non-computer
equipment, such as copiers and phone systems, that utilize components similar
to those found in computers. Our current assessment is that upgrades or
migration to major internal computer, software and equipment systems will not
be necessary. We expect that our review will be completed and fully documented
by October 31, 1999.
We are completing compliance verification of external vendors supplying
products and services to us, as well as communicating with significant
suppliers to determine the readiness of third parties' remediation of their own
year 2000 issues. No vendors have advised us that they will be unable to timely
complete their year 2000 review and remediation. Although we have employed year
2000 consultants to assist us in our evaluation of year 2000 matters, except as
described above, neither we nor, to our knowledge, any of our mission-critical
vendors have employed any independent verification and validation processes to
assure the reliability of our respective year 2000 risk and cost assessments.
We have established a steering committee comprised of senior executives
and a year 2000 compliance task force composed of representatives from
various functional areas, including our product, management and information
systems departments. This task force includes outside consultants with
expertise in addressing year 2000 issues. The task force has formulated and is
implementing a year 2000 readiness program and is applying a phased approach to
analyzing our operations and relationships as they relate to the year 2000
problem. The phases of our year 2000 program are as follows:
. establishment of a year 2000 steering committee and task force;
. inventory of all aspects of our operations and third-party
relationships subject to the year 2000 problem;
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. assignment of responsibility for external issues, such as products
licensed by us, internal issues, such as hardware, facilities,
equipment and software; and
. remediation, testing and contingency planning.
Identification of mission-critical and non-mission-critical systems
Our project year 2000 task force has identified and classified all
information technology systems, non-IT systems and embedded technology as
"mission-critical" or "non-mission-critical." Mission-critical systems are
crucial to the continuation of our business operations while non-mission-
critical systems are elements that, should they fail to be year 2000 compliant,
would not have a significant impact on our business operations.
How far along are we?
We have completed the first three phases of the program, and expect that the
final phase will be completed for our mission-critical systems by September 30,
1999 and for all of our systems by October 31, 1999. Our efforts have had
little impact on current IT projects and will not adversely affect our internal
development schedule, operations or financial condition. Our current project
status is as follows:
<TABLE>
<CAPTION>
% Complete Expected
Task as of Completion
Description 9/7/99 Date
----------- ---------- ----------
<S> <C> <C>
Establish year 2000 steering committee and task force... 100 Done
Establish year 2000 project plan and assignment of
responsibilities....................................... 100 Done
Inventory/assessment of systems and vendor
relationships.......................................... 100 Done
Testing/remediation of mission-critical systems......... 75 9/30/99
Gather compliance statements for vendor systems and
services............................................... 75 9/30/99
Contingency planning for all mission-critical systems... 50 10/15/99
Testing/remediation/contingency planning for non-
mission-critical systems and services.................. 25 10/31/99
</TABLE>
Year 2000 risks related to our business
Based on our assessment to date, we believe the current versions of our
software products are year 2000 compliant. We have performed various testing
processes to confirm that our products do not have identifiable year 2000
problems. However, we continue to formally retest and document the processes we
have completed and the results thereof. We expect this product retesting and
documentation to be completed by September 30, 1999. We are also in the process
of testing the year 2000 compliance of third-party components of our products.
The third-party vendors have certified the year 2000 compliance of these
components through public or private recorded disclosure.
We may still be subject to external forces that might generally affect
industry and commerce, such as extended power outages or widespread failures
across the internet, which would create disruptions that would take time to
repair. The time required to make these repairs would depend on the severity of
the power outages or widespread failures. The costs associated with these
external forces could be material.
Our worst-case year 2000 scenario would occur if customers using our
products experience product failure following the shift in millennium. This
scenario should only unfold if the supporting environment required for
operating our products fails to be year 2000 compliant. If our products do have
year 2000 problems, we have a limited number of personnel who are technically
experienced with our year 2000 compliance procedures and, in the event our
systems were to fail as a result of year 2000 problems, these employees would
likely be unable to timely comply with several customers' requests for year
2000 remediation. Any such delay could impair our business or prospects or
relationships with those customers. The total cost of year 2000 compliance and
remediation may be material and may harm our business. Although we do not
expect this scenario to happen and are testing thoroughly to prevent its
incidence, we have contingency plans in place to minimize damage to our
reputation or brand if it happens. We are requiring that all employees be
available to assist us between the dates of December 1, 1999 and January 31,
2000. In this regard, none of our employees is permitted to leave
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the area of their service to the company without executive permission, and our
engineering, sales and technical support staff will be available to fix any
problems that might arise. We are also requiring staff to come to the office on
January 1, 2000 to assist our customers with any year 2000 issues that may
arise.
Our products are generally used with sophisticated hardware and complex
software products that may not be year 2000 compliant. The accuracy of the
information generated by our products is inherently dependent on the quality of
the source data from these other hardware and software. We expect that our
products will not produce errors processing, providing and receiving date data
within and between the twentieth and twenty-first centuries, provided that all
products used with our software accurately exchange date data to and from our
products in accordance with our documentation. Therefore, to the extent that
the underlying source data is inaccurate or corrupted, or to the extent that
the hardware or software products that generate or store that data are not year
2000 compliant or are otherwise flawed, the information generated by our
products may be similarly inaccurate or corrupted. The success of our year 2000
compliance efforts may depend on the success of our customers in dealing with
their 2000 issues. We sell our products to companies in a variety of
industries, each of which is experiencing different year 2000 compliance
issues. Customer difficulties with year 2000 issues might require us to devote
additional resources to resolve underlying problems.
We could also experience material adverse effects on our business if we fail
to identify all year 2000 dependencies in our systems and in the systems of our
suppliers, customers and financial institutions. We will identify mission
critical business operations and develop contingency plans for those
operations. We presently do not have a contingency plan for handling year 2000
problems that are not detected and corrected prior to their occurrence. There
can be no assurance that the total cost of year 2000 compliance will not be
material to our business. We may not identify and remediate all significant
year 2000 problems on a timely basis, remediation efforts may involve
significant time and expense, and unremediated problems may have a material
adverse effect on our business.
Although we have not been a party to any litigation or arbitration
proceeding to date involving our products or services and related to year 2000
compliance issues, we cannot assure you that we will not in the future be
required to defend our products or services in such proceedings, or to
negotiate resolutions of claims based on year 2000 issues. The costs of
defending and resolving year 2000-related disputes, regardless of the merits of
such disputes, and any liability for year 2000-related damages, including
consequential damages, may have a material adverse effect on our business,
results of operations and financial condition.
In addition, we believe that purchasing patterns of customers and potential
customers may be affected by year 2000 issues as companies expend significant
resources to correct or upgrade their current software systems for year 2000
compliance or defer additional software purchases until after 2000. As a
result, some customers and potential customers may have more limited budgets
available to purchase software products such as those offered by us, and others
may choose to refrain from changes in their information technology environment
until after 2000. To the extent year 2000 issues cause significant delay in, or
cancellation of, decisions to purchase our products or services, our business
would be materially adversely affected.
For additional discussion of our year 2000-related risks, see "Risk
Factors--Our failure and the failure of third parties to be year 2000 compliant
could negatively impact our business" and "--If our customers defer technology
purchases because of year 2000 concerns, our growth and results of operations
for the remainder of 1999 and early 2000 may suffer" on pages 12 and 7,
respectively.
Qualitative and Quantitative Disclosures About Market Risk
We develop products in the United States and market our products in North
America, Europe and the Asia-Pacific region. As a result, our financial results
could be affected by factors such as changes in foreign currency exchange rates
or weak economic conditions in foreign markets. As all of our sales are
currently made in U.S. dollars, a strengthening of the dollar could make our
products less competitive in foreign markets. Our interest income is sensitive
to changes in the general level of U.S. interest rates, particularly since the
majority of our investments are in short-term instruments. Due to the short-
term nature of our investments, we believe that there is no material risk
exposure. Therefore, no quantitative tabular disclosures are required.
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BUSINESS
Overview
We develop and market internet software that enables businesses to create
enterprise information portals. An enterprise information portal gives users a
single browser-based interface with which to quickly and easily access
information from a variety of enterprise data sources. We believe the Viador E-
Portal Suite offers a comprehensive and integrated enterprise information
portal that is specifically designed for the web and works with a customer's
existing hardware and software systems, without the need for additional
technology expenditures. It provides our customers with the ability to manage
and share information on a secure and cost-effective basis that can accommodate
significant increases in the number of users and amount of information. As more
users contribute increasing amounts of information to the portal, we believe
our customers are able to increase business productivity and efficiency.
Industry Background
In today's highly competitive environment, businesses are focused on
improving their efficiency, effectiveness and ability to meet customer demands.
Providing diverse internal decision makers with relevant, accurate and timely
information is a key strategic priority for business and an important element
of achieving competitive advantage. Similarly, sharing information with
customers and suppliers is essential to succeed as an e-business.
Abundance of Information
Business decision makers need quick access to relevant information from a
variety of sources, including the internet, internal corporate networks, e-
mail, databases and business software programs. However, the large and growing
quantity of information, coupled with the lack of effective solutions for
efficiently accessing, combining and organizing it, makes it difficult to
identify and utilize relevant information. Due to this information overload,
businesses need to be able to quickly identify and obtain relevant information
in order to make timely and informed decisions.
The Proliferation of Disparate Information Technology Formats
There is a rapidly growing variety of technologies used for creating,
storing and organizing information. These include many different computer
hardware, such as mainframe computers and computer networks, and numerous
software programs, such as those for finance, accounting, sales, manufacturing
and human resources. However, many of these hardware and software systems were
developed independently to be operated on a stand-alone basis and were not
designed to be compatible with other hardware and software. As a result, it is
increasingly difficult and time consuming to gain access to all relevant
information. In order to access all this information, users may need to use
separate software programs, complete separate security protocols and use
different computer terminals. As the number of formats and amount of
information grows, it becomes increasingly difficult and time consuming to
navigate around these technological obstacles to obtain relevant information.
Emergence of the Internet as the Global Medium for Communications
The internet continues to experience rapid growth and expansion as an
important global medium for communications and business due to its cost
effectiveness, extensive reach and ability to handle tremendous growth. The
internet provides a powerful medium for enterprises and their customers,
suppliers and strategic partners to share business information efficiently. We
expect that the ability to securely share information efficiently over the
internet will become increasingly important and lead growing numbers of
enterprises to adopt web-based information and communication solutions.
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Growth of E-Business
The internet continues to transform the way that business is conducted. It
can help businesses improve customer satisfaction, reduce cost structures,
globalize operations, foster innovation and accelerate speed to market. E-
business is the use of the internet and emerging technologies to replace or
supplement traditional business channels and practices. As the number of
internet users has grown, enterprises have increasingly viewed the internet as
an opportunity to interact rapidly with a larger number of geographically
distributed offices, employees, customers, suppliers and partners. In many
cases, the adoption of a web-based marketing, communication or financial model
provides enterprises with strategic competitive advantages and can prevent the
loss of market share to aggressive e-business innovators.
Need for a Comprehensive Solution
The above factors suggest the need for a solution that facilitates the
organization, secure access to and use of enterprise information by those who
require it, regardless of whether they are users inside the business or outside
partners. However, current solutions generally do not enable companies to
organize and provide secure access to enterprise information through a single
interface regardless of its format. The ideal solution would work with all of
the enterprise's information technology and provide integrated access to all
enterprise information regardless of its source or format. Furthermore, given
the large amounts of electronic data being generated, the ideal solution would
help users get fast access to personalized and relevant information.
A comprehensive solution would work with existing customer information
systems and would not require customers to replace or upgrade their existing
technology investments. It also would utilize the internet, so that it would
work through a web browser without any need to install additional software on
users' computers. An internet-based solution could be implemented quickly,
accommodate significant increases in the number of users and amount of
information, and adapt to changes in the customer's business model. In
contrast, we believe that any solution that does not utilize the internet would
have significant difficulty accommodating substantial increases in the number
of users and amount of information.
The Viador E-Portal Suite
We provide a suite of enterprise software products that enables
organizations to build enterprise information portals that permit quick, easy
access to all enterprise information, facilitate the provision of customized
and personalized information and permit the secure sharing of enterprise
information both within the enterprise and with outside partners.
Single Interface for All Enterprise Information. Our software permits users
to access data from multiple sources within and outside the company through a
single interface. We provide a comprehensive and integrated enterprise
information portal solution that provides access to user-personalized, up-to-
the-minute information quickly and easily.
Adaptable Web-Based Architecture. In contrast to existing solutions, our
software architecture can accommodate significant increases in the number of
users and amount of information. Our software architecture is designed for the
internet, which means that it:
. works through a user's existing web browser,
. does not require the installation of any additional software on the
user's desktop, and
. can be quickly rolled out to thousands of additional users.
Our solution provides the means to build and enhance over time the methods by
which our customers organize, retrieve and distribute information. The open and
highly adaptable architecture of our software gives our customers the
flexibility to customize and extend their enterprise portal framework as their
needs evolve. Our
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enterprise information portal provides greater benefits to the enterprise the
more users it reaches and the more broadly our software is deployed.
Customized and Personalized Information. We address the information overload
problem by helping users locate and retrieve the most pertinent business
information. This capability increases the efficiency of information use by our
customers' employees. Our software allows the organization to automatically
categorize information by subject, by user, by department, by role within the
organization and according to other criteria. Its capabilities permit users to
locate and access desired information from various data sources. In addition,
our software permits each user to customize his or her portal interface to
access and display information in accordance with that user's needs and
preferences.
Combines Ease of Use with Sophisticated Functions. The Viador E-Portal Suite
provides browser-based searchable access to the entire range of an
organization's enterprise information assets, facilitating location of and
access to information regardless of the underlying data source. Our browser-
based interface combines the ease of use of popular consumer internet portals,
while providing users with the ability to search enterprise-wide for specific
information and analyze data. The database access capabilities within our
software are all web-based and, unlike unintegrated database access tools,
offer a uniform look and feel for reporting, querying and analytical
processing.
Builds Upon Customers' Existing Investments in Information
Technology. Customers who utilize our software are able to build upon their new
and existing hardware and software investments. As a result, our customers
typically do not need to purchase new computer equipment or software in order
to install and integrate our software.
Ease of Implementation. The Viador E-Portal Suite is designed to be
implemented rapidly over the web using our customers' existing information
technology. Once installed on an organization's servers, our software can reach
employees enterprise-wide via their existing web browsers. New users can be
added in minutes on the customer's servers since no new software has to be
installed on the user's computer.
Secure and Selective Access. Security features are essential to permit
customers to share confidential information rapidly over the internet with a
large number of geographically distributed offices, employees, customers,
suppliers and partners. Our software allows the organization to customize
information access by individual user and category of user. Our product's
security features operate in conjunction with our customers' existing security
services to identify and authenticate users.
Viador Strategy
Our goal is to be the leading provider of enterprise information portal
software solutions. Key elements of our strategy include:
Extend Technology Leadership. We believe we are among the first companies to
provide a solution that has all of the following features:
. based on pure internet architecture;
. provides search capabilities using internet search technology;
. facilitates personalization of the information provided to each user;
. designed to accommodate significant increases in the number of users and
amount of information;
. can retrieve and deliver information from different, otherwise
incompatible sources; and
. provides multi-level security.
We intend to enhance our technology by continuing to devote significant
resources to research and development efforts and by forming strategic
relationships that will enable us to further enhance the performance and
adaptability of our software.
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Expand Sales, Distribution and Marketing. We intend to significantly grow
our direct sales organization to expand coverage and penetration of large
enterprise opportunities to take advantage of our innovative technologies. We
are making significant new investments in our corporate and field marketing
capacity as well as efforts to improve awareness of Viador and the Viador E-
Portal Suite solution. In addition, we will continue to exploit and build our
network of resellers of products who also provide related services,
manufacturers who use our software in their products, system integrators who
bring together various hardware and software to solve a specific customer
problem and distributors to expand our indirect distribution worldwide.
Increase Use by Existing Customers. The value of our software to our
customers grows as it is deployed more widely throughout the organization for
the following reasons:
. more data can be accessed by customers' users as the number of
departments within an organization that uses our software increases;
. users become more accustomed to using the portal to access data; and
. users contribute increasing amounts of information to the portal, which
makes this information accessible to all authorized users.
For these reasons, we believe that our customers are able to realize greater
productivity and efficiency in their businesses. We believe that our success at
winning and delivering initial deployments of our software by customers can be
grown to enterprise-wide adoption of our technology, which would generate
significant added revenue.
Build Strategic Relationships. We have formed strategic relationships
covering marketing, engineering and sales with numerous multinational companies
that are at the forefront of providing technology for e-business. We have an
established marketing arrangement with IBM which has significantly improved our
distribution capabilities and resulted in additional sales. In addition, our
technology is used in IBM's Net.Commerce initiative for e-commerce storefronts
and we are delivering our technology onto the IBM OS/390 mainframe. E-commerce
involves buying and selling merchandise and services over the internet. Our
products are currently distributed in Japan by Mitsui, which assisted us in
adapting our products for Japan and other international markets. In addition,
we have partnered with Infoseek for joint marketing purposes and to incorporate
into our software Infoseek's technologies for searching and indexing
information available on the internet and on our customers' internal networks.
We also intend to develop new strategic relationships with other large
hardware, software and e-business companies.
Create Standardized Business Portal Solutions. We are creating a series of
standardized portal formats for specific business uses. These portal formats
provide a turn-key solution by meeting the specific information requirements of
customers with similar business needs. For example, we have developed an e-
commerce portal format to assist e-commerce companies to understand information
regarding shopping behavior of those using their web sites. This contrasts with
the format requirements of a supply chain portal. Our standardized business
portals are designed to significantly reduce the time required to implement the
Viador E-Portal Suite in a tailored format that satisfies a significant portion
of the customer's information needs. Furthermore, these standardized formats
can be customized over time to better suit the information needs of a specific
customer. These standardized portal formats complement our broader sales
strategy by facilitating initial deployments at new customers, so that our
relationship with these customers can develop over time resulting in broader
deployments of our software.
Build World Class Service and Support Operations. Superior customer service,
training and support is necessary to build long-term customer relationships
that enable enterprise-wide deployments of our software. Our goal is to deliver
technology and services that enable our customers to rapidly implement advanced
technology business solutions throughout their organizations at the lowest
possible cost. To succeed and maintain a competitive edge, we will continue to
build on the success of our Advanced Solutions Division, which uses our core
technology to solve customers' individual problems. We intend to grow our
direct service and support organization to expand our training capabilities and
to provide reliable customer support.
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Technology
We believe the Viador E-Portal Suite offers a comprehensive and integrated
enterprise information portal that gives users a single browser-based interface
with which to quickly and easily access up-to-the-minute information from a
variety of enterprise data sources. Combining this easy-to-use browser-based
interface with our products' information delivery capability, our software
provides secure access and delivery of data.
Adaptable Internet Architecture
The architecture of the Viador E-Portal Suite is designed for the web, which
gives it the ability to accommodate significant increases in the number of
users and the amount of information. Our software's highly adaptable
architecture and software development kit give customers the added flexibility
to customize and extend their enterprise information portal as their needs
evolve. It is Java-based, it operates on Microsoft Windows NT servers, and we
anticipate that it will operate on Unix servers beginning in the third fiscal
quarter of 1999. Our software works with major web servers and browsers. We
facilitate enterprise-wide scalability through add-on options that enable
multiple servers, distributed throughout a customer's organization, to work
together in servicing user information requests.
Comprehensive Access
Our software provides comprehensive information access for the following
categories of data:
. structured data, including data from databases, data marts, data
warehouses and business software;
. unstructured data, including data contained in internal company
networks, on the internet, in groupware, such as Lotus Notes, and in
documents stored in file systems; and
. event data, such as news or stock quotes, that is constantly changing
and which is delivered in real time.
Information Personalization
We address the information overload problem by helping users locate and
retrieve the most pertinent business information. This capability increases the
efficiency of information use by our customers' employees. Our software allows
the organization to focus information by subject, by user, by department, by
role within the organization and according to other criteria. Its capabilities
permit the location of and access to desired information from structured,
unstructured and event data sources. In addition, our software permits each
user to customize his or her portal interface to access and display information
in accordance with that user's needs and preferences.
Secure Information Sharing
Security features are essential to permit customers to share confidential
information rapidly over the internet with a large number of geographically
distributed offices, employees, customers, suppliers and partners. Our
products' security features operate in conjunction with our customers' existing
security services to identify and authenticate users. These features permit the
enterprise to establish multiple levels of access rights based upon each user's
job function and organizational role.
Easy Administration
Our software facilitates the management of enterprise information in large
organizations with thousands of users, giving the system administrator an added
measure of flexibility to centrally monitor and administer the system from
virtually anywhere. User administration by the user's job function and
organizational role enables the administrator to precisely delineate access
privileges to reports, databases and documents for individual users and groups.
The server management component of our software audits server usage and
monitors user access in real time.
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Products and Services
Products
The Viador E-Portal Suite is comprised of the following products, which are
sold both individually and as a suite:
Viador Sage is a browser-like interface that gives users the ability to
search, access, analyze and share business information through a simple
interface similar to popular consumer internet portals. Both organizations and
individual users can customize the Viador Sage interface to meet their
information needs. Viador Sage provides comprehensive access to structured,
unstructured and event data. Personalization capabilities enable the filtering
of information by time, subject and job function to improve user productivity.
Viador Information Center is a high-performance Java server that provides
data access, content delivery, session management and user security. Viador
Information Center further ensures that our software can grow with the
enterprise through add-on options that provide support for additional computers
and balancing the needs of multiple users. These options enable multiple
servers, distributed enterprise-wide, to work together in servicing user
information requests.
Viador Gateway allows customers to choose from a wide range of data sources
they would like to include in the Viador Information Center. These sources
include: Oracle, Sybase, Informix, DB2, Microsoft SQL Server, Hyperion,
Essbase, Oracle Express, WhiteLight, ODBC, Lotus Notes, Microsoft Office,
internal company networks and others.
Viador Sentinel is an integrated security server for extending secure web-
based access to partners, customers and suppliers over the internet. Viador
Sentinel operates in conjunction with existing security services to identify
and authenticate users, encrypt data, process requests and securely deliver
sensitive information. Viador Sentinel allows companies to exchange information
with e-business customers, suppliers and partners, thereby facilitating more
efficient operations and improving customer satisfaction.
Viador Administrator facilitates the management of large customer
information technology environments with thousands of users by giving the
system administrator flexibility to centrally monitor and administer the system
from virtually anywhere. Administration of users by job responsibilities and
role within the organization enables the administrator to precisely define
access privileges for individual users and groups. A server management feature
monitors and creates a record of user access in real time.
Services
Our Advanced Solutions Group offers architectural and technical consulting
services, customer support and training in connection with licenses of our
software. We believe that services are an important part of our success and we
expect to continue to expand our professional services organization.
Consulting. Our pre-sale and post-sale technology implementation services
are organized into a single organization so that our assigned consulting
engagement team can work with a customer from the initial business problem
discussions through implementation of their solution. We believe that this
allows us to develop greater knowledge of the customer's environment and add
the highest level of value. Our consultants are qualified and trained to
perform a wide variety of services including prototype development,
installation, configuration and testing of our software and integration with
the customer's existing databases, security and other systems. Our consultants
also help customers develop a strategy for the customers' enterprise-wide
deployment of our software. Once deployed into a customer site on an
engagement, our consultants become advisors and help us discover new business
opportunities within the company.
Customer Support. We provide product upgrades and customer support through
our customer support program. Customer support personnel are available 24 hours
a day, seven days a week. We also offer e-mail-based support. Customers
generally purchase the first year of product support at the time they license
37
<PAGE>
our software; after that, support may be renewed on an annual basis. Our
support engineers will immediately render assistance to system critical
problems and work with the customer to diagnose the issue and resolve it until
the customer is satisfied. Once a customer has purchased a technical support
contract, they are entitled to free upgrades for the software they have
licensed. Our support organization works with our sales force in identifying
new opportunities, product uses and for maintenance renewals.
Training. We offer a variety of training programs tailored to particular
user groups, including end users and information technology personnel. Training
classes are offered at customer sites, in various high demand cities and also
at our headquarters in San Mateo, California. We also provide training classes
for third-party service providers, such as independent systems consultants and
distributors. We provide training early in the sales cycle to ensure successful
implementations and sponsor free one-day training seminars as an inducement to
potential customers.
Customers
Our customer base spans multiple industry segments including financial
services, government, healthcare, manufacturing and telecommunications. The
following is a representative list of companies that have purchased over
$50,000 of our products and services since January 1, 1998. We do not intend
the identification of these customers to imply that these customers are
actively endorsing or promoting our products.
<TABLE>
<CAPTION>
Financial Energy & Utilities High Tech/Telecom
<S> <C> <C>
. American Century . INTESA . 3Com
. Charles Schwab . Pacific Gas & Electric . Cisco Systems
. CIBC . Retail Energy Transaction Exchange . IBM
. Citigroup Government/Education . Lucent Technologies
. Putnam Investments . Federal Aviation Administration . Nortel
Manufacturing . Internal Revenue Service . Sprint PCS
. Allied Signal . University of Buffalo . Sterling Software
. Raytheon . Multnomah County, Oregon . Sun Microsystems
Internet . US Department of Defense . Sybase
. Baker Healthcare . Xerox
Street Technologies
. Netcentives . Ministry Health Care
. FaceTime Communication Services
. Micromuse . Gelco Information Systems
. Mitsui
</TABLE>
The following examples illustrate how certain of our customers use the
Viador E-Portal Suite to perform business-critical tasks:
Sprint PCS. Sprint PCS provides digital personal communication services over
a nationwide wireless network, covering more than 280 metropolitan areas and
over 1,100 cities. Sprint was rapidly hiring employees, resulting in an
increase from a few hundred users of its information systems to thousands of
users. Sprint sought an enterprise solution that would enable it to deliver to
thousands of users and critical customers financial information from multiple
data sources that normally could only be accessed with a disparate collection
of client/server tools. Sprint knew that it would be cost prohibitive to use
client/server database access tools because of the high cost of installing and
maintaining the necessary PC software on thousands of desktops. Sprint
determined that the way to scale its information technology infrastructure was
to use its existing desktop browsers and its intranet. After 90 days following
project initiation, we were able to provide Sprint with a solution that offered
hundreds of users web-based access to a wide variety of financial data sources
through the users' web browsers and the ability to significantly and easily
expand the number of users in the future. In addition to addressing the
scalability issue with the web, Viador offered Sprint a secure way to access
the data on the internet and personalize user access based on the user's job
function.
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<PAGE>
Xerox. Xerox offers a wide variety of document-related solutions, products
and services that enhance business productivity. Xerox needed an efficient
method for searching, analyzing and distributing business information from its
many different corporate data sources so that its thousands of employees
worldwide could directly access timely, customized information. Xerox required
a solution that would support thousands of users around the world, which
existing client/server solutions are not capable of efficiently doing. Thus,
Xerox conducted a comprehensive evaluation of web data access solutions, after
which Xerox selected the Viador E-Portal Suite. Xerox chose our software in
order to provide a single solution that can be used across multiple platforms
to access any corporate data source including databases, data warehouses,
desktop applications and enterprise resource planning software applications. We
offered Xerox a comprehensive user functionality along with a 100% web software
architecture to permit Xerox to deploy the solution worldwide. The Viador E-
Portal Suite is now being used in several areas by Xerox including e-business
channel supply tracking, data warehouse access, and reporting for customer
service administration, human resources/payroll and global service.
Sales
We sell our software primarily through our domestic direct sales
organization, with sales professionals located in eight regions in the United
States including the North Atlantic, Rocky Mountain, Southeast, Eastern,
Pacific Northwest, South Central, Western and Great Lakes regions. The field
sales force is complemented by direct telesales and telemarketing
representatives based at our headquarters in San Mateo, California. As of June
30, 1999, we employed 16 commission-based sales people. Technical sales support
is provided by sales engineers located in several of the field offices. We
currently intend to add a significant number of sales representatives and sales
engineers in other domestic locations. We use distributors in the Netherlands,
Germany, United Kingdom, Canada, Hong Kong and Japan and plan to expand our
distributor channel to other international markets. For additional information
regarding the risks of our move toward a direct sales model, see "Risk
Factors--If our plan to sell our Viador E-Portal Suite directly to customers is
not successful, we may not be able to grow our revenue and our stock price may
suffer" on page 9.
Since our products affect users throughout the customer's organization, our
sales effort involves multiple decision makers and frequently includes the
chief financial officer, vice president of finance, controller and vice
president of purchasing. While the average sales cycle varies substantially
from customer to customer, for initial sales it has generally ranged from three
to nine months. Our sales cycle is affected by seasonal fluctuations as a
result of our customers' fiscal year budgeting cycles and slow summer
purchasing patterns overseas. We typically receive a substantial portion of our
orders in the last two weeks of each fiscal quarter because our customers often
delay purchases of products to the end of the quarter. Also, we expect our
revenue to be higher in the fourth quarter than in other quarters of the year.
Implementation of additional components of our software and broader rollout to
additional users within the organization generally occur over multiyear
periods. For further discussion regarding these risks, see " Risk Factors--
Since our sales cycle is long, unpredictable and subject to seasonal
fluctuations, it is difficult to accurately forecast our revenue; if we fail to
achieve our forecasted revenue, our operating results will suffer and our stock
price may decline" on page 8.
Marketing
Our marketing efforts are directed at promoting our enterprise information
portal product family, building a leadership position by defining the
enterprise information portal market space and increasing our market share in
that market. Our marketing programs are targeted at both mid- to executive-
level information technology professionals as well as line-of-business
executives and are focused on creating awareness of, and generating interest
in, our software.
We engage in a variety of marketing activities, including developing and
executing joint marketing strategies designed to leverage our existing
strategic relationships, managing and maintaining our web site, issuing
newsletters and direct mailings, web-marketing campaigns, creating and placing
advertisements in various media, conducting aggressive public relations
campaigns, and establishing and maintaining close
39
<PAGE>
relationships with recognized industry analysts. We are an active participant
in technology-related conferences and demonstrate our products at trade shows
targeted at information technology audiences. Our marketing campaigns are
tightly synchronized with our sales force to ensure appropriate follow up with
sales leads.
We expect to grow our sales and marketing staff significantly. We believe
that demand is increasing, and will continue to increase, for web enterprise
information access software and services, such as those sold by us. We may not
be able to expand our sales and marketing staff, either domestically or
internationally, to take advantage of any increase in demand for web enterprise
information portals. Our failure to expand our sales and marketing organization
or other distribution channels could materially adversely affect our business.
For additional discussion of risks we face with respect to our inability to
grow our sales and marketing staff, see "Risk Factors--If we do not expand our
customer base, we may never become profitable and our stock price will likely
decline" on page 6.
Product Development
Our development staff is responsible for enhancing our existing products and
expanding our product line. We believe that a technically skilled, quality
oriented and highly productive software development organization will be a key
component of the continued success of our new product offerings. We expect that
we will increase our product development expenditures substantially in the
future.
Our current product development activities focus on product enhancements to
the Viador E-Portal Suite and the integration of external services and partner
technology. These development efforts may not be completed within our
anticipated schedules, and if completed, they may not have the features
necessary to make them successful in the marketplace. Delays or problems in the
development or marketing of product enhancements or new products could result
in a material adverse effect on our business. For a discussion of risks related
to our product development, see "Risk Factors--If we fail to manage
technological change or effectively respond to changes in customer needs,
demand for our products and services will drop and our business will suffer"
and "--If our plan to sell software services over the internet as a substitute
for licensing our software fails, it could harm our business" on pages 13 and
11, respectively.
Competition
The market for our products is intensely competitive, subject to rapid
change and significantly affected by new product introductions and other market
activities of industry participants. Our primary source of direct competition
comes from independent software vendors of corporate portal software. We also
compete with business intelligence software vendors. Business intelligence
software is installed on a personal computer and permits the analysis of
information in databases. We also face indirect competition from potential
customers' internal development efforts.
Our major competitors in the corporate portal field tend to be early stage
private companies. In addition, several major business intelligence software
vendors have introduced portal products as a web interface to their business
intelligence software. At least one business software company, Peoplesoft, has
introduced a portal that works with its software and we expect more will do so.
We also expect to face competition from new entrants. Most business software
companies have a significantly installed customer base and have the opportunity
to offer portal products to those customers as additional components of their
software.
We believe that the principal competitive factors considered in selecting
enterprise information portal solutions are comprehensive access to existing IT
infrastructure, security, scalability, personalization and filtering
capabilities and an installed base of customers. We believe that the ability of
our software to access a wide variety of data sources is a major
differentiating factor relative to competing portal products. Our competitors
which are early-stage private companies focus on providing access to
unstructured data in the form
40
<PAGE>
of websites and documents. Portals offered by business intelligence software
vendors concentrate on integrating and accessing structured data. Portals
offered by business software companies generally only provide an interface for
their software programs.
Many of our competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, significantly
greater name recognition and a larger installed base of customers. Moreover, a
number of our competitors, particularly major business software companies, have
well-established relationships with our current and potential customers as well
as with independent systems consultants and other vendors and service
providers. In addition, these competitors may be able to respond more quickly
to new or emerging technologies and changes in customer requirements, or to
devote greater resources to the development, promotion and sale of their
products, than we can.
It is also possible that new competitors, alliances among competitors or
other third parties may emerge and rapidly acquire significant market share. We
expect that competition in our markets will increase as a result of
consolidation and the formation of alliances in the industry. Increased
competition may result in price reductions, reduced gross margins and loss of
market share, any of which could materially adversely affect our business. We
may be unable to compete successfully against current or future competitors and
the competitive pressures we face may materially adversely affect our business.
For a discussion of the competitive risks we face, see "Risk Factors--The
markets in which we compete are highly competitive and we may not be able to
compete effectively" and "--If our strategic relationships are discontinued, it
may be more difficult for us to maintain certain features of our products or
reach particular customers or markets" each of which is on page 13.
Intellectual Property Rights
Our success depends upon our proprietary technology. We rely primarily on a
combination of patent, copyright, trade secret and trademark laws,
confidentiality procedures, contractual provisions and other similar measures
to protect our proprietary information. For example, we license rather than
sell our software to customers and require licensees to enter into license
agreements that impose certain restrictions on licensees' ability to utilize
the software. We have applied for two U.S. patents, but we have no patents or
patent applications pending in any foreign countries. There can be no assurance
that any of our patents, copyrights or trademarks will not be challenged or
invalidated.
As part of our confidentiality procedures, we enter into non-disclosure
agreements with certain of our employees, directors, contractors, consultants,
corporate partners, customers and prospective customers. We also enter into
license agreements with respect to our technology, documentation and other
proprietary information. Those licenses are generally non-transferable and have
a perpetual term. Despite our best efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use our
products or technology that we consider proprietary and third parties may
attempt to develop similar technology independently. In particular, we provide
our licensees with access to object code versions of our software, and other
proprietary information underlying our licensed software. Policing unauthorized
use of our products is difficult, particularly because the global nature of the
internet makes it difficult to control the ultimate destination or security of
software or other data transmitted. While we are unable to determine the extent
to which piracy of our software exists, we expect software piracy to be a
persistent problem. In addition, effective protection of proprietary rights may
be unavailable or limited in certain countries. The laws of some foreign
countries do not protect our proprietary rights to the same extent as do the
laws of the United States. Overall, the protection of our proprietary rights
may not be adequate and our competitors may independently develop similar
technology.
We are not aware that our products, trademarks, copyrights or other
proprietary rights infringe the proprietary rights of third parties. Third
parties may assert infringement claims against us in the future with respect to
current or future products. Further, we expect that software product developers
will increasingly be
41
<PAGE>
subject to infringement claims as the number of products and competitors in our
industry segment grows and the functionality of products in different industry
segments overlaps. From time to time, we hire or retain employees or
consultants who have worked for independent software vendors or other companies
developing products similar to those offered by us. Those prior employers may
claim that our products are based on their products and that we have
misappropriated their intellectual property. Any claims of that variety, with
or without merit, could cause a significant diversion of management attention,
result in costly and protracted litigation, cause product shipment delays or
require us to enter into royalty or licensing agreements. Those royalty or
licensing agreements, if required, may not be available on terms acceptable to
us or at all, which would have a material adverse affect on our business. For
additional discussion regarding our intellectual property risk, see "Risk
Factors--If we are unable to effectively protect our proprietary rights, our
competitors may be able to copy important aspects of our products or product
message, which would undermine the relative appeal of our products to customers
and reduce our sales" on page 12.
Employees
As of June 30, 1999, we had a total of 108 employees, including 49 people in
sales and marketing, 32 people in engineering, 16 people in operations and 11
people in finance and administration. We believe that our future success will
depend in part on our continued ability to attract, hire and retain qualified
personnel. The competition for those personnel is intense, and there can be no
assurance that we will be able to identify, attract and retain those personnel
in the future. None of our employees is represented by a labor union, and
management believes that our employee relations are good.
Facilities
We currently lease the following facilities: our corporate headquarters in
San Mateo, California and sales offices in New York, New York, Arlington,
Virginia, League City, Texas, Huntington Beach, California, Palm Coast, Florida
and Sylvan Lake, Michigan.
Legal Proceedings
We are not a party to any material legal proceedings.
42
<PAGE>
MANAGEMENT
Executive Officers and Directors
The following table sets forth certain information regarding the executive
officers and directors of Viador as of July 20, 1999:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Stan X. Wang............ 37 Chief Executive Officer, President, Chairman of the Board of Directors
Jonathan M. Harding..... 46 Senior Vice President, North American Operations
Raja H. Venkatesh....... 38 Vice President and Chief Financial Officer and Secretary
Ben C. Connors.......... 41 Vice President, Business Development
Steven C. Dille......... 39 Vice President, Marketing
Paul C. Vilandre........ 57 Vice President
Teddy Kiang............. 46 Director
Dawn G. Lepore.......... 45 Director
Chong Sup Park.......... 51 Director
Virginia M. Turezyn..... 41 Director
</TABLE>
Directors Teddy Kiang and Virginia M. Turezyn serve on the Compensation
Committee. Directors Chong Sup Park and Virginia M. Turezyn serve on the Audit
Committee.
Each director will hold office for the term described on page 45 in "--
Classified Board" and until such director's successor is elected and qualified
or until such director's earlier resignation or removal. Each officer serves at
the discretion of the Board of Directors of Viador.
Stan X. Wang is a co-founder of Viador. Mr. Wang has served as President,
Chief Executive Officer and Chairman of the Board of Directors since Viador was
founded in December 1995. Prior to founding Viador, from January 1995 to
December 1995, Mr. Wang oversaw the data warehouse division of the RightSizing
Group, a software and services company focused on Internet, data warehouse and
large database and financial database applications where he designed and
implemented numerous large enterprise software projects. From July 1990 to
January 1995, Mr. Wang was an architect in Oracle Corporation's information
access tools group. Mr. Wang holds a B.S. in Electrical Engineering from Tsing
Hua University in China, an M.S. in Mathematics from Oregon State University
and an M.S. in Mechanical Engineering from the California Institute of
Technology.
Jonathan M. Harding has served as Senior Vice President of North American
Operations since April 1998. Prior to joining Viador, from July 1994 to April
1998, Mr. Harding was Managing Partner at Vision Unlimited, an information
technology consulting company. Mr. Harding also served as Vice President of
Professional Services at Brock Control Systems from July 1993 to July 1994.
Previously, Mr. Harding has held senior executive positions at Computer Task
Group and Knowledge Ware. Mr. Harding holds a B.S. in Economics from SUNY-
Brockport and attended the Graduate School of Industrial Administration at
Carnegie Mellon University.
Raja H. Venkatesh joined Viador as Vice President and Chief Financial
Officer and Secretary in June 1999. Prior to joining Viador, from August 1997
to June 1999, Mr. Venkatesh served as Corporate Treasurer at Maxtor
Corporation, a manufacturer of information storage products for desktop
computer systems. From April 1996 to August 1997, Mr. Venkatesh served as
Director of Corporate Strategy and Development at the Pacific Telesis Group.
Previously, Mr. Venkatesh served in various capacities in the Treasurer's
office of General Motors Corporation from July 1990 to March 1996. Mr.
Venkatesh holds a B.S. in Engineering from the Regional Engineering College in
India and an M.B.A. from the Darden Graduate School of Business Administration
at the University of Virginia.
Ben C. Connors is a co-founder of Viador. Mr. Connors has served as Vice
President of Business Development since November 1998. Mr. Connors served as
Chief Operating Officer from July 1997 to November 1998 and as Vice President
of Sales and Marketing from January 1996 to July 1997. Prior to joining
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<PAGE>
Viador, from November 1995 to Jan 1996, Mr. Connors served as Chief Executive
Officer of Quadsoft, Inc., a custom software development and outsourcing
company, which he also co-founded. Mr. Connors also served as Vice President of
Sales and Marketing for The RightSizing Group from May 1994 to November 1995.
Previously, Mr. Connors held sales and marketing management positions with The
ASK Group, Oracle Corporation and Hewlett-Packard Company. Mr. Connors holds a
B.S. in Mechanical Engineering from Stanford University and a M.B.A. from
Harvard Business School.
Steven C. Dille has served as Vice President of Marketing since December
1997. Prior to joining Viador, from February 1992 to November 1997, Mr. Dille
served in the marketing division at Sybase, Inc., a global independent software
company, most recently as director of data warehousing. Previously, Mr. Dille
has held marketing and technology leadership positions at Hewlett-Packard
Company, NCR and as an independent consultant. Mr. Dille holds a B.S. in
Computer Science and Mathematics from the University of Pittsburgh and a M.B.A.
in Marketing and Finance from The University of Chicago.
Paul C. Vilandre has served as Vice President since November 1997 and
previously served as Chief Financial Officer and Secretary. Prior to joining
Viador, from January 1996 to August 1996, Mr. Vilandre served as Vice President
of Finance and Chief Financial Officer of Metra Corporation and from September
1993 to August 1995, he served as Vice President of Finance and Chief Financial
Officer of Axil Computers, Inc. Mr. Vilandre was a professor in finance at San
Jose State University before joining Viador. Previously, Mr. Vilandre held
financial management positions at Intel Corporation, Digital Equipment
Corporation and IBM Corporation. Mr. Vilandre has served as Area Vice President
and National Director for the Financial Executives Institute, an international
organization of senior financial officers. Mr. Vilandre holds a B.A. in
Accounting from Loyola College and an M.B.A. from Harvard Business School.
Teddy Kiang has served as a director since April 1997. Mr. Kiang is a
Managing Director of Crosslink Technology Partners, an early stage venture
capital firm, specializing in funding and developing healthcare, network and
information technology ventures. From July 1990 to September 1995, Mr. Kiang
was the program director and a business development executive for the Point-of-
Care Coagulation product system at Boeringer Mannheim Corporation, a
biotechnology firm. From August 1980 to July 1990, Mr. Kiang served as a
project manager in the Medical Products Group at Hewlett-Packard Laboratories.
Mr. Kiang serves on the Board of Directors of two privately-held companies as
the investment representative of Standard Foods Taiwan, Ltd., a publicly traded
company in Taiwan. He also serves as a special advisor to the Chairman of
AboveNet Communications, Inc. Mr. Kiang holds an M.S. in Chemistry from
Columbia University and a Ph.D. in Chemical Physics from Stanford University.
Dawn G. Lepore has served as a director since July 1999. Ms. Lepore is
Executive Vice President and Chief Information Officer and a member of the
Management Committee of The Charles Schwab Corporation, where she has served
for over fifteen years in various capacities. Prior to her appointment as Chief
Information Officer at Schwab in 1993, Ms. Lepore served as Senior Vice
President of Information Technology at Schwab, responsible for the development
of a wide range of systems to support Schwab's growing product offerings and
client base. She also led a strategic initiative for redesigning Schwab's
entire technology platform. Prior to joining Schwab in 1983, Ms. Lepore was
employed at Informatics, an information consulting firm in San Francisco. Ms.
Lepore serves on the Board of Directors of Times Mirror Company, a publisher of
several daily news and specialty publications. Ms. Lepore holds a B.A. in Music
from Smith College.
Chong Sup Park has served as a director since March 1999. Mr. Park is
President and Chief Executive Officer of Hyundai Electronics America. Prior to
joining Hyundai, from February 1995 to August 1996, Mr. Park served as
President and Chief Executive Officer of Maxtor Corporation, a manufacturer of
information storage products for desktop computer systems. From July 1993 to
January 1995, Mr. Park served as President and Chief Executive Officer of Axil
Computers Inc. Mr. Park serves on the board of directors of several companies,
both publicly and privately held, which include Maxtor Corporation, Artecon,
Inc., ChipPAC, Inc. and MMC, Inc. Mr. Park holds a B.A. in Business
Administration from Yonsei University in Seoul, Korea, a M.B.A. from The
University of Chicago and a Ph.D. in Business Administration from Nova
Southeastern University.
44
<PAGE>
Virginia M. Turezyn has served as a director since September 1998. Ms.
Turezyn co-founded Information Technology Ventures, a venture capital firm in
September 1994 and has served as a General Partner since its founding. From
April 1982 to September 1994, she served in a variety of capacities at Morgan
Stanley & Company, Inc., including most recently as Vice President in the
Venture Capital Group. Ms. Turezyn serves on the Board of Directors of several
privately held companies. Ms. Turezyn holds a B.A. in Accounting from Queens
College and is a Certified Public Accountant.
Director Compensation
Directors of Viador receive $1,000 for each board meeting attended if in
person and $500 if attended telephonically. Directors also receive $500 for
each board committee meeting attended if in person and $250 if attended
telephonically. All directors are also reimbursed for their reasonable out-of-
pocket expenses in serving on the Board of Directors or any Committee thereof.
Directors are eligible to receive equity incentives in the form of stock option
grants or direct stock issuances under our 1999 Stock Incentive Plan.
Classified Board
Our certificate of incorporation provides for a classified Board of
Directors consisting of three classes of directors, each serving staggered
three-year terms. As a result, a portion of our Board of Directors will be
elected each year. To implement the classified structure, prior to the
consummation of the offering, one of the nominees to the board will be elected
to one-year terms, two will be elected to two-year terms and two will be
elected to three-year terms. After these initial terms, directors will be
elected for three-year terms. Virginia M. Turezyn has been designated a Class I
director whose term expires at the 2000 annual meeting of stockholders. Dawn G.
Lepore and Chong Sup Park have been designated Class II directors whose terms
expire at the 2001 annual meeting of stockholders. Stan X. Wang and Teddy Kiang
have been designated Class III directors whose terms expire at the 2002 annual
meeting of stockholders. For additional discussion regarding the effects of our
classified board, see "Description of Capital Stock--Certain Anti-takeover,
Limited Liability and Indemnification Provisions" beginning on page 58.
Board Committees
The audit committee of the Board of Directors consists of Chong Sup Park and
Virginia M. Turezyn. The audit committee reviews our financial statements and
accounting practices, makes recommendations to the Board of Directors regarding
the selection of independent auditors and reviews the results and scope of our
annual audit and other services provided by our independent auditors.
The compensation committee of the Board of Directors consists of Teddy Kiang
and Virginia M. Turezyn. The compensation committee makes recommendations to
the Board of Directors concerning salaries and incentive compensation for our
officers and employees and administers our employee benefit plans.
Compensation Committee Interlocks and Insider Participation
None of the members of the compensation committee of the Board of Directors
was at any time since the formation of Viador an officer or employee of Viador.
No executive officer of Viador serves as a member of the Board of Directors or
compensation committee of any entity that has one or more executive officers
serving on our Board of Directors or our compensation committee of the Board of
Directors.
In August 1998, we issued and sold an aggregate of 4,230,770 shares of
Series B preferred stock to Information Technology Ventures II, L.P. and ITV
Affiliates Fund II, L.P. Virginia M. Turezyn, a director of Viador and a member
of the compensation committee, is a principal member of ITV Management II LLC,
the general partner of Information Technology Ventures II, L.P. and ITV
Affiliates Fund II, L.P.
In August 1998, we issued and sold an aggregate 1,185,996 shares of Series B
preferred stock to Standard Foods Taiwan, Ltd. Teddy Kiang, a director of
Viador and a member of the compensation committee is the investment
representative for Standard Foods Taiwan Ltd.
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<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
Summary of Cash and Certain Other Compensation
The following table sets forth the compensation earned by our Named
Executive Officers which include our Chief Executive Officer and our four other
executive officers whose salary and bonus for services rendered to Viador for
the fiscal year ended December 31, 1998 exceeded $100,000. The options listed
in the table were originally granted under either our 1996 Stock Option/Stock
Issuance Plan or our Amended and Restated 1997 Stock Option/Stock Issuance
Plan. These options will be incorporated into the new 1999 Stock Incentive
Plan, but will continue to be governed by their existing terms. For additional
information regarding the terms of our options, see "--Executive Compensation
and Other Information--Employee Benefit Plans" beginning on page 47. Since
December 31, 1998, certain of these executive officers have been succeeded by
new persons and we have added additional officers. For a list of our current
executive officers and certain members of senior management, see "Management"
beginning on page 43.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
1998 Annual Compensation
Compensation Awards
---------------- ------------
Number of
Securities
Underlying
Name and Principal Position(s) Salary Bonus Options
- ------------------------------ -------- ------- ------------
<S> <C> <C> <C>
Stan X. Wang.................................... $125,000 $20,000 898,783
President, Chief Executive Officer and
Chairman of the Board of Directors
Jonathan M. Harding............................. $ 73,920 -- 79,167
Senior Vice President of North American
Operations
Ben C. Connors.................................. $100,000 $ 5,000 --
Vice President of Business Development
Steven C. Dille................................. $115,000 $ 7,500 58,334
Vice President of Marketing
Paul C. Vilandre................................ $120,000 $15,000 96,222
Vice President of Administration and Secretary
</TABLE>
Jonathan M. Harding joined Viador as Senior Vice President of North American
Operations in April 1998. Mr. Harding earned $73,920 in 1998, but his annual
base salary for 1998 was $115,000. Mr. Harding is included in the above table
because his salary and bonus would have exceeded $100,000 had he served in his
position for the full year.
46
<PAGE>
Stock Options and Stock Appreciation Rights
The following table sets forth information regarding option grants to each
of the Named Executive Officers during the fiscal year ended December 31, 1998.
No stock appreciation rights were granted to the Named Executive Officers
during the 1998 fiscal year.
Stock Option Grants in Fiscal Year 1998
<TABLE>
<CAPTION>
Potential
Realizable Value
at Assumed
Number of Percentage of Annual Rates of Stock
Securities Total Options Exercise Price Appreciation
Underlying Granted to Price for Option Term
Options Employees in Per Share Expiration ---------------------
Name Granted (#) 1998 ($/Sh) Date 5% 10%
---- ----------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Stan X. Wang............ -- -- -- -- -- --
Ben C. Connors.......... -- -- -- -- -- --
Jonathan Harding........ 79,167 11.7% $0.24 4/19/08 $1,270,547 $2,034,388
Steven C. Dille......... -- -- -- -- -- --
Paul C. Vilandre........ -- -- -- -- -- --
</TABLE>
- ----------
(1) Based on the assumed initial public offering price of $10.00 per share less
the exercise price payable per share.
Aggregated Option/SAR Exercises and Fiscal Year-End Values
The following table sets forth information with respect to the Named
Executive Officers concerning their exercise of stock options during the fiscal
year ended December 31, 1998 and the number of shares subject to unexercised
stock options held by them as of the close of such fiscal year. No stock
appreciation rights were exercised during the fiscal year ended December 31,
1998, and no stock appreciation rights were outstanding at the close of such
year.
Aggregated Option Exercises in 1998 and Year-End Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options
Shares Options at Year-End at Year-End(2)
Acquired on Value ------------------------- -------------------------
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stan X. Wang............ -- -- 898,783 -- $8,944,688 --
Ben C. Connors.......... -- -- -- -- -- --
Jonathan Harding........ -- -- 79,167 -- $ 722,670 --
Steven C. Dille......... -- -- 58,334 -- $ 569,340 --
Paul C. Vilandre........ -- -- 96,222 -- $ 939,127 --
</TABLE>
- ----------
(2) Based on the assumed initial public offering price of $10.00 per share less
the exercise price payable per share.
Employee Benefit Plans
1999 Stock Incentive Plan.
Introduction. The 1999 Stock Incentive Plan is intended to serve as the
successor program to both our 1996 Stock Option/Stock Issuance and 1997 Stock
Option/Stock Issuance Plans. The 1999 plan was adopted by the board on July 20,
1999 and has not yet been approved by our stockholders. The 1999 plan will
become effective when the underwriting agreement for this offering is signed.
At that time, all outstanding options under our existing 1996 and 1997 plans
will be transferred to the 1999 plan, and no further option grants will be made
under the 1996 or 1997 plans. The transferred options will continue to be
governed by their existing terms, unless our compensation committee decides to
extend one or more features of the 1999 plan to those options. Except as
otherwise noted below, the transferred options have substantially the same
terms as will be in effect for grants made under the discretionary option grant
program of our 1999 plan.
47
<PAGE>
Share Reserve. 7,000,000 shares of our common stock have been authorized for
issuance under the 1999 plan. This share reserve consists of the number of
shares we estimate will be carried over from the 1996 and 1997 plans plus an
additional increase of approximately 3,000,000 shares. The share reserve under
our 1999 plan will automatically increase on the first trading day in January
of each calendar year, beginning with calendar year 2000, by an amount equal to
four percent of the total number of shares of our common stock outstanding on
the last trading day of December in the prior calendar year, but in no event
will this annual increase exceed 3,000,000 shares. In addition, no participant
in the 1999 plan may be granted stock options or direct stock issuances for
more than 1,000,000 shares of common stock in total in any calendar year.
Programs. Our 1999 plan has five separate programs:
. the discretionary option grant program, under which eligible individuals
in our employ may be granted options to purchase shares of our common
stock at an exercise price not less than the fair market value of those
shares on the grant date;
. the stock issuance program, under which eligible individuals may be
issued shares of common stock directly, upon the attainment of
performance milestones or the completion of a specified period of
service or as a bonus for past services;
. the salary investment option grant program, under which our executive
officers and other highly compensated employees may be given the
opportunity to apply a portion of their base salary each year to the
acquisition of special below market stock option grants;
. the automatic option grant program, under which option grants will
automatically be made at periodic intervals to eligible non-employee
board members to purchase shares of common stock at an exercise price
equal to the fair market value of those shares on the grant date; and
. the director fee option grant program, under which our non-employee
board members may be given the opportunity to apply a portion of any
director or retainer fee otherwise payable to them in cash each year to
the acquisition of special below-market option grants.
Eligibility. The individuals eligible to participate in our 1999 plan
include our officers and other employees, our board members and any consultants
we hire.
Administration. The discretionary option grant and stock issuance programs
will be administered by our compensation committee. This committee will
determine which eligible individuals are to receive option grants or stock
issuances under those programs, the time or times when the grants or issuances
are to be made, the number of shares subject to each grant or issuance, the
status of any granted option as either an incentive stock option or a
nonstatutory stock option under the federal tax laws, the vesting schedule to
be in effect for the option grant or stock issuance and the maximum term for
which any granted option is to remain outstanding. The compensation committee
will also have the authority to select the executive officers and other highly
compensated employees who may participate in the salary investment option grant
program in the event that program is put into effect for one or more calendar
years.
Plan Features. Our 1999 plan will include the following features:
. The exercise price for any options granted the plan may be paid in cash
or in shares of our common stock valued at fair market value on the
exercise date. The option may also be exercised through a same-day sale
program without any cash outlay by the optionee.
. The compensation committee will have the authority to cancel outstanding
options under the discretionary option grant program, including any
transferred options from our 1996 or 1997 plans, in return for the grant
of new options for the same or different number of option shares with an
exercise price per share based upon the fair market value of our common
stock on the new grant date.
. Stock appreciation rights may be issued under the discretionary option
grant program. These rights will provide the holders with the election
to surrender their outstanding options for a payment from
48
<PAGE>
us equal to the fair market value of the shares subject to the
surrendered options less the exercise price payable for those shares. We
may make the payment in cash or in shares of our common stock. None of
the options under our 1996 or 1997 plan have any stock appreciation
rights.
Change in Control. The 1999 plan will include the following change in
control provisions which may result in the accelerated vesting of outstanding
option grants and stock issuances:
. In the event that we are acquired by merger or asset sale, each
outstanding option under the discretionary option grant program which is
not to be assumed by the successor corporation will immediately become
exercisable for all the option shares, and all outstanding unvested
shares will immediately vest, except to the extent our repurchase rights
with respect to those shares are to be assigned to the successor
corporation.
. The compensation committee will have complete discretion to grant one or
more options which will become exercisable for all the option shares in
the event those options are assumed in the acquisition but the
optionee's service with us or the acquiring entity is subsequently
terminated. The vesting of any outstanding shares under our 1999 plan
may be accelerated upon similar terms and conditions.
. The compensation committee may grant options and structure repurchase
rights so that the shares subject to those options or repurchase rights
will immediately vest in connection with a successful tender offer for
more than fifty percent of our outstanding voting stock or a change in
the majority of our board through one or more contested elections. Such
accelerated vesting may occur either at the time of such transaction or
upon the subsequent termination of the individual's service.
. The options currently outstanding under our 1996 and 1997 plans will
immediately vest in the event we are acquired, unless those options are
assumed by the acquiring entity or our repurchase rights with respect to
any unvested shares subject to those options are assigned to such
entity. However, several options outstanding under the 1996 and 1997
plans contain additional acceleration provisions. Some of those options
will vest up to 50% of the unvested shares immediately upon the
acquisition, whether or not those options are assumed, and other of
those options will immediately vest upon an involuntary termination of
the optionee's employment within 18 months following an acquisition in
which those options are assumed.
Salary Investment Option Grant Program. In the event the compensation
committee decides to put this program into effect for one or more calendar
years, each of our executive officers and other highly compensated employees
may elect to reduce his or her base salary for the calendar year by an amount
not less than $10,000 nor more than $50,000. Each selected individual who makes
such an election will automatically be granted, on the first trading day in
January of the calendar year for which his or her salary reduction is to be in
effect, an option to purchase that number of shares of common stock determined
by dividing the salary reduction amount by two-thirds of the fair market value
per share of our common stock on the grant date. The option will have exercise
price per share equal to one-third of the fair market value of the option
shares on the grant date. As a result, the option will be structured so that
the fair market value of the option shares on the grant date less the exercise
price payable for those shares will be equal to the amount of the salary
reduction. The option will become exercisable in a series of twelve equal
monthly installments over the calendar year for which the salary reduction is
to be in effect.
Automatic Option Grant Program. Each individual who first becomes a non-
employee board member at any time after the effective date of this offering
will receive an option grant to purchase 15,000 shares of common stock on the
date such individual joins the board. In addition, on the date of each annual
stockholders meeting held after the effective date of this offering, each non-
employee board member who is to continue to serve as a non-employee board
member, including each of our current non-employee board members, will
automatically be granted an option to purchase 5,000 shares of common stock,
provided such individual has served on the board for at least six months.
49
<PAGE>
Each automatic grant will have an exercise price per share equal to the fair
market value per share of our common stock on the grant date and will have a
term of 10 years, subject to earlier termination following the optionee's
cessation of board service. The option will be immediately exercisable for all
of the option shares; however, we may repurchase, at the exercise price paid
per share, any shares purchased under the option which are not vested at the
time of the optionee's cessation of board service. The shares subject to each
initial 15,000-share automatic option grant will vest in a series of six
successive semi-annual installments upon the optionee's completion of each six-
month of board service over the thirty-six-month period measured from the grant
date. However, the shares will immediately vest in full upon certain changes in
control or ownership or upon the optionee's death or disability while a board
member. The shares subject to each annual 5,000-share automatic grant will be
fully-vested when granted.
If the financial accounting treatment for non-employee director stock
options proposed in the March 31, 1999 Exposure Draft of the Financial
Accounting Standards Board under APB Opinion No. 25 is adopted, then following
changes shall be made to the foregoing provisions of the Automatic Option Grant
Program:
. The 15,000-share option grant shall not be made to a newly-elected or
appointed non-employee Board member until the first Annual Stockholders
Meeting held more than twelve months after the date of his or her
initial election or appointment to the Board. At that annual meeting,
the non-employee Board member shall also receive an option grant for an
additional 5,000 shares under the annual grant portion of the Automatic
Option Grant Program.
. One-third of the shares subject to the 15,000-share option grant shall
be immediately vested at the time of the option grant, and the remaining
shares shall vest in a series of four successive equal semi-annual
installments upon the Optionee's completion of each six-month period of
Board service over the twenty-four-month period measured from the grant
date.
Director Fee Option Grant Program. If this program is put into effect in the
future, then each non-employee board member may elect to apply all or a portion
of any cash retainer fee for the calendar year to the acquisition of a below-
market option grant. The option grant will automatically be made on the first
trading day in January in the calendar year for which the non-employee board
member would otherwise be paid the cash retainer fee in the absence of his or
her election. The option will have an exercise price per share equal to one-
third of the fair market value of the option shares on the grant date, and the
number of shares subject to the option will be determined by dividing the
amount of the retainer fee applied to the program by two-thirds of the fair
market value per share of our common stock on the grant date. As a result, the
option will be structured so that the fair market value of the option shares on
the grant date less the exercise price payable for those shares will be equal
to the portion of the director or retainer fee applied to that option. The
option will become exercisable in a series of twelve equal monthly installments
over the calendar year for which the election is in effect. However, the option
will become immediately exercisable for all the option shares upon the death or
disability of the optionee while serving as a board member.
Additional Program Features. Our 1999 plan will also have the following
features:
. Outstanding options under the salary investment and director fee option
grant programs will immediately vest if we are acquired by a merger or
asset sale or if there is a successful tender offer for more than 50% of
our outstanding voting stock or a change in the majority of our board
through one or more contested elections.
. Limited stock appreciation rights will automatically be included as part
of each grant made under the salary investment option grant program and
the automatic and director fee option grant programs, and these rights
may also be granted to one or more officers as part of their option
grants under the discretionary option grant program. Options with this
feature may be surrendered to us upon the successful completion of a
hostile tender offer for more than 50% of our outstanding voting stock.
In return for the surrendered option, the optionee will be entitled to a
cash distribution from us in an amount per surrendered option share
based upon the highest price per share of our common stock paid in that
tender offer.
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<PAGE>
. The board may amend or modify the 1999 plan at any time, subject to any
required stockholder approval. The 1999 plan will terminate no later
than June 15, 2009.
1999 Employee Stock Purchase Plan.
Introduction. Our 1999 Employee Stock Purchase Plan was adopted by the board
on July 20, 1999 and has not yet been approved by our stockholders. The plan
will become effective immediately upon the signing of the underwriting
agreement for this offering. The plan is designed to allow our eligible
employees and the eligible employees our participating subsidiaries to purchase
shares of common stock, at semi-annual intervals, with their accumulated
payroll deductions.
Share Reserve. 300,000 shares of our common stock will initially be reserved
for issuance. The reserve will automatically increase on the first trading day
in January of each calendar year, beginning in calendar year 2000, by an amount
equal to one percent of the total number of outstanding shares of our common
stock on the last trading day in December in the prior calendar year. In no
event will any such annual increase exceed 500,000 shares.
Offering Periods. The plan will have a series of successive offering
periods, each with a maximum duration of 24 months. The initial offering period
will start on the date the underwriting agreement for the offering covered is
signed and will end on the last business day in October 2001. The next offering
period will start on the first business day in November 2001, and subsequent
offering periods will set by our compensation committee.
Eligible Employees. Individuals scheduled to work more than 20 hours per
week for more than 5 calendar months per year may join an offering period on
the start date or any semi-annual entry date within that period. Semi-annual
entry dates will occur on the first business day of May and November each year.
Individuals who become eligible employees after the start date of an offering
period may join the plan on any subsequent semi-annual entry date within that
offering period.
Payroll Deductions. A participant may contribute up to 15% of his or her
cash earnings through payroll deductions, and the accumulated deductions will
be applied to the purchase of shares on each semi-annual purchase date. The
purchase price per share will be equal to 85% of the fair market value per
share on the participant's entry date into the offering period or, if lower,
85% of the fair market value per share on the semi-annual purchase date. Semi-
annual purchase dates will occur on the last business day of April and October
each year. However, a participant may not purchase more than 750 shares on any
purchase date, and not more than 75,000 shares may be purchased in total by all
participants on any purchase date. Our compensation committee will have the
authority to change these limitations for any subsequent offering period.
Reset Feature. If the fair market value per share of our common stock on any
purchase date is less than the fair market value per share on the start date of
the two-year offering period, then that offering period will automatically
terminate, and a new two-year offering period will begin on the next business
day. All participants in the terminated offering will be transferred to the new
offering period.
Change in Control. Should we be acquired by merger or sale of substantially
all of our assets or more than fifty percent of our voting securities, then all
outstanding purchase rights will automatically be exercised immediately prior
to the effective date of the acquisition. The purchase price will be equal to
85% of the market value per share on the participant's entry date into the
offering period in which an acquisition occurs or, if lower, 85% of the fair
market value per share immediately prior to the acquisition.
Plan Provisions. The following provisions will also be in effect under the
plan:
. The plan will terminate no later than the last business day of October
2009.
. The board may at any time amend, suspend or discontinue the plan.
However, certain amendments may require stockholder approval.
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<PAGE>
Change of Control Arrangements
A limited number of employees have stock options that will partially
accelerate upon a change of control. Typically, one half of the person's
options will vest upon a change of control.
Limitation of Liability and Indemnification
Our certificate of incorporation eliminates, to the fullest extent permitted
by Delaware law, liability of a director to Viador or our stockholders for
monetary damages for conduct as a director. Although liability for monetary
damages has been eliminated, equitable remedies such as injunctive relief or
rescission remain available. In addition, a director is not relieved of his or
her responsibilities under any other law, including the federal securities
laws.
Our certificate of incorporation requires us to indemnify our directors to
the fullest extent permitted by Delaware law. We have also entered into
indemnification agreements with each of our directors. We believe that the
limitation of liability provisions in our certificate of incorporation and
indemnification agreements may enhance our ability to attract and retain
qualified individuals to serve as directors. For additional discussion of the
limitation of liability provisions in our certificate of incorporation, see
"Description of Capital Stock" beginning on page 58.
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<PAGE>
CERTAIN TRANSACTIONS
Since June 30, 1999, there has not been, nor is there currently proposed,
any transaction or series of similar transactions to which we were or are to be
a party in which the amount involved exceeded or will exceed $60,000 and in
which any director, executive officer, holder of more than 5% of our common
stock or any member of the immediate family of any of the foregoing persons had
or will have a direct or indirect material interest other than (A) compensation
agreements and other arrangements, which are described where required in
"Management" and (B) the transactions described below. We believe each of the
transactions described below was negotiated at arms-length and were on terms as
favorable as those obtainable from disinterested third parties.
Preferred Stock Financings
Since May 23, 1997, we have issued 5,990,385 shares of our Series C
Preferred Stock at a price of $2.434 per share, 6,632,716 shares of our Series
B Preferred Stock at a price of $1.30 per share and 3,703,764 shares of our
Series A Preferred Stock at a price of $1.031 per share in a series of private
financings. We issued these securities pursuant to preferred stock purchase
agreements and an investors' rights agreement on substantially similar terms
except for terms relating to date and price, under which we made standard
representations, warranties, and covenants, and which provided the purchasers
thereunder with registration rights, information rights, and rights of first
refusal, among other provisions standard in venture capital financings. Each
share of our preferred stock will automatically convert into 0.417 shares of
our common stock upon the completion of the offering. The purchasers of our
preferred stock included, among others, the following holders of 5% or more of
our common stock, directors, and entities associated with directors:
<TABLE>
<CAPTION>
Shares of Preferred Stock
Purchased Total Shares
------------------------------ on an Effective
Series As-Converted Price Per
Name A Series B Series C Basis Share
- ---- ------- --------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Stan X. Wang............ 11,737 -- -- 4,895 $2.4744
Ruby McGrath............ 17,606 -- -- 7,342 2.4744
Y. P. Cheng............. 176,056 -- -- 73,416 2.4744
Teddy Kiang & Sylvia Te-
Yi Kiang............... 58,685 -- 246,508 127,164 5.1941
Crosslink Semiconductor,
Inc. (Taiwan)(1)....... 586,854 -- -- 244,719 2.4744
Information Technology
Ventures II, L.P.(2)... -- 4,230,770(3) 1,027,116(3) 2,190,786 3.6516
Standard Foods Taiwan,
Ltd.(4)................ -- 1,185,996 -- 494,561 3.12
</TABLE>
- ----------
(1) Teddy Kiang, a director of Viador, is the investment representative of
Crosslink Semiconductor, Inc. (Taiwan).
(2) Virginia Turezyn, a director of Viador, is a principal member of ITV
Management II, LLC, the general partner of Information Technology Ventures
II, L.P.
(3) Includes shares held by ITV Affiliates Fund II, L.P., an entity affiliated
with Information Technology Ventures II, L.P.
(4) Teddy Kiang, a director of Viador, is the investment representative for
Standard Foods Taiwan, Ltd.
Amended and Restated Investors' Rights Agreement
Under the terms of an investors' rights agreement dated May 21, 1999, among
Viador and the holders of our preferred stock, the investors acquired certain
registration rights with respect to their capital stock of Viador. At any time
after three-months following our initial public offering, holders of more than
40% of the outstanding preferred stock may require us to effect registration
under the Securities Act covering at least 40% of the outstanding Registrable
Securities, as defined in the Investors' Rights Agreement, subject in either
case to the board of directors' right to defer such registration for a period
up to 60 days. However, Viador is obligated to effect only two of those
registrations. In addition, if we propose to issue equity securities under the
53
<PAGE>
Securities Act for our own account in an underwritten public offering, then any
of the investors has a right, subject to quantity limitations determined by the
underwriters, to request that Viador register that investor's Registrable
Securities. All registration expenses incurred in connection with the first two
demand registrations described above and all piggyback registrations will be
borne by Viador. The participating investors will pay for underwriting
discounts and commissions incurred in connection with any those registrations.
We have agreed to indemnify the investors against certain liabilities in
connection with any registration effected pursuant to this investors' rights
agreement, including Securities Act liabilities.
Amended and Restated Right of First Refusal and Co-Sale Agreement
Under the terms of a right of first refusal and co-sale agreement dated May
21, 1999 among Viador and some of its investors, those investors acquired first
refusal and co-sale rights with respect to their shares of preferred stock.
Subject to customary exceptions, in the event that any of our management
members, as defined in the right of first refusal and co-sale agreement, or
major shareholders, as defined in the right of first refusal and co-sale
agreement, proposes to sell shares of common stock, an investor may elect to
participate pro-rata in that sale or purchase the shares being sold on the same
terms and conditions as the seller. These rights will terminate upon completion
of this offering.
Amended and Restated Voting Agreement
Under a voting agreement dated May 21, 1999 among Viador, the common
shareholders, as defined in the voting agreement, and the holders of our
Series A preferred stock, Series B preferred stock and Series C preferred
stock, one of our directors is elected by the holders of the common stock and
the holders of our Series A preferred stock and another of our directors is
elected by the holders of our Series B preferred stock. This agreement shall
terminate upon the completion of this offering.
Certain Business Relationships
Dawn G. Lepore, a director of Viador, also serves as Executive Vice
President and Chief Information Officer and a member of the Management
Committee of the Charles Schwab Corporation. Sales to Schwab accounted for more
than 5% of Viador's gross revenues during fiscal year 1998.
Indemnification Agreements
We have entered into indemnification agreements with each of our directors
and officers containing provisions that may require us to indemnify our
directors and officers against liabilities that may arise as by reason of their
status or service as officers or directors, other than liabilities arising from
willful misconduct of a culpable nature, and to advance their expenses incurred
as a result of any proceeding against them. For additional information
regarding these agreements, see "Management--Executive Compensation and Other
Information--Limitation of Liability and Indemnification" on page 52.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of June 30, 1999
(except as indicated in the footnotes below) with respect to the beneficial
ownership of our common stock by:
. each person known by us to own beneficially more than 5%, in the
aggregate, of the outstanding shares of our common stock,
. the directors and Named Executive Officers of Viador who hold securities
of Viador, and
. all executive officers and directors as a group.
Unless otherwise indicated, the address for each shareholder is c/o Viador
Inc., 167 Second Avenue, San Mateo, CA 94401. Except as indicated by footnote,
we understand that the persons named in the table below have sole voting and
investment power with respect to all shares shown as beneficially owned by
them.
Shares of common stock subject to options, which are currently exercisable
or exercisable within 60 days of June 30, 1999, are deemed outstanding for
computing the percentages of the person holding such options but are not deemed
outstanding for computing the percentages of any other person. The number of
shares reflects the number of shares of common stock in the aggregate assuming
the conversion of the preferred stock. Each share of preferred stock is
currently convertible into one share of common stock. Percentage ownership is
based on 11,803,134 shares of common stock and preferred stock, as converted,
outstanding as of June 30, 1999. For additional information about the ownership
and terms of our stock, see "Description of Capital Stock--Preferred Stock" on
page 58. "Beneficial Ownership of Shares Before the Offering" reflects the
beneficial ownership of the common stock, assuming the conversion of the
preferred stock. "Beneficial Ownership of Shares After the Offering" reflects
the beneficial ownership of common stock, assuming the conversion of the
preferred stock and after giving effect to the Offering.
<TABLE>
<CAPTION>
Beneficial Beneficial
Ownership of Ownership of
Shares Before the Shares After the
Offering Offering
----------------- -----------------
Name of Beneficial Owner Number Percent Number Percent
------------------------ --------- ------- --------- -------
<S> <C> <C> <C> <C>
Entities affiliated with Information
Technology Ventures(1)................... 2,190,786 18.6% 2,190,786
Entities affiliated with Mitsui & Co.,
Ltd.(2).................................. 606,207 5.1% 606,207
Jia-Bao Chu(3)............................ 1,326,838 11.2% 1,326,838
Kin Liu(4)................................ 1,088,928 9.2% 1,088,928
Stan X. Wang(5)........................... 2,132,054 18.1% 2,132,054
Jonathan M. Harding(6).................... 158,334 1.3% 158,334
Raja H. Venkatesh(7)...................... 100,000 * 100,000
Ben C. Connors(8)......................... 530,735 4.5% 530,735
Steven C. Dille(9)........................ 125,001 1.1% 125,001
Paul C. Vilandre(10)...................... 96,222 * 96,222
Teddy Kiang(11)........................... 160,498 1.4% 160,498
Dawn G. Lepore(12)........................ -- -- --
Chong Sup Park(13)........................ 20,834 * 20,834
Virginia Turezyn(14)...................... -- -- --
All directors and executive officers as a
group (ten persons)(15).................. 3,323,678 28.2% 3,323,678
</TABLE>
- ----------
* Less than 1%.
(1) Stock consists of 4,075,585 shares of Series B Preferred Stock and 989,441
shares of Series C Preferred Stock held by Information Technology Ventures
II, L.P. and 155,185 shares of Series B Preferred Stock and 37,675 shares
of Series C Preferred Stock held by ITV Affiliates Fund II, L.P. Ms.
Turezyn, a director of Viador, is a principal member of ITV Management II,
LLC, the general partner of Information Technology Ventures II, L.P. and
ITV Affiliates Fund II, L.P. The general partners of Information
Technology Ventures, Mark Dubovoy, Sam H. Lee and Virginia M. Turezyn,
have voting and dispositive
55
<PAGE>
powers with respect to shares held by Information Technology Ventures II,
L.P. and ITV Affiliates Fund II, L.P. The address for Information
Technology Ventures is 3000 Sand Hill Road, Suite 1-280, Menlo Park,
California 94025.
(2) Stock consists of 290,979 shares of Series A Preferred Stock held by
Mitsui & Co. (USA), Inc., 775,945 shares of Series A Preferred Stock held
by Mitsui & Co., Ltd., 193,986 shares of Series A Preferred Stock held by
Mitsui Comtek Corporation and 193,986 shares of Series A Preferred Stock
held by MVC Global Japan Fund I. The address for Mitsui & Co. (USA), Inc.
is 200 Park Avenue, New York, NY 10166. Kenichi Yamamoto, the General
Manager of the Information Technology Marketing Division of Mitsui & Co.
Ltd., has voting and dispositive powers with respect to that entity's
shares. Yasushi Okazaki, the General Manager of the Electronics and
Information Division of Mitsui & Co., Inc., has voting and dispositive
powers with respect to that entity's shares. Hitoshi Suga, the President
and Chief Executive Officer of MVC Global Corporation, has voting and
dispositive powers with respect to shares held by MVC Global Japan Fund
I. Masaaki Miura, the President of Mitsui Comtek Corporation, has voting
and dispositive powers with respect to shares held by that entity.
(3) Stock consists of 800,094 shares of common stock held directly by Mr.
Chu, of which 54,249 shares are subject to repurchase by Viador, and
526,744 shares of common stock subject to options exercisable within 60
days of June 30, 1999.
(4) Stock consists of 702,680 shares of common stock held directly by Mr.
Liu, of which 51,357 shares are subject to repurchase by Viador, and
386,248 shares of common stock subject to options exercisable within 60
days of June 30, 1999.
(5) Stock consists of 1,221,534 shares of common stock held directly by Mr.
Wang, of which 72,424 shares are subject to repurchase by Viador, 11,737
shares of Series A Preferred Stock held directly by Mr. Wang and 898,783
shares of common stock subject to options exercisable within 60 days of
June 30, 1999.
(6) Stock consists of 158,324 shares of common stock subject to options
exercisable within 60 days of June 30, 1999.
(7) Stock consists of 100,000 shares of common stock subject to options
exercisable within 60 days of June 30, 1999.
(8) Stock consists of 530,735 shares of common stock held directly by Mr.
Connors of which 53,628 shares are subject to repurchase by Viador.
(9) Stock consists of 125,001 shares of common stock subject to options
exercisable within 60 days of June 30, 1999.
(10) Stock consists of 96,222 shares of common stock subject to options
exercisable within 60 days of June 30, 1999, of which 4,972 shares were
exercised by Mr. Vilandre on February 5, 1999 and 2,084 shares were
exercised by Mr Vilandre on June 11, 1999. Of these shares, 4,972 shares
are held directly by Mr. Vilandre and 2,084 shares are held by his wife
and children.
(11) Stock consists of 58,685 shares of Series A Preferred Stock and 246,508
shares of Series C Preferred Stock held directly by Mr. Kiang and his
wife and 33,334 shares of common stock subject to options exercisable
within 60 days of June 30, 1999. Excludes 1,185,996 shares of Series B
Preferred Stock, as converted, and warrants to purchase 46,875 shares of
common stock at an exercise price of $0.72 per share held by Standard
Foods Taiwan, Ltd; 226,854 shares of Series A Preferred Stock, as
converted, held by Crosslink Semiconductor, Inc. (Taiwan); 120,000 shares
of Series A Preferred Stock, as converted, held by Eric S. Chen; 120,000
shares of Series A Preferred Stock, as converted, held by Ju-Liang Chen;
120,000 shares of Series A Preferred Stock held by Paula Chen; 58,685
shares of Series A Preferred Stock and 246,508 shares of Series C
Preferred Stock held by the Chen Living Trust dated 7/22/96; 58,685
shares of Series A Preferred Stock and 246,508 shares of Series C
Preferred Stock held by the Cheng Living Trust dated 8/8/95; 58,685
shares of Series A Preferred Stock, as converted, and 246,508 shares of
Series C Preferred Stock held by Ter-Fung Tsao and 58,685 shares of
Series A
56
<PAGE>
Preferred Stock, as converted, and 246,508 shares of Series C Preferred
Stock held by Wendy Te-Hau Wang, for all of whom Crosslink Technology
Partners LLC holds a power of attorney. Mr. Kiang, a director of Viador,
is a Managing Director of Crosslink Technology Partners LLC and the
investment representative for Standard Foods Taiwan, Ltd. and Crosslink
Semiconductor, Inc. (Taiwan). Mr. Kiang disclaims beneficial ownership of
the shares of preferred and/or common stock held by Crosslink
Semiconductor, Inc. (Taiwan), Standard Foods Taiwan, Ltd., Eric S. Chen,
Ju-Liang Chen, Paula Chen, Chen Living Trust dated 7/22/96, Cheng Living
Trust dated 8/8/95, Ter Fung Tsao and Wendy Te-Hua Wang, except to the
extent of his pecuniary interest therein.
(12) As of June 30, 1999, Ms. Lepore does not own any stock or hold any
options to purchase common stock. At the meeting of our board of
directors held on July 20, 1999, Ms. Lepore was granted options to
purchase 40,000 shares of common stock.
(13) Stock consists of 20,834 shares of common stock subject to options
exercisable within 60 days of June 30, 1999.
(14) Excludes an aggregate of 5,257,886 shares of preferred stock, as
converted, held by Information Technology Ventures II, L.P. and ITV
Affiliates Fund II, L.P. Ms. Turezyn, a director of Viador, is a
principal member of ITV Management II, LLC, the general partner of
Information Technology Ventures II, L.P. and ITV Affiliates Fund II, L.P.
Ms. Turezyn disclaims beneficial ownership of the shares held by
Information Technology Ventures II, L.P. and ITV Affiliates Fund II, L.P.
(15) See footnotes 5 through 13 above. Includes options exercisable for
1,425,450 shares of common stock within 60 days of June 1999 under the
1997 Stock Option/Stock Issuance Plan.
57
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the closing of this offering, the authorized capital stock of Viador
will consist of 100,000,000 shares of common stock, $0.001 par value per share,
and 10,000,000 shares of preferred stock, $0.001 par value per share.
Common Stock
As of June 30, 1999, 4,915,433 shares of our common stock were outstanding
and held of record by 120 stockholders. After this offering,
shares will be outstanding. Concurrently with the completion of this offering,
each outstanding share of our preferred stock will be exchanged for and
converted into one share of our common stock. The following description of
rights assumes this conversion.
Holders of common stock are entitled to receive dividends as may from time
to time be declared by our Board of Directors out of funds legally available
therefor. For a description of our dividend policy, see "Dividend Policy" on
page 17. Holders of common stock are entitled to one vote per share on all
matters on which the holders of common stock are entitled to vote and do not
have any cumulative voting rights. Holders of common stock have no preemptive,
conversion, redemption or sinking fund rights. In the event of a liquidation,
dissolution or winding up of Viador, holders of common stock are entitled to
share equally and ratably in the assets of Viador, if any, remaining after the
payment of all our liabilities and the liquidation preference of any then
outstanding class or series of preferred stock. The outstanding shares of
common stock are, and the shares of common stock offered by us in this offering
when issued will be, fully paid and nonassessable. The rights, preferences and
privileges of holders of common stock are subject to any series of preferred
stock that we may issue in the future, as described below.
Preferred Stock
Our Board of Directors has the authority to issue preferred stock in one or
more series and to fix the number of shares constituting any such series and
the preferences, limitations and relative rights, including dividend rights,
dividend rate, voting rights, terms of redemption, redemption price or prices,
conversion rights and liquidation preferences of the shares constituting any
series, without any further vote or action by our stockholders. The issuance of
preferred stock by our Board of Directors could adversely affect the rights of
holders of common stock.
The potential issuance of preferred stock may have the effect of delaying or
preventing a change in control of Viador, may discourage bids for our common
stock at a premium over the market price of the common stock and may adversely
affect the market price of, and the voting and other rights of the holders of,
common stock. Immediately after this offering there will be no shares of
preferred stock outstanding, and we have no current plans to issue shares of
preferred stock.
Certain Anti-takeover, Limited Liability and Indemnification Provisions
Effect of Delaware Anti-takeover Statute. We are subject to Section 203 of
the Delaware General Corporation Law, as amended, which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder for a period of three years
following the date that such stockholder became an interested stockholder,
unless:
. prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
. upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned
. by persons who are directors and also officers and
58
<PAGE>
. by employee stock plans in which employee participants do not have
the right to determine confidentially whether shares held subject to
the plan will be tendered in a tender or exchange offer; or
. on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines business combinations to include:
. any merger or consolidation involving the corporation or any majority-
owned subsidiary of the corporation and any other person or entity;
. subject to certain exceptions, any sale, transfer, pledge or other
disposition of 10% or more of the assets of the corporation or any
majority-owned subsidiary of the corporation involving the interested
stockholder;
. subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation or any majority-owned subsidiary
of the corporation of any stock of the corporation to the interested
stockholder;
. any transaction involving the corporation or any majority-owned
subsidiary of the corporation that has the effect of increasing the
proportionate share of the stock of any class or series of the
corporation or any majority-owned subsidiary of the corporation
beneficially owned by the interested stockholder; or
. the receipt by the interested stockholder of the benefit of any loans,
advances, guarantees, pledges or other financial benefits provided by or
through the corporation or any majority-owned subsidiary of the
corporation.
In general, Section 203 defines an interested stockholder as any entity or
person beneficially owning 15% or more or the outstanding voting stock of the
corporation and any entity or person affiliated with or controlling or
controlled by such entity or person.
Certificate of Incorporation and Bylaw Provisions. Our certificate of
incorporation and bylaws include provisions that may have the effect of
discouraging, delaying or preventing a change in control of Viador or an
unsolicited acquisition proposal that a stockholder might consider favorable,
including a proposal that might result in the payment of a premium over the
market price for the shares held by stockholders. These provisions are
summarized in the following paragraphs.
Classified Board of Directors. Our certificate of incorporation and bylaws
provide for our board to be divided into three classes of directors serving
staggered, three year terms. The classification of the board has the effect of
requiring at least two annual stockholder meetings, instead of one, to replace
a majority of the members of the Board of Directors. For additional discussion
regarding our classified board, see "Management--Classified Board" on page 45.
Supermajority Voting. Our certificate of incorporation requires the approval
of the holders of at least 66 2/3% of our combined voting power to effect
certain amendments to the certificate of incorporation or to effect any
business combination, as defined in Section 203, relating to us. Our bylaws may
be amended by either a majority of the Board of Directors, or the holders of a
majority of our voting stock, provided that certain amendments approved by
stockholders require the approval of at least 66 2/3% of our combined voting
power.
Authorized but Unissued or Undesignated Capital Stock. Our authorized
capital stock consists of 100,000,000 shares of common stock and 10,000,000
shares of preferred stock. No preferred stock will be designated upon
consummation of this offering. After this offering, we will have outstanding
shares of common stock. The authorized but unissued--and in the
case of preferred stock, undesignated--stock may be issued by the Board of
Directors in one or more transactions. In this regard, our certificate of
incorporation grants the Board of Directors broad power to establish the rights
and preferences of authorized
59
<PAGE>
and unissued preferred stock. The issuance of shares of preferred stock
pursuant to the Board of Director's authority described above could decrease
the amount of earnings and assets available for distribution to holders of
common stock and adversely affect the rights and powers, including voting
rights, of such holders and may have the effect of delaying, deferring or
preventing a change in control of Viador. The Board of Directors does not
currently intend to seek stockholder approval prior to any issuance of
preferred stock, unless otherwise required by law.
Special Meetings of Stockholders. Our bylaws provide that special meetings
of stockholders of Viador may be called only by the Board of Directors, or by
the Chairman of our Board of Directors or our President.
No Stockholder Action by Written Consent. Our certificate of incorporation
and bylaws provide that an action required or permitted to be taken at any
annual or special meeting of the stockholders of Viador may only be taken at a
duly called annual or special meeting of stockholders. This provision prevents
stockholders from initiating or effecting any action by written consent.
Notice Procedures. Our bylaws establish advance notice procedures with
regard to all stockholder proposals to be brought before meetings of
stockholders of Viador, including proposals relating to the nomination of
candidates for election as directors, the removal of directors and amendments
to our certificate of incorporation or bylaws. These procedures provide that
notice of such stockholder proposals must be timely given in writing to the
Secretary of Viador prior to the meeting. Generally, to be timely, notice must
be received by our Secretary not less than 120 days prior to the meeting. The
notice must contain certain information specified in the bylaws.
Other Anti-takeover Provisions. See "Management--Executive Compensation and
Other Information--Employee Benefit Plans" beginning on page 47 for a
discussion of certain provisions of the 1999 Stock Incentive Plan which may
have the effect of discouraging, delaying or preventing a change in control of
Viador or unsolicited acquisition proposals.
Limitation of Director Liability. Our certificate of incorporation limits
the liability of our directors, in their capacity as directors but not in their
capacity as officers, to Viador or our stockholders to the fullest extent
permitted by Delaware law. Specifically, directors of Viador will not be
personally liable for monetary damages for breach of a director's fiduciary
duty as a director, except for liability:
. for any breach of the director's duty of loyalty to Viador 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, which relates
to unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. for any transaction from which the director derived an improper personal
benefit.
Indemnification Arrangements. Our bylaws provide that the directors and
officers of Viador shall be indemnified and provide for the advancement to them
of expenses in connection with actual or threatened proceedings and claims
arising out of their status as such to the fullest extent permitted by the
Delaware General Corporation Law. Prior to consummation of this offering, we
will enter into indemnification agreements with each of our directors and
executives officers that will provide them with rights to indemnification and
expense advancement to the fullest extent permitted under the Delaware General
Corporation Law.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is Boston Equiserve.
60
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been any public market for our common
stock. Future sales of substantial amounts of common stock in the public
market, or the prospect of such sales, could adversely affect prevailing market
prices.
Upon completion of this offering, shares of common stock will be
outstanding. Of these shares, all of the shares sold in this offering will be
freely tradable without restriction under the Securities Act, unless purchased
by an "affiliate" of Viador, as that term is defined in Rule 144. The remaining
shares outstanding after completion of this offering are "restricted
securities" as defined in Rule 144 and may be sold in the public market only if
registered under the Securities Act or if they qualify for an exemption from
registration, including an exemption pursuant to Rule 144.
Holders of approximately 98% our outstanding common stock as of the date
hereof have agreed that, subject to certain exceptions and consents, during the
period beginning from the date of this prospectus, and continuing to and
including the date 180 days after the date of this prospectus, they will not
offer, sell, contract to sell or otherwise dispose of any securities of Viador.
Upon expiration of these agreements, shares will be eligible for
immediate resale in the public market subject to the volume and other
limitations of Rule 144, and shares will be eligible for immediate
resale pursuant to Rule 144(k) without such limitations, unless they are held
by affiliates of Viador. Of such shares, approximately will be
eligible for immediate resale in the public market pursuant to Rule 144 subject
to the volume and manner of sale limitations in Rule 144 and shares
will be eligible for resale without such volume limitations.
In general under Rule 144, a person, including an "affiliate" of Viador, who
has beneficially owned restricted shares for at least one year is entitled to
sell within any three-month period a number of shares that does not exceed the
greater of 1% of the then outstanding shares of common stock, approximately
shares immediately following this offering, or the average weekly
trading volume of the common stock during the four calendar weeks preceding
such sale. Sales under Rule 144 are subject to certain manner of sale
limitations, notice requirements and the availability of current public
information about Viador. Rule 144(k) provides that a person who is not an
"affiliate" of the issuer at any time during the three-months preceding a sale
and who has beneficially owned shares for at least two years is entitled to
sell those shares at any time without compliance with the public information,
volume limitation, manner of sale and notice provisions of Rule 144.
As of June 30, 1999, options to purchase 3,287,063 shares of common stock
were outstanding under the Amended and Restated 1997 Stock Option/Stock
Issuance Plan. We intend to file as soon as practicable following completion of
this offering a registration statement on Form S-8 under the Securities Act
covering shares of common stock reserved for issuance under the 1999 Stock
Incentive Plan. Based on the number of options expected to be outstanding upon
completion of this offering and shares reserved for issuance under the 1999
Stock Incentive Plan, the registration statement would cover shares.
For additional information about our stock options see "Management--Executive
Compensation and Other Information--Employee Benefit Plans" beginning on page
47. The registration statement will become effective immediately upon filing,
whereupon, subject to the satisfaction of applicable exercisability periods,
Rule 144 volume limitations applicable to affiliates and, in certain cases, the
agreements with the underwriters referred to above, shares of Common Stock to
be issued upon exercise of outstanding options granted pursuant to the 1999
Stock Incentive Plan, to the extent that such shares were held by affiliates,
will be available for immediate resale in the open market.
61
<PAGE>
UNDERWRITING
The underwriters of this offering named below, for whom Bear, Stearns & Co.
Inc., CIBC World Markets Corp. and U.S. Bancorp Piper Jaffray Inc. are acting
as representatives, have severally agreed with Viador, subject to the terms and
conditions of the Underwriting Agreement (the form of which has been filed as
an exhibit to the Registration Statement on Form S-1 of which this prospectus
is a part), to purchase from Viador the aggregate number of shares of common
stock set forth opposite their respective names below:
<TABLE>
<CAPTION>
Underwriter Number of Shares
----------- ----------------
<S> <C>
Bear, Stearns & Co. Inc. ...................................
CIBC World Markets Corp. ...................................
U.S. Bancorp Piper Jaffray Inc. ............................
----
Total.....................................................
====
</TABLE>
The nature of the respective obligations of the underwriters is such that
all of the shares of common stock (other than shares of common stock covered by
the over-allotment option described below) must be purchased if any are
purchased. Those obligations are subject, however, to various conditions,
including the approval of certain matters by counsel. We have agreed to
indemnify the underwriters against certain liabilities, including liabilities
under the Securities Act, and, where such indemnification is unavailable, to
contribute to payments that the underwriters may be required to make in respect
of such liabilities.
We have been advised that the underwriters propose to offer the shares of
common stock directly to the public initially at the public offering price set
forth on the cover page of this prospectus and to certain selected dealers at
such price less a concession not to exceed $ per share, that the
underwriters may allow, and such selected dealers may reallow, a concession to
certain other dealers not to exceed $ per share and that after the
commencement of this offering, the public offering price and the concessions
may be changed.
We have granted to the underwriters an option to purchase in the aggregate
up to additional shares of common stock to be sold in this
offering solely to cover over-allotments, if any. The option may be exercised
in whole or in part at any time within 30 days after the date of this
prospectus. To the extent the option is exercised, the underwriters will be
severally committed, subject to certain conditions, including the approval of
certain matters by counsel, to purchase the additional shares of common stock
in proportion to their respective purchase commitments as indicated in the
preceding table.
The underwriters have reserved for sale at the initial public offering price
up to 5% of the number of shares of common stock offered hereby for sale to
certain directors, officers, other employees, business affiliates and related
persons of Viador who have expressed an interest in purchasing shares. The
number of shares available for sale to the general public will be reduced to
the extent any reserved shares are purchased. Any reserved shares not so
purchased will be offered by the underwriters on the same basis as the other
shares offered hereby.
Viador and our executive officers, directors and our current stockholders,
holding approximately 98% of our common stock, have agreed that, subject to
certain limited exceptions, for a period of 180 days after the date of this
prospectus, without the prior written consent of Bear, Stearns & Co. Inc., they
will not, directly or indirectly, issue, sell, offer or agree to sell or
otherwise dispose of any shares of common stock (or securities convertible
into, exchangeable for or evidencing the right to purchase shares of common
stock.)
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<PAGE>
Prior to this offering, there has been no public market for the common
stock. Consequently, the initial public offering price will be determined
through negotiations among Viador and the representatives of the underwriters.
Among the factors considered in making such determination were our financial
and operating history and condition, market valuations of other companies
engaged in activities similar to ours, our prospects and prospects for the
industry in which we do business in general, our management, prevailing equity
market conditions and the demand for securities considered comparable to those
of Viador.
In order to facilitate this offering, certain persons participating in this
offering may engage in transactions that stabilize, maintain or otherwise
affect the price of the common stock during and after this offering.
Specifically, the underwriters may over-allot or otherwise create a short
position in the common stock for their own account by selling more shares of
common stock, than have been sold to them by Viador. The underwriters may elect
to cover any such short position by purchasing shares of common stock in the
open market or by exercising the over-allotment option granted to the
underwriters. In addition, the underwriters may stabilize or maintain the price
of the common stock by bidding for or purchasing shares of common stock in the
open market and may impose penalty bids, under which selling concessions
allowed to syndicate members or other broker-dealers participating in this
offering are reclaimed if shares of common stock previously distributed in this
offering are repurchased in connection with stabilization transactions or
otherwise. The effect of these transactions may be to stabilize or maintain the
market price of the common stock at a level above that which might otherwise
prevail in the open market. The imposition of a penalty bid may also affect the
price of the common stock to the extent that it discourages resales thereof. No
representation is made as to the magnitude or effect of any such stabilization
or other transactions. Such transactions may be effected on the Nasdaq National
Market or otherwise and, if commenced, may be discontinued at any time.
63
<PAGE>
LEGAL MATTERS
The validity of the issuance of the common stock offered in this offering
will be passed upon for us by Brobeck, Phleger & Harrison LLP, Palo Alto,
California. Brobeck, Phleger & Harrison LLP and certain attorneys currently
affiliated with Brobeck, Phleger & Harrison LLP currently hold an aggregate of
86,442 shares of our capital stock and a warrant to purchase an additional
12,500 shares of our capital stock. Certain legal matters in connection with
this offering will be passed upon for the underwriters by Latham & Watkins, San
Francisco, California.
EXPERTS
The Financial Statements and Schedule of Viador as of December 31, 1997 and
1998 and for each of the years in the three-year period ended December 31,
1998, have been included herein and in the registration statement in reliance
upon the report of KPMG LLP, independent auditors, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
Viador has filed with the Securities and Exchange Commission, Washington,
D.C. 20549, a Registration Statement on Form S-1 under the Securities Act with
respect to the common stock offered in this offering. This prospectus is
materially complete, but omits certain information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to Viador and the common stock offered in this
offering, reference is made to such Registration Statement, exhibits and
schedules. For statements contained in this prospectus which refer to the
contents of any contract or other document reference is made to the copy of
such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. After consummation of this offering we will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended,
and in accordance therewith, will be required to file annual and quarterly
reports, proxy statements and other information with the Commission. The
Registration Statement, including the exhibits and schedules filed therewith,
as well as such reports and other information filed by us may be inspected
without charge at the public reference facilities maintained by the Securities
and Exchange Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Securities and Exchange Commission
located at Seven World Trade Center, Suite 1300, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials may be obtained from the Public Reference Section of
the Securities and Exchange Commission, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates and from the Commission's Internet
Web site at http://www.sec.gov.
64
<PAGE>
VIADOR INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Form of Independent Auditors' Report..................................... F-2
Balance Sheets as of December 31, 1997 and 1998 and June 30, 1999
(unaudited)............................................................. F-3
Statements of Operations for the years ended December 31, 1996, 1997, and
1998, and for the six months ended June 30, 1998 and 1999 (unaudited)... F-4
Statements of Stockholders' Equity (Deficit) for the years ended December
31, 1996, 1997 and 1998, and for the six months ended June 30, 1999
(unaudited)............................................................. F-5
Statements of Cash Flows for the years ended December 31, 1996, 1997, and
1998, and for the six months ended June 30, 1998 and 1999 (unaudited)... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
FORM OF INDEPENDENT AUDITORS' REPORT
When the events referred to in Note 8(c) to the Financial Statements have
been consummated, we will be in a position to render the following report.
/s/ KPMG LLP
The Board of Directors
Viador Inc.:
We have audited the accompanying balance sheets of Viador Inc. (the
Company), as of December 31, 1997 and 1998, and the related statements of
operations, stockholders' equity (deficit), and cash flows for each of the
years in the three-year period ended December 31, 1998. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Viador Inc., as of December
31, 1997 and 1998, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
Mountain View, California
June 11, 1999, except as to note 8,
which is as of July 20, 1999
F-2
<PAGE>
VIADOR INC.
BALANCE SHEETS
(In thousands, except share data)
<TABLE>
<CAPTION>
December 31, June 30, 1999
---------------- -------------------
1997 1998 Actual Pro Forma
------- ------- -------- ---------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............. $ 1,029 $ 4,181 $ 14,259 $
Accounts receivable, net of allowance
of $50,000, $53,000 and $90,000 in
fiscal 1997, 1998 and June 30, 1999... 1,473 2,404 3,085
Other current assets................... 9 -- 410
------- ------- -------- ----
Total current assets................. 2,511 6,585 17,754
Property and equipment, net.............. 341 577 917
Other assets............................. 66 23 198
------- ------- -------- ----
$ 2,918 $ 7,185 $ 18,869 $
======= ======= ======== ====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable....................... $ 222 $ 542 $ 686 $
Accrued liabilities.................... 525 565 1,779
Deferred revenue....................... 2,081 2,707 3,120
------- ------- -------- ----
Total liabilities.................... 2,828 3,814 5,585
------- ------- -------- ----
Commitments
Stockholders' equity:
Convertible preferred stock, $0.001 par
value; actual--10,000,000, 12,500,000,
and 25,000,000 shares authorized as of
December 31, 1997 and 1998, and June
30, 1999, respectively; 3,703,764,
10,336,478, and 16,326,863 shares
issued and outstanding as of December
31, 1997 and 1998, and June 30, 1999,
respectively; aggregate liquidation
preference of $3,819, $12,441, and
$27,022 as of December 31, 1997 and
1998, and June 30, 1999, respectively;
pro forma-- shares authorized; no
shares issued and outstanding......... 4 10 16 --
Common stock, $0.001 par value;
actual--16,666,667, 16,666,667, and
20,833,333 shares authorized as of
December 31, 1997 and 1998, and June
30,1999 respectively; 4,612,512,
4,664,589, and 4,915,433 shares issued
and outstanding as of December 31,
1997 and 1998 and June 30, 1999,
respectively; pro forma-- shares
authorized; shares issued and
outstanding........................... 11 11 12
Additional paid-in capital............. 3,679 14,209 30,257
Deferred stock-based compensation...... -- (1,148) (2,029)
Treasury stock......................... -- (34) (34)
Notes receivable from stockholders..... (138) -- -- --
Accumulated deficit.................... (3,466) (9,677) (14,938)
------- ------- -------- ----
Total stockholders' equity........... 90 3,371 13,284
------- ------- -------- ----
$ 2,918 $ 7,185 $ 18,869 $
======= ======= ======== ====
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
VIADOR INC.
STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
--------------------------- ------------------
1996 1997 1998 1998 1999
-------- -------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenue:
License.................... $ 56 $ 839 $ 2,283 $ 1,142 $ 2,131
Service.................... 941 743 1,542 612 1,159
------- -------- -------- -------- --------
Total revenue............ 997 1,582 3,825 1,754 3,290
Cost of revenue.............. 314 903 1,387 640 874
------- -------- -------- -------- --------
Gross profit............. 683 679 2,438 1,114 2,416
------- -------- -------- -------- --------
Operating expenses:
Research and development... 364 1,351 2,481 1,107 1,871
Sales and marketing........ 125 1,802 4,295 1,806 4,397
General and
administrative............ 358 936 1,365 374 996
Amortization of stock-based
compensation.............. -- -- 445 94 529
------- -------- -------- -------- --------
Total operating
expenses................ 847 4,089 8,586 3,381 7,793
------- -------- -------- -------- --------
Operating loss........... (164) (3,410) (6,148) (2,267) (5,377)
Interest income.............. 10 68 134 32 116
Interest expense............. -- (6) (197) (34) --
------- -------- -------- -------- --------
Net loss................. $ (154) $(3,348) $(6,211) $(2,269) $(5,261)
======= ======== ======== ======== ========
Basic and diluted net loss
per share................... $(0.08) $ (1.34) $ (1.82) $ (0.71) $ (1.28)
======= ======== ======== ======== ========
Shares used in computing
basic and diluted net loss
per share................... 1,993 2,495 3,416 3,177 4,126
======= ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
VIADOR INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share data)
<TABLE>
<CAPTION>
Convertible Notes Total
preferred stock Common stock Additional Deferred receivable stockholders'
----------------- ----------------- paid-in stock-based Treasury from Accumulated equity
Shares Amount Shares Amount capital compensation stock stockholders deficit (deficit)
---------- ------ --------- ------ ---------- ------------ -------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balances as of
December 31,
1995............ -- $ -- 1,843,752 $ 5 $ 45 $ -- $ -- $ -- $ 36 $ 86
Issuance of
common stock to
founders for
cash........... -- -- 187,504 -- 5 -- -- -- -- 5
Issuance of
common stock to
founders for
notes.......... -- -- 2,560,422 6 117 -- -- (123) -- --
Interest on
notes
receivable from
stockholders... (4) (4)
Net loss........ -- -- -- -- -- -- -- -- (154) (154)
---------- ---- --------- ---- ------- -------- ----- ---- --------- --------
Balances as of
December 31,
1996............ -- -- 4,591,678 11 167 -- -- (127) (118) (67)
Stock options
exercised...... -- -- 20,834 -- 1 -- -- -- -- 1
Issuance of
Series A
convertible
preferred
stock.......... 3,703,764 4 -- -- 3,511 -- -- -- -- 3,515
Interest on
notes
receivable from
stockholders... -- -- -- -- -- -- -- (11) -- (11)
Net loss........ -- -- -- -- -- -- -- -- (3,348) (3,348)
---------- ---- --------- ---- ------- -------- ----- ---- --------- --------
Balances as of
December 31,
1997............ 3,703,764 4 4,612,512 11 3,679 -- -- (138) (3,466) 90
Stock options
exercised...... -- -- 78,996 -- 8 -- -- -- -- 8
Repurchase of
stock in
settlement of
notes
receivable from
founders....... -- -- (26,919) (1) -- (34) 35 -- --
Cancellation of
stockholders
notes.......... -- -- -- -- -- -- -- 103 -- 103
Issuance of
Series B
convertible
preferred stock
net of $92
issuance
costs.......... 6,632,714 6 -- -- 8,524 -- -- -- -- 8,530
Deferred stock-
based
compensation
related to
stock option
grants......... -- -- -- -- 1,593 (1,593) -- -- -- --
Amortization of
stock-based
compensation... -- -- -- -- -- 445 -- -- -- 445
Warrants for
services
performed...... -- -- -- 88 -- -- -- -- 88
Options issued
to
nonemployees... -- -- -- 188 -- -- -- -- 188
Warrants issued
in connection
with bridge
loan........... -- -- -- 130 -- -- -- -- 130
Net loss........ -- -- -- -- -- -- -- -- (6,211) (6,211)
---------- ---- --------- ---- ------- -------- ----- ---- --------- --------
Balances as of
December 31,
1998............ 10,336,478 10 4,664,589 11 14,209 (1,148) (34) -- (9,677) 3,371
Stock options
exercised
(unaudited).... -- -- 250,844 1 29 -- -- -- -- 30
Issuance of
Series C
convertible
preferred stock
net of $38
issuance costs
(unaudited).... 5,990,385 6 -- -- 14,537 -- -- -- -- 14,543
Warrants for
services
performed
(unaudited).... -- -- 37 -- -- -- -- 37
Options issued
to nonemployees
(unaudited).... -- -- -- 35 -- -- -- -- 35
Deferred stock-
based
compensation
related to
stock option
grants
(unaudited).... -- -- -- 1,410 (1,410) -- -- -- --
Amortization of
stock-based
compensation
(unaudited).... -- -- -- -- -- 529 -- -- -- 529
Net loss
(unaudited).... -- -- -- -- (5,261) (5,261)
---------- ---- --------- ---- ------- -------- ----- ---- --------- --------
Balances as of
June 30, 1999
(unaudited)..... 16,326,863 $ 16 4,915,433 $ 12 $30,257 $ (2,029) $ (34) $ -- $ (14,938) $ 13,284
========== ==== ========= ==== ======= ======== ===== ==== ========= ========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
VIADOR INC.
STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Six Months ended
Years Ended December 31, June 30,
-------------------------- ------------------
1996 1997 1998 1998 1999
---------------- -------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating ac-
tivities:
Net loss...................... $ (154) $(3,348) $(6,211) $(2,269) $(5,261)
Adjustments to reconcile net
loss to net cash provided by
(used in) operating
activities:
Cancellation of stockholder
notes...................... -- -- 103 -- --
Issuance of options for
services performed......... -- -- 188 -- 35
Interest on bridge loan..... -- -- 63 -- --
Interest on note receivable
from stockholders.......... 3 11 -- -- --
Warrants issued for services
performed.................. -- -- 88 -- 37
Amortization of discount on
bridge loan................ -- -- 130 -- --
Amortization of deferred
stock-based compensation... -- -- 445 93 529
Software sold in exchange
for property and
equipment.................. -- (22) -- -- --
Depreciation and
amortization............... 18 89 248 84 248
Changes in operating assets
and liabilities:
Accounts receivable........ -- (1,342) (931) 158 (681)
Other assets............... (69) (4) 52 19 (585)
Accounts payable and
accrued liabilities....... 440 261 360 75 1,358
Deferred revenue........... 11 2,020 626 (264) 413
------ -------- -------- -------- --------
Net cash provided by (used
in) operating activities.. 249 (2,335) (4,839) (2,104) (3,907)
------ -------- -------- -------- --------
Cash flows used in investing
activities--acquisition of
property and equipment........ (106) (342) (484) (218) (588)
------ -------- -------- -------- --------
Cash flows from financing
activities:
Proceeds from issuance of
common stock................. 5 1 8 3 30
Proceeds from issuance of
preferred stock, net......... -- 3,515 6,467 -- 14,543
Loan from stockholder......... 100 -- -- -- --
Proceeds from bridge loan..... -- -- 1,870 1,870 --
Proceeds from issuance of
warrants..................... -- -- 130 130 --
Borrowing under line of
credit....................... -- 100 500 500 --
Repayment under line of
credit....................... -- (100) (500) (300) --
Repayment of loan from
stockholder.................. -- (100) -- -- --
------ -------- -------- -------- --------
Net cash provided by
financing activities...... 105 3,416 8,475 2,203 14,573
------ -------- -------- -------- --------
Net increase (decrease) in cash
and cash equivalents.......... 248 739 3,152 (119) 10,078
Cash and cash equivalents,
beginning of period........... 42 290 1,029 1,029 4,181
------ -------- -------- -------- --------
Cash and cash equivalents, end
of period..................... $ 290 $ 1,029 $ 4,181 $ 910 $14,259
====== ======== ======== ======== ========
Supplemental disclosures of
cash flow information:
Cash paid during period for
interest..................... $ -- $ 6 $ 22 $ 9 $ --
====== ======== ======== ======== ========
Noncash financing activities:
Common stock issued to
founders for note
receivable.................. $ 123 $ -- $ -- $ -- $ --
====== ======== ======== ======== ========
Repurchase of common stock in
settlement of notes
receivable from
stockholders................ $ -- $ -- $ 35 $ -- $ --
====== ======== ======== ======== ========
Preferred stock issued upon
conversion of bridge loan
and accrued interest........ $ -- $ -- $ 2,063 $ -- $ --
====== ======== ======== ======== ========
Deferred stock-based
compensation................ $ -- $ -- $ 1,593 $ 1,114 $ 1,410
====== ======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
(1) Business of the Company
Viador Inc. (the Company) was incorporated as Infospace Inc. in California
in December 1995. In January 1999, the Company changed its name to Viador Inc.
The Company develops web-based products designed to search, analyze and deliver
relevant information to users within and outside an enterprise.
(2) Summary of Significant Accounting Policies
(a) 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 expenses during the reporting period.
Actual results could differ from those estimates.
(b) Revenue Recognition
The Company has adopted Statement of Position (SOP) 97-2, Software Revenue
Recognition, as amended by SOP 98-4. SOP 97-2 as amended, generally requires
revenue earned on software arrangements involving multiple elements to be
allocated to each element based on the relative fair value of the elements. The
adoption of SOP 97-2, as amended, did not have a significant impact on the
Company's accounting for revenues.
In December 1998, the American Institute of Certified Public Accountants'
(AICPA) issued SOP 98-9, Software Revenue Recognition, with Respect to Certain
Arrangements, which requires recognition of revenue using the "residual method"
in a multiple element arrangement when fair value does not exist for one or
more of the delivered elements in the arrangement. Under the "residual method",
the total fair value of the undelivered elements is deferred and subsequently
recognized in accordance with SOP 97-2. The Company does not expect a material
change to its accounting for revenues as a result of the provisions of SOP 98-
9.
The Company licenses its products to end user customers, original equipment
manufacturers (OEM) and value added resellers (VAR). Software license revenue
from sales to end users is generally recognized upon receipt of a signed
contract or purchase order and delivery of the software, provided the related
fee is fixed and determinable and collectibility of the fee is probable. The
entire fee related to arrangements that require the Company to deliver
specified additional features or upgrades is deferred until delivery of the
feature and/or upgrade has occurred, because the Company does not have
sufficient vendor-specific objective evidence of fair value to allocate revenue
to the various elements in such arrangements. All of the contract software
revenue related to arrangements involving consulting services that are
essential to the functionality of the software at the customer site is deferred
until the consulting services have been completed and customer acceptance has
been obtained using the completed contract method. Contract software revenue
related to arrangements to maintain the compatibility of the company's software
products with the software products or platforms of the customer or other
vendor is recognized ratably over the term of the arrangement. License revenue
from OEM and VAR arrangements in which the Company earns a royalty based on a
specified percentage of OEM and VAR sales to end users incorporating the
Company's software is recognized upon delivery to the end user. Nonrefundable
prepaid royalty fees received by the Company from OEM and VAR customers are
deferred and recognized as the end user sales are reported to the Company by
the OEM or VAR, unless the Company has an arrangement to maintain the
compatability of its software products with the software products or platforms
of the OEM or VAR. In that case, due to the Company's software compatibility
obligation, the prepaid royalty fees are recognized as the end user sales are
reported to the Company by the OEM or VAR but limited to no
F-7
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
more than the fee that would be recognizable on a cumulative basis if the
entire fee was being recognized ratably over the term of the arrangement.
Service revenue consists of fees from professional services and from
maintenance and support. Professional services include integration of software,
application development, training and software installation. We bill
professional services fees either on a time and materials basis or on a fixed-
price schedule. We recognize professional services fees generally as the
services are performed except as described above where such services are
essential to the functionality of software sold as part of the arrangement. Our
clients typically purchase maintenance agreements annually, and we price
maintenance agreements based on a percentage of the product license fee. We
recognize revenue from maintenance and support agreements ratably over the term
of the agreement, which is typically one year.
Cost of service revenue includes salaries and related expenses for
consulting services, customer support, implementation and training services
organizations, costs of contracting with third parties contracted to provide
consulting services to customers. Cost of license revenue includes royalties
due to third parties for integrated technology, the cost of manuals and product
documentation, production media used to deliver our products and shipping
costs, including the costs associated with the electronic transmission of
software to new customers and an allocation of our facilities, communications
and depreciation expenses. Costs of license revenues have not been significant
to date.
(c) Initial Public Offering and Unaudited Pro Forma Balance Sheet
In May 1999, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission ("SEC") that would permit
the Company to sell shares of the Company's common stock in connection with a
proposed initial public offering ("IPO"). Following the closing of the
Company's IPO, the number of authorized shares of convertible preferred stock
and common stock will be and , respectively. If the offering is
consummated under the terms presently anticipated, all the then outstanding
shares of the Company's convertible preferred stock will automatically convert
into 0.417 shares of common stock upon the closing of the proposed IPO. The
conversion of all of the convertible preferred stock has been reflected in the
accompanying unaudited pro forma consolidated balance sheet as if it had
occurred on June 30, 1999.
(d) Cash and Cash Equivalents
Cash and cash equivalents consists of cash and highly liquid investments
such as money market funds purchased with remaining maturities of three months
or less. The Company is exposed to credit risk in the event of default by the
financial institutions or the issuers of these investments to the extent of the
amounts recorded on the balance sheet.
(e) Financial Instruments and Concentration of Credit Risk
The carrying value of the Company's financial instruments, including cash
and cash equivalents and accounts receivable approximates fair market value.
Financial instruments that subject the Company to concentrations of credit risk
consist primarily of cash and cash equivalents and trade accounts receivable.
The Company sells its products and services primarily to established
customers. Credit risk is concentrated in North America and Asia. The Company
performs ongoing credit evaluations of its customer's financial condition and,
generally, requires no collateral from its customers.
F-8
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
(f) Property and Equipment
Property and equipment are recorded at cost less accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method
over the estimated useful lives of the respective assets generally three to
five years. Leasehold improvements are amortized on a straight line basis over
the shorter of the estimated useful lives of the assets or the lease term.
(g) Software Development Costs
Development costs incurred in the research and development of software
products are expensed as incurred until technological feasibility in the form
of a working model has been established. As of June 30, 1999, technological
feasibility was established concurrent with the general release of the software
and therefore, no costs have been capitalized.
(h) Impairment of Long-Lived Assets
The Company evaluates its long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability of assets to be held and used is measured by
a comparison of the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset. If such assets are considered to
be impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount of the
assets or fair value less costs to sell.
(i) Income Taxes
The Company utilizes the asset and liability method of accounting for income
taxes. Deferred tax assets and liabilities are determined based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amounts
expected to be recovered.
(j) Defined Contribution Plan
The Company has a defined contribution retirement plan under Section 401(k)
of the Internal Revenue Code which covers substantially all employees. Eligible
employees may contribute amounts to the plan, via payroll withholding, subject
to certain limitations. Under the 401(k) plan, employees may elect to reduce
their current compensation by up to the statutorily prescribed annual limit and
to have the amount of such reduction contributed to the 401(k) plan. The 401(k)
plan permits, but does not require, additional matching contributions to the
401(k) plan by the Company on behalf of all participants in the 401(k) plan. To
date, the Company has not made any matching contributions to the 401(k) plan.
(k) Stock-Based Compensation
The Company uses the intrinsic-value method to account for all of its
employee stock-based compensation plans. Expense associated with stock-based
compensation is being amortized on an accelerated basis over the vesting period
of the individual award consistent with the method described in Financial
Accounting Standards Board (FASB) Interpretation No. 28.
F-9
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
(l) Advertising Expense
The cost of advertising is generally expensed as incurred. Such costs are
included in selling and marketing expense and totalled approximately $10,000,
$114,000, $273,000, $132,000, and $400,000, for the years ended December 31,
1996, 1997 and 1998, and for the six months ended June 30, 1998 and 1999,
respectively.
(m) Comprehensive Income
The Company has no material components of other comprehensive income (loss)
for all periods presented.
(n) Unaudited Interim Financial Statements
The accompanying unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information. In the opinion of management, the accompanying
unaudited financial statements have been prepared on the same basis as the
audited financial statements and include all adjustments, consisting only of
normal recurring adjustments, for the fair statement of the Company's
financial condition as of June 30, 1999 and its results of operations and cash
flows for the six months ended June 30, 1998 and 1999.
(o) Net Loss Per Share
Basic net loss per share is computed using the weighted-average number of
outstanding shares of common stock excluding shares of restricted stock
subject to repurchase summarized below. Diluted net loss per share is computed
using the weighted-average number of shares of common stock outstanding
excluding shares of restricted stock subject to repurchase and, when dilutive,
potential common shares from restricted stock options and warrants to purchase
common stock using the treasury stock method and from convertible securities
using the "as if converted" basis. The following potential common shares have
been excluded from the computation of diluted net loss per share for all
periods presented because the effect would have been antidilutive (in
thousands):
<TABLE>
<CAPTION>
Six Months
Year Ended Ended June
December 31, 30,
----------------- -----------
1996 1997 1998 1998 1999
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Shares issuable under stock options............. 2,365 2,823 3,045 3,315 3,287
Shares of restricted stock subject to
repurchase..................................... 2,560 1,636 765 1,209 348
Shares issuable pursuant to warrants to purchase
common and convertible preferred stock......... -- -- 90 63 102
Shares of convertible preferred stock on an "as
if converted" basis............................ -- 1,545 4,310 1,545 6,808
</TABLE>
The weighted-average exercise price of stock options was $0.05, $0.05 and
$0.12 for the years ended December 31, 1996, 1997, and 1998 and $0.10 and
$0.74 for the six months ended June 30, 1998 and 1999, respectively. The
weighted-average purchase price of restricted stock was $0.02 for all periods
presented. The weighted-average exercise price of the warrants was $0.70,
$0.72, and $0.89 for the year ended December 31, 1998 and for the six months
ended June 30, 1998 and 1999.
F-10
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
(q) Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No.
133 establishes accounting and reporting standards for derivative financial
instruments and hedging activities related to those instruments, as well as
other hedging activities. Because the Company does not currently hold any
derivative instruments and does not engage in hedging activities, the Company
expects that the adoption of SFAS No. 133 will not have a material impact on
its financial position, results of operations, or cash flows. The Company will
be required to adopt SFAS No. 133 in fiscal 2001.
(3) Property and Equipment
A summary of property and equipment consisted of the following (in
thousands):
<TABLE>
<CAPTION>
December 31,
------------- June 30,
1997 1998 1999
------ ------ --------
<S> <C> <C> <C>
Computers and software............................... $ 387 $ 608 $1,046
Furniture and fixtures............................... 61 120 260
Leasehold improvements............................... -- 204 214
------ ------ ------
448 932 1,520
Less accumulated depreciation and amortization....... 107 355 603
------ ------ ------
$ 341 $ 577 $ 959
====== ====== ======
</TABLE>
(4) Stockholders' Equity
(a) Convertible Preferred Stock
Convertible preferred stock outstanding as of June 30, 1999 is as follows
(in thousands):
<TABLE>
<CAPTION>
Shares Issued and
Designated Outstanding
---------- -----------
<S> <C> <C>
Series A............................................ 3,704 3,704
Series B............................................ 8,000 6,633
Series C............................................ 6,000 5,990
------ ------
17,704 16,327
====== ======
</TABLE>
The rights, preferences, privileges, and restrictions of Series A and B
convertible preferred stock are as follows:
. Each share of Series A and B convertible preferred stock is convertible
at the option of the holder, at any time after the date of issuance,
into 0.417 shares of common stock, subject to adjustment for certain
dilutive events. Each share has voting rights equal to the common stock
on an "as-if-converted" basis.
. Conversion into common stock is automatic upon the closing of a public
offering of the Company's common stock at a purchase price of not less
than $7.42 and $5.00 per share and at an aggregate offering price of not
less than $7,500,000 and $15,000,000 for Series A and B convertible
preferred stock, respectively.
F-11
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
. Series A and B convertible preferred stockholders are entitled to
noncumulative dividends of $0.10 and $0.13 per share per annum,
respectively, when and if declared by the Company's Board of Directors.
As of June 30, 1999, no dividends have been declared.
. Each share of Series A and B convertible preferred stock has a
liquidation preference of $1.031 and $1.30 per share, respectively, plus
any declared but unpaid dividends over holders of common stock.
In the event of liquidation of the Company, after payment has been made
to the holders of Series A and B convertible preferred stock of the full
preferential amounts, any remaining assets would be distributed ratably
amongst the common and convertible preferred stockholders in proportion
to their common ownership on an "as if converted" basis up to a maximum
of three times the initial preferred investment. Thereafter common
shareholders equally divide the remaining assets.
In April 1998, the Company issued $2,000,000 in convertible bridge notes,
bearing 9% interest, payable to certain preferred stockholders. The full amount
of the notes plus accrued interest payable of $63,000 was converted into
2,350,559 shares of Series B preferred stock in August 1998. In conjunction
with the issuance of the convertible notes, the Company issued warrants to
purchase 26,042 common stock at an exercise price of $0.72 per share. The
$130,000 fair value assigned to the warrants and related discount on the notes
was determined using the Black-Scholes option pricing model using the following
assumptions: no dividends; contractual life of 5 years; risk-free interest rate
of 6.9%; and expected volatility of 65%. The discount on the notes payable was
amortized to interest expense over the period the notes were outstanding. The
warrants expire in April 2003 or upon the closing of an IPO, whichever occurs
first.
On May 14, 1999, the Company issued 5,990,385 shares of Series C convertible
preferred stock for $2.434 per share resulting in gross proceeds to the Company
of approximately $14,581,000. The rights, preferences, and privileges of the
holders of Series C preferred stock are the same as the holders of Series A and
B convertible preferred stock discussed above, except that the dividend rate is
$0.15 per share, and the liquidation preference is $2.434 per share. The Series
C preferred stock will automatically convert into common stock upon completion
of the offering described in this prospectus.
(b) Stock Plan
The Company has reserved 4,047,326 shares of common stock for issuance under
its 1997 stock option plan (the Plan). The Plan provides for the issuance of
stock purchase rights, incentive stock options, or nonstatutory stock options.
The stock purchase rights are subject to a restricted stock purchase
agreement whereby the Company has the right to repurchase the stock upon the
voluntary or involuntary termination of the purchaser's employment with the
Company at the original issuance cost. The Company's repurchase right lapses
generally over a three year period. Through June 30, 1999, the Company has
issued 2,560,417 shares under restricted stock purchase agreements of which
347,695 are subject to repurchase at a weighted average price of $0.05 per
share. These restricted shares were issued to officers of the Company for full
recourse promissory notes with an interest rate of 9% and a term of three
years.
The incentive stock options under the Plan can be exercised at a price of at
least 85% of the stock's fair market value on the date of grant for employees
owning less than 10% of the voting power of all classes of stock, and at least
110% of the fair market value on the date of grant for employees owning more
than 10% of the voting power of all classes of stock.
F-12
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Under the Plan, options generally expire in 10 years. However, the term of
the options may be limited to 5 years if the optionee owns stock representing
more than 10% of the voting power of all classes of stock. Vesting periods are
determined by the Company's Board of Directors and generally provide for
shares to vest ratably over a 3 to 4 year period.
In August 1998, the Company repurchased 26,920 shares of common stock at
prices ranging from $.113 to $1.44 per share in settlement of $35,000 notes
receivable from two stockholders and forgave notes receivable from five other
stockholders totaling $103,000 for the return of 181,414 unvested stock
options. The Company recorded a $103,000 compensation charge for the
forgiveness of the notes.
The Company issued options to purchase 94,783 shares of common stock at
exercise prices ranging from $0.05 to $0.24 to non-employees for services
performed. The fair value of the options at the vesting date was determined to
be $188,000 using the Black-Scholes option pricing model using the following
assumptions: no dividends; contractual life of 10 years; risk-free interest
rate of 6.9%; and expected volatility of 65%. The fair value of the options
was charged to expense in 1998 as the related services were performed.
In the first six months of 1999, the Company issued options to purchase
9,358 shares of common stock at exercise prices ranging from $0.62 to $5.28 to
non-employees for services performed. The fair value of the options at the
vesting date was determined to be $35,000 using the Black-Scholes option
pricing model using the following assumptions: no dividends; contractual life
of 10 years; risk-free interest rate of 5.6%; and expected volatility of 65%.
The fair value of the options was charged to expense in 1999 as the related
services were performed.
As of December 31, 1998, there were 396,481 additional stock options
available for grant under the Plan.
(c) Warrants
In 1998, the Company issued warrants to purchase 12,500 shares of common
stock at an exercise price of $0.72 per share in exchange for services. These
warrants expire upon the earlier of August 2003, or upon an IPO of the
Company's common stock. The $39,000 fair value of the warrants was determined
using the Black-Scholes option pricing model, using the following assumptions:
no dividends; contractual life of 5 years; risk-free interest rate of 6.5%;
and expected volatility of 65%. The fair value of the warrants was charged to
expense in 1998 as the related services were performed.
In 1998, the Company issued warrants to purchase 14,760 shares of common
stock at prices ranging from $0.24 to $0.62 per share in exchange for
services. These warrants expire upon the earlier of five years from the grant
date, or upon an IPO of the Company's common stock. The $49,000 fair value of
the warrants was determined using the Black-Scholes option pricing model using
the following assumptions: no dividends; contractual life of 5 years; risk-
free interest rate of 6.5%; and expected volatility of 65%. The fair value of
the warrants was charged to expense in 1998 as the related services were
performed.
In May 1999, the Company issued warrants to purchase 9,615 shares of Series
C preferred stock at a price of $2.434 per share in exchange for services.
These warrants expire upon the earlier of May 2003, or upon an IPO of the
Company's common stock. The $15,000 fair value of the warrants was determined
using the Black-Scholes option pricing model using the following assumptions:
no dividends; contractual life of 5 years; risk-free interest rate of 5.6%;
and expected volatility of 65%. The fair value of the warrants was charged to
expense in 1999 as the related services were performed.
F-13
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
In the first six months of fiscal 1999, the Company issued 3,479 warrants to
purchase common stock at a price of $0.62 per share in exchange for services.
These warrants expire upon the earlier of five years from the grant date, or
upon an IPO of the Company's common stock. The $22,000 fair value of the
warrants was determined using the Black-Scholes option pricing model using the
following assumptions: no dividends; contractual life of 5 years; risk-free
interest rate of 5.6%; and expected volatility of 65%. The fair value of the
warrants was charged to expense in 1999 as the related services were performed.
(d) Stock-Based Compensation
The Company uses the intrinsic-value method in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for any of its stock options granted or restricted stock sold
because the exercise price of each option or purchase price of each share of
restricted stock equaled or exceeded the fair value of the underlying common
stock as of the grant date for each stock option or purchase date of each
restricted stock share, except for stock options granted and restricted stock
sold from September 1998 through June 1999. With respect to the stock options
granted and restricted stock sold from September 1998 to June 1999, the Company
recorded deferred stock compensation of $3,003,000 for the difference at the
grant or issuance date between the exercise price of each stock option granted
or purchase price of each restricted share sold and the fair value of the
underlying common stock. This amount is being amortized on an accelerated basis
over the vesting period, generally 48 months. Had compensation costs been
determined in accordance with SFAS No. 123 for all of the Company's stock-based
compensation plans, net loss and basic and diluted net loss per share would
have been as follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Net loss:
As reported.................................. $ (154) $ (3,348) $ (6,211)
Pro forma.................................... (154) (3,357) (6,229)
Basic and diluted net loss per share:
As reported.................................. $ (0.08) $ (1.34) $ (1.82)
Pro forma.................................... (0.08) (1.35) (1.82)
</TABLE>
The fair value of each option was estimated on the date of grant using the
minimum value method with the following weighted-average assumptions: no
dividends, risk-free interest rate of 6.6%, 6.5%, and 5.6% for fiscal 1996,
1997, and 1998, respectively, and expected life of 4.3, 4.6 and 4.1 years for
1996, 1997 and 1998, respectively.
F-14
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
A summary of the status of the Company's options under the Plan is as
follows:
<TABLE>
<CAPTION>
Six Months Ended
Years Ended December 31, June 30,
------------------------------------------------------------- -------------------
1996 1997 1998 1999
------------------- -------------------- -------------------- -------------------
Weighted- Weighted- Weighted- Weighted
average average average Average
exercise exercise exercise Exercise
Shares price Shares price Shares price Shares Price
--------- --------- --------- --------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. -- $ -- 2,364,583 $0.05 2,822,481 $0.05 3,045,363 $0.12
Granted................. 2,364,583 0.05 570,580 0.10 723,737 0.26 539,906 4.02
Exercised............... -- -- (20,833) 0.05 (78,990) 0.10 (250,836) 0.12
Canceled................ -- -- (91,849) 0.05 (421,865) 0.05 (47,370) 1.28
--------- --------- --------- ---------
Outstanding at end of
period................. 2,364,583 0.05 2,822,481 0.05 3,045,363 0.12 3,287,063 0.73
========= ========= ========= =========
Options vested and
exercisable at end of
period................. -- -- 854,941 0.05 1,780,226 0.07 1,955,438 0.11
========= ========= ========= =========
Weighted-average fair
value of options
granted during the
period with exercise
prices equal to fair
value at date of
grant.................. $0.01 $0.02 $ -- $1.07
Weighted-average fair
value of options
granted during the
period with exercise
prices less than fair
value at date of
grant.................. $ -- $ -- $1.73 $6.35
</TABLE>
As of December 31, 1998, the range of exercise prices and weighted-average
remaining contractual life of outstanding options were as follows:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
---------------------------------- ---------------------
Weighted-
average Weighted- Weighted-
remaining average average
Exercise Number contractual exercise Number exercise
prices outstanding life (years) price exercisable price
-------- ----------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.05.............. 2,207,628 7.74 $0.05 1,559,203 0.05
0.24.............. 778,985 9.29 0.24 221,023 0.24
0.62.............. 58,750 9.88 0.62 -- --
--------- ---------
3,045,363 8.18 0.12 1,780,226 0.07
========= =========
</TABLE>
F-15
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
As of June 30, 1999, the range of exercise prices and weighted-average
remaining contractual life of outstanding options were as follows:
<TABLE>
<CAPTION>
Options outstanding Options Exercisable
--------------------------------- ---------------------
Weighted-
average
remaining Weighted- Weighted-
contractual average average
Exercise Number life exercise Number exercise
Prices outstanding (years) price exercisable price
-------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.05............... 2,041,548 7.24 $0.05 1,697,906 $0.05
0.24............... 679,753 8.79 0.24 241,733 0.24
0.62............... 180,335 9.52 0.62 2,743 0.62
5.28............... 385,427 10.00 5.28 13,056 5.28
--------- ---------
3,287,063 8.01 0.73 1,955,438 0.11
========= =========
</TABLE>
(5) Income Taxes
The differences between the income tax benefit computed at the federal
statutory rate and the Company's tax provision for all periods presented
primarily relate to net operating losses not benefited.
The types of temporary differences that give rise to significant portions of
the Company's deferred tax assets and liabilities as of December 31, 1996,
1997, and 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997 1998
---- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Reserves and accruals..... $ 54 116 523
Net operating loss and tax
credit carryforwards..... 32 1,366 3,266
---- ------- -------
Gross deferred tax
assets................... 86 1,482 3,789
Less valuation allowance.. (83) (1,474) (3,788)
---- ------- -------
Total deferred tax
assets................. 3 8 1
Deferred tax liabilities--
property and equipment... (3) (8) (1)
---- ------- -------
Net deferred tax
assets................. $ -- $ -- $ --
==== ======= =======
</TABLE>
In light of the Company's recent history of operating losses, the Company
has provided a valuation allowance for its net deferred tax assets as it is
presently unable to conclude that it is more likely than not that the deferred
tax assets will be realized. The net change in the total valuation allowance
for the year ended December 31, 1998, was $2,314,000.
As of December 31, 1998, the Company has net operating loss carryforwards
for federal and state income tax purposes of approximately $6,700,000 available
to reduce future income subject to income taxes. The federal net operating loss
carryforwards expire between 2012 and 2019. The state net operating loss
carryforwards expire beginning in 2004.
As of December 31, 1998, the Company also has research credit carryforwards
for federal and state income tax purposes of approximately $210,000 and
$169,000, respectively, available to reduce future income taxes. The federal
research credit carryfoward expire beginning in 2011 through 2019. The research
credit carryforwards for state purposes carry forward indefinitely until
utilized. The Company has a foreign tax credit carryforward for federal tax
purposes in the amount of $20,000. The foreign tax credit carryforward expires
in 2002.
F-16
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Federal and state tax laws impose substantial restrictions on the
utilization of net operating loss carryforwards in the event of an "ownership
change" as defined in Section 382 of the Internal Revenue Code. If the Company
has an ownership change, utilization of the above mentioned carryforwards could
be reduced significantly.
(6) Geographic, Segment and Significant Customer Information
In 1998, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 131, Disclosures about Segments of an Enterprise and Related
Information. SFAS No. 131 establishes standards for the manner in which public
companies report information about operating segments in annual and interim
financial statements. It also establishes standards for related disclosures
about products and services, geographic areas, and major customers. The method
for determining what information to report is based on the way management
organizes the operating segments within the Company for making operating
decisions and assessing financial performance.
The Company's chief operating decision-maker is considered to be the chief
executive officer (CEO). The CEO reviews financial information presented on an
entity level basis accompanied by disaggregated information about revenues by
product type and certain information about geographic regions for purposes of
making operating decisions and assessing financial performance. The entity
level financial information is identical to the information presented in the
accompanying statements of operations. Therefore, the Company has determined
that it operates in a single operating segment: Enterprise information portal
systems. The disaggregated information reviewed on a product basis by the CEO
is as follows (in thousands):
<TABLE>
<CAPTION>
Six Months
Years Ended Ended June
December 31, 30,
---------------- -----------
1996 1997 1998 1998 1999
---- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Revenue
License....................................... 56 839 2,283 1,142 2,131
Services
Consulting................................... 940 638 1,112 518 823
Maintenance.................................. 1 105 430 94 336
--- ----- ----- ----- -----
997 1,582 3,825 1,754 3,290
=== ===== ===== ===== =====
</TABLE>
Significant customer information is as follows:
<TABLE>
<CAPTION>
% of Total Accounts
% of Total Revenue Receivable
------------------------------------------- ---------------------
Six Months
Ended
Year Ended December 31, June 30,
--------------------------- ------------- December 31, June 30,
1996 1997 1998 1998 1999 1998 1999
------- ------- ------- ----- ----- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
Customer A.............. 23% -- -- -- -- -- --
Customer B.............. 1% 10% 11% 6% 4% 14% 7%
Customer C.............. -- -- -- -- 12% 17% 1%
Customer D.............. 43% -- -- -- -- -- --
Customer E.............. -- 2% 5% 12% -- 1% --
Customer F.............. -- 5% 15% 17% 3% 6% --
Customer G.............. 18% 8% -- -- -- -- --
Customer H.............. -- -- 6% 10% 1% 4% 2%
</TABLE>
F-17
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1998 and 1999 is unaudited)
Revenues aggregating 4% and 6% of total revenues for the year ended December
31, 1998 and for the six months ended June 30, 1998, respectively, were
generated from customers who are also stockholders of the Company, and whose
ownership percentages ranged from 5% to 10% as of June 30, 1999.
The Company markets its products from its operations in North America.
International sales are primarily to customers in Europe and Asia Pacific.
Revenues derived from International sales were 14% and 12% for the years ended
December 31, 1997 and 1998 and 8% and 14% for the six months ended June 30,
1998 and 1999. Sales did not exceed 4% for any one country outside of North
America in any period presented.
(7) Bank Borrowing, Commitments and Contingencies
In 1998 the Company had a $1.5 million line of credit. The contractual rate
of interest under this line of credit was 9.5%. The Company had no balances
outstanding under this line of credit at December 31, 1998.
On March 17, 1999, the Company entered into a $2,000,000 bank line of
credit. Borrowings under the agreement bear interest of prime plus 1%. On March
17, 1999 the Company also entered into a revolving equipment loan in the amount
of $500,000. This loan bears interest at prime plus 1.5%. As of June 30, 1999,
the Company had no balances outstanding under the line of credit or the
equipment loan. The loans are based on a percentage of qualified outstanding
accounts receivable and is secured by a security interest in certain of the
Company's intellectual property.
The Company leases its facilities and certain equipment under noncancelable
operating lease agreements expiring in the year 2000. Rent expense was
approximately $38,000, $103,000 and $293,000 for the years ended December 31,
1996, 1997 and 1998, respectively. Future minimum lease payments under
noncancelable operating leases are approximately $391,000 and $200,000 for
fiscal years 1999 and 2000, respectively.
On April 1, 1999 the Company entered into a software marketing and
distribution agreement with a distributor located in Germany. The agreement
includes a buyout obligation that can be exercised by the distributor following
the third anniversary of the agreement if minimum sales quotas and certain
conditions have been met. As of June 30, 1999, no sales have been reported by
the distributor.
In 1999, a third party advised the Company of objections to an advertising
campaign the Company undertook in connection with its name change. The third
party filed a complaint in California state court alleging that the Company
violated their right of publicity, the Lanham Act and unfair competition law
because of the advertising campaign. The complaint seeks an injunction against
further advertising that uses the third parties name or likeness, compensatory
damages, the Company's profits resulting from the advertising, punitive
damages, attorneys' fees and costs and interest. The Company estimates this
matter will result in a settlement of approximately $138,000 which has been
accrued as of June 30, 1999 and is reflected in the accompanying statements of
operations for the six months then ended.
(8) Subsequent Events
(a) Employee Stock Purchase Plan
The Company's Board of Directors adopted the Employee Stock Purchase Plan
(the Purchase Plan) on July 20, 1999 under which 300,000 shares have been
reserved for issuance. The Purchase Plan is pending approval by the
stockholders. The number of shares reserved under the Purchase Plan will
automatically increase beginning on January 1 of each year by the lesser of an
amount equal to 1% of the total number of
F-18
<PAGE>
VIADOR INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
December 31, 1996, 1997, and 1998
(Information for the six months ended June 30, 1999 and 1999 is unaudited)
outstanding shares, or 500,000 shares. Under the Purchase Plan, eligible
employees may purchase common stock in an amount not to exceed 15% of an
employee's cash compensation. The purchase price per share will be 85% of the
common stock fair value at the lower of certain plan defined dates.
(b) 1999 Stock Incentive Plan
The Company's Board of Directors adopted the 1999 Stock Incentive Plan (the
Incentive Plan) on July 20, 1999 under which 7,000,000 shares have been
reserved for issuance. The Directors Plan is pending approval by the
stockholders. The number of shares reserved under the Incentive Plan will
automatically increase beginning on January 1 of each year by the lessor of 4%
of the total number of shares outstanding or 3,000,000 shares. The Incentive
Plan has five separate programs which allows non-employee board members,
executive officers and other highly compensated employees to purchase shares
using a portion of their salary or retainer fee. The Incentive Plan allows
eligible employee to be issued shares of common stock directly, upon the
attainment of performance milestones or the completion of services. The
Incentive Plan also allows automatic option grants at periodic intervals to
eligible non-employee board members to purchase shares of common stock.
(c) Reverse Stock Split and Reincorporation
On July 28, 1999, the Board of Directors approved a 1 for 2.4 reverse stock
split of the Company's convertible preferred stock and common stock and a
reincorporation in the state of Delaware to be completed prior to the
effectiveness of the Company's IPO. The accompanying financial statements have
been retroactively restated to give effect to the reverse stock split and the
reincorporation in Delaware.
F-19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Prospective investors may rely only on the information contained in this pro-
spectus. Neither Viador Inc. nor any underwriter has authorized anyone to pro-
vide prospective investors with different or additional information. This pro-
spectus is not an offer to sell nor is it seeking an offer to buy these securi-
ties in any jurisdiction where the offer or sale is not permitted. The informa-
tion contained in this prospectus is correct only as of the date of this pro-
spectus, regardless of the time of the delivery of this prospectus or any sale
of these securities.
--------------------
TABLE OF CONTENTS
--------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 1
The Offering............................................................. 3
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Financial Data.................................................. 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 21
Business................................................................. 32
Management............................................................... 43
Certain Transactions..................................................... 53
Principal Stockholders................................................... 55
Description of Capital Stock............................................. 58
Shares Eligible for Future Sale.......................................... 61
Underwriting............................................................. 62
Legal Matters............................................................ 64
Experts.................................................................. 64
Additional Information................................................... 64
Index to Consolidated Financial Statements............................... F-1
</TABLE>
---------------
Until , 1999 (25 days after the date of this prospectus), all dealers that
effect transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
dealers' obligation to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF VIADOR]
Shares
Common Stock
-------------------------
PRELIMINARY PROSPECTUS
-------------------------
Bear, Stearns & Co. Inc.
CIBC World Markets
U.S. Bancorp Piper Jaffray
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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, payable by the Registrant in connection with the offer
and sale of the common stock being registered. All amounts are estimates
except the registration fee, the NASD filing fee and the Nasdaq National
Market entry and application fee.
<TABLE>
<S> <C>
Registration fee.................................................... $12,788
NASD filing fee..................................................... 5,100
Blue Sky/NASD fees and expenses (including legal fees).............. 7,500
Nasdaq National Market entry and application fee.................... *
Accounting fees and expenses........................................ 300,000
Other legal fees and expenses....................................... *
Transfer agent and registrar fee.................................... *
Printing and engraving.............................................. *
Miscellaneous....................................................... 130,000
-------
Total............................................................. $ *
=======
</TABLE>
* To be supplied by amendment.
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit such
indemnification under some circumstances for liabilities, including
reimbursement for expenses incurred, arising under the Securities Act of 1933,
as amended. To the extent that indemnification for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant under the foregoing provisions, we have been advised
that in the opinion of the Securities and Exchange Commission that
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. Article VII, Section 6, of our bylaws
provides 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. Our amended and
restated certificate of incorporation provides that, under Delaware law, our
directors shall not be liable for monetary damages for breach of the
directors' fiduciary duty as directors to us or our stockholders. This
provision in the certificate of incorporation does not eliminate the
directors' fiduciary duty, and in appropriate circumstances equitable remedies
such as injunctive or other forms of non-monetary relief will remain available
under Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Company for acts
or omissions not in good faith or involving intentional misconduct, for
knowing violations of law, for actions leading to improper personal benefit to
the director, and for payment of dividends or approval of stock repurchases or
redemptions that are unlawful under Delaware law. The provision also does not
affect a director's responsibilities under any other law, such as the federal
securities laws or state or federal environmental laws. We have entered into
indemnification agreements with our officers and directors, a form of which is
attached as Exhibit 10.4 and incorporated herein by reference. The
indemnification agreements provide our officers and directors with further
indemnification to the maximum extent permitted by the Delaware General
Corporation Law. We maintain directors and officers liabilities insurance.
Reference is made to Section 8 of the underwriting agreement contained in
Exhibit 1.1, indemnifying our officers and directors against certain
liabilities.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities
Since July 1996, we have issued and sold the following securities:
(a) We issued and sold 2,169,792 shares of our common stock to founders
for a total purchase price of $104,150 by direct stock issuances and we
issued 359,606 shares of common stock for consideration of $60,019 upon the
exercise of options under our Amended and Restated 1997 Stock Option/Stock
Issuance Plan.
(b) We issued options to purchase 3,278,116 shares of common stock with
a weighted average exercise price of $0.73 per share.
(c) In May 1998, we issued a warrant which currently permits the holder
to purchase up to 46,875 shares of our common stock, at an exercise price
of $0.72 per share (subject to adjustment), to Standard Foods Taiwan, Ltd.
and two of its affiliated entities.
(d) In August 1998, we issued a warrant which currently permits the
holder to purchase up to 12,500 shares of our common stock, at an exercise
price of $0.72 per share (subject to adjustment), to Brobeck, Phleger &
Harrison LLP.
(e) In November 1998, we issued a warrant which currently permits the
holder to purchase up to 5,834 shares of our common stock, at an exercise
price of $0.24 per share (subject to adjustment), to Outcast
Communications, Inc.
(f) In July 1998, we issued 46,000 shares of Series B preferred stock to
Mr. Robert Santoni under a settlement agreement entered into between Health
Point Ltd., Mr. Santoni and us. We also issued an option to purchase 18,334
shares of common stock, at an exercise price of $0.24 per share (subject to
adjustment) to Mr. Santoni under such settlement agreement.
(g) In July 1999, we issued a warrant to purchase 9,615 shares of Series
C preferred stock, at an exercise price of $2.434 per share (subject to
adjustment), to a commercial bank.
(h) In May 1997, we issued and sold an aggregate of 3,703,764 shares of
Series A preferred stock to several investors for total consideration of
$3,515,000.
(i) In August 1998, we issued and sold an aggregate of 6,632,714 shares
of Series B preferred stock to several investors for total consideration of
$8,622,528.
(j) In May 1999, we issued and sold an aggregate of 5,990,385 shares of
Series C preferred stock to several investors for total consideration of
$14,580,603.
None of the foregoing transactions involved any underwriters, underwriting
discounts or commissions, or any public offering, and we believe that each
transaction was exempt from the registration requirements of the Securities
Act by virtue of Section 4(2) thereof, Regulation D promulgated thereunder or
Rule 701 pursuant to compensatory benefit plans and contracts relating to
compensation as provided under such Rule 701. The recipients in such
transaction represented their intention to acquire the securities for
investment only and not with a view to or for sale in connection with any
distribution thereof, and appropriate legends were affixed to the share
certificates and instruments issued in such transactions. All recipients had
adequate access, through their relationships with us, to information about us.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1** Form of Underwriting Agreement
2.1* Form of Agreement and Plan of Merger of Viador Inc., a Delaware
corporation, and Viador, Inc., a California Corporation
3.1* Second Amended and Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
4.1 Reference is made to Exhibit 3.1
4.2** Specimen Common Stock Certificate
4.3* Amended and Restated Investors' Rights Agreement, among the registrant
and the parties listed on Schedule A thereto dated May 21, 1999, as
amended on July 23, 1999
5.1 Opinion of Brobeck, Phleger & Harrison LLP
10.1* Form of Amended and Restated 1997 Stock Option/Stock Issuance Plan
10.2* Form of 1999 Stock Incentive Plan
10.3* Form of 1999 Employee Stock Purchase Plan
10.4* Form of Indemnification Agreement for Officers and Directors
10.5* Assignment of Lease, by and between the Registrant and Valley of
California, Inc., and Consent to Assignment, dated as of December 16,
1997 and related office leases
10.6* Collateral Assignment, Patent Mortgage and Security Agreement, by and
between the Registrant and Comerica Bank--California, dated March 4,
1997
10.7* Revolving Credit Loan and Security Agreement, by and between the
Registrant and Comerica Bank--California, dated March 17, 1999
10.8+ Space SQL Version 4.0 License Agreement by and between the Registrant
and IBM Corporation, dated September 18, 1998.
10.9+ Software Marketing and Distribution Agreement by and between the
Registrant and Mitsui & Co. Ltd, dated June 26, 1997.
23.1 Consent of KPMG LLP, independent auditors
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1)
24.1* Power of Attorney
27.1* Financial Data Schedule
</TABLE>
- ----------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment requested.
(b) Financial Statement Schedules
<TABLE>
<CAPTION>
Schedule Page
-------- ----
<S> <C>
II--Valuation and Qualifying Accounts S-1
</TABLE>
Schedules not listed about have been omitted because the information
required to be set forth therein is not applicable or is shown in the
financial statements or thereto.
Item 17. Undertakings
To the extent that indemnification for liabilities arising under the
Securities Act may be permitted to our directors, officers and controlling
persons under the provisions described in Item 14, or otherwise, we have been
advised that in the opinion of the Securities and Exchange Commission that
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against those 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 a director, officer or controlling person in
connection with the securities being registered, we will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether
indemnification by us is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of the issue. We undertake
to provide to the Underwriters at the
II-3
<PAGE>
closing specified in the Underwriting Agreement certificates in the
denominations and registered in the names as required by the Underwriters to
permit prompt delivery to each purchaser. We undertake 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 us
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 and (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 it offers, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering of those securities.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-1 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Palo Alto, State of California, on this 9th day
of September, 1999.
VIADOR INC.
/s/ Stan X. Wang
By: _________________________________
Stan X. Wang
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the persons whose signatures appear
below, which persons have signed such Registration Statement in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stan X. Wang Chief Executive Officer, President September 9, 1999
______________________________________ and Director (Principal Executive
Stan X. Wang Officer)
* Chief Financial Officer (Principal September 9, 1999
______________________________________ Financial Officer and Principal
Raja H. Venkatesh Accounting Officer)
* Director September 9, 1999
______________________________________
Teddy Kiang
* Director September 9, 1999
______________________________________
Dawn G. Lepore
* Director September 9, 1999
______________________________________
Chong Sup Park
* Director September 9, 1999
______________________________________
Virginia M. Turezyn
</TABLE>
*By: /s/ Stan X. Wang
________________________
Attorney-in-fact
II-5
<PAGE>
VIADOR INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning of cost and Charged to end of
the year expenses other accounts Deductions the year
------------ ---------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31,
1998
Allowance for doubtful
accounts............... $50,000 $112,575 $ -- $109,575 $53,000
Year ended December 31,
1997
Allowance for doubtful
accounts............... $20,000 $ 43,000 $ -- $ 13,000 $50,000
Year ended December 31,
1996
Allowance for doubtful
accounts............... $ -- $ 20,000 $ -- $ -- $20,000
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Exhibit Name
------- ------------
<C> <S>
1.1** Form of Underwriting Agreement
2.1* Form of Agreement and Plan of Merger of Viador Inc., a Delaware
corporation, and Viador, Inc., a California Corporation
3.1* Second Amended and Restated Certificate of Incorporation
3.2* Amended and Restated Bylaws
4.1* Reference is made to Exhibit 3.1
4.2** Specimen Common Stock Certificate
4.3* Amended and Restated Investors' Rights Agreement, among the registrant
and the parties listed on Schedule A thereto dated May 21, 1999, as
amended on July 23, 1999
5.1 Opinion of Brobeck, Phleger & Harrison LLP
10.1* Form of Amended and Restated 1997 Stock Option/Stock Issuance Plan
10.2* Form of 1999 Stock Incentive Plan
10.3* Form of 1999 Employee Stock Purchase Plan
10.4* Form of Indemnification Agreement for Officers and Directors
10.5* Assignment of Lease, by and between the Registrant and Valley of
California, Inc., and Consent to Assignment, dated as of December 16,
1997 and related office leases
10.6* Collateral Assignment, Patent Mortgage and Security Agreement, by and
between the Registrant and Comerica Bank--California, dated March 4,
1997
10.7* Revolving Credit Loan and Security Agreement, by and between the
Registrant and Comerica Bank--California, dated March 17, 1999
10.8+ Space SQL Version 4.0 License Agreement by and between the Registrant
and IBM Corporation, dated September 18, 1998.
10.9+ Software Marketing and Distribution Agreement by and between the
Registrant and Mitsui & Co. Ltd, dated June 26, 1997.
23.1 Consent of KPMG LLP, independent auditors
23.2 Consent of Brobeck, Phleger & Harrison LLP (included in Exhibit 5.1)
24.1* Power of Attorney
27.1* Financial Data Schedule
</TABLE>
- ----------
* Previously filed.
** To be filed by amendment.
+ Confidential treatment requested.
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF BROBECK, PHLEGER & HARRISON LLP]
September 9, 1999
Viador Inc.
167 Second Avenue
San Mateo, CA 94401
Re: Registration Statement on Form S-1
File No. 333-84041
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 originally filed by
Viador, Inc. (the "Company") with the Securities and Exchange Commission (the
"Commission") on July 29, 1999, as thereafter amended or supplemented (the
"Registration Statement"), in connection with the registration under the
Securities Act of 1933, as amended, of ________ shares of the Company's
Common Stock (the "Shares"). The Shares include an over-allotment option
granted to the Underwriters to purchase ______ additional Shares and are to be
sold to the Underwriters as described in such Registration Statement for resale
to the public. As your counsel in connection with this transaction, we have
examined the proceedings taken and we are familiar with the proceedings
proposed to be taken by you in connection with the sale and issuance of the
Shares.
It is our opinion that, upon conclusion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, the Shares, when issued and sold in the manner described in the
Registration Statement, will be validly issued, fully paid and nonassessable.
We consent to the use of this Opinion as an exhibit to said Registration
Statement, and further consent to the use of our name wherever appearing in said
Registration Statement, including the prospectus constituting a part thereof,
and in any amendment thereto.
Very truly yours,
/s/ Brobeck, Phleger & Harrison LLP
Brobeck, Phleger & Harrison LLP
<PAGE>
EXHIBIT 10.8
IBM STORWATCH
[*] AGREEMENT
INFOSPACE, INC. and IBM CORPORATION
SpaceSQL VERSION 4.0 LICENSE AGREEMENT
Agreement Number: 4998SJ0071
This Agreement dated as of September 18, 1998 is between Infospace, Inc.
("Infospace") with an address at 181 2nd Avenue, Suite 218, San Mateo, CA 94401,
and International Business Machines Corporation ("IBM") with an address at 5600
Cottle Road, San Jose, CA 95193. Under this Agreement, IBM licenses from
Infospace a computer software program known as SpaceSQL Version 4.0 which will
be embedded into an IBM software product being developed called StorWatch Core
Services.
By signing below, the parties agree to the terms of this Agreement. The complete
Agreement between the parties regarding this transaction consists of this
License Agreement and the following Attachments:
1. Attachment A "Description of Licensed Work;"
2. Attachment B "Schedule;"
3. Attachment C "Testing, Maintenance and Support;"
4. Attachment D "Education and Training,"
5. Attachment E "Certificate of Originality," and
6. Attachment F "On Premises."
The following are related agreements between the parties:
1. Agreement for Exchange of Confidential Information ("AECI") No.
SN980025;
2. Supplement to Agreement for Exchange of Confidential Information No.
J9801; and
3. Source Code Custody Agreement No. 4998SJ0104.
This Agreement replaces all prior oral or written communications between the
parties relating to the subject matter. Once signed, any reproduction of this
Agreement made by reliable means (for example, photocopy or facsimile) is
considered an original, unless prohibited by local law.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
INTERNATIONAL BUSINESS INFOSPACE INC.
MACHINES CORPORATION
By: /s/ BJ Grogan By: /s/ Ben Connors
------------------------- -------------------------------
Authorized Signature Authorized Signature
Name: /s/ BJ Grogan Name: /s/ Ben Connors
---------------------------- -------------------------------
Type or Print Type or Print
Title: Mgr, Global Contracts Off Title: /s/ Chief Operating Officer
--------------------------- -----------------------------
Date: Sept 18, 1998 Date: Sept. 18, 1998
--------------------------- -----------------------------
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as [*]. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
Page-1
<PAGE>
1 DEFINITIONS
Capitalized terms in the Agreement have the following meanings.
1.1 Code is computer programming code, including both Object Code and Source
Code.
a. Object Code is Code substantially in binary form, and includes header
files of the type necessary for use or interoperation with other
computer programs. It is directly executable by a computer after
processing or linking, but without compilation or assembly. Object Code
is all Code other than Source Code.
b. Source Code is Code in a form which when printed out or displayed is
readable and understandable by a programmer of ordinary skills. It
includes related source code level system documentation, comments and
procedural code. Source Code does not include Object Code.
1.2 Deliverable is any item that Infospace provides under this Agreement.
1.3 Derivative Work is a work that is based on all or any portion of the
Licensed Work that is intended to be embedded in IBM Products commonly
referred to as "StorWatch" and would be a copyright infringement if
prepared without the authorization of owner of the Licensed Work.
Derivative Works are subject to the ownership rights and licenses of a
party or of others in the underlying work.
1.4 Distributors are those authorized or licensed by IBM, IBM Subsidiaries or
IBM Distributors to license or distribute Products.
1.5 Enhancements are changes or additions, other than Error Corrections, to the
Licensed Work.
a. Basic Enhancements are all Enhancements, other than Major Enhancements,
including those that support new releases of operating systems and
devices.
b. Major Enhancements provide substantial additional value and are offered
to customers for an additional charge.
1.6 Error Corrections are revisions that correct errors and deficiencies
(collectively referred to as "errors") in the Licensed Work.
1.7 Externals are (1) any pictorial, graphic, and audiovisual works (such as
icons, screens, sounds, and characters) generated by execution of Code, and
(2) any programming interfaces, languages or protocols implemented in Code
to enable interaction with other computer programs or the end user.
Externals do not include the Code that implements them.
1.8 Licensed Work is (1) any material described in or that conforms to the
description in the Attachment entitled "Description of Licensed Work," or
that is delivered to IBM as the Licensed Work, including (but not limited
to) Code, associated documentation, and Externals, and (2) Error
Corrections and Enhancements thereto.
1.9 Moral Rights are personal rights associated with authorship of a work under
applicable law. They include the rights to approve modifications and to
require authorship identification.
1.10 Product is an offering or service, provided to IBM business partners, OEM
customers, distributors, or other users, whether or not branded under an
IBM, IBM Subsidiary or third party logo, which includes an embedded version
of the Licensed Work or a Derivative Work of the Licensed Work.
1.11 Subsidiary is an entity during the time that more than 50% of its voting
stock is owned or controlled, directly or indirectly, by another entity. If
there is no voting stock, a Subsidiary is an entity during the time that
more than 50% of its decision-making power is controlled, directly or
indirectly, by another entity.
1.12 Tools include devices, compilers, programming, documentation, media and
other items required for the development, maintenance or implementation of
the Licensed Work that are not commercially available.
Page-2
<PAGE>
2 RESPONSIBILITIES OF INFOSPACE
2.1 Infospace will provide the following Deliverables to IBM according to the
schedule set forth in the Attachment entitled "Schedule":
a. one complete set of the Licensed Work described in the Attachment
entitled "Description of Licensed Work" to IBM no later than 30 days
from the Effective Date of this Agreement. The Licensed Work includes
Object Code and supporting documentation recorded on industry standard
120-mm 650 megabyte CD-ROM media capable of being read on a standard
CD-ROM drive contained in an IBM-compatible personal computer.
b. Tools. The Tools for the Licensed Work are identified below.
----------------------------------------------------------------------
Part Number/
Model Version/
Description Number Release Owner
----------------------------------------------------------------------
None None None None
Infospace will deliver the Tools to IBM no later than 30 days from the
Effective Date. Infospace will provide an updated written list to IBM
for all changes and promptly deliver updated Tools to IBM.
c. Infospace will deliver to IBM within six months of the Effective Date of
this Agreement a version of the Licensed Work that contains all the
features, and performs all of the functions, of the existing SpaceSQL
Version 4.0 software program but operates in the following computer
environment:
. executing under the IBM OS/390 (formerly MVS/ESA) Version 2 Release 5
operating system on an IBM S/390 computer system
. utilizing the Unix System Services (formerly OpenEdition) component
of the IBM OS/390 operating system
. utilizing the Lotus Domino Go Webserver Release 4.6.1 for OS/390
software product
. retrieving data from, and displaying reports and graphs of data
contained in, relational database tables managed by the DB2 for
OS/390 relational database management system.
d. a completed certificate of originality with the Licensed Work, and with
each Enhancement to the Licensed Work, in the form specified in the
Attachment entitled "Certificate of Originality." IBM may suspend
payments to Infospace for the Licensed Work if Infospace does not
provide a properly completed certificate of originality. Payment will
resume after IBM receives and accepts the certificate.
2.2 Infospace will re-engineer the SpaceSQL Version 4.0 product to run in the
OS/390 operating system environment as described in section 3 "Description
of Engineering Work" in the Attachment entitled "Description of Licensed
Work."
2.3 For the term of this Agreement and continuing for [*] thereafter, Infospace
will provide Error Corrections for the Licensed Work, including testing,
maintenance and support as described in this Agreement, including the
Attachment entitled "Testing, Maintenance and Support."
2.4 Infospace will provide to IBM, at no charge, Basic Enhancements for the
Licensed Work beginning when IBM accepts the Licensed Work and continuing
for the term of this Agreement.
2.5 Infospace will offer to IBM, Major Enhancements to the Licensed Work
beginning when IBM accepts the Licensed Work and continuing for the term of
this Agreement. Infospace will offer to IBM, within 60 days after general
availability, all Major Enhancements to the Licensed Work that Infospace
creates or authorizes others to create. If IBM accepts Infospace's offer,
IBM will amend this Agreement to include charges, terms and conditions, and
the Major Enhancements will become part of the Licensed Work. If IBM and
Infospace do not agree, Infospace will make the Major Enhancements
available to IBM's, IBM Subsidiaries' and Distributors' customers under
terms and conditions no less favorable than those Infospace offers anyone
else.
2.6 Infospace will:
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-3
<PAGE>
a. participate in progress reviews, as reasonably requested by IBM, to
demonstrate Infospace's performance of Infospace's obligations;
b. implement a process designed to help prevent contamination of the
Licensed Work delivered to IBM by harmful code. Infospace will
provide IBM notice if Infospace suspects contamination;
c. have agreements with Infospace's personnel and third parties to
perform obligations and to grant or assign rights to IBM as required
by this Agreement. On request, Infospace will provide IBM with
evidence of these agreements;
d. obtain a written agreement not to assert any Moral Rights from any
person or entity having Moral Rights in the Licensed Work. Infospace
agrees not to assert any Moral Rights in the Licensed Work;
e. obtain all necessary consents of individuals or entities required for
the use of names, likenesses, voices, and the like in the Licensed
Work;
f. maintain records to verify authorship of the Licensed Work for two (2)
years after the termination or expiration of this Agreement. On
request, Infospace will deliver or otherwise make available this
information in a form specified by IBM;
g. not assign or transfer this Agreement or Infospace's rights under it,
or delegate or subcontract Infospace's obligations, without IBM's prior
written consent. Any attempt to do so is void;
h. not provide any information to the media, or issue any press releases
or other publicity, regarding this Agreement or the parties'
relationship under it, without IBM's prior written consent; and
i. not disclose to a third party the terms of this Agreement or the fact
that IBM has licensed the Licensed Work, without IBM's prior written
consent. Infospace may, however, make such disclosures (i) to its
accountants, lawyers or other professional advisors provided that any
such advisor is under a confidentiality obligation and (ii) as required
by law provided Infospace obtains any confidentiality treatment for it
which is available.
2.7 If Infospace fails to perform any of its obligations, IBM may either reduce
any amounts due hereunder by an amount equal to the value not received, or
have Infospace reimburse IBM for the value not received. Infospace
acknowledges that if it does not deliver the Licensed Work and the
engineering changes to the Licensed Work described in section 3
"Description of Engineering Work" in the Attachment entitled "Description
of Licensed Work," IBM will suffer irreparable harm and will be entitled to
all equitable remedies, including specific performance for the delivery of
such Licensed Work.
3 LICENSE
3.1 Infospace grants IBM a nonexclusive worldwide license, during the term of
this Agreement, to prepare Derivative Works of the Licensed Work, and to
use, execute, reproduce, display, perform, transfer, distribute, and
sublicense the Licensed Work and such Derivative Works in Object Code form
only, and documentation, in any medium or distribution technology
whatsoever, whether known or unknown, solely as such items are, or are to
be, incorporated and/or embedded in IBM Products commonly referred to as
"StorWatch" and any successor or related Products of the same or similar
application. Infospace grants IBM the right to authorize or sublicense
others to exercise any of the rights granted to IBM in this Section.
3.2 Infospace grants IBM a nonexclusive worldwide paid-up license, during the
term of this Agreement, to prepare Derivative Works of the Externals, and
to use, execute, reproduce, display, perform, transfer, distribute, and
sublicense the Externals and such Derivative Works, in any medium or
distribution technology whatsoever, whether known or unknown, solely as
such items are, or are to be, incorporated and/or embedded in IBM Products
commonly referred to as "StorWatch" and any successor or related Products
of the same or similar application. Infospace grants IBM the right to
authorize or sublicense others to exercise any of the rights granted to IBM
in this Section.
3.3 Infospace grants IBM a nonexclusive, worldwide paid-up license, during the
term of this Agreement, to prepare Derivative Works of the Tools, and to
use, execute, reproduce, display, perform, and distribute internally the
Tools and such Derivative Works, in any medium or distribution technology
whatsoever, whether known or unknown, solely as such items are, or are to
be, incorporated and/or embedded in IBM Products commonly referred to as
"StorWatch" and any successor or related Products of the same or similar
application. The rights and licenses granted by Infospace to IBM hereunder
include the right of IBM to authorize or sublicense its Subsidiaries,
contractors, and consultants to exercise any of the rights granted to IBM
in this Section.
3.4 The grant of rights and licenses to the Licensed Work and Tools includes a
nonexclusive, worldwide, paid-up license under any patents and patent
applications that are owned or licensable by Infospace now or in the future
and are (1) required to make, have made, use and have used the Licensed
Work or its Derivative
Page-4
<PAGE>
Works or (2) required to license or transfer the Licensed Work or its
Derivative Works. This license applies to the Licensed Work and its
Derivative Works operating alone or in combination with equipment or Code.
The license scope is to make, have made, use, have used, offer to sell,
sell, import, license or transfer items, and to practice and have practiced
methods, to the extent required to exercise the rights granted hereunder to
the Licensed Work and Tools.
3.5 Subject to Infospace's ownership of the Licensed Work and Tools, IBM will
own any Derivative Works it creates.
3.6 Infospace grants IBM a nonexclusive, worldwide, paid-up license to use the
names and trademarks Infospace uses to identify the Licensed Work for IBM's
marketing of the Licensed Work and its Derivative Works. Infospace grants
IBM the right to authorize or sublicense others to exercise any of the
rights granted to IBM in this Section. If IBM's use of Infospace's names
and trademarks is improper and Infospace provides IBM notice that Infospace
objects to it, IBM will take all reasonable steps necessary to resolve
Infospace's objections. Infospace may reasonably monitor the quality of
Products bearing its trademark under this license.
3.7 Any goodwill attaching to IBM's trademarks, service marks, or trade names
belongs to IBM and this Agreement does not grant Infospace any right to use
them. Each IBM Product will display, in an easily readable manner, that
Infospace has provided the Licensed Work.
3.8 For each Product that IBM, IBM Subsidiaries or Distributors license to a
customer and for which Infospace receives a royalty payment in accordance
with section 4.1 and 4.3 below, the rights and licenses granted to IBM in
sections 3.1, 3.2, 3.3, 3.4 and 3.6 above become perpetual and irrevocable.
4 PAYMENT
4.1 IBM will pay Infospace royalties of [*] for each IBM-authorized copy of
the Licensed Work or Derivative Work thereof that is incorporated and/or
embedded in an IBM Product commonly referred to as "StorWatch" and any
successor or related Products of the same or similar application, up to a
cumulative maximum amount of [*]. The per copy royalty payment includes
service and support for the Licensed Work as described in the Attachment
"Testing, Maintenance and Support."
4.2 All royalty obligations for the Licensed Work will be paid-up when the
cumulative amount of all royalty payments reaches the maximum amount of
[*]. Notwithstanding anything to the contrary in this Agreement,
all licenses granted to IBM in this Agreement will become perpetual and
irrevocable when the cumulative maximum royalty payments of [*]
is reached.
4.3 IBM will pay Infospace the following royalty advances:
- --------------------------------------------------------------------------------
DATE/EVENT ROYALTY ADVANCE
- --------------------------------------------------------------------------------
1. Delivery of Licensed Work, excluding OS/390 [*]
version of the Licensed Work.
- --------------------------------------------------------------------------------
2. Delivery and acceptance of an OS/390 [*]
version of the Licensed Work.
- --------------------------------------------------------------------------------
3. General availability of an IBM Product containing [*]
an embedded version of the Licensed Work or a
Derivative Work.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL: [*]
- --------------------------------------------------------------------------------
[*]
[*]
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-5
<PAGE>
[*]
4.4 IBM's second royalty advance to Infospace, as described in the table in
section 4.3 of this Agreement, may be reduced by [*] for each calendar
week, up to a maximum of [*], that Infospace fails to meet specified
milestone of delivering to IBM an OS/390 version of the Licensed Work as
described in section 3 "Description of Engineering Work" in the Attachment
entitled "Description of Licensed Work". In the event that Infospace fails
to deliver an OS/390 version of the Licensed Work within 34 calendar weeks
of the Effective Date of this Agreement, then the second payment contained
in the table above will not be made and no other payments will be made by
IBM to Infospace under this Agreement, other than the [*] royalty payment
referred to in Section 4.1 above.
4.5 Notwithstanding anything to the contrary, IBM has no royalty obligation
for:
a. the Licensed Work or its Derivative Works used for:
(1) IBM's and IBM Subsidiaries' (including third parties under contract)
development, maintenance or support activities;
(2) marketing demonstrations, customer testing or trial periods
(including early support, pre-release, or other similar programs),
Product training or education; or
(3) backup and archival purposes;
b. a copy of the Product used by a licensed end user at home or on travel
when such Product is stored on both the user's primary machine as well
as another machine, provided that the end user is not authorized to
actively use the Product on both machines at the same time;
c. the Licensed Work (or a functionally equivalent work) becomes generally
available from Infospace to third parties without a payment obligation;
d. documentation provided with, contained in, or derived from the Licensed
Work;
e. Error Corrections or Basic Enhancements;
f. warranty replacement copies of the Product;
g. Externals; or
h. the Licensed Work or Derivative Work used for IBM's and IBM
Subsidiaries' internal use provided, however, that they are incorporated
and/or embedded in IBM Products commonly referred to as "StorWatch" and
any successor or related Products of the same or similar application.
4.6 IBM and IBM Subsidiaries, when providing outsourcing services to licensees
of Products, will not owe Infospace a fee for access to or assignment of a
license to such Products. In addition, IBM and IBM Subsidiaries will not
owe Infospace a fee to transfer the applicable Products to an IBM or IBM
Subsidiaries computer system which is of like configuration as the computer
system for which the Products were licensed. The forgoing is subject to IBM
providing Infospace notice of such Products to be managed by IBM or IBM
Subsidiaries. The Products will only be used on behalf of the licensee.
Upon expiration or termination of the agreement to provide outsourcing
services to the licensee, IBM's or an IBM Subsidiaries' right to use the
Products will end.
4.7 IBM, IBM Subsidiaries, and Distributors may, without incurring any royalty
obligation, copy the Product and distribute it on a CD-ROM, or other media
or distribution technology on or through which the Product is secured
(e.g., "encrypted" or "locked") to limit a customer's access to or use of
the Product. IBM may allow the customer, under a limited license, a limited
preview, trial or demonstration use of the Product. IBM will have no
royalty obligation to Infospace unless IBM, IBM Subsidiaries, or
Distributors license the Product to such customer for full productive use.
4.8 IBM may request a lower royalty for the Licensed Work when a licensing
transaction requires a substantial discount. If Infospace agrees, both
parties will sign a letter specifying the licensing transaction and its
lower royalty payment.
4.9 If Infospace offers another party more favorable rates, prices or royalties
than are available to IBM under this Agreement, taking into account all
relevant facts and circumstances, Infospace will promptly offer the same to
IBM. If IBM accepts Infospace's offer, IBM will also accept associated
differences in licensing terms and conditions.
4.10 Royalties are paid against revenue recorded by IBM in a royalty payment
quarter. In the U.S., a royalty payment quarter ends on the last business
day of the calendar quarter. Outside of the U.S., a royalty payment
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-6
<PAGE>
quarter is defined according to IBM's current administrative practices.
Payment will be made by the last day of the second calendar month
following the royalty payment quarter. Royalties will be paid less
adjustments and refunds due to IBM. IBM will provide a statement
summarizing the royalty calculation with each payment. All payments will
be made in U.S. dollars. Payments based on foreign revenue will be
converted to U.S. dollars on a monthly basis at the rate of exchange
published by Reuters Financial Service on approximately the same day each
month.
4.11 IBM will maintain relevant records to support payments made to Infospace.
The records will be retained and made available two (2) years from the
date of the related payment. If Infospace requests, IBM will make these
records available to an independent certified public accountant chosen
and compensated: other than on a contingency basis, by Infospace.
Infospace's request must be in writing, will provide IBM 90 days prior
notice, and will not occur more than once each year. The audit will be
conducted during normal IBM business hours at IBM's office and in such a
manner as not to interfere with IBM's normal business activities. The
auditor will sign a confidentiality agreement and will only disclose to
Infospace any amounts overpaid or underpaid for the period examined. The
cost of such audit will be borne by Infospace unless such audit reflects
an underpayment of more than fifteen (15) percent in the royalty payments
reported due by IBM over the period of time being audited, but in no
event less than one (1) year. In the event that the underpayment is more
than fifteen (15) percent, IBM will reimburse Infospace for the cost of
the audit.
4.12 Each party will be solely responsible for any taxes incurred by the
party, directly or indirectly, associated with its performance of this
Agreement.
4.13 The payments defined in this Section fully compensate Infospace for its
performance under, and for the rights and licenses granted in, this
Agreement.
4.14 Infospace will submit invoices to IBM following completion of each
milestone contained in the Attachment entitled "Schedule". IBM will pay
Infospace the amounts due within 30 days of Infospace's meeting the
milestone described and IBM's receipt of a valid invoice.
4.15 All invoices will include the following information:
a. this Agreement number;
b. Infospace's company and remit to address;
c. a short description of the milestone for which payment is due; and
d. IBM's Purchase Order number, Infospace's invoice number and its date.
4.16 All invoices will be addressed to IBM Corporation and sent (with a copy
to the IBM Technical Coordinator) to the following address:
IBM Corporation
Accounts Payable Center
P.O. Box 9005
1701 North Street
Endicott, NY 13761-9005
5 TESTING
5.1 Infospace will perform the following tests prior to each delivery of the
Licensed Work:
a. component testing;
b. functional verification testing;
c. system testing; and
d. compatibility testing.
Upon IBM's request, the details of such testing will be mutually agreed
to by the parties.
5.2 Infospace will, upon IBM's request, provide to IBM concurrent with each
delivery of the Licensed Work and Tools all-test results, test scenarios,
test cases, and test reports associated with the pre-delivery testing.
5.3 Upon receipt of each delivery of the Licensed Work to IBM, IBM may
evaluate the Licensed Work for a period of 30 days and perform such tests
as IBM deems appropriate to determine if:
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<PAGE>
a. the Licensed Work meets the specifications described in the Attachment
entitled "Description of Licensed Work;"
b. the Licensed Work executes repetitively within the system environment
described in the Attachment entitled "Description of Licensed Work;" and
c. IBM can successfully execute to completion all functional and system
test scenarios developed by IBM.
At the end of the 30 day evaluation period, IBM will notify Infospace of
its acceptance or non acceptance of the Licensed Work. If IBM fails to
notify Infospace of its acceptance or non acceptance of the Licensed Work
at the end of the 30 day evaluation period, IBM shall be deemed to have
accepted the Licensed Work.
5.4 IBM's testing does not relieve Infospace of its obligations under this
Agreement. IBM has no obligation to perform testing of or identify errors
in the Licensed Work.
5.5 For the purposes of performing the engineering work described in section 3
"Description of Engineering Work" of the Attachment "Description of
Licensed Work", IBM will assist Infospace by providing access to the
services and facilities of the IBM Solution Partnership Center (SPC)
located at 2929 Campus Drive, San Mateo, CA 94401. Infospace and its
employees shall use the services and facilities of the SPC solely for the
purposes of creating an OS/390 version of the Licensed Work. Infospace will
be responsible for scheduling the use of the services and facilities of the
IBM Solution Partnership Center by completing the necessary reservations
forms on the SPC web page (www.spc.ibm.com) within 30 days of the Effective
Date of this Agreement. Upon mutual agreement, these services and
facilities will be made available within 60 days of the Effective Date of
this Agreement and continuing for a period not to exceed twelve (12) weeks.
These services and facilities are normally available during normal business
hours (8:00AM PST to 5:00PM PST) Monday through Friday, excluding standard
holidays as defined by that IBM location. The services and facilities are
to include access to a S/390 computer system running the software described
in Section 3.2 of the Attachment "Description of Licensed Work." The
services and facilities of the SPC may not be available during all of the
time periods specified above as a result of vacation and education plans of
key technical employees, planned relocation of the SPC to a new facility or
other unknown circumstances. Infospace will be solely responsible for any
travel, lodging or any other expenses associated with the use of these IBM
facilities by Infospace and its employees.
In the event that the services and facilities of the SPC are not available
for the purposes of performing the engineering work described in section 3
"Description of Engineering Work" in the Attachment "Description of
Licensed Work" or Infospace needs additional time beyond the twelve (12)
weeks allocated at the SPC, IBM will use reasonable efforts to provide
access to an alternate S/390 computer system running the software described
in section 3.2 of said Attachment. IBM will use reasonable efforts to
provide access to said alternate S/390 computer system within thirty (30)
days of receiving written notice from Infospace of the need for access to
such alternate S/390 computer system for thirty-six (36) calendar weeks
after the Effective Date of this Agreement. Said alternate S/390 computer
system will be located at IBM's Storage Systems Division Test Facility at
5600 Cottle Road, San Jose, California. IBM will provide access during
normal business hours (8:00 AM PST to 5:00 PM PST) Monday through Friday,
excluding holidays as defined by the IBM location. Infospace and its
employees shall use this computer system solely for the purposes of
creating an OS/390 version of the Licensed Work. Infospace will be solely
responsible for any travel, lodging or any other expenses associated with
the use of these IBM facilities by Infospace and its employees. If for any
reason IBM is unable to supply the foregoing alternate S/390 computer
system and software, the parties will meet and negotiate in good faith to
address the hardware and software requirements for creating an OS/390
version of the Licensed Work as described in Section 3 "Description of
Engineering Work" in Attachment "Description of Licensed Work."
In meeting its obligations under the immediately preceding paragraph, IBM
will attempt to provide remote access to Infospace for the IBM Test
Facility located at IBM's facility in San Jose, California during the
period specified above, provided that Infospace fully complies with IBM's
remote access requirements, as described below:
a. Infospace shall provide IBM with the names, home addresses, home phone
numbers and titles of those employees who require remote access to the
IBM Test Facility;
b. Infospace shall not allow usage of access codes (userids and passwords)
assigned by IBM except by those employees to whom they have been
individually assigned;
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<PAGE>
c. Infospace shall not allow any access codes assigned by IBM to be shared
among Infospace's employees, and shall take reasonable precautions
against allowing them to be used in an unauthorized manner;
d. Infospace and its employees shall use the access codes and test facility
solely for use in connection with the engineering work described in
Section 3 "Description of Engineering Work" in Attachment "Description
of Licensed Work";
e. Infospace shall schedule its use of the IBM Test Facility with the
appropriate IBM personnel;
f. Infospace and its employees shall only use software provided by IBM for
the remote connection to the IBM Test Facility;
g. Infospace and its employees shall only initiate remote access to IBM's
Test Facility from Infospace's offices located at 181 2nd Avenue, San
Mateo, California or 167 2nd Avenue, San Mateo, California;
h. Infospace and its employees shall operate all computers or workstations
solely on a private (single party) line basis;
i. Infospace and its employees shall not use any telephone or other devices
with a call forwarding feature to transmit or receive data; and
j. Infospace shall comply with any additional reasonable security
requirements that IBM requests in order to maintain the security of
IBM's Test Facility.
5.6 In addition, in the event that Infospace needs access to an IBM S/390
computer system running the software described in Section 3.2 of Attachment
"Description of Licensed Work", after its has delivered to IBM an OS/390
version of the Licensed Work to IBM, in order to perform its
responsibilities and obligations described in Attachment "Testing,
Maintenance and Support", IBM will provide access to such a S/390 computer
system with the necessary software. This access will be on an as-needed
basis for the term of this Agreement and continuing for as long as
Infospace has testing, maintenance and support obligations and
responsibilities under this Agreement. Infospace and its employees shall
use this computer system solely for performing its testing, maintenance and
support obligations and responsibilities. Such access will be at the IBM's
Storage Systems Division Test Facility located at 5600 Cottle Rd., San
Jose, California during normal business hours (8:00 AM PST to 5:00 PM PST)
Monday through Friday, excluding holidays as defined by that IBM location.
Infospace will be solely responsible for any travel, lodging or any other
expenses associated with the use of these IBM facilities by Infospace and
its employees.
IBM will attempt to provide remote access to the IBM Test Facility located
at IBM's facility in San Jose, California during the period specified above
in this section, provided that Infospace fully complies with IBM's remote
access requirements, as described in Section 5.5 above.
5.7 If IBM provides remote access to a S/390 computer system located at the IBM
Storage Systems Division Test Facility in San Jose, California as described
in Section 5.5 and 5.6 above, Infospace will provide however many IBM-
compatible personal computer(s) (which will be used to remotely access the
IBM-owned S/390 computer system) are required by its software engineers. In
order to remotely access the IBM-owned S/390 computer system, the personal
computer will have the following hardware and software Products installed
and operational.
[*]
[*]
[*]
[*]
5.8 For the purposes of performing the engineering work described in section 3
"Description of Engineering Work" of the Attachment entitled "Description
of Licensed Work", IBM will provide a complete set of product documentation
for the software Products and components listed below to Infospace on
industry standard 120-mm 650 megabyte CD-ROM media within 30 days of the
Effective Date of this Agreement
. IBM OS/390 Version 2 Release 5 operating system
. IBM Unix Systems Services (a component of the OS/390 operating system)
. IBM DB2 for OS/390 Version 5.0 (IBM program number 5655-DB2)
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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. Lotus Domino Go Webserver Version 4.6.1 for OS/390
5.9 IBM is responsible for supplying, for the term of this Agreement and for
[*] following its expiration or termination, the following corequisite
software that allows the SpaceSQL Version 4.0 product to function, and to
be maintained and serviced, on an IBM S/390 computer running the IBM
OS/390 operating system.
. a C/C++ compiler, such as the OS/390 C/C++ Version 2 Release 4 product
which includes a C compiler, C++ compiler and a set of C++ class
libraries
. a Java Virtual Machine (JVM), such as that contained in the Java for
OS/390 Java Development Kit (JDK)
. a web server, such as the Lotus Domino Go Webserver Version 4.6.1 for
OS/390 product
6 REPRESENTATIONS AND WARRANTIES
6.1 Infospace makes the following ongoing representations and warranties:
a. Infospace has full legal rights to grant the fights granted herein;
b. Infospace is not under, and will not assume, any contractual obligation
that prevents Infospace from performing its obligations or conflicts
with the rights and licenses granted in this Agreement;
c. except for existing secured bank lines of credit, there are no liens,
encumbrances or claims pending or threatened against Infospace, or to
Infospace's knowledge, anyone else, that relate to the rights and
licenses granted in this Agreement;
d. neither the Licensed Work nor the Tools contain libelous matters nor,
do they directly or indirectly infringe any publicity, privacy or
intellectual property rights of a third party including any patents or
patent applications;
e. the Licensed Work and the Tools will perform in accordance with the
requirements set forth in this Agreement, including the Attachment
entitled "Description of Licensed Work", and will conform to
Infospace's user documentation, and any sales and marketing materials
provided by Infospace;
f. the Source Code that Infospace will provide into escrow, pursuant to
the Attachment "Source Code Custody Agreement" hereto, corresponds to
the current release or version of the Licensed Work provided by
Infospace under this Agreement;
g. the Licensed Work supports the Year 2000; it is capable of correctly
processing, providing and receiving date data, as well as properly
exchanging accurate date data with all Products (for example, hardware,
software and firmware) with which the Licensed Work is designed to be
used;
h. neither the Licensed Work nor the Tools are contaminated by harmful
Code; and
i. all authors have waived their Moral Rights in the Licensed Work to the
extent permitted by law.
Infospace will promptly provide IBM written notice of any change that may
affect its representations and warranties.
6.2 Except as provided above, anything either party provides to the other
related to this Agreement is "AS IS", without warranty of any kind.
7 INDEMNIFICATION AND LIABILITY
7.1 Infospace will defend and indemnify IBM and IBM's Subsidiaries if a third
party makes a claim against IBM or its Subsidiaries based on an actual or
alleged:
a. failure by Infospace, to the extent not caused by IBM, to perform
Infospace's obligations under this Agreement;
b. breach of Infospace's representations and warranties;
c. failure by Infospace to comply with government laws and regulations; or
d. infringement by Infospace, the Licensed Work or Tools of patents,
copyrights, trademarks, trade secrets, and other intellectual property
rights.
7.2 Infospace shall have no obligation under subsection 7.1.d above to the
extent any claim of infringement or misappropriation results from: (i) use
of the Licensed Work or Tools in combination with any other product, end
item, or assembly if such infringement would have been avoided but for
such combination or use, and the combination with other product, end item
or assembly does not occur in an ordinary and expected use of the
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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<PAGE>
Licensed Work, (ii) any claim based on IBM's use of the License Work or
Tools as shipped after Infospace has informed IBM of modifications or
changes in the Licensed Work or Tools required to avoid such claims and
offered to implement those modifications or changes, if such claim would
have been avoided by implementation of Infospace's suggestions. Infospace
shall not be liable hereunder for enhanced or punitive damages which could
have been avoided or reduced by actions within the control of IBM.
7.3 IBM will:
a. promptly provide Infospace notice of any such claim; and
b. allow Infospace to control, and cooperate with Infospace in, the defense
of the claim and settlement negotiations.
IBM may participate in the proceedings at its option and expense.
7.4 In addition, if an infringement claim appears likely or is made, Infospace
will:
a. obtain the necessary rights for IBM, IBM Subsidiaries and Distributors
and their respective customers to continue to distribute, license,
otherwise transfer and use the Licensed Work on an uninterrupted basis
and exercise all rights granted in the Licensed Work and Tools; or
b. modify the Licensed Work and Tools at Infospace's expense to resolve the
claim. This modified Licensed Work will comply with the Attachment
entitled "Description of Licensed Work."
If Infospace is not able to do either within a reasonable period of time,
IBM may terminate this Agreement for Infospace's breach.
7.5 In addition to any remedies specified in this Agreement, IBM may pursue any
other remedy it may have in law or in equity.
7.6 Regardless of the type of claim, neither party is liable to the other for
indirect, incidental, special, or consequential damages including, but not
limited to, lost profits or revenues, under any part of this Agreement,
even if informed that they may occur. This limitation does not apply to (a)
Infospace's liabilities for indemnity above or (b) any obligations of
either party to make a payment which is due under this Agreement. IBM's
total liability is limited to payments due to Infospace under this
Agreement.
8 TERM AND TERMINATION
8.1 The term of this Agreement begins on the Effective Date and expires [*]
from the Effective Date, unless terminated sooner under the terms of this
Agreement.
8.2 Either party may terminate this Agreement for the other's material breach
by providing the breaching party with a written notice that describes the
breach. The termination will become effective 45 days after receipt of the
notice unless the breach is cured within that 45 day period. However, if
the breach (other than a breach for failure to deliver the Licensed Work)
by its nature, cannot be remedied in 45 days, but can be remedied in a
reasonable time thereafter, the breaching party will take reasonable and
diligent steps to remedy it, notify the other party of the action plan,
progress towards completion, and complete such remedial action promptly. In
such event, the notice period will be suspended while the breaching party
takes these actions.
8.3 After such time as IBM has made the second royalty advance of [*]
referred to in Section 4.3 above, IBM may terminate this Agreement
without cause on 30 days notice to Infospace.
8.4 Expiration or termination of this Agreement does not affect any licenses
granted in accordance with the terms of this Agreement for the Licensed
Work, Externals or Tools. In the event of termination by IBM for breach by
Infospace, IBM will not be obligated to make any payments that would have
become due under this Agreement on or after the effective date of
termination, other than per copy royalty payments for authorized copies of
the Licensed Work or Derivative Work contained in an IBM Product and such
Product was licensed to a customer by IBM, IBM Subsidiary or Distributor
prior to the effective date of termination. IBM's payment obligations are
also subject to Subsection 2.7 of this Agreement.
8.5 Subject to Subsection 8.4, any provisions of this Agreement that by their
nature extend beyond termination or expiration will survive in accordance
with their terms. These include Sections 3.5, 3.6, 3.7 and 3.8, and the
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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Sections entitled Representations and Warranties, Indemnification and
Liability, and General. These terms will apply to either party's successors
and assigns.
8.6 In the event of either termination or expiration of this Agreement,
Infospace agrees to maintain and support, as described in the Attachment
entitled "Testing, Maintenance and Support", the latest maintenance level
of the Licensed Work delivered to IBM for a period of two (2) years after
the termination or expiration date of this Agreement. Following termination
or expiration of this Agreement, Infospace will maintain and support the
latest maintenance level of the Licensed Work delivered to IBM using
software levels of prerequisite or corequisite software Products (operating
systems, web browsers, Java Virtual machines, etc.) that are either current
at the time of expiration or termination of this Agreement or more current.
9 COORDINATORS AND COMMUNICATIONS
9.1 Any notice required or permitted to be made by either party to this
Agreement must be in writing. Notices are effective when received by the
appropriate coordinator as demonstrated by reliable written confirmation
(for example, certified mail receipt or facsimile receipt confirmation
sheet).
9.2 The Contract Coordinators responsible to receive all notices and administer
this Agreement are:
<TABLE>
<CAPTION>
For IBM: For Infospace
<S> <C> <C> <C>
Name: [*] Name: Ben Connors
Title: [*] Title: Chief Operating Officer
Address: [*] Address: 181 2nd Ave., Suite 218
[*] San Mateo, CA 94401
Phone: [*] Phone: (650) 685-3011
Fax: [*] Fax: (650) 685-3098
</TABLE>
9.3 The Technical Coordinators responsible to accept all Deliverables,
coordinate all exchanges of confidential information, and administer and
coordinate the technical matters associated with this Agreement are:
<TABLE>
For IBM: For Infospace
<S> <C> <C> <C>
Name: [*] Name: Joe Thomas
Title: [*] Title: Director of Strategic Alliance
Address: [*] Address: 181 2nd Ave., Suite 218
San Mateo, CA 94401
Phone: [*] Phone: (650) 685-3030
Fax: [*] Fax: (650) 762-2110
</TABLE>
Technical Coordinators may propose, accept (by signature or initial), and
implement technical changes to this Agreement that do not change dollar
amounts or materially change Deliverables or the schedules of this
Agreement.
9.4 All legal notices regarding this Agreement will be sent to the addresses
indicated below and shall be deemed received two (2) days after mailing if
sent by certified mail, return receipt requested, or on the date
confirmation is received, if sent by facsimile transmittal to the party set
forth below:
<TABLE>
<CAPTION>
For IBM: For INFOSPACE
<S> <C> <C>
Name: General Legal Department Name: Legal Department
</TABLE>
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-12
<PAGE>
<TABLE>
<S> <C> <C>
Address: [*] Address: 181 2nd Ave., Suite 218
[*] San Mateo, CA 94401
[*]
Phone: [*] Phone: (650) 685-3000
Fax: [*] Fax: (650) 685-3001
</TABLE>
9.5 Each party will provide written notice to the other party when its
coordinators change.
10 GENERAL
10.1 Independent Contractor. Each party is an independent contractor. Neither
party is, nor will claim to be, a legal representative, partner,
franchisee, agent or employee of the other except as specifically stated
in the Subsection entitled "Copyright" below. Neither party will assume or
create obligations for the other. Each party is responsible for the
direction and compensation of its employees.
10.2 Freedom of Action. Each party may have similar agreements with others.
Each party may design, develop, manufacture, acquire or market competitive
Products and services, and conduct its business in whatever way it
chooses. IBM is not obligated to announce or market any Products or
services. IBM does not guarantee the success of its marketing efforts. IBM
will independently establish prices for its Products and services.
10.3 Reliance. Neither party relies on any promises, inducements or
representations made by the other or expectations of more business
dealings, except as expressly provided in this Agreement. This Agreement
accurately states the parties' agreement.
10.4 Compliance With Applicable Laws. Each party will comply with all
applicable laws and regulations at its expense including, to the extent
applicable, Executive Order 11246 on Equal Employment Opportunity, as
amended, the Occupational Safety and Health Act of 1970, as amended, and
the Americans With Disabilities Act of 1990, as amended. This also
includes all applicable government export and import laws and regulations.
10.5 Confidential Information. The parties agree that information exchanged
under this Agreement that is considered by either party to be confidential
information will be subject to the terms of the AECI referenced on the
first page of this Agreement and its Supplements. In addition, Infospace
will not provide IBM with any information which may be considered
confidential information of any third party unless provided under the
AECI. The obligations set forth in the AECI with regard to confidential
information will not limit or preclude the exercise of the licenses
granted in this Agreement.
10.6 Copyright. Any publication by IBM of the Licensed Work or a Derivative
Work thereof may contain an appropriate copyright notice, as determined by
IBM. Infospace will enforce and maintain its copyright protection in the
Licensed Work. At IBM's request, Infospace agrees to provide IBM
reasonable evidence of copyright protection of the Licensed Work. IBM is
not responsible for enforcing and maintaining such copyright protection.
However, in the event that Infospace fails to enforce or maintain its
copyright protection in the Licensed Work, Infospace authorizes IBM to act
as Infospace's agent in the copyright registration of the Licensed Work in
the name of Infospace.
10.7 Order of Precedence. If there is a conflict among the terms of this base
License Agreement and its Attachments, the terms of this base License
Agreement prevail over those of the Attachments, unless the parties
expressly indicate in the Attachments that particular terms within the
Attachments prevail. Terms in IBM's purchase orders and Infospace's
invoices or acknowledgments, if any, are void.
10.8 Headings. The headings of this Agreement are for reference only. They will
not affect the meaning or interpretation of this Agreement.
10.9 Counterparts. This Agreement may be signed in one or more counterparts,
each of which will be considered an original, but all of which together
form one and the same instrument.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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<PAGE>
10.10 Amendment and Waivers. For a change to this Agreement to be valid, both
parties must sign it. No approval, consent or waiver will be enforceable
unless signed by the granting party. Failure to insist on strict
performance or to exercise a right when entitled does not prevent a party
from doing so later for that breach or a future one.
10.11 Cooperation. Each party shall use reasonable commercial efforts to
cooperate with the other party and shall respond in a prompt manner to
any inquiries, requests for information or deliveries made by the other
party so that each may meet its obligations pursuant to this Agreement
10.12 Actions. Neither party will bring a legal action relating to the subject
matter of this Agreement, against the other more than 2 years after the
cause of action arose or the party became aware or should have become
aware of the cause of action, if later, except in the case of
indemnification for infringement, in which case this period runs for 2
years after the award or settlement was made.
10.13 Dispute Resolution. Both parties will act in good faith to resolve
disputes prior to instituting litigation. Each party waives its rights to
a jury trial in any resulting litigation. Litigation will only be
commenced in the State of New York.
10.14 Governing Law. This Agreement will be governed by the substantive law of
the State of New York applicable to contracts executed in and performed
entirely within that State. The United Nations Convention on Contracts
for the International Sale of Goods does not apply. Infospace will, upon
written notice from IBM, submit to personal jurisdiction in any forum
where IBM is sued for claims related to this Agreement.
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<PAGE>
Attachment A
Page 1 of 2
DESCRIPTION OF LICENSED WORK
1 General description of Licensed Work:
Infospace SpaceSQL Version 4.0 software product supporting the following
server platforms:
. [*] operating system
. [*] operating system
. [*] operating system
. [*] operating system
Capable of retrieving data from, and displaying reports and charts of data
contained in, relational database tables managed by the following
relational database management systems:
. [*]
. [*]
. [*]
. [*]
Working in conjunction with the following web browsers:
. [*]
. [*]
2 Specific description of Licensed Work:
Complete Infospace SpaceSQL Version 4.0 software product, contained on
industry standard 120-mm 650 megabyte CD-ROM media, including the software
components listed below and any others that are considered part of the
product:
. Infospace Java Server (IJS)
. User Administration and security module
. Server Administration module
. all Java applets, including the Infospace SpaceSQL designer applet for
designing reports and charts
In addition, all product documentation, including:
. all external customer documentation, whether printed or online,
including user guides, installation guides and reference manuals, etc.
Infospace SpaceSQL Java Language application programming interface
(API).
. all other written product documentation.
3 Description of Engineering Work
3.1 Infospace will re-engineer the SpaceSQL to run on an IBM S/390 computer
system such that the product contains all of its existing features and is
capable of performing all of its current functions. The objective of this
engineering effort is to create a version of the SpaceSQL software product
that runs under the IBM OS/390 operating system and is capable of
retrieving data from, and displaying reports and charts of data contained
in, relational database tables managed by the IBM DB2 for OS/390 relational
database management system.
3.2 This engineering effort will be accomplished using an IBM S/390 computer
system running the following software Products and components:
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-15
<PAGE>
Attachment A
Page 2 of 2
. IBM OS/390 Version 2 Release 5 operating system
. IBM Unix Systems Services (a component of the OS/390 operating system)
. IBM DB2 for OS/390 Version 5.0 (IBM program number 5655-DB2)
. Lotus Domino Go Webserver Version 4.6.1 for OS/390
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<PAGE>
Attachment B
Page 1 of 1
SCHEDULE
<TABLE>
Milestone Date (Not Later
--------- ---------------
Than)
-----
<S> <C> <C>
1. Execution of this Agreement September 18, 1998
2. Receipt of the completed Certificate of Originality for the August 21, 1998
Licensed Work.
3. Infospace's delivery of the Licensed Work which substantially October 18, 1998
complies with the specifications outlined in the Attachment
entitled "Description of Licensed Work", excluding engineering
work described in Section 3 of Attachment A "Description of
Licensed Work".
4. Infospace's delivery of the other Deliverables (other than Licensed October 18, 1998
Work, Tools, etc.)
5. Successful completion of IBM's testing of the initial delivery of November 18, 1998
the Licensed Work
6. Delivery of OS/390 product documentation from IBM to October 18, 1998
Infospace.
7. Remote access to IBM-owned S/390 computer from Infospace for November 17, 1998
engineering work.
8. Delivery by Infospace to IBM of an OS/390 version of the [*]
Licensed Work as described in Section 3 "Description of
Engineering Work" in Attachment "Description of Licensed
Work."
9. Successful completion of IBM's testing of the OS/390 version of [*]
the Licensed Work
</TABLE>
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-17
<PAGE>
Attachment C
Page 1 of 7
TESTING, MAINTENANCE AND SUPPORT
1 Definitions
Capitalized terms in this Attachment have the following meanings.
1.1 APAR is the completed form entitled "Authorized Program Analysis Report"
that is used to report suspected Code or documentation errors, and to
request their correction.
1.2 APAR Closing Codes are the established set of codes used to denote the
final resolution of an APAR. IBM will identify APAR Closing Codes prior to
the start of the maintenance obligations.
1.3 APAR Correction Times are the objectives that Infospace is expected to
achieve for resolution of errors and distribution of the correction to IBM.
a. "Severity 1" must be resolved within fourteen (14) calendar days and
requires maximum effort support until an emergency fix or circumvention
is developed. Critical situations may require customer, IBM and
Infospace personnel to be at their respective work locations or
available on an around-the-clock basis. The objective will be to provide
a circumvention from Infospace to IBM within 24 hours after receipt of
notification from Infospace;
b. "Severity 2" must be resolved within forty-five (45) calendar days;
c. "Severity 3 & 4" must be resolved within sixty (60) calendar days; and
Total quarterly average resolution time for all severity's not to exceed 40
days.
The calendar days begin when Infospace receives the APAR and supporting
documentation and ends when the Error Correction or other resolution is
shipped to IBM. IBM will consider exceptions from these objectives when
warranted by technical or business considerations.
1.4 APAR Severity Levels are designations assigned by IBM to errors to indicate
the seriousness of an error based on the impact that an error has on a
customer's operation:
a. Severity 1 is a critical problem. The customer cannot use the Product or
there is a critical impact on the customer's operations which requires
an immediate solution;
b. Severity 2 is a major problem. The customer can use the Product, but an
important function is not available or the customer's operations are
severely impacted;
c. Severity 3 is a minor problem. The customer can use the Product with
some functional restrictions, but it does not have a severe or critical
impact on the customer's operations; and
d. Severity 4 is a minor problem that is not significant to the customer's
operations. The customer may be able to circumvent the problem.
1.5 Developer Test Systems are an appropriate configuration of installed
hardware and software that Infospace maintains which is representative of
typical customer installations for the Software. These Developer Test
Systems will contain, at a minimum, the following:
a. the current and penultimate level of the Software supplied to IBM;
b. the current and penultimate level of prerequisite/co-requisite software
that IBM specifies to Infospace; and
c. specific fix-packages as required.
The Developer Test Systems will consist of the appropriate configured
workstations only unless IBM specifies and provides Infospace other
equipment at no charge.
1.6 Highly Pervasive (HIPER) APAR is an APAR that documents a high impact or
pervasive code defect. Code defects that result in data loss or data
integrity will always be identified as a HIPER APAR.
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Attachment C
Page 2 of 7
1.7 Maintenance Level Service is the service provided when a customer
identifies an error in the Software.
a. Level 1 is the service provided in response to customer's initial phone
call identifying an error.
b. Level 2 is the service provided to attempt to reproduce and isolate an
error or to find that the service provider cannot reproduce the error.
c. Level 3 is the service provided to isolate the error at the component
level of the Code. The service provider distributes Error Correction or
circumvention or gives notice if no Error Correction or circumvention
is possible.
1.8 Problem Determination is the process of determining whether a problem is
being caused by hardware, Software, documentation or user.
1.9 Problem Management Record ("PMR") and Problem Management - Hardware
("PMH") are records created when a customer makes the initial support
request. This record becomes a part of the Problem Management System
database and records the essential information about the customer question
or problem. PMRs are created for requests for software support and PMHs
are created for requests for hardware support.
1.10 Problem Management System ("PMS") is an internal IBM developed software
system used to record customer demographic information and record
information about reported question or problem. The PMS will handle the
dispatching of the call record. The PMS will provide management reports of
the call activity and the recording and tracking of all questions and
problems to final resolution. The PMS will verify that each customer is
"entitled" to support.
1.11 Problem Source Identification is the process of determining which
hardware, software or documentation component is failing or attributing
the failure to some external cause such as customer error or no trouble
found.
1.12 Program Temporary Fix ("PTF") is a final correction to an APAR. A PTF is
distributed to the customer who originated the error and other customers
who report the same error.
1.13 Reader Comment Form ("RCF") is the form which is used by the IBM customer
to record corrections and comments on the documentation. The RCF is
generally the last page of a manual, brochure or other publication. The
customer completes it and mails it to the address specified.
1.14 Software is (1) any material described in or that conforms to the
description contained in the Attachment entitled "Description of Licensed
Work" in this Agreement or that is delivered to IBM as the Licensed Work,
including, but not limited to, Code, associated documentation and
interfaces, and (2) Error Corrections and Enhancements thereto.
1.15 Error Corrections are revisions that correct defects and deficiencies in
the Software.
1.16 Enhancements are changes or additions, other than Error Corrections, to
the Software and include code modifications that support new releases of
operating systems and other software or that provide substantial
additional function and/or value.
2 Software Maintenance and Support Funding and Responsibilities
2.1 IBM will be the primary customer contact point for questions, problems and
assistance concerning the Product.
2.2 The parties will agree to the specific details of the process flow and
escalation procedures each will follow to resolve customer calls and
product defects for requests for support thirty (30) days prior to the
beta test or general availability of an IBM Product, whichever is earlier.
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<PAGE>
Attachment C
Page 3 of 7
2.3 Infospace will provide IBM [*] on any known problems in the Software,
including error corrections, basic enhancements, or publication changes,
and the work arounds and solutions, if available, thirty (30) days prior
to the beta test or general availability of an IBM Product, whichever is
earlier, in the agreed to fix format.
2.4 Within thirty (30) days of IBM advising Infospace of the date of general
availability of an IBM Product or the start of an early support program
for an IBM Product, Infospace will establish a process to check and
respond to IBM incoming requests for Level 3 support.
2.5 Infospace will be expected to provide Customer Problem Support and Error
Correction Support to IBM in accordance with the response time criteria
stated in Sections 2.8 and 3.4 of this Attachment.
2.6 In order to provide Error Corrections, Infospace will maintain a current
copy of the Software. Infospace will maintain procedures to ensure that
new Error Corrections are compatible with previous Error Corrections and
with supported releases of prerequisite/corequisite software identified by
IBM.
2.7 Packaging of Error Corrections will be done as mutually agreed to by IBM
and Infospace.
2.8 Infospace will respond to IBM requests for technical assistance regarding
maintenance and support of the Software within the following time frames:
APAR Severity Level Response Time
------------------- -------------
Severity 1 [*]
Severity 2 [*]
Severity 3 and 4 [*]
Infospace will ensure that the contacts for IBM support personnel are
proficiently skilled on the Software externals and internals. The response
times stated in this section are effective [*]
2.9 Upon receipt of prior notice from IBM, Infospace will participate in
conference calls, as requested and at mutually convenient times, with
IBM's Level 2 support personnel and IBM's customers when a customer
situation requires it.
2.10 Infospace will participate in joint conference calls at mutually
convenient times with IBM for purposes of technical and process related
interchanges regarding support of the Software.
2.11 If IBM notifies Infospace of critical customer(s) situation status, as
defined by IBM, Infospace shall work with IBM, including work after normal
business hours in certain cases, to jointly determine cause and define the
most technically feasible and most aggressive recovery plan possible after
receiving notification from IBM, and will implement plan as expeditiously
as possible within plan parameters.
2.12 If Infospace needs to engage IBM's Level 2 support personnel, IBM will
provide [*] to such personnel.
2.13 Infospace will provide to IBM [*], or on request if needed more
frequently, information regarding the status of open/unresolved APARs
related to the Software.
2.14 Critical situations may require the parties to travel on-site to IBM's
customer accounts. Each party is responsible for funding the costs for any
expenses incurred for on-site travel to IBM customer accounts for critical
situations.
2.15 In circumstances where materials have to be exchanged between the parties
using facsimile, courier services or any other means of delivery, each
party is responsible for funding the costs of these exchanges.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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Attachment C
Page 4 of 7
2.16 In the event that confidential information belonging to IBM or IBM's
customers needs to be exchanged with Infospace for the performance of the
testing, maintenance and support responsibilities described in this
Attachment, Infospace will protect the confidentiality of this information
and treat this information, and give it the same level of protection, as
IBM Confidential information received under the "Agreement for the
Exchange of Confidential Information" and its Supplement referenced on the
first page of this Agreement.
3 APAR Origination and Correction
3.1 Generally, APARs will originate from IBM. Infospace will, upon IBM's
request, also report to IBM as APARs, all valid errors discovered by
Infospace or Infospace's customers. After receiving an APAR, IBM will
assign an identifying number and Severity Level, and forward the APAR to
Infospace for action.
3.2 Each APAR will document a unique code or documentation defect. Each APAR
correction is to contain a correction for only the reported error.
3.3 For verified APARs for the Software, Infospace will use best efforts to
provide Error Corrections as set out below within the applicable APAR
Correction and PTF Turnaround Times:
a. The fix to the Object Code in machine-readable form including a hard
copy description of the Error Corrections (which may include a paper
submission of the Error Corrections); packaged according to software
update packaging standards for the associated operating system.
b. For a procedural work-around, the corrected procedure in machine-
readable form.
3.4 For all versions of the Software, PTFs are to be delivered to IBM within
the following time criteria:
APAR Severity Level Response Time
------------------- -------------
Severity 1 [*]
Severity 2 [*]
Severity 3 and 4 [*]
3.5 Unless otherwise agreed to by IBM, fixes (PTFs) are to be delivered on
industry standard 120-mm 650 megabyte CD-ROM media capable of being read
on a standard CD-ROM drive contained in an IBM-compatible personal
computer. For all versions of the Software, the PTF delivered to IBM will
be a complete product replacement of the Software.
3.6 Reader Comment Forms received by IBM that do not form the basis of an APAR
will be forwarded to. Infospace for proper and prompt handling as
appropriate. Infospace will provide a response to the Reader Comments
Forms to IBM within an average of 10 business days after receipt.
4 IBM's Software Maintenance Level Service Responsibilities
4.1 IBM customers will initiate requests for support of an IBM Product by
contacting IBM at which time the IBM representative will begin work on the
problem. In the event IBM customers contact Infospace for support of the
IBM Product, Infospace will redirect those callers to contact IBM Software
Support at (800) 237-5511 (Domestic). IBM will perform the following Level
1 and Level 2 support responsibilities:
4.2 Level 1
a. create the PMR;
b. obtain a description of the problem and verify its severity;
c. search the IBM PMS data base for known problems;
d. provide available resolution if known problem;
e. recommend local IBM assistance as required
f. if no resolution, pass PMR to Level 2; and
g. update PMR, documenting Level 1 actions.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-21
<PAGE>
Attachment C
Page 5 of 7
4.3 Level 2, to the extent possible without access to Source Code for the
Software,
a. receive the PMR from Level 1;
b. contact customer, verify and analyze problem symptoms and gather
additional data from customer as required;
c. search IBM database for known problems;
d. provide available resolution if known problem;
e. recommend local IBM assistance as required;
f. recreate problem on IBM Test System, if available;
g. determine if error is due to improper installation of the Product by
the customer;
h. determine if suspected error is due to prerequisite or corequisite
software at the customer location;
i. if no resolution and problem appears to be a newly discovered code or
documentation error in the Software, contact Infospace for further
problem and/or source code diagnosis;
j. create APAR record and notify Infospace of the APAR providing problem
description and supporting documentation and materials;
k. if the request is a technical question, provide response to customer,
obtaining assistance from Infospace, as needed;
l. if Infospace requests, IBM will assist Infospace in obtaining
additional information or materials from customer to support Level 3
Problem Determination, Problem Source Identification and problem
resolution; and
m. update PMR, documenting Level 2 actions;
n. close-out the problem record with the customer in the PMS database;
o. notify Infospace level 2 support personnel of potential customer
satisfaction situations and engage Infospace escalation process when
appropriate; and
p. engage Infospace support during off shift hours when appropriate for
Severity 1 customer problems.
5 INFOSPACE's Software Maintenance Level Service Responsibilities
5.1 Infospace will provide all other support to resolve problems in the
Software that cannot be resolved by IBM. Infospace will provide the
following support responsibilities to IBM following notification from IBM
pursuant to Sections 4.3(j) above:
5.1.1 Customer Problem Support
a. receive the PMR and/or APAR from IBM;
b. open call in Infospace's problem tracking database and provide
identifying problem number to IBM;
c. analyze problem symptoms and request IBM to obtain additional data
from the customer as required to support Problem Determination,
Problem Source Identification and problem resolution;
d. provide PMR and/or APAR and supporting documentation to Infospace
Product Support Engineers;
e. notify IBM of any new defects or pervasive problems not identified by
IBM's support personnel;
f. use best efforts to provide support to IBM and directly to IBM's
customers within one (1) hour after receipt of a request for support
from IBM during off shift hours for severity one customer problems;
g. upon prior notice from IBM, be available to participate in conference
calls as required, at mutually convenient times, with IBM and IBM's
customers regarding support of the Software;
h. attempt bypass or circumvention for high impact customer problems;
i. provide information to IBM regarding Infospace's dealings with IBM's
customers so that IBM may update its PMS database; and
j. close out the problem record in the Infospace's problem tracking
database,
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<PAGE>
Attachment C
Page 6 of 7
5.1.2 Error Correction Support (Level 3)
a. receive PMR and/or APAR and supporting documentation and materials
from Infospace customer problem support;
b. analyze the problem symptoms and diagnose the suspected error;
c. notify IBM if additional information, materials or documentation are
required;
d. attempt to recreate the problem on the Developer Test System, if
required;
e. develop a bypass or circumvention as required;
f. determine if Error Corrections are required to the Software;
g. if Error Corrections are required to the Software, request IBM to
create an APAR record and provide Error Corrections to IBM in the
format specified by IBM to include the deliverable fix;
h. return all APARs to IBM with one of the defined APAR Closing Codes
assigned, including text describing the resolution of the error. In
the event a Code error was found, provide the rationale for the
closing of the APAR;
i. provide resolution to APARs according to the assigned APAR Severity
Level and within the defined APAR Correction and PTF Response Times.
The APAR Correction Times include building, testing, certifying
successful tests of Error Corrections, and packaging for shipment to
IBM any applicable Error Corrections in the format specified by IBM.
PTF Response Time includes installation and regression testing of
PTFs;
j. transmit PTF to IBM destination point;
k. receive technical questions, and supporting documentation and
materials;
l. analyze the technical questions and provide answers to IBM that
cannot be resolved by IBM;
m. Infospace will contact IBM's Level 2 support personnel, when
appropriate, to expedite problem resolution and maintain clarity on
problem requests.
n. If there are any publication changes associated with the APAR,
Infospace will forward the publication changes to IBM for proper and
prompt handling as appropriate
o. be available, with prior notice, to participate in conference calls
as required, at mutually convenient times, with IBM and IBM's
customers regarding support of the Software.
6 Support Process
6.1 Support Engagement Process
6.1.1 When the determination is made that Infospace Support involvement is
required, IBM calls Infospace support at (650) 762-2150. The steps below
define the problem flow and escalation.
6.1.2 IBM will be the primary customer contact point for support of the
Product. Infospace will not make contact directly with IBM customers
without express agreement from IBM, nor will IBM make direct customer
contact with InfoSpace's customers.
6.1.3 IBM support personnel and/or Support Center will provide Infospace with
the following information.
a. The nature and severity of the problem;
b. The PMR number and/or APAR number and associated documentation from
IBM PMS database (for cross reference purposes); and
c. Name and telephone number Infospace should contact to provide action
plan or for further discussions as required.
6.1.4 Infospace will provide the IBM support personnel with the unique problem
number from Infospace's problem tracking database (for cross reference
purposes).
6.1.5 Infospace will respond to IBM requests for technical assistance
regarding maintenance and support of the Software within the APAR
severity response times set forth in section 2.8 of this Attachment.
6.1.6 Infospace works the problem through resolution as documented in section
5.1.1 Customer Problem Support and section 5.1.2 Error Correction
Support (Level 3).
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<PAGE>
Attachment C
Page 7 of 7
6.1.7 Telephone and Internet mail will be used to communicate supporting PMR
and/or APAR number and associated documentation between IBM and
Infospace.
6.1.8 In the event that Infospace needs to engage IBM's support personnel, IBM
will provide 24 x 7 phone number access to IBM's support personnel.
6.2 IBM to Infospace Call Transfer Process
6.2.1 In the event that Infospace's customers contact IBM for support of the
Infospace's SpaceSQL software product, IBM will redirect those callers
to contact Infospace Software Support at (650) 762-2150.
6.3 Escalation Management Process
6.3.1 In the event of a dispute over APAR severity's, the necessity of on-site
customer support by Infospace's support personnel, or other items, IBM
can request escalation to Infospace situation management.
6.3.2 IBM can request escalation to Infospace management at any time through
Infospace Support at (650) 762-2150. Between [*] PST this same number
may also be contacted to initiate critical situation management
escalation.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-24
<PAGE>
Attachment D
Page 1 of 1
EDUCATION AND TRAINING
1 General Requirements
1.1 Infospace will provide training, at no charge, for up to [*] IBM
personnel in a SpaceSQL overview, installation, configuration and
programming [*] class.
1.2 Infospace will provide a focal point to answer technical questions from
IBM's development personnel regarding the usage of the Software and any of
it's programming interfaces.
2 Specific Education and Training Requirements
2.1 Infospace will provide IBM, for its review and concurrence, a detailed
course description including course objectives, a specific outline,
required advance study assignments, and course completion criteria; and
2.2 Technical overview education consisting of [*] of instruction describing an
overview, installation and configuration of the SpaceSQL product (such
training will not include a video tape); and
2.3 Technical programming education consisting of [*] of classroom instruction
and one day of workshop exercises describing the functions, features,
classes and methods associated with the internal Java language Application
Programming Interface (API) provided by the SpaceSQL product for creating
reports and charts (such training will not include a video tape); and
2.4 Technical service education consisting of [*] of instruction covering
material that would be of value and interest to IBM development and service
personnel, including but not limited to: product components; component
descriptions; where components reside within the product; directory
structure; installation and configuration problem scenarios and problem
determination approaches; how to debug performance questions/problems;
recovery and termination flow and tools; error information recording and
error messages; tracing tools and parameters; service tools and facilities;
performance tuning and monitoring; any additional information Infospace
deems relevant to support of the Software (such training will not include a
video tape); and
2.5 Refresher code version training will also be provided for the items
provided in section 2.2, 2.3 and 2.4 above, at least 30 days prior to
delivery of Error Corrections and Enhancements at the request of IBM. Such
training will be in a format similar to the initial course and will only
describe incremental changes in the Software as a result of Error
Corrections and Enhancements.
3 Location, Facilities and Supplies
3.1 The training and education session outlined above will be held at IBM's
facilities in [*]
3.2 IBM will arrange for classroom facilities for up to [*] students and
provide the following facilities: overhead transparency projector, personal
computer overhead projector, flip charts, and white boards.
3.3 Infospace will provide all classroom study and training materials,
including any materials required for advance study assignments.
4 Miscellaneous
4.1 IBM reserves the right to create a video and/or audio tapes of the training
and education classes described in sections 2.2, 2.3 and 2.4 above. All
costs associated with the production of such recordings will be assumed by
IBM.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-25
<PAGE>
Attachment E
Page 1 of 1
Certificate of Originality
You may use this questionnaire to cover one complete product, even if that
product includes multiple modules. Please leave no questions blank. Write "not
applicable" or "N/A" if a question is not relevant to the furnished software
material. If you need additional space to complete any questions, please attach
a separate sheet of paper that identifies the question number. Depending on your
responses, IBM may require additional information.
================================================================================
1. Please identify the software material including version, release, and
modification numbers for program and any documentation:
SpaceSQL 4.0
-----------------------------------------------------------------
2. Was any portion of the software material written by anyone other than you or
your employees within the scope of their employment? Yes x NO If YES,
---- ----
provide, as an attachment, the following information: See Attachment
A) Indicate if the whole software material or only a portion thereof
was written by such party, and identify such portion:
i. Specify for each involved party the name, address, and citizenship:
ii. If the party is a company, how did it acquire title to the software
material (e.g., software material was written by company's employees
within the scope of their employment)?
iii. If the party is an individual, did he/she create the software
material while employed by or under contractual relationship with
another party? YES___NO ___. If YES, provide name and address of the
other party and explain the name of the contractual relationship:
B) How did you acquire title to the software material written by the
other party?
3. Are any copyright, confidentiality, or proprietary notice(s) present on the
software material(s)? YES X NO If YES, please describe such notice(s). On
---- ----
[*] it states "Copyright(s) 1997, 1998 Infospace, Inc. All rights reserved."
- ---------------------------------------------------------------------------
4. Was any portion of the software material (e.g., Code, associated
documentation or any pictorial, graphic and audiovisual works {e.g., icons,
screens, sounds, and characters} derived from preexisting works (either yours
or a third party's), including any code from freeware, shareware, electronic
bulletin boards or the internet? YES X NO___ If YES, please identify the
-
material, author, owner and copyright notice, if any, for each of the
preexisting materials.
[*]
5. Do any of the software materials (e.g., Code, associated documentation or any
pictorial, graphic and audiovisual works {e.g., icons, screens, sounds, and
characters}) include recognizable voices, pictures or other likenesses? YES
----
NO X If YES, how did you acquire rights to use such recognizable voices,
----
pictures or other likenesses?
- ----------------------------------------------------------------------------
6. Provide, as an attachment, an explanation of any other circumstances which
might affect IBM's ability to reproduce, distribute and market this software
material, including whether your software material was prepared from any
preexisting materials which have any: a) confidentiality or trade secret
restrictions to others; b) known or possible royalty obligations to others; or
c) other preexisting materials developed for another party or customer
(including any governmental entity) where you may not have retained full rights
to such other preexisting materials. None
7. You recognize that, for copyright registration or enforcement of legal rights
relating to the furnished software material, IBM may need you to produce
additional information related to the software material. You hereby agree to
cooperate with IBM and provide such information to IBM at IBM's request.
As an authorized representative of Infospace, Inc., I hereby
------------------
certify the above to be true and accurate.
By: /s/ [*]
--------------------------------
Authorized Signature
Name: [*]
-------------------------------
(Type or Print) Date
Title: [*]
------------------------------
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
Page-26
<PAGE>
Attachment
Infospace SpaceSQL 4.0 uses three third party libraries and one shared libraries
1. JCT library developed by Shafir Inc. This library is a user interface library
that provides GUI widgets. Infospace purchase license from Shafir Inc and it
comes with free runtime (no royalty fee).
Shafir Inc information:
Telephone
(512) 257-9392
Fax
(512) 378-3330
Postal address
P.O. Box 201796
Austin, TX 78720-1796
Electronic mail
General Information: [email protected]
Webmaster: [email protected]
--------------------
2. [*] runtime library. This library is a user interface library that provides
GUI widgets. Infospace purchase license from Symantec Inc and it comes with
free runtime (no royalty fee).
[*]
3. [*] This library is a user interface library that provides GUI widgets.
Infospace purchase license from Symantec Inc and it comes with free runtime
(no royalty fee).
[*]
4. [*] that comes with [*] [*].
[*]
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Agreement #4998SJ0071
ON PREMISES ATTACHMENT F
1.0 Access to Premises: Infospace will ensure that Infospace personnel assigned
to work on IBM's premises will: (i) participate in a preemployment criminal
background check covering the counties in which the person was employed or
resided for the past seven years (or longer as required by State legislation),
and inform IBM of any negative findings; (ii) maintain a current and complete
list of the persons' names and social security numbers; (iii) obtain for each
person a valid identification badge from IBM and ensure that it is displayed to
gain access to and while on IBM's premises (it is IBM's policy to deactivate any
such badge if not used for one month); (iv) maintain a signed acknowledgment
that each person will comply with IBM's Safety & Security Guidelines including
search guidelines; (v) ensure that each person with regular access to IBM's
premises registers their vehicles with IBM and comply with all parking
restrictions; (vi) inform IBM if a former employee of IBM will be assigned work
under this Agreement, such assignment subject to IBM approval; (vii) at IBM's
request, remove a person from IBM's premises and not reassign such person to
work on IBM's premises (IBM is not required to provide a reason for such
request); and (viii) notify IBM immediately upon completion or termination of
any assignment and return IBM's identification badge. Upon IBM's request,
Infospace will provide documentation to verify compliance with this Subsection.
2.0 General Business Activity Restrictions: Infospace will ensure that Infospace
personnel assigned to work on IBM's premises: (i) will not conduct any non-IBM
related business activities (such as interviews, hirings, dismissals or personal
solicitations) on IBM's premises; (ii) will not conduct Infospace's personnel
training on IBM's premises, except for on-the-job training; (iii) will not
attempt to participate in IBM benefit plans or activities; (iv) will not send or
receive non-IBM related mail through IBM's mail systems; and (v) will not sell,
advertise or market any products or distribute printed, written or graphic
materials on IBM's premises without IBM's written permission.
3.0 Safety and Security: Infospace will ensure that Infospace personnel assigned
to work on IBM's premises: (i) do not bring weapons of any kind onto IBM's
premises; (ii) do not manufacture, sell, distribute, possess, use or be under
the influence of controlled substances (for nonmedical reasons) or alcoholic
beverages while on IBM's premises; (iii) do not have in their possession
hazardous materials of any kind on IBM's premises without IBM's authorization;
(iv) acknowledge that all persons, property, and vehicles entering or leaving
IBM's premises are subject to search; and (v) remain in authorized areas only
(limited to the work locations, cafeterias, rest rooms and, in the event of a
medical emergency, IBM's medical facilities). Infospace will promptly notify IBM
of any accident or security incidents involving loss of or misuse or damage to
IBM's intellectual or physical assets; physical altercations; assaults; or
harassment and provide IBM with a copy of any accident or incident report
involving the above. Infospace must coordinate with IBM access to IBM's premises
during non-regular working hours.
4.0 Asset Control: In the event Infospace personnel have access to information,
information assets, supplies or other property, including property owned by
third parties but provided to Infospace personnel by IBM ("IBM Assets"),
Infospace Personnel: (i) will not remove IBM Assets from IBM's premises without
IBM's authorization; (ii) will use IBM Assets only for purposes of this
Agreement and reimburse IBM for any unauthorized use; (iii) will only connect
with, interact with or use programs, tools or routines that IBM agrees are
needed to provide Services; (iv) will not share or disclose user identifiers,
passwords, cipher keys or computer dial port telephone numbers; and (v) in the
event the IBM Assets are confidential, will not copy, disclose or leave such
assets unsecured or unattended. IBM may periodically audit Infospace's data
residing on IBM's information assets.
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<PAGE>
Source Code Custody Agreement
[IBM LOGO]
Base Agreement
============================================================================
This Source Code Custody Agreement ("SCCA") between Infospace Inc.,
("Infospace"), Fort Knox Escrow Services ("Custodian") and International
Business Machines Corporation ("IBM") describes the rights and obligations of
the parties for the Escrowed Works that Infospace delivers to Custodian.
The SCCA consists of this Base Agreement and its Descriptions of Escrowed Work
("DEWs"). Each DEW together with this SCCA forms a separate agreement. The SCCA
is our complete agreement and replaces all prior oral or written communications
between us regarding the Escrowed Works.
By signing below for our companies, the parties agree to the terms of this Base
Agreement. Once signed, 1) all parties agree any reproduction of the SCCA made
by reliable means (for example, photocopy or facsimile) is an original unless
prohibited by local law and 2) all Escrowed Works are subject to it.
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Agreed To: Agreed To:
Infospace Inc. ("Infospace") International Business Machines Corporation ("IBM")
By: /s/ Ben Connors By: /s/ BJ Grogan
--------------------------------- ---------------------------
Authorized Signature Authorized Signature
Name: Ben Connors Name: BJ Grogan
--------------------------------- ---------------------------
Date: Sept 18, 1998 Date: Sept. 18, 1998
--------------------------------- ---------------------------
Infospace Address: IBM Office Address:
181 2nd Avenue, Suite 218 5600 Cottle Road
San Mateo CA. 94401 San Jose, CA. 95153
-------------------------------- ----------------------------
IBM Source Code Custody Agreement #. 4998SJ0104
Agreed To:
Fort Knox Escrow Services License Agreemet #: 4998SJ0071
Custodian Name IBM/Infospace Confidentiality Agrmt # SN980025
By: /s/ Ches L. Eaton
---------------------------------
Authorized Signature
Name: Ches L. Eaton
---------------------------------
Date: 9-21-98
---------------------------------
Custodian Address:
2100 Norcross Pkwy., Suite 150
Norcross, GA 30071
---------------------------------
---------------------------------------------------------------------------------------------------------------
After signing, please return a copy of this Base Agreement to the local "IBM Office Address" shown above.
---------------------------------------------------------------------------------------------------------------
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Source Code Custody Agreement
[IBM LOGO]
Base Agreement
TABLE OF CONTENTS
<TABLE>
- --------------------------------------------------------------------------------------------------------------------------
PART TITLE PAGE PART TITLE PAGE
- ------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C> <C>
1 DEFINITIONS 2 7 LIABILITY AND INDEMNIFICATION 4
2 ESCROWED WORKS DEPOSITS 3 8 TERM AND TERMINATION 5
3 ESCROWED WORKS VERIFICATION 3 9 COORDINATORS 5
4 RELEASE OF ESCROWED WORKS 3 10 PAYMENT 6
5 LICENSE TO ESCROWED WORKS 4 11 GENERAL 6
6 DEVELOPER'S WARRANTY 4
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
PART 1 DEFINITIONS
Capitalized terms in the SCCA have the following meanings. A DEW may define
additional terms. However, those terms apply only to that DEW.
1.1 Code is computer programming code including both Object Code and Source
Code.
a) Object Code is the computer programming code substantially in binary
form. It is directly executable by a computer after processing, but
without compilation or assembly.
b) Source Code is the computer programming code that may be displayed in
a form readable and understandable by a programmer of ordinary skill.
It includes related source code level system documentation, comments
and procedural code, such as job control language. Source Code does
not include Object Code.
1.2 Derivative Work is a work in which all or any portion of the Licensed
Work is intended to be embedded in IBM products commonly referred to as
"StorWatch" and would be a copyright infringement if prepared without the
authorization of the owner of the Licensed Work. Derivative Works are
subject to the ownership rights and licenses of a party or of others in
the underlying work.
1.3 Escrowed Works are the materials, including all updates to them, that are
described in a DEW. They include:
a) the Source Code in machine-readable form and the source code level
system documentation in hard copy form;
b) a list of all Source Code modules of the Licensed Work;
c) a directory listing for each machine-readable medium;
d) commentary required to understand and use the Source Code;
e) a list of all Tools; and
f) the Tools that Infospace are required to escrow under the License
Agreement.
1.4 License Agreement is the IBM Infospace SpaceSQL License Agreement, or any
equivalent agreement signed by Infospace and IBM, in which Infospace
licenses IBM to its Licensed Works.
1.5 Licensed Works are those deliverables that Infospace licenses to IBM
under the License Agreement. Licensed Works include their basic
enhancements and maintenance modifications. They also include major
enhancements when identified in the License Agreement.
1.6 Release Events are the following occurrences when IBM may demand that
Custodian deliver the Escrowed Works to IBM:
a) Infospace or its successors or representatives refuses, fails or is
unable to perform any obligation:
1) in the SCCA; or
2) in the License Agreement which requires Source Code access to
complete.
b) Infospace or its successors or representatives rejects or terminates
the License Agreement or SCCA for reasons other than IBM's breach.
This includes rejection or termination under bankruptcy or similar
laws;
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c) Infospace or its successors or representatives fails to accept the
License Agreement and SCCA within 15 days of filing a bankruptcy or
similar petition;
d) Infospace or its successors or representatives liquidates or shuts
down most of its business operations relating to the Licensed Works;
or
e) any sale or assignment of the Licensed Works or Escrowed Works to a
third party if such third party does not agree in writing, in
connection with such sale or assignment, to grant all of the rights
and licenses provided to IBM, and perform all of Infospace's
obligations, under the SpaceSQL Version 4.0 License Agreement No.
4998SJ0071 and this Agreement as if such third party was named in
Infospace's place and stead therein.
1.7 Tools include devices, compilers, programming documentation, media or
other items required for the development, maintenance or implementation
of Licensed Work.
PART 2 ESCROWED WORKS DEPOSITS
2.1 Infospace will:
a) deposit with Custodian two copies of Escrowed Works for each
Licensed Work described in a DEW. Infospace will identify each item
in the deposit by labeling it;
b) deliver the Escrowed Works in good condition in sealed containers;
c) provide Custodian with a nonconfidential notice of all items
contained in each container; and
d) replace all lost or damaged Escrowed Works within three days of
notice from Custodian.
2.2 Custodian will:
a) accept each Escrowed Works deposit in trust for IBM and send IBM a
notice confirming receipt within three business days;
b) retain both the original Escrowed Works and any updates to them.
Together, these will comprise Escrowed Works;
c) match all items on the nonconfidential notice to the labels on
Escrowed Works;
d) take all reasonable steps to protect and store Escrowed Works in
appropriate containers and atmospheric conditions, segregated from
other materials;
e) promptly provide notice to IBM and Infospace in the event of lost or
damaged Escrowed Works; and
f) store a copy of this SCCA and the nonconfidential notice of items
with Escrowed Works.
2.3 If IBM provides Custodian notice to return to Infospace or to destroy
certain portions of Escrowed Works, Custodian will do so and provide
notice to Infospace and IBM when complete.
PART 3 ESCROWED WORKS VERIFICATION
3.1 Unless IBM and Custodian agree in writing, Custodian is not responsible
for technical verification that Escrowed Works are complete, accurate and
current. IBM may, at its expense, hire a party qualified to do this
verification. Infospace will reimburse IBM's expenses if the Escrowed
Works do not comply with the requirements of this SCCA.
3.2 Verification includes generating Object Code from Source Code for each
Licensed Work. The verifier will witness the transfer of the verified
Source Code to deposited media. Infospace will supervise the verification
which will be conducted at Infospace's facilities unless IBM advises
otherwise.
3.3 One technical IBM employee may witness verification. To the extent
possible, verification will be done in a way that does not expose the
Source Code to the IBM employee. If this is not possible, the IBM
employee will treat the Source Code according to the IBM/Infospace
confidentiality agreement.
PART 4 RELEASE OF ESCROWED WORKS
4.1 IBM will give Infospace and Custodian a notice describing the Release
Event when it occurs. The notice will state that IBM intends to demand
release of the Escrowed Works unless Infospace cures the conditions
causing the Release Event within 45 days of the date of the notice. This
cure period will run concurrently with any cure period allowed in the
License Agreement.
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If Infospace does not cure, IBM may demand delivery of Escrowed Works by
notice to Custodian, copying Infospace. The notice will identify the
Release Event, state that the cure period has elapsed and advise Custodian
where to deliver Escrowed Works. Custodian will deliver Escrowed Works
according to the notice. Custodian will not independently verify that a
Release Event has occurred or, unless obligated by court order, refuse to
deliver Escrowed Works.
If Infospace disputes the existence of the conditions upon which IBM's
notice is based, then Infospace shall, within five (5) business days
following its receipt of such notice, submit a written counternotice to
Custodian and IBM. After its submission of such written counternotice to
Custodian and IBM, Infospace may seek injunctive or other relief in court
to prevent the Custodian from releasing the Escrowed Works under this
Agreement to IBM.
4.2 If IBM determines that it does not have a complete set of Escrowed Works,
IBM may request them from Infospace. Infospace will provide the materials
required within three days of IBM's request.
4.3 IBM will:
a) use Escrowed Materials to support the licenses and rights granted under
the License Agreement;
b) own any Derivative Works of Escrowed Works that it creates;
c) pay Infospace the royalties specified in the License Agreement to
maintain its rights to the Licensed Works; and
d) treat Escrowed Works according to the IBM/Infospace confidentiality
agreement.
4.4 Release Events are not authorization for rejection or termination of the
License Agreement or SCCA. Enforcement of the SCCA is not an adequate
remedy for such rejection or termination.
PART 5 LICENSE TO ESCROWED WORKS
5.1 Subject to the occurrence of a Release Event under this SCCA, and the
failure by Infospace to cure all of the conditions causing such Release
Event to IBM's reasonable satisfaction within the period specified in
Section 4.1 of this SCCA, Infospace grants IBM, and its successors and
assigns:
a) all right and title to the media containing Escrowed Works;
b) a nonexclusive, worldwide copyright license to use, execute, reproduce,
display, perform, distribute and prepare Derivative Works of, all
Escrowed Works and their Derivative Works, solely as such items are, or
are to be, incorporated and/or embedded in IBM Products commonly
referred to as "StorWatch" and any successor or related Products of the
same or similar application. This license also applies to associated
audio and visual works. IBM may authorize others to do any of the
above; and
c) an irrevocable, nonexclusive, worldwide, paid-up license under any
patents and patent applications that are 1) owned or licensable by
Infospace now or in the future and 2) required to make, have made, use
and have used Escrowed Works and Tools, solely as such items are, or
are to be, incorporated and/or embedded in IBM Products commonly
referred to as "StorWatch" and any successor or related Products of the
same or similar application. This license applies to Escrowed Works or
their Derivative Works operating alone or in combination with equipment
or software.
5.2 If Escrowed Works are released to IBM, IBM retains its rights to the
Licensed Works as provided in the License Agreement. This includes
IBM's right to use Infospace's trademarks and product names.
PART 6 INFOSPACE'S WARRANTY
6.1 Infospace represents and warrants that:
a) it has all rights necessary for IBM to maintain, support and modify the
Licensed Works;
b) it has the authority to deliver the Escrowed Works
to the Custodian;
c) Escrowed Works are sufficient to allow a programmer of ordinary skill
to understand, maintain and prepare Derivative Works using the Source
Code version of the Licensed Work; and
d) Escrowed Works are complete, accurate and current.
PART 7 LIABILITY AND INDEMNIFICATION
7.1 Custodian will take all reasonable precautions to prevent disclosure of
Escrowed Works to unauthorized third parties.
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7.2 Custodian is liable only for willful misconduct, gross negligence and
fraud in performing its duties under this SCCA. Custodian is not liable if
Infospace or IBM fails to comply with any provision of the License
Agreement or this SCCA. Custodian is not liable for acting on any notice
that it in good faith believes to be genuine and legitimate.
7.3 If a third party makes a claim against Custodian:
a) Infospace will indemnify Custodian for claims based on Infospace's
failure to comply with this SCCA; and
b) IBM will indemnify Custodian for claims based on IBM's failure to
comply with this SCCA.
These indemnities do not apply where it is found that Custodian acted with
willful misconduct, gross negligence or fraud.
7.4 The indemnifying party will pay any settlement amount that it authorizes
and all costs, damages and attorney's fees that a court finally awards if
Custodian:
a) promptly provides the indemnifying party notice of the claim; and
b) allows the indemnifying party to control and cooperates with it in the
defense of the claim and settlement negotiations.
Custodian may participate in the proceedings at its option and expense.
PART 8 TERM AND TERMINATION
8.1 This SCCA begins when all parties sign it and continues until terminated.
The terms of the SCCA apply to a Licensed Work when the parties sign the
associated DEW. IBM may, at its option, extend the term of any DEW for
additional years as described in Payment. IBM may, for its convenience,
terminate this SCCA or any DEW on notice to Custodian and Infospace.
However, this SCCA will continue for any DEWs already in place until they
are terminated or expire.
8.2 Custodian will destroy any remaining Escrowed Works 30 days after the
expiration or termination of the DEW unless IBM provides notice otherwise.
8.3 Any terms of this SCCA that by their nature extend beyond its termination
(for example, Release of Escrowed Works, License to Escrowed Works and
Liability and Indemnification) will survive. These terms will apply to the
parties' respective successors and assigns.
8.4 If Custodian cannot continue its responsibilities, Custodian may resign by
giving IBM and Infospace 90 days' notice. IBM will select a successor
custodian to assume Custodian's responsibilities.
PART 9 COORDINATORS
9.1 SCCA Coordinators responsible to administer all matters associated with
this SCCA and its exhibits are:
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For: IBM For: Infospace
------------------------------
Name: [*] Name: [*]
------------------------------ -------------------------------
Title/Dept: [*] Title/Dept: Director of Strategic Alliances
------------------------------ -------------------------------
Address: [*] Address: 181 2nd Avenue, Suite 218
------------------------------ -------------------------------
[*] San Mateo, CA 94401
------------------------------ -------------------------------
Phone: [*] Phone: (650) 685-3030
------------------------------ -------------------------------
Facsimile: [*] Facsimile: (650) 762-2110
------------------------------ -------------------------------
For: Fort Knox Escrow Services, Inc.
Name: Glen Bryman
---------------------------------------
Title/Dept: Senior Account Manager
---------------------------------------
Address: 2100 Norcross Pkwy., Suite 150
---------------------------------------
Norcross, GA 30071
---------------------------------------
---------------------------------------
</TABLE>
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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Phone: (770) 239-9200 X107
-----------------------------------
Facsimile: (770) 239-9201
-----------------------------------
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9.2 Each of us will assign an Escrowed Work Coordinator in the DEW. These
coordinators are responsible to administer matters associated with the
DEW. The SCCA Coordinator and the Escrowed Work Coordinator may be the
same person. A party will provide notice to the others when coordinators
change.
PART 10 PAYMENT
10.1 [*] within 30 days after receipt of an acceptable invoice for services
under active DEWs. All payments will be made in U.S. dollars. The Exhibit:
Fee Schedule identifies the specified period of Custodian's services and
the firm fees for that period. Custodian may propose a revised fee
schedule to the IBM SCCA Coordinator no later than 90 days before the end
of the specified period. The IBM SCCA Coordinator will notify Custodian if
it accepts or rejects the proposed fee schedule. If rejected, the IBM and
Custodian SCCA Coordinators will negotiate a new fee schedule for the next
period. The IBM and Custodian SCCA Coordinators add the new fee schedule
to the SCCA by initialing and dating it. If IBM and Custodian cannot agree
to a new fee schedule for an active DEW, it will expire at the end of its
term and IBM may select a successor custodian. Custodian will provide all
assistance required to move the Escrowed Works to the successor custodian.
10.2 Custodian will invoice [*]
a) all services to be performed under a DEW for one year; and
b) renewal of a DEW 60 days before it expires. IBM may renew the DEW for
an additional year by paying the renewal fees. If Custodian does not
receive the renewal fees within 30 days, it will notify the IBM
Escrowed Work Coordinator. If IBM does not pay the fees by the
expiration date of the DEW, that DEW will expire.
In addition to information required by the DEW, the invoice will identify
this SCCA, the DEW and the services invoiced plus their associated fees.
Custodian will submit all invoices as identified in the DEW.
PART 11 GENERAL
11.1 Each party will comply with all applicable laws and regulations at its
expense. This includes all export and import laws and regulations.
11.2 Except as provided in the SCCA, none of the parties may assign or
transfer the SCCA or its rights under it or delegate or subcontract
its obligations without the prior written approval of the other
parties. Any attempt to do so is void.
11.3 If any provision of the SCCA is unenforceable at law, the rest of the
provisions remain in effect. The headings in the SCCA are for
reference only. They will not affect the meaning or interpretation of
the SCCA.
11.4 No party will bring a legal action against another party more than two
years after the cause of action arose. All parties will act in good
faith to resolve disputes. All parties waive their rights to a jury
trial in any resulting litigation. Litigation will only be commenced
in the State of New York.
11.5 All notices must be in writing. Except as provided in the SCCA, for a
change to the SCCA to be valid, IBM and Infospace must sign it. Other
than changes to the Release Events, Custodian must also sign changes
that affect its rights or obligations under the SCCA. IBM will provide
Custodian with copies of all changes that Custodian is not required to
sign.
No approval, consent or waiver will be enforceable unless signed by
the granting party. Failure to insist on strict performance or to
exercise a right when entitled does not prevent a party from doing so
later for that breach or a future one.
11.6 The substantive laws of the State of New York govern the SCCA.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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Source Code Custody Agreement
[IBM LOGO]
Description of Escrowed Work
==============================================================================
This Description of Escrowed Work ("DEW") is a Transaction Document issued under
the IBM Source Code Custody Agreement ("SCCA").
By signing below, the parties agree to the terms of this DEW. The complete
agreement between us regarding this subject consists of this DEW Transaction
Document and:
a) the IBM Source Code Custody Agreement No. 4998SJ0104;
b) the IBM Source Code Custody Agreement Exhibit: Fee Schedule;
c) IBM Purchase Order No._____________________________________
The following are related agreements between IBM and Developer:
a) the License Agreement No. 4998SJ0071;
b) IBM/Infospace Confidentiality Agreement No.SN980025;
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<CAPTION>
Agreed To: Agreed To:
Infospace Inc. International Business Machines Corporation
<S> <C> <C>
By: /s/ Ben Connors By: /s/ BJ Grogan
------------------------ ---------------------------------
Authorized Signature Authorized Signature
Name: Ben Connors Name: BJ Grogan
------------------------- ----------------------------------
Date: Sept. 18, 1998 Date: Sept. 18, 1998
------------------------- ----------------------------------
Inforspace Address: IBM Office Address:
181 2nd Avenue, Suite 218 5600 Cottle Road
San Mateo, CA 94401 San Jose, CA 95193
-------------------------- ----------------------------------
IBM Source Code Custody Agreement # 4998SJ0104
IBM DEW Transaction Document # 4998SJ0105
IBM Office Address:
5600 Cottle Road
San Jose CA, 95153
Agreed To:
Fort Knox Escrow Services
By: /s/ Ches L. Eaton
---------------------------------
Authorized Signature
Name: Ches L. Eaton
---------------------------------
Date: 9-21-98
---------------------------------
Custodian Address:
2100 Norcross Pkwy., Suite 150
Norcross, GA 30071
---------------------------------
After signing, please return a copy of this DEW to the local "IBM Office
Address" shown above.
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PART 1 DESCRIPTION
1.1 The Licensed Work is all Code, documentation and related written materials
described in the Attachment "Description of Licensed Work" of the
referenced License Agreement.
1.2 The Escrowed Works associated with the Licensed Works and required for
deposit with Custodian are:
a) all Source Code, in whatever programming language it is written in,
associated with the Infospace SpaceSQL Version 3.0 product, including
the Source Code associated with the following components:
1) Infospace Java Server (US),
2) User Administration and security module,
3) Server Administration module,
4) all Java applets associated with the Infospace SpaceSQL Version 3.0
product, including the designer applet for designing reports and
graphs,
b) all Object Code, including Java byte codes, associated with the
Infospace SpaceSQL Version 3.0 product and derived from the Source Code
described above,
c) all HyperText Markup Language (HTML) pages and Common Gateway Interface
(CGI) scripts associated with the Infospace SpaceSQL product,
d) all commentary required to understand and use the Source Code, including
any HTML based documentation created by the JavaDoc tool for documenting
computer programs written in the Java programming language,
e) all system level documentation (including programming guides and
references, installation guides and user guides) required to understand
the organization, structure, function and operation of the SpaceSQL
Version 3.0 product, including the SpaceSQL Java Language Application
Programming Interface.
f) a directory listing for each piece of machine-readable medium.
The initial Escrowed Works are to be delivered on industry standard 120-mm
650 megabyte CD-ROM media conforming to ISO/IEC 13490 standard and capable
of being read on an industry standard CD-ROM drive in an IBM-compatible
personal computer. Deposit will occur within five (5) days after the
signing of this SCCA. Infospace will provide the Custodian with two copies
of initial Escrowed Works.
1.3 In addition, Infospace will provide the Custodian updates to Escrowed Works
within thirty (30) days of their release or availability to the extent of
Infospace's obligation to provide such updates under the License Agreement.
Such updates will include both Error Corrections and Enhancements to the
Licensed Work. Updates to the Escrowed Works are to be delivered on
industry standard 120-mm 650 megabyte CD-ROM media conforming to ISO/IEC
13490 standard and capable of being read on an industry standard CD-ROM
drive in an IBM-compatible personal computer. Infospace will provide the
Custodian with two copies of any updates to the Escrowed Works.
PART 2 ESCROWED WORK COORDINATORS
2.1 Escrowed Work Coordinators responsible to administer all matters associated
with this DEW are:
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For: [*] For: Infospace, Inc.
--------------------------------- ---------------------------------------
Name: [*] Name: [*]
--------------------------------- ----------------------------------------
Title/Dept: [*] Title/Dept: Director of Strategic Alliances
--------------------------------- ----------------------------------------
Address: [*] Address: 181 2nd Avenue, Suite 218
--------------------------------- -----------------------------------------
[*] San Mateo, CA 94401
--------------------------------- -----------------------------------------
Phone: [*] Phone: (650) 685-3030
--------------------------------- -----------------------------------------
Facsimile: [*] Facsimile: (650) 762-2110
--------------------------------- -----------------------------------------
For: Fort Knox Escrow Services, Inc.
Name: Glen Bryman
---------------------------------------
Title/Dept: Senior Account Manager
---------------------------------------
Address: 2100 Norcross Pkwy., Suite 150
---------------------------------------
Norcross, GA 30071
---------------------------------------
Phone: (770) 239-9200 X107
---------------------------------------
Facsimile: (770) 239-9201
---------------------------------------
</TABLE>
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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2.2 Notices are effective when received by the appropriate coordinator as
demonstrated by reliable written confirmation (for example, certified mail
receipt, courier receipt or facsimile receipt confirmation sheet.)
PART 3 PAYMENT
3.1 Custodian will send its original invoices to IBM at the following address:
International Business Machines Corporation
Accounts Payable Center
P.O. Box 9005
1701 North Street
Endicott, NY 13761-9005
One copy of each invoice will be sent by mail or facsimile to the IBM
Escrowed Work Coordinator.
3.2 Custodian's invoices will include the following information:
a) IBM Source Code Custody Agreement Number;
b) this DEW Transaction Document Number;
c) name of Custodian and "remit to" address;
d) short description of the performance for which payment is due; and
e) IBM's purchase order number (if applicable), Custodian's invoice
number and its date.
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[IBM LOGO] Source Code Custody Agreement
EXHIBIT: Fee Schedule
===========================================================================
The terms of the IBM Source Code Custody Agreement ("SCCA") apply. The following
fees are firm for all services that the Custodian provides during the specified
effective period. These fees apply to all active Description of Escrowed Works
("DEWs") between Custodian, InfoSpace and IBM. Custodian accepts them by signing
the DEWs that reference this Exhibit.
PART 1 EFFECTIVE PERIOD
The fees are firm upon execution of the License Agreement and expires five (5)
years from the Effective Date.
PART 2 FEE SCHEDULE
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SERVICE FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Initiation fee for SCCA #4998SJ0104: $450.00
- -------------------------------------------------------------------------------------------------------------------
Annual Maintenance Fee: $700.00
- -------------------------------------------------------------------------------------------------------------------
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PART 3 NEW FEE SCHEDULES
This Fee Schedule may be amended or replaced by the IBM and Custodian SCCA
Coordinators according to the SCCA Part entitled Payment.
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EXHIBIT 10.9
SOFTWARE MARKETING AND DISTRIBUTORSHIP AGREEMENT
This Agreement ("Agreement") is made as of the Execution Date by and
between Infospace, Inc. ("Infospace"), organized under the laws of the State of
California, U.S.A., having a place of business at 3130 La Selva, Suite 300, San
Mateo, California, USA 94403 and Mitsui & Co., Ltd. ("Distributor") a
corporation having a place of business at 2-1, Ohtemachi l-Chome Chiyoda-Ku,
Tokyo Japan.
1. DEFINITIONS.
"Confidential Information" means all information identified at the
time of disclosure by a party as confidential or otherwise reasonably understood
as confidential by its nature and in any event, conspicuously marked as
"Confidential." Confidential Information does not include information which is
generally available to the public on an unrestricted basis; previously known or
independently developed outside this Agreement; or lawfully disclosed by a third
party without restriction.
"Documentation" means Infospace instruction manuals or other materials
provided by Infospace to Distributor regarding the use of the Software.
"Download" means the copying and transmittal of the Software from a
web site on the Internet to a remote computer.
"Distributor Price List" means Infospace's current U.S. list price, a
copy of which is attached hereto as Exhibit I and made an integral part hereof.
Infospace reserves the right to modify the Distributor Price List in its sole
discretion upon providing Distributor with one-hundred (100) days prior written
notice thereto.
"Distributor Web Site" means Distributor's site on the World Wide Web
which is accessible to the general public by a specific URL (http://To Be
Determined_.com).
"Effective Date" means the date set forth in Exhibit B as the
effective date of this Agreement.
"Execution Date" means the date that this Agreement is signed by both
Infospace and Distributor.
"End User(s)" means any person, firm, company or entity who acquires a
license to use the Software for the sole purpose set forth under Section 2.a
hereof.
"Infospace Web Site" means Infospace's site on the World Wide Web
which is accessible to the general public by a specific URL (http://www.
infospace-inc.com).
"Initial Period Maintenance" shall mean Maintenance which shall be
supplied by Distributor and its designees approved in writing and in advance by
Infospace based on Maintenance Agreements entered into by Distributor or such
designees and End Users concurrently with the grant of a Software license.
Except for End Users with multiple Maintenance Agreements, the Initial
Maintenance Period shall be [*]. For End Users with multiple Maintenance
Agreements, the initial Maintenance period may be adjusted so that the renewal
dates of the Maintenance Agreements coincide.
"License Agreement" means a form of end user license agreement to be
entered into by Distributor or its Sub-Distributor and End Users, the terms of
which, to the extent commercially viable in the Territory, shall be
substantially in accordance with Infospace's then current standard end user
license agreement, the current form of which is attached hereto as Exhibit E.
Distributor may at
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as [*]. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
its option, choose to have Infospace enter into License Agreements with the End
Users using the English version of the standard Infospace license agreement.
"List Price" means the prices as given in the then current Distributor
Price List.
"Maintenance" means support services provided by Distributor, or its
designees, to customers as described in the Infospace support services terms and
conditions attached hereto as Exhibit F.
"Maintenance Agreement" means a form of end user support services
agreement to be entered into by Distributor or its designee and End Users, the
terms of which, to the extent commercially viable in the Territory shall be
substantially in accordance with Infospace's then current "Support services
terms and conditions", the current form of which is attached hereto as Exhibit
F.
"Net Revenue" means the actual amount of license, sub-license and
Maintenance fee revenue actually paid by Distributor to Infospace under this
Agreement, exclusive of shipping charges, customs and import duties, value added
taxes and other taxes and duties.
"Minimum Quota" means the minimum Net Revenue Distributor must pay to
Infospace in a specified period to maintain the exclusive rights described
herein for the following year, as set forth in Exhibit B and made an integral
part thereof.
"Software" means all or any portion of the machine-readable and
executable object code software programs identified in Exhibit A and all
corrections. Updates and associated Documentation and updates thereto.
"Term" means the period defined in Exhibit B. The Term of this
Agreement shall renew automatically for additional two (2) year periods unless a
party hereto notifies the other to the contrary in writing at least ninety (90)
days in advance of the end of the three year term from the Effective Date.
"Territory" means the geographic area(s) listed in Exhibit B.
an "Update" means one (1) copy of all published revisions to the
Documentation and one (1) copy of subsequent releases and improvements of the
Software which are not designated by Infospace as new products for which it
charges separately.
2. APPOINTMENT AND TERRITORY; GRANT OF LICENSES.
a. Subject to Section 9. Infospace hereby appoints Distributor
[*] for the distribution of the [*] of this Agreement. Distributor may [*] in
accordance with Section 2.b below. Subject to the terms and conditions of this
Agreement and for the sole purpose of distributing the Software throughout the
Territory during the Term. Infospace hereby grants to Distributor a non-
exclusive, non-transferable license to:
(i) localize the Software for use in the Japanese
language:
(ii) reproduce the Software as part of Downloads to End
Users via the Distributor's Web Site;
(iii) reproduce the Software provided in tangible media
solely for the purpose of distribution to End Users in the Territory; and
(iv) distribute the Software, under Infospace's
trademarks, solely to End Users, for installation and use on a computer located
in the Territory subject to the terms and conditions of a License Agreement
between the Distributor and an End User.
Distributor understands that Infospace may enter into sales, license and/or
maintenance agreements with third parties within the Territory for Software only
when such Software is sold to the said third
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
party in conjunction with any products not owned by Infospace. Infospace will
consult with Distributor before entering into such agreements within the
Territory. For purposes of this Agreement the "Exclusive" appointment of
Distributor under this Section 2.a shall apply only to the distribution of the
Software by Distributor to Japan-based companies for use and resale in the
Territory. Distributor's right to distribute the Software in the Territory
including, without limitation, the right to distribute the Software to Japanese
subsidiaries of entities that are not based in Japan, shall otherwise be on a
non-exclusive basis.
b. Distributor may, [*]. Unless otherwise agreed in writing by
[*] Agreement shall contain a provision under which the [*] shall be assigned in
whole by Distributor to Infospace or its nominee in the event that this
Agreement expires or is terminated prior to the termination or expiry [*]. In
the event that either Infospace or the applicable [*], as parties to the
assigned [*] reasonably objects to such assignment, Infospace [*] shall each
have the right, in their sole discretion and without liability to the other
party, to terminate [*].
c. During the Term of this Agreement Infospace grants to
Distributor a non-exclusive, non-transferable license to acquire and use
internally up to [*] of the Software solely in connection with Distributor's
demonstration, distribution and provision of Maintenance under this Agreement.
Such licenses shall be subject to a license agreement to be entered into
between Infospace and Distributor and the additional restrictions of this
Agreement.
3. LICENSE EXCLUSIONS.
a. Except as expressly provided herein, Distributor shall not
(nor shall it permit [*], knowingly solicit End Users located outside the
Territory.
b. Distributor shall not permit any third party to license,
sublicense, distribute, assign, transfer or use the Software, except as
specifically permitted under this Agreement.
c. Distributor shall not (nor shall it permit any third party
to) copy the Software except for normal back-up and archival copies.
d. Distributor warrants and represents that it shall in all
ways comply with the export control laws and regulations of the United States.
Distributor acknowledges that (a) it is only authorized, by virtue of this
Agreement, to market, demonstrate, distribute, reproduce or transfer the
Software, including Documentation and other technical data subject to export
controls imposed by the U.S. Export Administration Act of 1979, as amended, and
the regulations promulgated hereunder. If Distributor is furnishing the
Software outside of its home country, Distributor shall obtain all U.S. and home
country export licenses, fully adhere to all applicable export control laws and
regulations, and indemnify and hold Infospace harmless from and against all
claims, liabilities, actions, damages and expenses (including reasonable
attorneys' fees incurred by Infospace) arising out of Distributor's failure to
comply with such laws and regulations. Infospace shall obtain and be
responsible for all required United States export licenses to Distributor's home
country.
e. Distributor shall not [*] knowingly make any false or
misleading representations concerning Infospace or the Software.
4. EVALUATION LICENSES. Distributor may provide a copy of the
Software to End Users, or allow End Users to Download copies of the Software for
no license fee solely for the purpose of evaluation by prospective End Users.
Distributor shall keep a record of the number of copies Downloaded for
evaluation purposes and shall advise such prospective End User that such
Software Downloaded for evaluation contains a disabling device that will not
allow the Software to function after thirty (30) days or other evaluation time
periods as mutually agreed between Infospace and Distributor.
5. ORDERING AND DISTRIBUTION.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
a. Unless otherwise agreed, a master copy of the current
version of the Software shall be made available to Distributor (i) though access
to Infospace's Web Site, and (ii) in CD-ROM format. For the purpose of
distributing to those End Users not purchasing the Software in CD-ROM format,
Distributor shall install the master copy of the Software at the Distributor Web
Site and allow its End Users to Download the Software directly from the
Distributor Web Site. The Distributor shall, upon execution of a License
Agreement, notify End Users that the Software is inoperable until they receive a
password enabling the Software to function. [*] and any other relevant
information concerning the applicable license granted. Infospace shall send to
Distributor, via Distributor Web Site, a license password to enable the End User
to use the products purchased and Distributor shall promptly supply the password
to the End User thereafter.
b. Distributor agrees that for each copy of Software it sells
in CD-ROM format to End Users or allows End Users to Download under this
Agreement, Distributor will either (i) deliver the License Agreement
electronically to the End User for its review and require the End User to
electronically accept the terms of the License Agreement before the End User
Downloads the Software; or (ii) enter into a written agreement with the end-user
that is no less restrictive than the terms of the License Agreement (a "Signed
License Agreement"). In all jurisdictions where an enforceable copyright
covering the computer programs of the Software does not exist, Distributor will
ensure that the Software is furnished under the Signed License Agreement.
c. Distributor shall use commercially reasonable efforts to
enforce each License Agreement with at least the same degree of diligence used
in enforcing agreements of a similar nature in which Distributor is currently
engaged, which in any event shall be sufficient to adequately enforce such
agreements. Distributor will, upon reasonable request by Infospace, and at the
Distributor's sole discretion, cooperate, at Infospace expense, with Infospace
in any legal action to prevent or stop unauthorized use, reproduction or
distribution of the Software.
6. MARKETING. During the Term of this Agreement, Distributor shall:
a. Use reasonable commercial efforts to meet or exceed each of
the [*].
b. Use its commercially reasonable efforts to solicit orders
for the licensing of the Software and provision of Maintenance, as Distributor
for Infospace, from customers located within the Territory.
c. Comply with the [*] specified in Exhibit C.
d. Offer Maintenance to all End Users pursuant to a Maintenance
Agreement. It is expressly agreed by Distributor that all Maintenance Agreements
executed by Distributor pursuant to this Agreement are executed by Distributor
as principal and not as agent for Infospace.
e. Distribute Updates to End Users under a current Maintenance
[*] with Distributor, or its Sub Distributor.
f. Bear and be liable for all costs and expenses initiated and
incurred by it in fulfilling its responsibilities under this Agreement.
g. Notify Infospace, immediately upon learning that a
prospective license may involve delivery of Software outside the Territory, so
that Infospace shall have the opportunity in its sole discretion, of becoming
directly responsible for coordinating or managing the marketing of such
license. Neither Distributor [*] may directly or indirectly license the Software
for installation outside the Territory without obtaining the separate prior
written consent of Infospace.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
h. Either own or otherwise have regular access to, compatible
computer hardware sufficient to enable Distributor to engage in: (i) extensive
live demonstrations of the Software for prospects and End Users;(ii) customer
and employee training programs which include the running of live data through
the Software; and (iii) on-line communications with Infospace.
7. INFOSPACE OBLIGATIONS. During the Term of this Agreement,
Infospace shall:
a. Provide Distributor with reasonable prior notice concerning
Infospace's release of new or updated products.
b. Provide Distributor with a copy of product marketing
materials that are made available to Infospace customers in the United States,
price lists and updates thereto for Distributor's use solely in connection with
this Agreement.
c. Provide Distributor with [*], as defined in [*]. Infospace
shall have no obligation to directly support Distributor's customers. Any other
technical support shall be provided by Infospace only on a basis agreeable to
both parties hereto and set forth in writing.
d. Provide Distributor with Updates as reasonably and in good
faith agreed to by the parties.
e. [*], and thereafter, promptly provide Distributor with a
copy of such double-byte enabled Software.
f. Support prior releases of the Software for periods set forth
below:
Year 1: [*] after shipment of the then current Japanese
version
Year 2: [*] after shipment of the then current English
version
8. COMMERCIAL TERMS.
a. Upon execution of this Agreement, Distributor shall pay to
Infospace the Prepaid License Fee, if any, as set forth in [*]. Upon
depletion of the Prepaid License Fee, Distributor shall pay Infospace the
license fee specified in [*] for each copy of Software licensed by
Distributor. The Prepaid License Fees shall be credited against the license fees
accruing under this Agreement in accordance with Exhibit B. Distributor shall
pay Infospace such license fees accrued during each month within thirty (30)
days following the end of each month based on an invoice issued by Infospace to
Distributor.
b. All payments shall be made in United States Dollars [*] to
Infospace's bank account specified in Exhibit B or as changed by Infospace from
time to time upon prior notice to Distributor. Overdue payments shall accrue
interest at the lesser of two percent (2%) per month or the maximum rate
permitted by applicable law.
c. All amounts payable by Distributor to Infospace under this
Agreement are exclusive of any tax, levy or similar governmental charge that may
be assessed by any jurisdiction, whether based on gross revenue, the delivery,
possession or use of the Software, the execution or performance of this
Agreement or otherwise except for the net income or net worth taxes assessed on
Infospace outside of the Territory. If under the laws of the Territory,
Distributor is required to withhold any tax on such payments, the amount of
withholding tax levied on any payment to be made by Distributor to Infospace
shall be borne by Infospace, provided, however, that all such tax shall in no
event exceed the maximum rate provided for in Article 14 of the Convention for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income between the Governments of Japan and the United
States of America. Distributor shall withhold the tax from such payment to
Infospace and pay any such tax to the appropriate governmental authority
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
and thereafter shall send to Infospace the tax certificate and any other
applicable documentation evidencing the payment of such tax.
d. It is expressly acknowledged by the parties hereto that, the
Distributor [*] is attached hereto only for reference purposes, and that,
Distributor, without any recourse to Infospace, is free to set its own prices
for the licensing and Maintenance of the Software in the Territory.
9. [*]
10. LIMITED USE OF INFOSPACE TRADEMARKS AND TRADE NAMES.
a. All trademarks, service marks, trade names, logos or other
words or symbols identifying the Software or Infospace's business (the "Marks")
are and will remain the exclusive property of Infospace, whether or not
specifically recognized or perfected under the laws of the Territory.
Distributor will not take any action that jeopardizes Infospace' proprietary
rights or acquire any rights in the Marks, except the limited use rights
specified in Section 10.b. Except as otherwise agreed to in writing in advance
by Infospace, Distributor will not register, any trademark, service mark, trade
name, copyright, company name or other proprietary or commercial right which is
identical or confusingly similar to the Marks or which are translations thereof
in any other language(s). Infospace may, at Infospace's sole expense, request
the Distributor to execute such instruments and take such actions that may be
appropriate to register, maintain or renew the registration of the Marks in
Infospace's name in the Territory and/or protect Infospace's interest in the
Marks.
b. Distributor may use Infospace's Marks which relate to the
Software solely in connection with Distributor's activities under this
Agreement, whether in combination with its own trademarks, provided that
Distributor clearly identifies Infospace' ownership of such Marks. In addition
to the foregoing, Distributor may sublicense. The rights granted to Distributor
in this Section 10.b to Sub-Distributors, provided that, Distributor shall
notify, prior to any such grant of sublicense, the manner in which such Sub-
Distributor is going to use the Marks. Infospace reserves the right to require
Distributor to submit all advertising and marketing material concerning the
Software and bearing the Marks to Infospace for review and approval prior to
release by Distributor.
11. TERM. This Agreement shall commence on the Execution Date and,
unless sooner terminated pursuant [*] herein, shall terminate and expire at the
end of the Term.
12. RECORDS AND REPORTS.
a. Distributor shall keep full, true, and accurate records and
accounts in accordance with generally accepted accounting practices to show all
licensing, Maintenance, Update and Upgrade revenue earned by Distributor and all
amounts payable by Distributor to Infospace. These records and accounts shall be
retained for a period of at least two (2) years following termination or expiry
of this Agreement for any reason.
b. For each copy of Software licensed and Maintenance Agreement
executed such records and accounts shall include at a minimum: (i) the name of
the End User (and country [*]); (ii) the date the Software was downloaded and
(iii) the price charged for the Software and Maintenance (iv) a copy of each
Maintenance Agreement; (v) records of revenues received in respect of
Maintenance and the period to which such Maintenance revenues apply, and a copy
of the End User license.
c. For each [*] such records and accounts shall include at a
minimum; (i) the name of [*] (ii) a copy of the [*] including all amendments and
exhibits; (iii) the number of copies of the Software, installed both at [*]
premises, and at the premises of any customer [*];(iv)
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
records of revenues received in respect of Maintenance and the period to which
such Maintenance revenues apply.
d. Distributor shall keep all records at Distributor's
principal place of business. Infospace shall have the right to conduct audits of
the records to determine Distributor's compliance with this Agreement, provided,
however that, such audit right shall not be exercised without a prior written
notice of ten (10) business days to the Distributor and, in any event more than
once a calendar year. Infospace shall bear the expenses of the audit, however,
in the event any such audit reveals that Distributor has understated the amount
that Distributor is obligated to pay Infospace under this Agreement by an amount
of more than five percent (5%) of the amount due to Infospace during the period
audited. Distributor shall pay, in addition to the amounts then due, all
reasonable costs associated with the audit.
13. COMPLIANCE WITH LAWS.
a. Distributor will at its own expense obtain and maintain all
necessary licenses, permits and approvals which are necessary for it to import
the Software into the Territory or sell and sublicense the Software in the
Territory including, if applicable, the registration of this Agreement with the
Japanese Ministry of Finance ("MOF"), provided that Distributor shall not accept
any modifications to this Agreement that may be required by the MOF without
prior notification to Infospace. Distributor will comply with all laws and
regulations applicable to this Agreement, the Software and the commercial
transactions contemplated herein.
b. Distributor will not use any payment or other benefit
derived from Infospace to offer, promise or pay any money, gift or any other
item of value to any person for the purpose of influencing official actions or
decisions affecting this Agreement while knowing or having reason to know that
any portion of this money, gift or item will, directly or indirectly, be given,
offered or promised to (i) an employee, officer or other person acting in an
official capacity for any government or its instrumentalities or (ii) any
political party, party official or candidate for political office.
14. TITLE AND PROTECTION OF SOFTWARE AND CONFIDENTIAL INFORMATION.
a. Distributor has no right to exploit Infospace's intellectual
property except as specifically set forth in this Agreement. Infospace retains
ownership of all intellectual property rights (including copyright and Marks) in
the Software. Any localization, enhancements, improvements, translations or
other modifications made to or derived from the Software and related
intellectual property shall be deemed to be a "work made for hire" and Infospace
shall have all right, title and intellectual properly interest in such
modifications. To the extent any such work may not by operation of law be a work
made for hire, Distributor hereby assigns to Infospace the ownership of
copyright and all other intellectual property rights in such work and Infospace
shall have the right to obtain and hold in Infospace's own name copyrights,
patents and similar protection which may be available in such work. Where
necessary or appropriate for the perfection of such ownership, Distributor
agrees, at Infospace's sole expense, to take all actions required or appropriate
for the perfection of such ownership interests by Infospace.
b. Each party agrees to take the necessary precautions to
maintain the confidentiality of Confidential Information pertaining to or
disclosed in connection with this Agreement by using at least the same degree of
care as such party employs with respect to its own Confidential Information of a
like-kind or nature, but in no case less than reasonable care to maintain
confidentiality. Each party shall notify use such Confidential Information in
connection with its performance of this Agreement.
c. Distributor shall not remove or alter any trademark, trade
name, copyright, or other proprietary notices, legends, symbols, or labels
appearing in or on the Software or accompanying documentation and shall use the
same notices, legends, symbols, or labels in and on all
<PAGE>
copies it allows to be Downloaded from Distributor's Web Site. The parties agree
that any breach of this Section 14 would cause the disclosing party irreparable
harm for which monetary damages would be inadequate. Accordingly, the disclosing
party will be entitled to seek injunctive or other equitable relief to remedy
any threatened or actual breach of this Section 14 by the other party.
15. REPRESENTATIONS AND LIMITATIONS OF LIABILITY.
a. Infospace represents that it has the right to enter into this
Agreement. Infospace represents that the then current, unmodified version of the
Software will perform substantially in accordance with Infospace's published
specifications in its documentation accompanying the Software for a period of
ninety (90) days from installation at an End User's facilities. All warranty
claims not made in writing or received by Infospace within the time period
specified above shall be deemed waived. In the case a warranty claim is properly
made, Infospace will correct within a reasonable time, at no charge, any errors
in the Software which have caused failure to perform in accordance with such
specifications, Infospace does not represent that the Software is error-free or
that the Software will satisfy all of Distributor's or any End User's
requirements, Distributor shall make no representation or warranty concerning
the Software which would expand the scope of Infospace's representations beyond
that which is made by Infospace in this Agreement.
b. Except in the case of death or bodily injury, this Section 15
states the sole warranty of Infospace relating to the Software. All other
warranties, conditions, and representations, express, implied or verbal,
statutory or otherwise, and whether arising under this Agreement or any prior
agreements made by or on behalf of Infospace or in the course of negotiations
with the Distributor or its representatives are hereby excluded. This Section 15
sets forth Distributor's sole and exclusive remedy for any express or implied
warranties hereunder.
c. Except for the Indemnification in Section 16 of this Agreement and
except in the case of death or bodily injury caused by the proven fault or
negligence of Infospace, (i) Infospace will not be liable for any indirect,
special, incidental, consequential or unforeseeable loss or damage (including,
without limitation, loss of anticipated profits, loss of data or costs of
procurement of substitute goods or services) however arising, even if Infospace
has been advised of the possibility of such damage or loss being incurred, and
(ii) Infospace's maximum liability to Distributor for breach of contract, for
negligence or any other claims, however arising, out of or in connection with
this Agreement or the Software shall in no event exceed the amount paid by
Distributor to Infospace cumulatively, during the previous twelve (12) months.
16. INDEMNIFICATION.
a. To the best of Infospace's knowledge, the Software does not
infringe intellectual property rights under any patent, copyright or trademark
of a third party in the Territory. Subject to the terms and conditions of this
Section. Infospace shall, at its sole expense, defend Distributor and its Sub-
Distributors against and, pay all costs (including reasonable attorneys fees)
and damages made in the settlement or award against Distributor and its Sub-
Distributor resulting from any claim based on an allegation that the Software
hereunder infringes a proprietary right of any third party, including but not
limited to copyrights, or trade secret, provided that Distributor (a) gives
Infospace prompt written notice of any such claim, (b) allows Infospace to
direct the defense and settlement of the claims, and (c) provides Infospace with
information and assistance necessary for the defense and settlement of the
claim. In addition to the foregoing, if a final injunction is obtained in an
action based on any such claim against the use of the Software by any End User
by reason of such infringement, or if, in Infospace's opinion, such an
injunction is likely to be obtained, Infospace may, at its sole option, either
(i) obtain for the End Users the right to continue to using the Software, (ii)
replace or modify the Software so that they become non-infringing, or (iii) if
neither (i) or (ii) can be reasonably effected by Infospace, direct Distributor
and its Sub-Distributors to terminate all licenses for the Software and refund
to Distributor and its Sub-Distributor the amount the Distributor and/or Sub-
Distributor is obligated to pay to the End Users (but in no event exceeding the
amount paid by such End Users) in respect of the infringing Software.
Notwithstanding the foregoing, Infospace shall have no obligation or liability
for any claim for infringement of the intellectual property rights of any party
which is based on or arises out of (i) any act or omission on the part of
Distributor, (ii) compliance with designs or specifications provided by or on
behalf of Distributor, (iii) modifications or alterations
<PAGE>
carried out-by Distributor or any party acting under the control of Distributor
without the prior written consent of Infospace, (iv) the use of the Software in
connection with any software not supplied by Infospace where the infringement is
due to such software not supplied by Infospace, or (v) the use of the Software
in a manner not authorized or contemplated by this Agreement, (vi) the failure
to promptly install any Update if such installation would have avoided an
infringement. The foregoing states the entire liability and obligation of
Infospace to Distributor for infringement of the intellectual property rights of
any third party, Infospace disclaims any liability for incidental or
consequential damages relating to the infringement of intellectual property
rights.
b. Distributor shall indemnify Infospace against any damage, loss,
liability or expense (including reasonable attorneys' fees) that Infospace may
incur (i) with respect to the acts or omissions of any of Distributor's
employees or agents while at Infospace's facilities or (ii) as a result of (1)
any modification or amendment of the prescribed terms of any License Agreement.
Maintenance Agreement or Sub-Distribution Agreement that Infospace did not
specifically approve, (2) any warranty, condition, representation, indemnity or
guarantee granted by Distributor with respect to the Software in addition to or
in lieu of the limited warranties specified in Section 15. (3) any omission or
inaccuracy in Distributor's advertisements and promotional materials that relate
to Infospace or the Software with respect to which Infospace has not exercised
its right of review and approval as specified in Section 10b. (4) any
customization or other modification of the Software by Distributor or its
employees or agents which has been carried out without the prior consent of
Infospace, or (5) Distributor's failure to comply with the Sections 3, 13 and 14
of this Agreement. This Section will not be construed to limit or exclude any
other claims or remedies which Infospace may assert under this Agreement or by
law.
17. DEFAULT.
a. The following events shall constitute an Event of Default: (i)
Distributor fails to pay any sum due under this Agreement within the time period
specified in this Agreement; or (ii) either party fails to perform any of its
other obligations under this Agreement and such failure remains uncured for
thirty (30) days after receipt of written notice thereof.
b. In the event that a Event of Default occurs, the non defaulting
part, in addition to any other rights available to it under law or equity, may
withhold its performance (other than payment of undisputed sums due and owing to
the other party) and/or may immediately terminate this Agreement by written
notice to the defaulting party. Unless otherwise provided in this Agreement,
remedies shall be cumulative and there shall be no obligation to exercise a
particular remedy.
18. TERMINATION.
a. All licenses granted by Distributor [*] to End Users pursuant to
this Agreement shall survive termination of this Agreement.
b. Either party hereto may terminate this Agreement in the event of a
merger, sale of a substantial part of the assets or change of control of the
other party. As used herein, a "change of control" shall have been deemed to
have occurred when an entity not in such position at the Execution Date of this
Agreement, acquires fifty percent (50%) or more of the voting shares or equity
interest in a party hereto. Infospace agrees that, if (i) a change of control
with respect to Infospace occurs; and (ii) the party acquiring such control of
Infospace (the "Acquiring Party") discontinues the sale or maintenance services
of the Software. Infospace shall itself, or cause the Acquiring Party to, refund
to Distributor any amounts out of the Prepaid License Fee for which Distributor
has not credited payment of Software against.
c. Immediately upon termination Distributor shall pay to Infospace
all sums that are outstanding under this Agreement, the due dates of which shall
be automatically accelerated to fifteen (15) days of the date of termination,
and shall return to Infospace or its designee, or certify in writing to
Infospace that all copies or partial copies of the Software in Distributor's
possession or control have been destroyed.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
d. Upon termination, Distributor shall offer to assign or perfect the
assignment to Infospace or its nominee of all License Agreements or Maintenance
Agreements previously entered into by Distributor and, if Infospace or its
nominee shall accept such assignment, the Distributor shall pay to Infospace or
its nominee; (i) all future revenues which it may receive from an End User under
any License, except future installment payments for which Distributor has
already paid Infospace in full. Infospace or its nominee shall hold Distributor
harmless against all liability, obligation, cost or expenses arising thereafter;
but nothing in this Section requires Infospace or its nominee to indemnify
Distributor from any liability, obligation, cost or expense in connection with
the performance or non-performance of any License Agreement by Distributor
before assignment.
e. Upon termination of this Agreement, Distributor shall immediately
(i) cease to use any documentation or advertising identifying it as a
Distributor or representative of Infospace or the Software, and (ii) remove
promptly all signs, cancel all business listings, and take such other reasonable
action as may be necessary to remove its identification as such a Distributor or
representative of Infospace, Distributor shall simultaneously disclose to
Infospace the identity of, and the current state of negotiations with, all
potential customers within the Territory together with copies of all applicable
correspondence with such potential customers. In addition, Distributor will
discontinue forthwith all use of the Marks, and all licenses granted to
Distributor under this Agreement shall automatically be terminated.
f. Except as expressly set forth in this Agreement, Distributor
agrees that it shall not be entitled to any additional compensation upon any
termination of this Agreement and Distributor expressly waives its rights to
receive any such compensation available under the statutes or laws of any
jurisdiction within the Territory.
g. In addition to this section, Sections 1, 3, 8, 12, 14, 15, 16,
18 and 19 shall survive termination of this Agreement.
19. GENERAL.
a. All notices or demands shall be in writing in English and sent to
the address set forth above by registered mail, return receipt requested or sent
by fax or express courier if delivery is confirmed by such form of transmission.
Either party may change its address by giving ten (10) days prior written
notice.
b. Neither party hereto may assign this Agreement, delegate any duty
or assign, transfer or encumber any right hereunder without the express prior
written consent of the other party.
c. Distributor is acting under this Agreement as an independent
contractor [*]. Nothing contained in this Agreement will be interpreted or
construed to characterize the relationship between Infospace and Distributor as
a joint venture, partnership or franchise for any purpose. Neither party has the
authority to, and neither party shall, make any representation, prepare
documents or statements on behalf of or in the name of the other party give any
warranties, accept orders, enter into a contract on behalf of the other party,
or obligate the other party in any manner, unless expressly authorized to do so
in writing by the other party. Both parties hereto agree to indemnify and hold
harmless the other party from all damages and expenses which result from any
unauthorized, wrongful or negligent act on its part or the part of its agents or
employees in connection with the performance of this Agreement.
d. Neither party hereto shall be in default hereunder by reason of
its delay in the performance of, or failure to perform, any of its obligations
hereunder, other than Distributor's obligations to make the fee payments to
Infospace in accordance with the terms of this Agreement if such delay or
failure is caused by strikes, acts of God or the public enemy, riots, or without
the significant fault or negligence of the other party. During the pendency of
such intervening event, each of the parties shall take all reasonable steps to
furnish the services required hereunder by other means, and, in any event,
shall, upon termination of such intervening event, forthwith resume obligations
under this Agreement.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
e. In the event that a court of competent jurisdiction holds that any
particular provision or requirement of this Agreement is in violation of any
applicable law, or is otherwise unenforceable, this Agreement shall be construed
as if such provision or requirement were not written into this Agreement,
whereupon the request of either party, such provision or requirement may be
reformed and construed in a manner which will be valid and enforceable to the
maximum extent permitted by law.
f. No contemporaneous or subsequent representation, warranties,
agreements, or consents shall waive, modify, or amend this Agreement unless made
by an instrument in writing and executed by the parties hereto. Failure of a
party to enforce one or more of the provisions, of this Agreement or to exercise
any option or other rights hereunder or to require at any time performance of
any of the obligations hereof shall not be construed to be a waiver of such
provisions by such party nor to, in any way, affect the validity of this
Agreement or such party's right thereafter to enforce each and every provision
of this Agreement nor to preclude such party from taking any other action at
any time which it would be legally be entitled to take.
g. The headings and titles to the Sections and paragraphs of this
Agreement are inserted for convenience only and shall not be deemed a part
hereof or affect the construction or interpretation of any provision hereof.
h. Words denoting the singular will include the plural and vice
versa; words denoting any gender will include all genders; words denoting
persons will include corporations and vice versa.
i. This Agreement shall be controlled and construed under the law of
the State of California, USA without regard to the conflicts of laws provisions
thereof or the U.N. Convention on the International Sale of Goods. Any claim,
dispute or controversy arising between the parties out of or in relation to this
Agreement, or breach thereof, which cannot be satisfactorily settled by the
parties shall be finally settled by arbitration upon the request of either
party, in accordance with the rules of Conciliation and Arbitration of the
International Chamber of Commerce. The place of arbitration shall be Tokyo,
Japan, in case Distributor is the respondent and San Francisco, California,
U.S.A. in case Infospace is the respondent. The arbitration proceeding shall be
conducted in English. The award shall be final and binding upon both parties.
Judgment upon the award may be entered in any court having competent
jurisdiction thereof. In any action or proceeding to enforce rights under this
Agreement, the prevailing party will be entitled to recover costs and reasonable
attorneys' fees from the other party.
j. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original, all of which shall constitute one
and the same Agreement.
k. This Agreement constitutes the entire agreement between the
parties and supersedes any prior written or oral agreements between the parties
concerning the subject matter. No amendments or modifications of this Agreement
shall be effective for any purpose unless confirmed in writing and signed by the
duly authorized representatives of both parties hereto.
[The remainder of this page is left intentionally blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement by their
duly authorized representatives as of the Execution Date.
DISTRIBUTOR
Name: Mitsui & Co., Ltd.
Authorized signature
[*]
Printed name: [*]
Title: [*]
INFOSPACE, INC.
Authorized signature
/s/ Stan Wang
Printed name: Stan Wang
Title: President & CEO
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Exhibits
A. Product Schedule
B. Territory, Performance & Compensation Schedule
C. Minimum Staffing Requirements
D. Second Line Support Terms
E. Software End User License Agreement
F. Support Services Terms & conditions
G. Maintenance Report Form
H. Monthly Revenue Report
I. Distributor Price List
<PAGE>
Exhibit A
Product Schedule
This document is an Exhibit to the Software Marketing and Distributor
Agreement between Infospace and Distributor ("Agreement"). Capitalized terms not
defined herein shall have the same meaning as set forth in the Agreement unless
otherwise defined herein.
1. PRODUCT
Distributor may grant licenses in respect of all products on the then
current Distributor Price List (a copy of which has been provided to
Distributor) with the exception of the following:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
Exhibit B
Territory, Performance and Compensation Schedule
This document is an Exhibit to the Software Marketing and Distributor
Agreement between Infospace and Distributor ("Agreement"). Capitalized terms
used herein shall have the same meaning as set forth in the Agreement unless
otherwise defined herein.
1. EFFECTIVE DATE. The Effective Date of the Agreement is: _the date
of commercial release of the first Japanese version of the Software_.
2. TERM. The Term of the Agreement is: [*].
3. TERRITORY. The Territory shall consist of the following countries
as constituted as of the Execution Date: [*].
4. MINIMUM QUOTAS.
For the Period Sales Quota
Effective Date to Effective Date + 1 year [*]
Effective Date + 1 year to Effective Date + 2 years
[*]
Effective Date + [*] year
Effective Date + 2 years to Effective Date + 3 years
[*]
Effective Date + [*] years
5. PREPAYMENT OF SOFTWARE LICENSE FEES. Distributor agrees to pay
Infospace a nonrefundable prepayment against future-owed license fees for the
Software equal [*] and payable within thirty days of execution of this
Agreement.
6. AMOUNTS PAYABLE TO INFOSPACE.
a. Except as otherwise agreed in advance by Infospace in writing.
Distributor shall pay (or credit against the Prepaid License Fee) Infospace the
applicable percentage set forth below of license fees, as set forth in the then-
current Infospace U.S. Price List for each license of Software granted, directly
[*]:
Until the depletion of the Prepaid License Fee [*]
After the depletion of the Prepaid License Fee [*]
b. The amounts to be paid by Distributor to Infospace shall be the
above percentages of Infospace's then current List Price for the Software.
Distributor shall also report and pay license fees to Infospace for upgrades to
licenses previously distributed by Distributor in an amount equal to the
percentage set forth above of the difference between the then current List Price
license fee of the Software in the new or upgraded environment less the then
current List Price license fee of the existing license; provided that Infospace
shall have no obligation to provide any credit to Distributor or any customer
for downgrades of existing licenses.
c. Distributor shall pay to Infospace fees for Maintenance (including
Updates) provided by Distributor pursuant to Maintenance Agreements including
Initial Period at the rate of [*] U.S. List Price for the Software licensed
for annual support contracts. Distributor assumes all risk and responsibility
for timely collections from End Users and Sub-Distributors for all payments
due. Distributor agrees to pay fees due to Infospace in the timeframes
specified herein despite delays, if any, in payments by End Users and/or Sub-
Distributors to
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Distributor. Distributor agrees that requests to reinstate any Maintenance
Agreements that become delinquent shall require reinstatement payments to be
mutually agreed by Infospace and Distributor.
d. Consulting, training and/or other services beyond those
provided pursuant to License, Maintenance, and Sub-Distribution Agreements shall
be independently negotiated with customers. The party providing such efforts
shall [*] proceeds therefrom. On such occasions as Infospace and Distributor
shall together provide such services, the allocation between Infospace and
Distributor of the revenues therefrom shall be agreed upon in advance.
7. DISTRIBUTOR CUSTOMERS. Infospace will [*] to customers who have
signed purchase agreements with Distributor until expiration of this Agreement.
Distributor may register any prospective customers by notifying Infospace in
writing of the contact name, company, and location of such prospective customer
("Registration"). Infospace will [*] any such prospective customers Registered
in accordance with the foregoing for a period of [*] following date of
Registration.
8. SPLITS.
a. In the event that a customer purchases Software in the Territory and
installs it in a different Territory, revenue credit will be split as follows:
English Version:
Local Distributor [*]
Mitsui [*]
Infospace [*]
Japanese Version:
Local Distributor [*]
Infospace [*]
Mitsui [*]
b. In the event that a customer that is a Japanese subsidiary of an entity
that is based outside of Japan purchases Software in the Territory, revenue
credit will be split as follows:
English Version:
Local Distributor [*]
Mitsui [*]
Infospace [*]
Japanese Version:
Local Distributor [*]
Infospace [*]
Mitsui [*]
c. In the event that a customer purchases localized Software from Infospace
outside of Japan and installs it outside of Japan, Infospace shall pay to
Distributor [*] of the actual amount of license fee revenue actually paid by
such customer to Infospace for the localized Software.
9. CURRENCY FOR PAYMENT. The currency for all Gross Revenues, Prepaid
License Fees, and payments to Infospace shall be United States Dollars. For
License, Maintenance and Sub-Distribution Agreements executed in other
currencies, the exchange rate used to determine the Gross Revenue shall be the
rate effective on the first day of the month in which the payment is due. The
exchange rate will be that published in The Wall Street Journal on the date of
payment.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Exhibit C
Minimum Staffing Requirements
This document is an Exhibit to the Software Marketing and Distributor
Agreement between Infospace and Distributor ("Agreement"). Capitalized terms
used herein shall have the same meaning as set forth in the Agreement unless
otherwise defined herein.
Distributor shall have at a minimum the following number of identified
personnel devoted full-time (unless otherwise specifically noted below) to the
marketing, promotion, licensing and Maintenance of the Software:
<TABLE>
<CAPTION>
Position By Date: By Date:
<S> <C> <C>
[*] [*]
[*] [*]
General Manager
Sales Reps [*] [*]
Technical [*] [*]
Administrative
Total: [*] [*]
================= =================
</TABLE>
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Exhibit D
Secondline Support Terms
This document is an Exhibit to the Software Marketing and Distributor
Agreement between Infospace and Distributor ("Agreement"). Capitalized terms
used herein shall have the same meaning as set forth in the Agreement unless
otherwise defined herein.
1. Definitions:
"Current Release" means the then-current release of the Software
available from Infospace and the prior release of the Software for a period of
six (6) months after availability of the then-current release.
"Error" means an error in the Software which, in any way,
significantly degrades the use or value of the Software.
"Fix" means the repair or replacement of object or executable code
versions of the Software to remedy an Error.
"Operating Environment" means a single combination of a hardware and
operating system, corresponding to a specific release of Software. An Operating
Environment may include multiple machine classes.
"Prepaid License Fee" means a non-refundable prepaid license fee
specified in Exhibit B of the Agreement.
"Priority A Error" means an Error that: (1) renders the Software
inoperative; or (2) causes the Software to fail catastrophically.
"Priority B Error" means an Error that significantly degrades
performance of the Software or materially restricts the use of the Software.
"Priority C Error" means an Error that causes a minor impact on the
use of the Software or a Documentation error.
"Technical Support Contact" means a Distributor employee designated by
Distributor, in writing, to communicate with Infospace on support matters and
who is knowledgeable in the use of the Software. Distributor shall designate one
(1) primary and one (l) backup Technical Support Contact.
"Telephone Support" means Software technical support telephone
assistance provided by Infospace to the primary or backup Technical Support
Contact during normal business hours in California concerning the installation
and use of the Software. Telephone Support includes Infospace' collection of
Software error reports submitted by Distributor.
"Workaround" means a change in the procedures followed or data
supplied to avoid an Error without significantly impairing performance of the
Software.
2. Secondline Support. Secondline Support consists of [*] provided
solely to Distributor's Technical Support Contact(s) concerning the use of the
Software by: (i) Distributor solely as set forth in the Agreement; (ii)
Distributor's [*] End Users in accordance with the terms and conditions of
License and Maintenance Agreements; and (iii) [*] specifically approved by
Infospace in accordance with Section 2.d of the Agreement.
3. Error Correction. Infospace shall exercise reasonable commercial
efforts to correct any Error reported by Distributor in the Software in
accordance with the procedure set forth below based on the following priority
levels reasonably assigned to such Error by Infospace.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
a. Priority A Errors: Infospace will promptly initiate the
following procedures: (1) assign senior Infospace engineers to correct the
Error; (2) notify senior Infospace management that such Errors have been
reported and that steps are being taken to correct the Error; (3) provide
Distributor with periodic reports on the status of the corrections; and
(4) commence work to provide Distributor with a Work Around or Fix.
b. Priority B Errors: Infospace shall exercise reasonable
commercial efforts to include the Fix for the Error in the next Software
release.
c. Priority C Errors: Infospace may include the Fix for the
Error in the next major release of the Software.
4. Exclusions. Infospace shall have no obligation to provide
Secondline Support for:
a. Software altered, damaged or modified, without the prior
consent of Infospace, by any party other than Infospace;
b. Software that is not the Current Release, or within the
support time periods specified in Article 7.f of Agreement;
c. Software problems caused by Distributor's or the End User's
negligence, hardware malfunction or other causes beyond the control of
Infospace;
d. Software installed on an operating environment which is not
specified in Exhibit ; or
------
e. Pre-release or beta Software that is not part of an official
Infospace beta program.
<PAGE>
Exhibit E [as this document is attached for reference purposes
only. It has not been reviewed.]
SOFTWARE END USER LICENSE AGREEMENT
** Redistribution Not Permitted **
Please read the following Agreement carefully. Installation of the
software is contingent on your agreement to the following terms:
1. GRANT OF LICENSE. Infospace, Inc. grants to you a limited, non-
exclusive, nontransferable, royalty-free license to use one copy of the
executable code of the software on a single CPU residing on your premises.
All other rights are reserved to Infospace. You shall not rent, lease,
sell, sublicense, assign, or otherwise transfer the software, including any
accompanying printed materials. You may not reverse engineer, decompile or
disassemble the software except to the extent that this restriction is expressly
prohibited by applicable law. Infospace and its suppliers shall retain title and
all ownership rights to the software.
2. SOFTWARE MAINTENANCE. Infospace is not obligated to provide
maintenance or updates to you for the software. However, any maintenance or
updates provided by Infospace shall be covered by this Agreement.
3. DISCLAIMER OF WARRANTY. Software is deemed accepted by you. The
SOFTWARE IS PROVIDED "AS IS" WITHOUT WARRANTY OF ANY KIND, TO THE MAXIMUM EXTENT
PERMITTED BY APPLICABLE LAW. INFOSPACE, INC. FURTHER DISCLAIMS ALL WARRANTIES,
INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT. THE ENTIRE RISK ARISING OUT OF
THE USE OR PERFORMANCE OF THE SOFTWARE AND DOCUMENTATION REMAINS WITH YOU, TO
THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW. IN NO EVENT SHALL INFOSPACE,
INC. OR ITS SUPPLIERS BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, DIRECT,
INDIRECT, SPECIAL, PUNITIVE, OR OTHER DAMAGES WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF
BUSINESS INFORMATION, OR OTHER PECUNIARY LOSS) ARISING OUT OF THIS AGREEMENT OR
THE USE OF OR INABILITY TO USE THE SOFTWARE, EVEN IF INFOSPACE, INC. HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. BECAUSE SOME STATES/JURISDICTIONS DO
NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL OR
INCIDENTAL DAMAGES, THE ABOVE LIMITATION MAY NOT APPLY TO YOU.
4. U.S. GOVERNMENT RESTRICTED RIGHTS AND EXPORT RESTRICTIONS. The
software is provided with RESTRICTED RIGHTS. Use, duplication, or disclosure by
the Government is subject to restrictions as set forth in subparagraph
(c)(l)(ii) of The Rights in Technical Data and Computer Software clause of DFARS
252.227-7015 or subparagraphs (c)(i) and (2) of the Commercial Computer Software
- - Restricted Rights at 48 CFR 52.227-19, as applicable. Manufacturer is
Infospace, Inc., 3130 La Selva, Suite 300, San Mateo, CA 94403.
5. EXPORT/IMPORT CONTROLS. None of the Software or underlying
information or technology may be downloaded or otherwise exported or re-exported
(i) into (or to a national or resident of) Cuba, Iraq, Libya, Yugoslavia, North
Korea, Iran, Syria or any other country to which the U.S. has embargoed goods;
or (ii) to anyone on the U.S. Treasury Department's list of Specially
Designated Nationals or the U.S. Commerce Department's Table of Denial Orders.
By downloading or using the Software, you are agreeing to the foregoing and you
are representing and warranting that you are not located in, under the control
of, or a national or resident of any such country or on any such list. You also
agree that you are responsible for all taxes, custom duties and royalties which
may be imposed by any governmental authority associated with downloading or
otherwise using this Software.
<PAGE>
6. GOVERNING LAW; ATTORNEYS FEES. This Agreement shall be governed by
the laws of the State of California without reference to the conflict of law
provisions thereof and you further consents to jurisdiction by the state and
federal courts sitting in the State of California.
This Agreement constitutes the complete and exclusive agreement
between Infospace and you with respect to the subject matter hereof, and
supersedes all prior oral or written understandings, communications or
agreements not specifically incorporated herein. This Agreement may not be
modified except in a writing duly signed by an authorized representative of
Infospace and you.
<PAGE>
Exhibit F [has not been reviewed for the same reason as Exhibit E]
SUPPORT SERVICES TERMS AND CONDITIONS
1. COVERAGE. Distributor will provide Licensee with Support Services
for the Software according to the level of Support Service selected by
Licensee.
2. LEVEL OF SUPPORT. Licensee may elect to obtain the following
levels of Support Services:
Support and Updates:
Consists of Error Correction and Telephone Support to the Technical
Support Contact concerning the installation and use of the Current Release of
Software.
3. TERM AND TERMINATION. Unless a shorter original term is agreed to
in writing, Support Services shall be provided for [*] from the Execution Date
of this Agreement and shall be extended each year for an additional one (1) year
term unless terminated by either party as provided herein. Unless otherwise
agreed to in writing, each [*] term shall commence with the last day of the same
month of this Agreement. For the final year of this agreement, Support Services
shall be provided up to the anniversary of the Effective Date.
Either party may terminate Support Services at the end of the original
term or at the end of any renewal term by giving the other party written notice
at least ninety (90) days prior to the end of any such term.
In the event Licensee fails to make payment pursuant to the Section
entitled "Charges and Payment", or in the event Licensee breaches the Support
Services provisions and such breach has not been cured within thirty (30) days
of receipt of notice of breach, Distributor may suspend or cancel Support
Services.
4. CHARGES AND PAYMENT. For each Software license electing Support
Services, Licensee shall pay Distributor the applicable Support Services fees
listed in the then current price list. Prices are exclusive of VAT where
applicable. Support Services are billed on an annual basis, payable in advance.
Licensee shall be responsible for all taxes associated with Support Services,
other than taxes based on Distributor's net income. Licensee's payment shall be
due within thirty (30) days of receipt of invoice.
In the event Licensee fails to pay Distributor on the due date, then
to reinstate or renew Support Services, Licensee must first pay Distributor the
annual Support Service fee, all past Update or enhancement charges and the
reinstatement charge listed in the then current price list.
If payment is not made within 180 days of the due date, then Support
Services will be renewed or reinstated only upon Licensee's payment of the then
current license fee and by re licensing the Software.
5. PRIORITY LEVELS OF ERRORS. Distributor shall exercise
commercially reasonable efforts to provide a Fix or Work around to correct any
Error reported by Licensee in the Current Release of the Software in accordance
with the priority level reasonably assigned to such Error by Distributor.
6. EXCLUSIONS. Distributor shall have no obligation to support:
a. Altered, damaged or modified Software;
b. Software that is not the Current Release;
c. Software problems caused by Licensee's negligence, hardware
malfunction or other causes beyond the control of Distributor; or
d. Software installed in an Operating Environment or in a
hardware environment other than the environment indicated on the applicable
License Agreement.
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Distributor shall have no liability for any changes in Licensee's
hardware which may be necessary to use the Software due to a Software Workaround
or Software maintenance release.
7. INCORPORATION INTO THE AGREEMENT. Licensee agrees that all
Support Services and Updates provided to Licensee shall be subject to the terms
and conditions of the License Agreement and the additional terms and conditions
of this Agreement.
8. GENERAL. Distributor shall not be liable for any failure or delay
in performance hereunder due to causes beyond its reasonable control and not due
to its negligence or willful misconduct. Any illegal or unenforceable provision
shall be severed from this Agreement. Licensee agrees that any information
received pursuant to this Agreement shall be deemed to be subject to the non-
disclosure obligations set forth in the License Agreement. Licensee's obligation
of payment of moneys due hereunder shall survive termination. This Agreement
and the License Agreement states the entire agreement regarding Distributor's
provision of Support Services to Licensee and may be amended only by a written
amendment executed by authorized representatives of both parties.
8. DEFINITIONS. Unless defined otherwise herein, capitalized terms
used herein shall have the same meaning as set forth in the License Agreement.
"E-mail Support" means Software Electronic mail technical assistance
provided to the Technical Support Contact(s) during normal business hours
concerning the installation and use of the Current Release of the Software. E-
mail Support includes collection of Software error reports submitted by
Licensee.
"Error" means an error in the Software which significantly degrades
the use of the Software.
"Fix" means the repair or replacement of object or executable code
versions of the Software to remedy an error.
"Operating Environment" means a single combination of a hardware and
operating system, corresponding to a specific release of Software.
"Current Release" means the then-current release of the Software
available for use in a particular Operating Environment and the prior release of
the Software in the same Operating Environment solely for a period of six (6)
months after availability of the then-current release.
"Site" shall mean each separate physical location of Licensee's
business.
"Technical Support Contact" means one (1) Licensee employee designated
by Licensee, in writing, to communicate with Distributor concerning Support
Services and who is knowledgeable in the use of the Software and Licensee's
Operating Environment. Licensee shall designate one (1) primary and one (1)
back-up Technical Support Contact per supported Licensee Site.
"Support Services" means Support and Updates or Updates only as
elected by Licensee.
"Telephone Support" means Software telephone technical assistance
provided to the Technical Support Contact(s) during normal business hours
concerning the installation and use of the Current Release of the Software.
Telephone Support includes collection of Software error reports submitted by
Licensee.
"Updates" means one (1) copy of all published revisions to the printed
documentation and one (1) copy of all new releases of the Software which are not
designated as new products.
"Workaround" means a change in the procedures followed or data
supplied by Licensee to avoid an Error without significantly impairing
performance of the Software.
LICENSEE:
<PAGE>
By:
Title:
DISTRIBUTOR:
By:
Title:
<PAGE>
Exhibit G
Maintenance Report Form
For Existing Customer Maintenance Contract Renewals
Customer Name Fees Due to Infospace
<PAGE>
Exhibit H
QUARTERLY REVENUE REPORT
Distributor Name: ____________________________ (or place on company letterhead)
Report period: _____________________________________________
(Note, please list (i) all licenses granted by Distributor not requiring
physical shipment (and related Initial Period Maintenance); and (ii) all
licenses granted and maintenance fees due from each Sub-Distributor separately
on the report using the following format)
A. Distributor: (list all licenses granted directly by Distributor not
requiring physical shipment)
<TABLE>
<S> <C> <C> <C> <C>
Download End User Infospace License Fee Maintenance Fee Quantity Fees Due
Date Name List Price $ Charged $ Charged $ $
- -------- ---- ----------- -------- ------- ------
</TABLE>
Total Amount due Infospace with respect to such Licenses and Maintenance
granted/provided directly by Distributor: $_____________
Total Amount due to Infospace with respect to Licenses and Maintenance
[*] _____________ $ _____________
++++++++++++++++++++++++++++++++++++++++++++
TOTAL AMOUNT DUE INFOSPACE $ _______
(from Distributor [*])
---------------------------------
Authorized Signature
---------------------------------
Name and Title_
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Exhibit I
Distributor Price List
Infospace Price List
Prices Effective 6/16/97
<TABLE>
<CAPTION>
SpaceSQL
- --------
<S> <C> <C>
$10,000 SpaceSQL Java Server
$10,000 5 Concurrent Users
$20,000 10 Concurrent Users
$85,000 50 Concurrent Users
$150,000 100 Concurrent Users
$700,000 500 Concurrent Users
SpaceOLAP
- --------
$15,000 SpaceOLAP Java Server
$12,500 5 Concurrent Users
$25,000 10 Concurrent Users
$106,250 50 Concurrent Users
$187,500 100 Concurrent Users
$875,000 500 Concurrent Users
Maintenance
- -----------
18% Based on List Price before discount
Training
- --------
$500 1 person / 1 day / Using SpaceSQL
$1,500 1 day / Using SpaceSQL at customer location + travel expenses
Consulting Service
- ------------------
[*]
[*]
</TABLE>
[*] Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Viador Inc.
We consent to the use of our form of report included herein and to the
references to our firm under the headings "Experts" and "Selected Financial
Data" in the Prospectus.
/s/ KPMG LLP
Mountain View, California
September 8, 1999
