<PAGE>
As filed with the Securities and Exchange Commission on April 5, 2000
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TOP TIER SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
---------------
<TABLE>
<S> <C> <C>
Delaware 7372 77-0461287
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
6203 San Ignacio Avenue, Suite 101, San Jose, CA 95119
(408) 360-1700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive office)
---------------
Gregory S. Ayers
Chief Financial Officer
Top Tier Software, Inc.
6203 San Ignacio Avenue, Suite 101, San Jose, CA 95119
(408) 360-1700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
Mark A. Bertelsen William D. Sherman
Herbert P. Fockler Justin L. Bastian
Burke F. Norton Corey Levens
Jon C. Avina Stephanie A. Gonye
Wilson Sonsini Goodrich & Rosati Morrison & Foerster, LLP
Professional Corporation 755 Page Mill Road
650 Page Mill Road Palo Alto, CA 94304
Palo Alto, CA 94304 (650) 813-5600
(650) 493-9300 ---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 145 under the Securities Act of
1933, as amended (the "Securities Act"), check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
<CAPTION>
Proposed Maximum
Aggregate
Offering Amount of
Title of Each Class of Securities to be Registered Price(1) Registration Fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, par value $0.001 per share ......................... $104,650,000 $27,628
- -----------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee
required by Section 6(b) of the Securities Act, and computed pursuant to
Rule 457(o) of the Securities Act.
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to such Section 8(a), may determine.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 5, 2000
Shares
[LOGO OF TOP TIER SOFTWARE]
Common Stock
--------
Prior to this offering, there has been no public market for our common stock.
The initial public offering price of our common stock is expected to be between
$ and $ per share. We have made application to list our common stock
on The Nasdaq Stock Market's National Market under the symbol "TOPT."
The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" on page 6.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions TopTier
------------- ------------- -------------
<S> <C> <C> <C>
Per Share............................. $ $ $
Total................................. $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Credit Suisse First Boston
Dain Rauscher Wessels
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 2000.
<PAGE>
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 14
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Consolidated Financial Data..................................... 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 26
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 41
Related Party Transactions................................................. 51
Principal Stockholders..................................................... 54
Description of Capital Stock............................................... 56
Shares Eligible for Future Sale............................................ 58
Underwriting............................................................... 60
Notice to Canadian Residents............................................... 62
Legal Matters.............................................................. 63
Experts.................................................................... 63
Where You Can Find More Information........................................ 63
Index to Financial Statements.............................................. F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may be used only where it is
legal to sell these securities. The information in this document may be
accurate only on the date of this document.
Dealer Prospectus Delivery Obligation
Until , 2000 (25 days after the commencement of this offering), all
dealers that engage in transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and when selling unsold allotments or subscriptions.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully.
Top Tier Software, Inc.
We are a leading provider of eBusiness portal technologies and products that
integrate information residing in a business' internal and external enterprise
applications, databases, text documents, Web sites and other data sources. Our
eBusiness Integration Portal software products are designed to enable a
business' extended enterprise of employees, customers, suppliers and business
partners to directly access, navigate and manipulate integrated information
using an intuitive and effective portal interface. We sell our software
directly or through independent software vendors. To date, we have licensed our
software directly to over 75 companies, including Equilon (a consortium of
Royal Dutch Shell, Texaco and Saudi Aramco), Herman Miller, Hewlett-Packard,
KPN (Dutch Telecom), Nortel Networks, Phillips Group, Ricoh Canada and Rolls
Royce Marine. Our technology is also embedded in eBusiness applications such as
mySAP.com Workplace, sold by SAP AG, and Baan Data Navigator, sold by Baan
Company.
Our software products are developed around our patented HyperRelational
technology, which is a protocol for accessing and interacting with structured
and unstructured data. Based upon a combination of hypertext and relational
models, our HyperRelational technology directs the end user to related meta-
data in multiple data sources, instead of pointing to one, predetermined linked
page as do hypertext links alone. As a result, end users of our software are
able to directly access, use and manipulate information that is relevant to
their query and based on the relations that they create. Our experience
indicates that the ability to enable all members of an extended enterprise to
directly and easily access and interact with data allows companies to compete
more effectively by reacting more swiftly to changing market conditions and
business events, to retain customers by being more responsive to their demands,
and to generate additional revenues while increasing operational efficiency and
reducing transaction costs.
Our software is designed to extend the functionality provided by new and
existing enterprise applications, making the information they contain easily
accessible over the Internet by a network of collaborating businesses.
Companies can enable their existing information technology infrastructure to
operate over the Internet by deploying our products on top of their existing
applications or by using software solutions sold by independent software
vendors that embed our technology. We believe that this Internet-based
functionality significantly increases the value and return on our customers'
technology infrastructure investments. In addition, this functionality
addresses the limitations of traditional enterprise information portals, which
generally present only a subset of the underlying application data that is
typically extracted and aggregated.
Our objectives are to establish our patented HyperRelational technology as
an industry standard protocol and increase awareness of the benefits of our
products by leveraging our strong sales channel relationships with strategic
software vendors such as SAP and Baan Company and extending our relationships
with systems integrators. Together, SAP and Baan Company have an installed base
of more than 20,000 enterprise application customers, representing over 10
million end users. Our relationships with these software vendors provide us
with an important endorsement of our software and create an opportunity for us,
as well as for these software vendors and systems integrators, to sell to this
installed base unrestricted versions of our HyperRelational technology that
extends its use to other enterprise applications and data sources. In addition,
to date, we have trained over 500 external professional consultants on our
products, tools and methodologies, and we anticipate that over 2,000 will have
been trained within the next 18 months.
We have a limited operating history and have incurred net losses since
inception. We have spent significant funds in developing our technology and
building our sales and marketing operations and, as of
3
<PAGE>
December 31, 1999, we had an accumulated deficit of $49.3 million. We intend to
continue to invest in extending our technology and product leadership by
enhancing our software solutions to support an increasing number of data
sources and enterprise applications and developing industry specific
applications that are built using our eBusiness Integration Portal software
products.
We began operations in 1992 as Quicksoft Development (1992) Ltd., an
Israeli-based research and development company, which became our subsidiary
when we were incorporated in Delaware in August 1996 under the name DataSurf
Inc. We changed the name of our subsidiary to Top Tier Israel Ltd. and, in
1997, changed our name to Top Tier Software, Inc. Our principal executive
office is located at 6203 San Ignacio Avenue, Suite 101, San Jose, California
95119, and our telephone number is (408) 360-1700.
"TopTier" and "HyperRelational" are our registered trademarks, and the
TopTier logo is a trademark of TopTier. This prospectus also includes
trademarks owned by others.
The Offering
<TABLE>
<C> <S>
Common stock offered by us.......................... shares
Common stock to be outstanding after this offering.. shares
Use of proceeds..................................... General corporate
purposes, including
expansion of sales and
marketing capabilities,
product development and
other working capital
requirements.
Proposed Nasdaq National Market symbol.............. "TOPT"
</TABLE>
The number of outstanding shares above is based on shares outstanding as of
December 31, 1999. This number excludes the following:
.4,022,840 shares issuable upon exercise of outstanding options on December
31, 1999 at a weighted average price of $0.80; and
.2,246,842 shares reserved for future issuances under our stock plans.
See "Management--Stock Plans" and Note 8 of Notes to Consolidated Financial
Statements.
4
<PAGE>
Summary Consolidated Financial Data
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Nine Months Three Months Year Ended
Year Ended Ended Ended December 31, Year Ended
December 31, September 30, December 31, 1998 December 31,
1997 1998 1998 (Pro Forma) 1999
------------ ------------- ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Total revenues.......... $ 95 $ 2,636 $ 317 $ 2,953 $ 9,645
Cost of revenues........ 80 192 91 283 1,698
Gross profit............ 15 2,444 226 2,670 7,947
Operating expenses:
Sales and marketing... 665 4,241 1,127 5,368 8,200
Research and
development, net..... 1,054 2,644 806 3,450 5,444
General and
administrative....... 1,823 1,913 434 2,347 2,386
Purchased in-process
research and
development.......... -- -- 3,557 3,557 --
Amortization of
deferred stock
compensation(*)...... -- -- -- -- 7,214
Amortization of
goodwill and
intangibles.......... -- -- 5,695 22,780 22,780
Loss from operations.... (3,526) (6,354) (11,393) (34,832) (38,077)
Basic net loss per
share.................. $ (0.48) $ (0.80) $ -- $ -- $(1,660.81)
Shares used in computing
basic net loss per
share.................. 7,190 7,375 -- -- 23
Pro forma basic net loss
per share (unaudited).. $ (2.10)
Shares used in computing
pro forma basic net
loss per share......... 18,040
</TABLE>
<TABLE>
<CAPTION>
December 31, 1999
-------------------
Actual As Adjusted
------- -----------
(unaudited)
<S> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents................................... $ 2,529 $
Working capital............................................. 5,922
Goodwill, net............................................... 38,082
Total assets................................................ 52,345
Total stockholders' equity.................................. 49,178
</TABLE>
The summary consolidated financial data above include unaudited pro forma
consolidated statement of operations data for the full year ended December 31,
1998. The unaudited pro forma consolidated statement of operations data for the
year ended December 31, 1998 was derived from unaudited financial statements
prepared by us and gives effect to Vanenburg's acquisition of us as if it
occurred on January 1, 1998. See also Note 3 of Notes to the Consolidated
Financial Statements.
See Note 2 of Notes to Consolidated Financial Statements for a description
of the method that we used to compute our basic net loss per share and pro
forma basic net loss per share applicable to common stockholders.
The as adjusted column in the consolidated balance sheet data table above
reflects our sale of shares of common stock in this offering at an assumed
initial public offering price of $ per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses.
----------------
Except as otherwise indicated, information in this prospectus:
. reflects the automatic conversion of all outstanding preferred stock into
common stock upon completion of this offering; and
. assumes no exercise of the underwriters' over-allotment option.
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before purchasing
our shares. Additional risks and uncertainties not presently known to us or
that we currently see as immaterial may also impair our business operations. If
any of the following risks actually occur, our business could be harmed, the
trading price of our common stock could decline, and you may lose all or part
of your investment.
Risks Related to TopTier
We have a limited operating history, which makes it difficult to evaluate our
prospects.
We began operations in 1992 and were incorporated in Delaware in August
1996. Until August 1996, we were engaged primarily in software development for
third parties on a contract basis and, to a lesser extent, in developing our
initial eBusiness integration portal technologies and products. Since August
1996, we have focused our efforts exclusively on developing these technologies
and products. We commercially released the first version of our eBusiness
Integration Portal software in late June 1998. The revenue and income potential
of our market is unproven, and we have limited insight into trends that may
emerge in our market and affect our business. As a result of our limited
operating history, we have limited financial data that you can use to evaluate
our business.
Our prospects must also be considered in light of the risks encountered by
companies in the early stages of development in new and rapidly evolving
markets, especially the eBusiness infrastructure integration software market.
Some of the risks that we face relate to our ability to:
. attract and retain a broad customer base;
. negotiate and maintain favorable strategic relationships;
. expand our direct sales force and indirect sales channels;
. attract, integrate, retain and motivate qualified professional personnel;
. continually enhance our products to meet market demand and customer
needs; and
. plan and manage our growth effectively.
If we fail to manage these risks successfully, our business will suffer.
We have a history of net losses and expect to continue to incur net losses.
We have experienced operating losses in each quarterly period since our
inception. We expect to incur net losses and negative operating cash flows for
the foreseeable future. The size of these net losses will depend, in part, on
the rate of growth of our revenues from license and service fees. Despite our
history of losses, we believe that it is critical to our future success that we
significantly increase our research and development, and our sales and
marketing expenditures. In addition, we have incurred and expect to continue to
incur significant non-cash operating expenses related to amortization of
goodwill resulting from Vanenburg's acquisition of us in October 1998 and
amortization of deferred stock compensation expense.
We incurred net losses of approximately $599,000 from inception through
December 31, 1996, $3.4 million for the year ended December 31, 1997, $17.3
million for the combined periods comprising the year ended December 31, 1998,
and $38.0 million for the year ended December 31, 1999. As of December 31,
1999, we had an accumulated deficit of approximately $49.3 million. We expect
to incur significant losses in the future. It is possible that we may never
achieve profitability, and even if we do achieve profitability, we may not
sustain or increase profitability on a quarterly or annual basis in the future.
If we do not achieve, sustain or increase profitability in the future, then we
may not be able to continue our operations as currently planned. We cannot
predict when we will operate profitably, if at all.
6
<PAGE>
We expect our quarterly operating results to fluctuate significantly, and an
unanticipated decline in revenues may disappoint securities analysts or
investors and result in a decline in our stock price.
We expect to experience significant fluctuations in our future quarterly
operating results due to the factors listed in these "Risk Factors" and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." Many of these factors are not within our control. Our revenues and
operating results depend upon the volume and timing of customer orders and
payments and the date of product delivery. Historically, a substantial portion
of revenues in a given quarter has been recorded in the third month of that
quarter. We expect this trend to continue, and, therefore, any failure or delay
in the closing of orders would have a material adverse affect on our quarterly
operating results. As a result, we believe that quarterly comparisons of our
operating results are not necessarily meaningful and that you should not rely
on the results of any quarter as an indication of our future performance.
Our operating expenses are based on anticipated revenues and a high
percentage of these expenses are relatively fixed. As a result, a shortfall in
revenue, whether or not caused by a delay in the recognition of revenue, could
cause significant variations in operating results from quarter to quarter and
cause unexpected results. We record as deferred revenues payments that do not
meet our revenue recognition policy requirements. Since a portion of our
revenues each quarter is recognized from deferred revenues, our quarterly
results will depend primarily upon entering into new contracts to generate
revenues for that quarter as well as contracts entered into in prior quarters.
New contracts may not result in revenue in the quarter in which the contract
was signed, and we may not be able to predict accurately when revenues from
these contracts will be recognized.
Our revenues will likely decline if we do not develop and maintain successful
strategic relationships.
We have established strategic relationships with independent software
vendors such as SAP AG and Baan Company and systems integrators such as
Andersen Consulting and Deloitte Consulting. We rely on these strategic
partners for insights into new technology and for exposure to, and influence
with, many potential customers to which we may not otherwise have access. In
October 1999, we granted SAP a non-exclusive and perpetual license to include a
restricted version of our HyperRelational technology in its software. We rely
on SAP for an important endorsement of our software, significant license
revenue and exposure of certain of our technologies and products to the SAP
customer base. In addition, we rely on the implementation services and joint
marketing and sales efforts of systems integrators. If these relationships
fail, we will have to devote substantially more resources to the sales and
marketing, and implementation and support of our product than we would
otherwise, and our efforts may not be as effective as those of the systems
integrators. Systems integrators with which we have relationships also train
their personnel to sell and implement our products. The failure of systems
integrators to train their personnel would significantly harm our ability to
successfully license and implement our software products. We are currently
investing, and plan to continue to invest, significant resources to develop
relationships with enterprise application software providers and systems
integrators. Our operating results could be adversely affected if these efforts
do not generate sufficient license and service revenues.
Because a small number of our customers have historically accounted for a high
percentage of our revenues, the loss of a customer, in particular SAP, could
result in lower than expected revenues.
In 1999, our two largest customers accounted for 87% of our total revenues,
with Baan Company accounting for 71% and SAP accounting for 16% of our total
revenues. We currently anticipate that revenue that we recognize under our
agreement with Baan Company may decrease significantly during 2000. In
addition, we anticipate that the proportion of our revenues attributable to our
relationship with SAP will account for an increasing proportion, and our
relationship with Baan Company will account for a decreasing proportion, of our
total revenues in the foreseeable future. We may also receive additional
revenues from the licensing of our TopTier Extension for mySAP.com Workplace to
SAP customers. If SAP chooses not to renew the license and resell agreement, or
chooses to cease promoting our software to its customers, our revenues may
decline and our business could be adversely affected. To offset this risk, we
need to attract and retain new
7
<PAGE>
customers. Our ability to attract and retain new customers will depend on a
variety of factors, including the performance, quality, breadth and depth of
our current and future products. Our failure to add new customers would limit
our ability to increase our revenues.
Our market is highly competitive, and if we do not compete effectively, we may
suffer price reductions, reduced gross margins and loss of market share.
The market for our products is intensely competitive, evolving and subject
to rapid technological change. The intensity of competition is expected to
increase in the future. Increased competition is likely to result in price
reductions, reduced gross margins and loss of market share, any one of which
could significantly affect our operating results. Our current competitors
include information technology groups within organizations, traditional vendors
of enterprise application software, systems integrators developing their own
products and vendors of other enterprise application integration solutions. In
addition, our customers and companies with whom we currently have strategic
relationships, such as SAP and Baan Company, may become competitors in the
future. Some of our competitors and potential competitors have larger technical
staffs, larger customer bases, more established distribution channels, greater
brand recognition, more experienced senior management and greater financial,
marketing and other resources than we do.
Our competitors may be able to develop products and services that are
superior to our software and services, that achieve greater customer acceptance
or that have significantly improved functionality as compared to our existing
software and future products and services. In addition, negotiating and
maintaining favorable customer and strategic relationships are critical to our
business. Our competitors may be able to negotiate strategic relationships on
more favorable terms than we are able to negotiate. Many of our competitors may
also have well-established relationships with our existing and prospective
customers. We may not be able to maintain our competitive position against
current and potential competitors, especially those with significantly greater
resources.
Our sales cycle is often long and unpredictable, and as a result, our operating
results could be harmed in any given quarter.
Our products and technology are often purchased as part of large projects
undertaken by our customers. These projects are often complex, time consuming
and expensive. Customers generally consider a wide range of factors before
committing to purchase our products or products that incorporate our
technology, including product benefits, cost, timeliness of solution,
reliability and ability to solve a customer's specific need and inter-operate
with existing and future enterprise systems. As a result, we or other parties,
including systems integrators, must educate potential customers with respect to
these factors. In addition, the purchase of our product generally involves a
significant commitment of capital and other resources by a customer. This
commitment often requires significant technical review, assessment of
competitive products, and approval at a number of management levels within the
customer's organization. Because of these issues, our sales cycle has ranged
from three to six months and is difficult to predict for any particular license
transaction. This variable sales cycle makes it difficult to predict the
quarter in which expected orders will occur. During such sales cycles, events
beyond our control may affect the scope and timing of our sales contracts with
prospective customers. Delays in the execution of orders shift some or all of
the licensing fee revenue from that order from the expected quarter to a
subsequent quarter or quarters. Failure by customers to successfully deploy our
product, or the failure by us or systems integrators to meet customers' needs,
could damage our reputation with existing and future customers and reduce
future revenues.
We derive most of our revenues from sales of our eBusiness Integration Portal
software products and HyperRelational technology, and our business could be
materially harmed by factors that adversely affect the pricing and demand this
software and technology.
We currently derive most of our revenues from licensing our eBusiness
Integration Portal software products and our HyperRelational technology. We
expect that we will continue to depend on our eBusiness
8
<PAGE>
Integration Portal software and HyperRelational technology for most of our
revenues in the foreseeable future. Consequently, our future operating results
will depend on the demand for these products and technology, including new and
enhanced releases. A decline in the price of, or demand for, our eBusiness
Integration Portal software products or our HyperRelational technology, or
their failure to achieve broad market acceptance, could seriously harm our
business and results of operations.
If we fail to adequately respond to rapid technological changes, our existing
products will become obsolete or unmarketable.
Advances in technology could render our current products obsolete and
unmarketable. We believe that to succeed we must enhance our eBusiness
Integration Portal software products and underlying HyperRelational technology,
develop new products and technologies on a timely basis, and satisfy the
increasingly sophisticated requirements of our customers. We may not
successfully respond to technological change, evolving industry standards or
customer requirements. If we are unable to adequately respond to these changes,
our revenues could decline. In connection with the introduction of new products
and enhancements, we have experienced development delays and related cost
overruns, which are not unusual in the software industry. To date, these delays
have not had a material impact on our revenues. If new releases or products are
delayed or do not achieve broad market acceptance, we could experience a delay
or loss of revenues and customer dissatisfaction.
If our software contains defects, we could lose customers and revenues.
Software as complex as ours often contains unknown and undetected errors or
performance problems. Many defects are frequently found during the period
immediately following the introduction of new software or enhancements to
existing software. Although we attempt to resolve all errors that we believe
would be considered serious by our customers, our software may not be error-
free. Undetected errors or performance problems may be discovered in the future
and errors considered minor by us may be considered serious by our customers
who typically use our software for strategically important eBusiness
initiatives. This could result in lost revenues or delays in customer
acceptance and would be detrimental to our reputation, which could harm our
business.
Managing the growth of our operations will continue to strain our managerial,
operational and financial resources.
We have rapidly and significantly expanded our operations. This expansion is
placing a significant strain on our managerial, operational and financial
resources, infrastructure and personnel. We anticipate that further significant
expansion will be required to grow our customer base. We may not be able to
implement management information and control systems in an efficient and timely
manner, and our current or planned personnel, systems, procedures and controls
may not be adequate to support our future operations. During 1999, we increased
the number of employees from 119 to 150, and from January 1, 2000 to March 1,
2000, we added 28 additional employees. Some of our existing senior management
personnel, including Gregory S. Ayers, our Chief Financial Officer, and Greg
Turner, our Senior Vice President of Worldwide Sales, joined us within the last
three months. To manage the expected growth, we must improve existing, and
implement new, operational, financial and management controls and reporting
systems and procedures. In addition, we will also need to install new
management information and financial management systems.
We have important facilities and resources located in Israel, which has
historically experienced severe economic instability and military and political
unrest.
Although we are incorporated in Delaware and headquartered in San Jose,
California, all of our research and development efforts are conducted through
our subsidiary, Top Tier Israel Ltd., which is incorporated under the laws of
the State of Israel. As a result, we are directly influenced by the political,
economic and military conditions affecting Israel. Any major hostilities
involving Israel could significantly harm our business. Israel's economy has
been subject to numerous destabilizing factors, including a period of rampant
inflation in
9
<PAGE>
the early to mid-1980s, low foreign exchange reserves, fluctuations in world
commodity prices, military conflicts and civil unrest. Since the establishment
of the State of Israel in 1948, a state of hostility has existed, varying in
degree and intensity, between Israel and the Arab countries. In addition,
Israel and companies doing business with Israel have been the subject of an
economic boycott by the Arab countries since Israel's establishment. Although
Israel has entered into various agreements with certain Arab countries and the
Palestinian Authority, and various declarations have been signed in connection
with efforts to resolve some of the economic and political problems in the
Middle East, we cannot predict whether or in what manner these problems will be
resolved. In addition, our Senior Vice President of Research and Development,
Udi Ziv, and some of our employees are currently obligated to serve annual
reserve duty in the Israel Defense Forces and are subject to being called for
active military duty at any time. TopTier Israel, Ltd. has operated effectively
under these circumstances since its inception. We cannot predict the effect of
these obligations on TopTier Israel, Ltd. or TopTier in the future.
Our international operations involve risks that may adversely affect our
operating results.
We have committed significant resources to international sales and marketing
of our products, and have offices in the United Kingdom, The Netherlands and
Germany. Our international expansion strategy may not generate sufficient
revenues to offset the expenditures required to establish and maintain our
international sales and marketing operations. Moreover, we may not successfully
localize, market and deliver our products in foreign markets, which may limit
our ability to sell our products in those markets. Risks that may affect our
international operations include:
. greater difficulties in collecting accounts receivable and longer
collection periods than for domestic customers;
. difficulties in staffing and managing foreign operations;
. changing and conflicting regulatory requirements;
. potentially adverse tax consequences;
. tariffs and general export restrictions, including export controls
relating to encryption technology;
. political instability;
. fluctuations in currency exchange rates;
. seasonal reductions in business activity during the summer months in
Europe and certain other parts of the world; and
. the impact of local economic conditions and practices.
In addition, as we expand our international operations, we may allow payment
in foreign currencies and exposure to losses in foreign currency transactions
may increase. Any steps we may take to limit this exposure may not be
successful in avoiding exchange related losses, which could be material to our
operating results.
It would require significant time and effort to replace our key personnel.
We depend on the continued service of our key technical, sales and senior
management personnel. The loss of any of our senior management or other key
research, development, sales and marketing personnel could have a material
adverse effect on our future operating results. In particular, Shai Agassi, our
Chief Executive Officer and Chairman of the Board of Directors, and Udi Ziv,
our Senior Vice President of Research and Development, would be difficult to
replace. We maintain "key person" life insurance for Mr. Agassi in the amount
of $1.0 million.
10
<PAGE>
We may not be able to recruit or retain personnel because competition for
qualified personnel is intense in our industry and in our geographic regions.
Our success depends on our ability to attract and retain qualified
management, engineering, sales and marketing and professional services
personnel. Competition for these types of personnel is intense, especially in
the Silicon Valley and Israel. If we are unable to attract, train and retain
additional qualified personnel, our growth may be limited due to our lack of
capacity to develop and market our products.
Risks Related to Our Industry
If the use of the Internet for business-to-business commerce does not grow as
anticipated, our future revenues could be lower than currently expected.
We depend on the increased acceptance and use of the Internet as a medium
for conducting business between companies. Acceptance and use may not continue
to develop at historical rates, and a sufficiently broad base of business
customers may not adopt or continue to use the Internet as a medium of
commerce. In addition, issues of performance or government regulation of the
Internet may adversely affect companies' willingness to continue using, or to
adopt, eBusiness solutions that use the Internet, such as our own. If the use
of the Internet for business-to-business commerce does not grow, whether or not
due to any of these reasons, our operating results may suffer.
Failure to adequately protect our intellectual property rights will harm our
ability to compete.
Our success depends on our ability to adequately protect our intellectual
property rights. Despite our efforts to protect our proprietary rights, these
efforts may not be sufficient to protect our proprietary rights against
unauthorized third-party copying or use, and existing laws afford only limited
protection. Attempts may be made to copy or reverse engineer aspects of our
products or to obtain and use information that we regard as proprietary. In
addition, existing laws may change in a manner that adversely affects our
proprietary rights. Furthermore, policing the unauthorized use of our product
is difficult, and expensive litigation may be necessary in the future to
enforce our intellectual property rights.
Our products could infringe the intellectual property rights of others,
resulting in costly litigation and the loss of significant rights.
We may be subject to legal proceedings and claims for alleged infringement
of proprietary rights of others, particularly as the number of products and
competitors in our industry grow and functionalities of products overlap. This
risk is higher in a new market in which a large number of patent applications
have been filed but are not yet publicly disclosed. We have limited ability to
determine which patents our products may infringe and take measures to avoid
infringement. Any litigation could result in substantial costs and diversion of
management's attention and resources. Further, parties making infringement
claims against us may be able to obtain injunctive or other equitable relief,
which could prevent us from selling our products or require us to enter into
royalty or license agreements which are not advantageous to us.
Risks Related to This Offering
The substantial number of shares that will be eligible for sale in the near
future may cause the market price for our common stock to decline.
Sales of a substantial number of shares of our common stock in the public
market following this offering could cause the market price of our common stock
to decline. The number of shares available for sale in the public market is
limited by restrictions under federal securities law and under agreements that
some of our stockholders have entered into with the underwriters and with us.
These lockup agreements restrict our stockholders from selling, pledging or
otherwise disposing of their shares for a period of 180 days after the date of
this prospectus without the prior written consent of Credit Suisse First Boston
Corporation. Credit Suisse First Boston Corporation may, however, in its sole
discretion, release all or any portion of the common stock from the
restrictions of the lockup agreements.
11
<PAGE>
The following table indicates approximately when the 20,671,699 shares of
our common stock that were outstanding as of December 31, 1999 will be eligible
for sale into the public market:
<TABLE>
<CAPTION>
Eligibility of
Restricted Shares
for Sale in
Public Market
-----------------
<S> <C>
On the date of this prospectus..............................
180 days after the date of this prospectus..................
At various times more than 180 days after the date of this
prospectus.................................................
</TABLE>
Additionally, there were options outstanding to purchase 4,022,840 shares as
of December 31, 1999. For a further description of the eligibility of shares
for sale into the public market following the offering, see "Shares Eligible
for Future Sale."
Investors in this offering will experience immediate and substantial dilution.
The initial public offering price per share is substantially higher than the
book value per share of our common stock. As a result, investors purchasing
common stock in this offering will incur immediate dilution of $ in net
tangible book value per share, based on an assumed public offering price of
$ per share. In addition, the number of shares available for issuance
under our stock option and employee stock purchase plans will automatically
increase without stockholder approval. Investors will incur additional dilution
upon the exercise of outstanding stock options and exercise of the
underwriters' overallotment option, if any.
Our charter documents and Delaware law will make it more difficult to acquire
us and may discourage take-over attempts and thus depress the market price of
our stock.
Provisions of our certificate of incorporation and bylaws could make it more
difficult for a third party to acquire us, even if doing so would be beneficial
to our stockholders. For example, we have implemented the following provisions:
. a staggered board of directors;
. stockholder meetings may be called only by our board of directors, the
chairman of the board or the president;
. advance notice is required prior to stockholder proposals; and
. stockholders may not act by written consent.
Further, we have authorized preferred stock that is undesignated, making it
possible for our board of directors to issue preferred stock with voting or
other rights or preferences that could impede the success of any attempt to
change our control. Provisions of Delaware law also could make it more
difficult for a third party to acquire us. Specifically, Section 203 of the
Delaware General Corporation Law may have a discouraging effect on attempts to
acquire us that are not approved in advance by our board of directors,
including a premium over the market price for the shares of common stock held
by our stockholders.
Control by our principal stockholders may limit your ability to influence the
outcome of director elections and other matters requiring stockholder approval.
Upon completion of this offering, our executive officers, directors and
persons holding at least 5% of our stock, and their affiliates, will own
shares, or approximately % of the outstanding shares of our common
stock ( % if the underwriters' over-allotment option is exercised in full).
These stockholders, acting together, would be able to control all matters
requiring approval by our stockholders, including the election of directors and
the approval of mergers or other business combination transactions. This
concentration of ownership could have the effect of delaying or preventing a
change in our control or otherwise discouraging
12
<PAGE>
a potential acquirer from attempting to obtain control of us. This could have a
negative effect on the market price of our common stock or prevent our
stockholders from realizing a premium over the market prices for their shares
of common stock. For information about the ownership of common stock by our
executive officers, directors and persons holding at least 5% of our stock, see
"Principal Stockholders."
Our stock price may be volatile, which could result in substantial losses for
investors purchasing shares in this offering.
Prior to this offering, you could not buy or sell our common stock publicly.
An active public market for our common stock may not develop or be sustained
after this offering. We will negotiate and determine the initial public
offering price with the representatives of the underwriters. The market price
of our common stock after this offering will likely vary from the initial
public offering price. You may be unable to sell your shares of our common
stock at or above the offering price. The market price of the common stock may
fluctuate significantly in response to the following factors, some of which are
beyond our control:
. variations in our quarterly operating results;
. changes in securities analysts' estimates of our financial performance or
in their buy/sell recommendations;
. changes in market valuations of similar companies;
. announcements by us or our competitors of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital
commitments;
. loss of an important strategic relationship with an enterprise
application software provider such as SAP;
. loss of an important business relationship with a systems integrator;
. additions or departures of key personnel; and
. fluctuations in our stock market price and volume, which are particularly
common among highly volatile securities of software and eBusiness
companies.
We are at risk of securities class action litigation due to our expected stock
price volatility.
In the past, securities class action litigation has often been brought
against companies following periods of volatility in the market price of their
securities. This risk is especially acute for us, because technology companies
like ours have experienced greater than average stock price volatility in
recent years and, as a result, have been subject to, on average, a greater
number of securities class action claims than companies in other industries.
Due to the potential volatility of our stock price, we may in the future be the
target of similar litigation. Securities litigation could result in substantial
costs and divert management's attention and resources.
13
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology including "anticipates,"
"believes," "continue," "could," "estimates," "expects," "intends," "may,"
"plans," "potential," "predicts," "should," or "will," or the negative of these
terms or other comparable terminology. These statements are only predictions
and involve known and unknown risks, uncertainties and other factors, including
the risks outlined under "Risk Factors," that may cause our or our industry's
actual results, levels of activity, performance or achievements to be
materially different from any future results, levels or activity, performance
or achievements expressed or implied by these forward-looking statements.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking
statements after the date of this prospectus to conform these statements to
actual results, unless required by law.
USE OF PROCEEDS
We estimate that our net proceeds from the sale of the shares of
common stock in this offering will be approximately $ at an assumed
initial public offering price of $ per share, after deducting estimated
underwriting discounts and estimated offering expenses. If the underwriters
fully exercise their over-allotment option, we estimate that the net proceeds
will be approximately $ .
Our primary purposes of this offering are to obtain additional equity
capital, create a public market for our common stock, facilitate our future
access to public equity markets, provide liquidity to our existing
stockholders, and increase our visibility in the marketplace for our products.
We expect to use the net proceeds for general corporate purposes, including
expansion of sales and marketing capabilities, product development and other
working capital requirements. The amounts we actually expend for these purposes
may vary significantly and will depend on a number of factors, including the
amount of our future revenues and the other factors described under "Risk
Factors." Accordingly, we will have broad discretion in the allocation of the
proceeds of this offering. We may also use a portion of the proceeds to acquire
or invest in complementary businesses, technologies, product lines or products,
although we have no current plans or commitments for any of these acquisitions
or investments. Pending such uses, the net proceeds of this offering will be
invested in short-term, interest-bearing, investment-grade securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain our future earnings to finance the growth and
development of our operations. We do not anticipate declaring or paying cash
dividends on our common stock for the foreseeable future. Any future
determination to declare or pay dividends will be at the discretion of our
board of directors and will be dependent upon our financial condition, results
of operations, capital requirements and other factors that our board of
directors considers relevant.
14
<PAGE>
CAPITALIZATION
The following table sets forth, as of December 31, 1999:
. our actual capitalization;
. our pro forma capitalization, which gives effect to the automatic
conversion of all outstanding preferred stock into common stock upon
completion of this offering; and
. our pro forma as adjusted capitalization, which gives effect to the sale
of shares of common stock in this offering at an assumed initial
public offering price of $ per share, after deducting estimated
underwriting discounts and commissions and estimated offering expenses.
This information should be read in conjunction with our Consolidated
Financial Statements and related Notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
----------------------------
Pro
Pro Forma As
Actual Forma Adjusted
-------- -------- --------
(in thousands, except
share and
per share data)
<S> <C> <C> <C>
Cash and cash equivalents......................... $ 2,529 $ 2,529 $
======== ======== ====
Stockholders' equity:
Convertible preferred stock, $0.001 par value:
23,514,176 shares authorized; 19,981,043 shares
outstanding, actual; no shares outstanding, pro
forma; 5,000,000 shares authorized, no shares
outstanding, pro forma as adjusted............. 20 -- --
Common stock, $0.001 par value: 33,125,000
shares authorized, 690,656 shares outstanding,
actual; 200,000,000 shares authorized,
20,671,699 shares outstanding, pro forma;
200,000,000 shares authorized,
shares outstanding, pro forma as adjusted...... 1 21
Additional paid-in capital........................ 111,438 111,438
Deferred stock compensation....................... (12,521) (12,521)
Notes receivable.................................. (466) (466)
Accumulated deficit............................... (49,294) (49,294)
-------- -------- ----
Total stockholders' equity...................... 49,178 49,178
-------- -------- ----
Total capitalization.......................... $ 49,178 $ 49,178 $
======== ======== ====
</TABLE>
Outstanding shares exclude the following shares:
. 4,022,840 shares of common stock issuable upon exercise of outstanding
options at December 31, 1999 at a weighted average price of $0.80; and
. 2,246,842 shares of common stock reserved for future issuances under our
stock plans.
15
<PAGE>
DILUTION
Our pro forma net tangible book value at December 31, 1999 was approximately
$7.3 million or $0.35 per share. Pro forma net tangible book value per share is
equal to the amount of our total tangible assets less our total liabilities,
divided by the number of outstanding shares of our common stock assuming the
conversion of all outstanding preferred stock into common stock.
New investors who purchase shares in this offering will be diluted to the
extent of the difference between the initial public offering price and the pro
forma net tangible book value per share of common stock immediately after
completion of this offering. After giving effect to the sale of shares
of common stock in this offering at an assumed initial public offering price of
$ per share, after deducting estimated underwriting discounts and
commissions and estimated offering expenses, our pro forma net tangible book
value at December 31, 1999 would have been $ or $ per share. This
represents an immediate increase in pro forma net tangible book value of $
per share to existing stockholders and an immediate dilution in pro forma 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 December 31,
1999............................................................ $0.35
Increase in pro forma net tangible book value per share
attributable to new investors...................................
-----
Pro forma net tangible book value per share upon completion of this
offering..........................................................
-----
Dilution per share to new investors................................ $
=====
</TABLE>
The following table sets forth at December 31, 1999 the differences between
the existing stockholders and new investors who purchase shares of common stock
in this offering in the number of shares purchased from us, the total
consideration paid, and the average price paid per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ -------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ------------ ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 20,671,699 % $101,220,288 % $4.90
New investors...........
---------- ----- ------------ -------
Total................. 100.0% $ $ 100.0%
========== ===== ============ =======
</TABLE>
This table excludes the following shares:
. 4,022,840 shares of common stock issuable upon exercise of outstanding
options on December 31, 1999 at a weighted average price of $0.80; and
. 2,246,842 shares of common stock reserved for future issuances under our
stock plans.
This table includes consideration attributable to existing stockholders of
$73,931,474 pushed down at the time of Vanenburg's acquisition of us in October
1998. To the extent outstanding options are exercised after December 31, 1999
or the underwriters exercise their over-allotment option, there will be further
dilution to new investors.
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our Consolidated Financial Statements and related Notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." The statement of operations data for the years ended December 31,
1995 and 1996 and the balance sheet data as of December 31, 1995 and 1996 are
derived from unaudited consolidated financial statements not included in this
prospectus. The balance sheet data as of December 31, 1997 is derived from
audited financial statements not included in this prospectus. The statements of
operations data for the year ended December 31, 1997, nine months ended
September 30, 1998, three months ended December 31, 1998 and the year ended
December 31, 1999 and the balance sheet data as of December 31, 1998 and 1999,
are derived from our audited Consolidated Financial Statements included
elsewhere in this prospectus. The weighted average shares used in computing
basic net loss per share below reflect the acquisition by Vanenburg of all of
our outstanding stock by October 1998, and the resulting decrease in shares
outstanding for the year ended December 31, 1999. The unaudited pro forma
consolidated statement of operations data for the year ended December 31, 1998
was derived from unaudited financial statements prepared by us and gives effect
to Vanenburg's acquisition of us as if it occurred on January 1, 1998. See also
Note 3 of the Notes to the Consolidated Financial Statements. The selected
financial data for the years ended December 31, 1995, 1996 and 1997 and the
period from January 1, 1998 through September 30, 1998 reflect the results of
operations and balance sheet data prior to the acquisition. The selected
consolidated financial data for the period from October 1, 1998 through
December 31, 1999 reflect the results of operations and balance sheet data
subsequent to the acquisition.
<TABLE>
<CAPTION>
Nine Months Three Months Pro Forma
Ended Ended Year Ended Year Ended
Year Ended December 31, September 30, December 31, December 31, December 31,
-------------------------- ------------- ------------ ------------ ------------
1995 1996 1997 1998 1998 1998 1999
-------- ------ -------- ------------- ------------ ------------ ------------
(unaudited) (unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Revenues:
License revenues....... $ -- $ -- $ 30 $ 2,484 $ 244 $ 2,728 $ 7,260
Service revenues....... 1,150 1,238 65 152 73 225 2,385
-------- ------ -------- ------- -------- -------- -----------
Total revenues....... 1,150 1,238 95 2,636 317 2,953 9,645
-------- ------ -------- ------- -------- -------- -----------
Cost of revenues:
Cost of license
revenues.............. -- -- -- 1 -- 1 30
Cost of service
revenues.............. 380 654 80 191 91 282 1,668
-------- ------ -------- ------- -------- -------- -----------
Total cost of
revenues............ 380 654 80 192 91 283 1,698
-------- ------ -------- ------- -------- -------- -----------
Gross profit............ 770 584 15 2,444 226 2,670 7,947
-------- ------ -------- ------- -------- -------- -----------
Operating expenses:
Sales and marketing.... -- -- 665 4,241 1,127 5,368 8,200
Research and
development, net...... 477 605 1,054 2,644 806 3,450 5,444
General and
administrative........ 368 575 1,823 1,913 434 2,347 2,386
Purchased in-process
research and
development........... -- -- -- -- 3,557 3,557 --
Amortization of
deferred stock
compensation(*)....... -- -- -- -- -- -- 7,214
Amortization of
goodwill and
intangibles........... -- -- -- -- 5,695 22,780 22,780
-------- ------ -------- ------- -------- -------- -----------
Total operating
expenses............ 845 1,180 3,542 8,798 11,619 37,502 46,024
-------- ------ -------- ------- -------- -------- -----------
Operating loss.......... (75) (596) (3,527) (6,354) (11,393) (34,832) (38,077)
Other income (expense),
net.................... (10) (3) 92 426 62 488 114
-------- ------ -------- ------- -------- -------- -----------
Net loss................ $(85) $(599) $ (3,435) $(5,928) $(11,331) $(34,344) $ (37,963)
======== ====== ======== ======= ======== ======== ===========
Basic net loss per
share.................. $(850.00) $(0.20) $ (0.48) $ (0.80) $ -- $ -- $ (1,660.81)
======== ====== ======== ======= ======== ======== ===========
Weighted average shares
used in computing basic
net loss per share..... 1 2,942 7,190 7,375 -- -- 23
======== ====== ======== ======= ======== ======== ===========
Pro forma basic net loss
per share (unaudited).. -- -- -- -- -- -- $ (2.10)
Shares used in computing
pro forma basic net
loss per share
(unaudited)............ -- -- -- -- -- -- 18,040
</TABLE>
- -------
* Amortization of deferred stock compensation has been excluded from the
following expenses:
<TABLE>
<S> <C>
Cost of service revenues.............................................. $ 433
Sales and marketing................................................... 927
Research and development, net......................................... 3,353
General and administrative............................................ 2,501
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
December 31,
-----------------------------------------
1995 1996 1997 1998 1999
---- ------ ------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents............ $ 11 $ 589 $ 3,115 $ 3,458 $ 2,529
Working capital...................... (22) 240 10,222 2,545 5,923
Goodwill, net........................ -- -- -- 59,844 38,082
Total assets......................... 275 1,000 13,073 111,995 52,345
Accumulated deficit.................. (86) (599) (4,034) (11,331) (49,294)
Total stockholders' equity........... (75) 211 10,753 68,481 49,178
</TABLE>
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a leading provider of eBusiness portal technologies and products that
integrate information residing in a business' internal and external enterprise
applications, databases, text documents, Web sites and other data sources. We
develop our software products around our patented HyperRelational technology.
We began operations in 1992 as Quicksoft Development (1992) Ltd., an
Israeli-based research and development company, which became our subsidiary
when we were incorporated in Delaware in August 1996. Until August 1996, we
were engaged primarily in software development for third parties on a contract
basis and, to a lesser extent, in developing our initial eBusiness integration
portal technologies and products. Since August 1996, we have focused our
efforts exclusively on developing these technologies and products. We
commercially released the first version of our eBusiness Integration Portal
software in late June 1998. With this release, we accelerated the development
of our sales and marketing organizations. During 1999, we increased the number
of total employees from 119 to 150, and from January 1, 2000 through March 1,
2000, we added 28 additional employees. We opened sales and marketing offices
in the United Kingdom in July 1998 and offices in Germany and The Netherlands
in October 1998. We have incurred significant losses since inception, and as of
December 31, 1999, we had an accumulated deficit of $49.3 million.
Sources of Revenues
We generate revenues from non-exclusive, perpetual product and technology
licenses and professional services. Since the release of our initial eBusiness
Intergration Portal software product, we have primarily generated revenues from
licenses of our technology and products. We license our technology and products
to large, independent software vendors and directly to corporations. We provide
engineering and maintenance services to these software vendors, training
services to systems integrators and implementation and maintenance support
services to corporations. Historically, we have derived a larger proportion of
our total revenues from license agreements with software vendors than from
agreements with corporations. To date, a majority of our total revenues has
been derived from customers located outside of the United States. We believe
that domestic revenues will represent a more significant component of our total
revenues as our operations grow, although the implementation of our products
will likely include foreign subsidiaries of U.S.-based customers.
License Revenues. We generate revenues from the grant to independent
software vendors of licenses to embed our technology into their products. We
also receive revenues for licenses to corporations for a limited number of
copies of our software products. We recognize these revenues when a license
agreement has been executed or a definitive purchase order has been received
and the product has been delivered, no significant obligations with regard to
implementation remain, the fee is fixed and determinable and collection is
probable. We consider our products to have been delivered when an access code
has been provided to the customer. In addition, we generate revenues from
software vendors that resell our stand-alone products to their customers. We
recognize these revenues when the distributor has met all provisions of SOP 97-
2 and when such revenues are reported to us by the software vendors. Payments
received from software vendors or corporations in advance of revenue
recognition are recorded as deferred revenues.
Service Revenues. Our customers may choose to separately enter into service
contracts for the provision of engineering assistance to embed our technology
into software vendors' products and for technology maintenance services to
these software vendors. We also generate revenues from implementation services
to integrate our technology within a corporation's enterprise information
system. These consulting services are generally billed at an hourly rate on a
time and materials basis and are recognized as the services are performed.
Corporations who license our products generally also purchase maintenance
services from us. We recognize revenues from these contracts over the period
during which these maintenance services are provided. We also offer training
services, which are billed on a per student basis. Revenues from training
services are recognized as classes are attended. Prior to June 1998, we entered
into consulting agreements with third parties and received service revenues,
which revenues we recognized ratably over the term of those consulting
agreements.
19
<PAGE>
Concentration of Revenues
A relatively small number of customers account for a significant portion of
our total revenues. As a result, the loss or delay of individual orders can
have a significant impact on our revenues. In 1998, sales to our largest
customer, Computer Curriculum Corporation, accounted for approximately 77% of
total revenues. In 1999, sales to our two largest customers accounted for
approximately 87% of total revenues, with Baan Company accounting for 71% and
SAP AG accounting for 16%. We expect that revenues from a limited number of
customers will continue to account for a large percentage of our total
revenues.
Acquisition by Vanenburg
From June 1997 to October 1998, Vanenburg Group BV acquired all of our
outstanding equity through a series of purchase transactions. Pursuant to SEC
accounting rules, the difference between the purchase price of those shares and
the book value of our net assets at September 30, 1998 is reflected on, or
"pushed down" to, our financial statements and a new basis of accounting was
established for our assets and liabilities. We have not acquired any entity in
a purchase transaction since inception that resulted in any goodwill being
reflected on our financial statements. As of December 31, 1999, Vanenburg owned
83% of our outstanding shares on a fully-diluted basis.
As a result of the Vanenburg acquisition, we recorded $65.3 million of
goodwill in October 1998. In addition, we recorded intangible assets of $5.1
million, reflecting the estimated fair market value of our assembled workforce,
trade name and core technology at the time. We also expensed $3.7 million of
purchased in-process research and development. The goodwill is being amortized
over a period of 36 months beginning October 1998, and the intangible assets
are being amortized over a period of five years beginning October 1998. The
quarterly amortization of goodwill is $5.4 million and the quarterly
amortization of intangibles is approximately $255,000. As of December 31, 1999,
$27.2 million of the goodwill and $1.3 million of the intangibles had been
amortized.
Income Taxes
Our deferred tax assets primarily consist of net operating loss
carryforwards. We have recorded a valuation allowance for the full amount of
our net deferred tax assets, as the future realization of the tax benefit is
not currently likely. As of December 31, 1999, we had net cumulative operating
loss carryforwards for federal tax purposes of $15.0 million and for state tax
purposes of $12.5 million. These federal and state tax loss carryforwards are
available to reduce future taxable income and expire at various dates through
2019 and 2005. Under the provisions of the Internal Revenue Code, substantial
changes in our ownership may limit the amount of net operating loss
carryforwards that could be utilized annually in the future to offset taxable
income. Our subsidiaries in Israel and the United Kingdom had carryforward
losses of $4.0 million and $3.0 million that have no expiration date.
Our Israeli subsidiary's initial investment plan of $80,000 and additional
investment plans of $644,000 have been granted "Approved Enterprise" status
under the Israeli Law for Encouragement of Capital Investments. In accordance
with this law, the income from the approved enterprises will be subject to tax
benefits for a seven year period, commencing with the first year in which
taxable income is generated but limited to twelve years from commencement of
production or fourteen years from the date of approval, whichever is earlier.
We have chosen to receive our subsidiary's benefits in respect of its plans
through the Alternative Benefits program. These benefits include a tax
exemption on income derived from the "Approved Enterprise" for a period of two
years and a reduced income tax rate of 25% (instead of the regular rate of 36%)
for the additional five years of the benefit period. A company in which foreign
investment exceeds 25% is entitled to a benefit period of ten years. If the
proportion of foreign investment is between 25% and 49%, a company will be
taxed at a rate of 25%; if between 49% and 74%, at a rate of 20%; if between
74% and 90%, at a rate of 15%; and if in excess of 90%, at a rate of 10%. The
proportion of holdings of foreign shareholders is measured annually based on
the lowest level of foreign investment during the year.
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Historical Results of Operations
Comparison of Years Ended December 31, 1997, Pro Forma Year Ended December 31,
1998 and Year Ended December 31, 1999
The discussion below includes a comparison to the pro forma consolidated
statements of operations data for the year ended December 31, 1998. This data
gives effect to Vanenburg's acquisition of us as if it occurred on January 1,
1998.
Revenues
License Revenues. License revenues increased from approximately $30,000 in
1997 to $2.7 million in 1998. Substantially all of this increase was due to
revenues recognized under a license agreement entered into in 1997 with one
software vendor. License revenues increased 270% from $2.7 million in 1998 to
$7.3 million in 1999. This increase was due to revenues recognized under one
significant software vendor license agreement entered into in 1998, and growth
in the number of licenses to new customers. In addition, our average license
revenues per transaction has increased year to year due to larger deployments
by our customers.
Service Revenues. Service revenues increased from approximately $65,000 in
1997, to approximately $225,000 in 1998, to $2.4 million in 1999. Substantially
all of the increase from 1997 to 1998 was due to service revenues recognized
under a license agreement entered into in 1997 with one software vendor. A
majority of the increase from 1998 to 1999 was due to service revenues
recognized under a license agreement entered into in 1998 with a different
software vendor. We expect service revenues to continue to increase in absolute
dollars as we support an increasing number of new deployments of our product.
Cost of Revenues
Cost of License Revenues. Cost of license revenues consists of packaging and
shipping materials used in fulfillment of our products. Cost of license
revenues was negligible for 1997 and was approximately $1,000 in 1998 and
approximately $30,000 in 1999.
Cost of Service Revenues. Cost of service revenues consists of salaries,
payments to third-party consultants incurred in providing customer support,
training and implementation services as well as reimbursable travel costs. Cost
of service revenues was approximately $80,000 in 1997, approximately $282,000
in 1998 and $1.7 million in 1999. A majority of the increase from 1998 to 1999
was due to increased costs related to services provided under a license
agreement entered into with one software vendor. The number of employees
providing services increased from 16 in December 1998 to 30 in December 1999.
We expect that cost of service revenues will continue to increase in absolute
dollars as we continue to expand our customer support organization to meet
anticipated customer demand. We expect cost of service revenues as a percentage
of service revenues to decrease as we discontinue discounts on services that we
offered during our early stages of development and through the first half of
1999.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist of salaries,
commissions, field office expenses, travel and entertainment, trade show and
conference expenses. Sales and marketing expenses increased from approximately
$665,000 in 1997, to $5.4 million in 1998, to $8.2 million in 1999. These
increases were due to expansion of our direct sales force, increased spending
on marketing and promotional activities, and the hiring of additional
professional services personnel. We expect that sales and marketing expenses
will continue to increase in absolute dollars as we continue to expand our
sales and marketing efforts, establish additional U.S. and international sales
offices and increase promotional activities.
Research and Development, Net. Research and development expenses consist of
costs associated with the development of new products, enhancements to existing
products and quality assurance activities. These costs
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consist primarily of employee salaries and benefits, as well as costs
associated with consulting resources that supplement the internal development
team. We have not capitalized any software development costs and have expensed
all of these costs as incurred. Research and development expenses increased
from $1.1 million in 1997, to $3.5 million in 1998, to $5.4 million in 1999.
The increase from 1997 to 1998 was due to costs associated with the hiring of
additional personnel. The increase from 1998 to 1999 was due to costs
associated with the hiring of additional personnel, fees paid to third-party
consultants and travel related expenditures. Our research and development
expenses are net of Israeli government grant reimbursements of approximately
$362,000 in 1997, $419,000 in 1998 and $617,000 in 1999. We anticipate that we
will continue to devote substantial resources to research and development and
that these expenses will continue to increase in absolute dollars.
General and Administrative. General and administrative expenses consist of
salaries for administrative, executive and finance personnel, recruiting costs,
information systems costs, professional service fees and allowances for
doubtful accounts. These expenses increased from $1.8 million in 1997 to $2.3
million in 1998, and increased to $2.4 million in 1999. These increases were
due to costs associated with the hiring of additional personnel and facility
costs. We believe that our general and administrative expenses will continue to
increase in absolute dollars as a result of our anticipated growth and the
expenses associated with operating as a public company.
Amortization of Deferred Stock Compensation. Amortization of deferred stock
compensation includes the amortization of unearned employee stock-based
compensation. Employee stock-based compensation expense is amortized over a
four-year vesting period in a manner consistent with FASB Interpretation No.
28. In connection with the grant of some employee stock options, we recorded
aggregate unearned stock-based compensation of $19.7 million through December
31, 1999. We amortized employee stock-based compensation expense of $7.2
million in 1999. We expect to record employee stock-based compensation expenses
of approximately $1.9 million for the first quarter of 2000, $1.9 million for
the second quarter of 2000, $1.8 million for the third quarter of 2000, and
$1.2 million for the fourth quarter of 2000. We anticipate these expenses will
to decrease consistently in future periods. Unearned compensation expense will
be reduced for future periods to the extent that options are terminated prior
to full vesting.
Amortization of Goodwill and Intangibles. As a result of Vanenburg's
acquisition of us, we recorded $65.9 million of goodwill in October 1998. In
addition, we recorded intangible assets of $5.1 million, reflecting the
estimated fair market value of our assembled workforce, trade name and core
technology at the time of the acquisition. The goodwill is being amortized over
a period of 36 months and the intangible assets are being amortized over a
period of five years.
Other Income, Net. Other income, net increased to approximately $488,000 in
1998 from approximately $92,000 in 1997. The increase was due to increased
interest income on higher average interest-earning investment balances obtained
from equity financings. Other income, net decreased to approximately $114,000
in 1999 on lower average interest-earning investment balances, as cash was
consumed in operations.
Net Loss. Net loss increased from $3.4 million in 1997, to $17.3 million in
1998, to $38.0 million in 1999.
Quarterly Results Of Operations
The following tables set forth statement of operations data for each of the
five most recent quarters, beginning with the quarter ended December 31, 1998,
the quarter in which the Vanenburg acquisition occurred, and ended December 31,
1999, as well as the percentage of our total revenues represented by each item.
This information has been derived from our unaudited consolidated financial
statements. The unaudited consolidated financial statements have been prepared
on the same basis as the audited Consolidated Financial Statements contained in
this prospectus and include all adjustments, consisting only of normal
recurring adjustments, that we consider necessary for a fair presentation of
this information. You should read this information in conjunction with our
audited Consolidated Financial Statements and related Notes. Our quarterly
operating results are expected to vary significantly from quarter to quarter,
and you should not draw any conclusions about our future results from the
results of operations for any quarter. We believe that period-to-period
22
<PAGE>
comparisons of our results of operations are not necessarily meaningful and
should not be relied upon as indications of future performance.
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------------------------------
Dec. 31, 1998 Mar. 31, 1999 Jun. 30, 1999 Sept. 30, 1999 Dec. 31, 1999
------------- ------------- ------------- -------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Operations Data:
Revenues:
License revenues....... $ 244 $ 1,285 $ 2,042 $ 1,521 $ 2,412
Service revenues....... 73 96 167 879 1,243
-------- ------- ------- ------- --------
Total revenues......... 317 1,381 2,209 2,400 3,655
-------- ------- ------- ------- --------
Cost of revenues:
Cost of license
revenues.............. -- 8 9 -- 13
Cost of service
revenues.............. 91 119 207 510 832
-------- ------- ------- ------- --------
Total cost of
revenues.............. 91 127 216 510 845
-------- ------- ------- ------- --------
Gross profit............ 226 1,254 1,993 1,890 2,810
-------- ------- ------- ------- --------
Operating expenses:
Sales and marketing.... 1,127 2,098 1,973 1,833 2,296
Research and
development, net...... 806 1,117 1,220 1,532 1,575
General and
administrative........ 434 336 360 602 1,080
Purchased in-process
research and
development........... 3,557 -- -- -- --
Amortization of
deferred stock
compensation.......... -- -- 512 171 6,531
Amortization of
goodwill and
intangibles........... 5,695 5,695 5,695 5,695 5,695
-------- ------- ------- ------- --------
Total operating
expenses.............. 11,619 9,246 9,760 9,833 17,185
-------- ------- ------- ------- --------
Operating loss.......... (11,393) (7,992) (7,767) (7,943) (14,375)
Other income, net....... 62 27 7 17 63
-------- ------- ------- ------- --------
Net loss................ $(11,331) $(7,965) $(7,760) $(7,926) $(14,312)
======== ======= ======= ======= ========
As a Percentage of Total
Revenues:
Revenues:
License revenues....... 77 % 93 % 92 % 63 % 66 %
Service revenues....... 23 7 8 37 34
-------- ------- ------- ------- --------
Total revenues......... 100 100 100 100 100
-------- ------- ------- ------- --------
Cost of revenues:
Cost of license
revenues.............. -- -- -- -- --
Cost of service
revenues.............. 29 9 10 21 23
-------- ------- ------- ------- --------
Total cost of
revenues.............. 29 9 10 21 23
-------- ------- ------- ------- --------
Gross margin............ 71 91 90 79 77
-------- ------- ------- ------- --------
Operating expenses:
Sales and marketing.... 356 152 89 76 63
Research and
development, net...... 254 81 55 64 43
General and
administrative........ 136 25 16 26 30
Purchased in-process
research and
development........... 1,122 -- -- -- --
Amortization of
deferred stock
compensation.......... -- -- 23 7 179
Amortization of
goodwill and
intangibles........... 1,797 412 258 237 156
-------- ------- ------- ------- --------
Total operating
expenses.............. 3,665 670 441 410 471
-------- ------- ------- ------- --------
Operating loss.......... (3,594) (579) (351) (331) (394)
Other income, net....... 20 2 -- 1 2
-------- ------- ------- ------- --------
Net loss................ (3,574)% (577)% (351)% (330)% (392)%
======== ======= ======= ======= ========
</TABLE>
The trends discussed in the comparisons of operating results for the years
ended December 31, 1997, 1998 and 1999 also generally apply to our results of
operations for our five most recent quarters ended December 31, 1999, with the
additional factors noted below. Our total revenues increased 279% from the
fourth quarter of 1998 to the first quarter of 1999, 60% from the first to the
second quarters of 1999, 9% from the second to the third quarters of 1999 and
52% from the third to the fourth quarters of 1999.
License revenues decreased from $2.0 million in the second quarter of 1999
to $1.5 million in the third quarter of 1999 due to significant license fees
paid in the second quarter. Service revenues increased 426% from approximately
$167,000 in the second quarter of 1999 to approximately $879,000 in the third
quarter of 1999 as separate service contracts were performed in these
subsequent quarters.
Gross margin decreased from 90% in the second quarter of 1999 to 79% in the
third quarter of 1999. This decrease was due to a decline in higher margin
license revenue from the second quarter of 1999 to the third quarter of 1999,
resulting in a greater proportion of our total revenues being derived from
services in the third quarter.
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Sales and marketing expenses increased from $1.3 million in the fourth
quarter of 1998 to $2.1 million in the first quarter of 1999 and to $2.0
million in the second quarter of 1999. The increased expenses in the first two
quarters of 1999 were due to our increased participation in various trade shows
and conferences. We expect sales and marketing expenses to fluctuate from
quarter to quarter due to the timing of, and our participation in, trade shows,
conferences and other marketing events.
General and administrative expenses increased approximately $242,000 from
the second quarter to the third quarter of 1999 and approximately $488,000 from
the third quarter to the fourth quarter of 1999. These increases were due to
increased salaries and benefits, recruitment, travel, and legal costs and
information systems expenses.
Amortization of goodwill and intangibles remained constant throughout the
five most recent quarters. We are amortizing goodwill that we recorded as a
result of Vanenburg's acquisition of us over a period of 36 months, and we are
amortizing intangibles we recorded as a result of this acquisition over a
period of five years.
Liquidity and Capital Resources
Prior to this offering, we financed our operations through private sales of
common and preferred stock, with aggregate net proceeds of $27.1 million. As of
December 31, 1999, we had $2.5 million in cash and cash equivalents, $2.2
million in marketable securities and $5.9 million in working capital with no
outstanding long-term debt.
In October 1998, Vanenburg acquired our outstanding equity and vested stock
options. At closing, the vested stock option holders were paid in full. The
selling stockholders received one-third of the purchase price in cash and were
issued notes for the balance consideration. The issuance of the notes was
recorded as a "pass through" transaction in our financial statements.
Accordingly, we issued notes due to selling stockholders totaling $40.2
million, and recorded a receivable due from Vanenburg for $40.2 million. In
1999, the total amount of the notes due to selling stockholders, including
accrued interest, was paid in full and an equal amount was received from
Vanenburg.
Vanenburg has committed to provide financial support to us through June
2001, if necessary.
Net cash used in operating activities was $1.5 million in 1997, $8.0 million
in 1998 and $9.0 million in 1999. Net cash used to fund operating activities in
each of these periods reflects net losses, offset in part by deferred revenues.
Our significant license transactions with software vendors have payment terms
that exceed 12 months. Payment terms that exceed one year are not considered
fixed and determinable and revenue is recognized as payments become due.
Net cash used in investing activities was $9.6 million in 1997 and $2.5
million in 1999. Net cash provided by investing activities was $7.5 million in
1998. Investing activities consist primarily of purchases and sales of
investments, computer hardware and software, office furniture and equipment and
leasehold improvements.
Net cash generated from financing activities was $14.0 million in 1997,
approximately $811,000 in 1998 and $10.6 million in 1999. Net cash generated
from financing activities consists of net proceeds from the issuance of
convertible preferred and common stock.
We expect to experience a significant growth in our operating expenses for
the forseeable future in order to execute our business plan. As a result, we
anticipate that operating expenses and capital expenditures will constitute a
material use of our cash resources. In addition, we may utilize cash resources
to fund acquisitions or investments in other businesses, technologies or
product lines. We believe that available cash and cash equivalents including
the net proceeds from the initial public offering will be sufficient to meet
our working capital and operating expense requirements for at least the next
twelve months. Thereafter, we may require additional funds to support our
working capital and operating expense requirements or for other purposes and
may seek to raise these additional funds through public or private debt or
equity financings. There can be no assurance that this additional financing
will be available on reasonable terms, if at all, or that any financing will
not be dilutive to our stockholders.
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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 requiring that every derivative
instrument be recorded in the balance sheet at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement. SFAS No. 133 is effective
for us in January 2001. We believe that the adoption of SFAS No. 133 will not
have a material effect on our financial statements.
In December 1998, the AICPA issued Statement of Position ("SOP") 98-9
"Modification of SOP 97-2, Software Revenue Recognition, with Respect to
Certain Transaction." SOP 98-9 amends SOP 97-2 and SOP 98-4 by extending the
deferral of the application of certain provisions of SOP 97-2 amended by SOP
98-4 through fiscal years beginning on or before March 15, 1999. All other
provisions of SOP 98-9 are effective for transactions entered into in fiscal
years beginning after March 15, 1999. We do not anticipate that this statement
will have a material impact on our statements of operations.
Seasonality
We have experienced, and may continue to experience, a seasonal reduction in
our total revenues during the third quarter of each year, primarily due to
European vacation schedules which typically result in reduced economic activity
in Europe during this quarter. As a result, these sales may close in the fourth
quarter, which would increase revenues for that quarter relative to both the
preceding and subsequent quarters. While we anticipate that this trend will
continue, we expect that the impact on our total revenues will diminish if
revenues from European countries decline as a percentage of our total revenues.
Qualitative And Quantitative Disclosures About Market Risk
We develop products in Israel and market our products in North America and
Europe. 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. Because substantially 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. In addition, as we expand our international
operations, we may allow payment in foreign currencies and exposure to losses
in foreign currency transactions may increase. Any steps we may take to limit
this exposure may not be successful in avoiding exchange related losses, which
could be material to our operating results. 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 presented.
Year 2000 Issues
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failures or miscalculations causing disruptions of
operations for any company using such computer programs or hardware, including,
among other things, a temporary inability to process research data, send
invoices or engage in normal business activities. We completed an assessment of
our information technology systems for year 2000 problems in September 1999. We
did not replace any of our systems based on the results of our assessment. We
experienced no problems with our systems since the beginning of 2000. To date,
we have incurred expenses related to the year 2000 issue of less than $100,000,
which were included in operating expenses. We plan to continue to monitor our
system throughout the year to assess whether any problems develop. If any
errors or defects become evident, we may incur costs to resolve them, however,
we do not expect to make any material expenditures related to year 2000
compliance issues in the future.
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BUSINESS
Overview
We are a leading provider of eBusiness portal technologies and products that
integrate information residing in a business' internal and external enterprise
applications, databases, text documents, Web sites and other data sources. Our
eBusiness Integration Portal software products are designed to enable a
business' extended enterprise of employees, customers, suppliers and business
partners to directly access, navigate and manipulate integrated information
using an intuitive and effective portal interface. We have licensed our
software directly to over 75 companies, including Equilon (a consortium of
Royal Dutch Shell, Texaco and Aramco), Herman Miller, Hewlett-Packard, KPN
(Dutch Telecom), Nortel Networks, Phillips Group, Ricoh Canada and Rolls Royce
Marine. Our technology is also embedded in and ships within eBusiness
applications such as mySAP.com Workplace, sold by SAP AG, and Baan Data
Navigator, sold by Baan Company.
Our software products are developed around our patented HyperRelational
technology, a protocol for accessing and interacting with structured and
unstructured data. Based on a combination of hypertext and relational models,
our HyperRelational technology directs the end user to related data from
multiple sources, using meta-data describing these sources. As a result, end
users of our software are able to directly access, use and manipulate
information that is relevant to their query and are not merely directed to one,
predetermined data location.
Industry Background
Conducting business over the Internet, often referred to as eBusiness, is
fundamentally changing the methods by which, and the speed at which, businesses
and individuals communicate and conduct commerce. International Data
Corporation estimates that the inter-company trade of goods and services over
the Internet, or business-to-business e-commerce, will grow from $97 billion in
1998 to $1.4 trillion in 2003. To compete in this dynamic eBusiness
environment, many companies are seeking to automate and accelerate business
processes by promoting tight business integration both within the enterprise
and among an extended enterprise of customers, suppliers and business partners.
By doing so, companies seek to increase revenues, streamline complex business
processes, lower costs and improve productivity. Companies want to rapidly and
seamlessly effect these changes, without interrupting the normal course of
business. In order to participate in this new economy, companies must deploy an
eBusiness platform based upon the Internet. Companies that can improve access
to their corporate information for their network of extended enterprise
partners are able to establish and maintain closer business relationships, gain
new efficiencies and create significant strategic advantages.
Existing Technology Infrastructure is Not Suitable for the New Market
Over the past two decades, companies have implemented a wide range of
software applications to automate or optimize many aspects of their business.
Companies have invested heavily in enterprise resource planning and knowledge
management applications, as well as electronic data interchange technologies.
Based on data from International Data Corporation, in 1999 alone, approximately
$153 billion was invested worldwide on tools, applications and systems
infrastructure software. For example, software products from SAP and Baan
Company, two leading independent software vendors, are being used by more than
20,000 businesses worldwide, representing more than 10 million end users.
Nonetheless, most traditional enterprise applications cannot easily be adapted
to exploit the capabilities of the Internet, which prevents them from creating
a fully integrated network of business partners and customers. In addition,
these applications can be complex, difficult to implement and use and do not
provide easy access to relevant data. Further, companies generally have only a
limited number of personnel trained to access and manipulate this data
effectively. Moreover, because companies frequently use applications provided
by multiple vendors, integration of these applications is frequently difficult.
These limitations dramatically reduce the value companies derive from their
investments in information technology.
As a result of the limitations of traditional enterprise applications,
companies have been required to make significant investments in enterprise
application integration, or EAI, software to integrate a broad range of
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<PAGE>
packaged and custom applications. These integration applications increase the
efficiency of enterprise applications by enabling disparate enterprise
applications to share data. Similarly, companies have begun to integrate their
extended business-to-business enterprise networks to facilitate links between
applications that exist in multiple companies. These applications, however,
facilitate only back-end inter-application communication. They fail to provide
the end user with an integrated view, or understanding, of the extended
enterprise's network of information. Traditional EAI solutions also fail to
fully capitalize on the benefits of the Internet and are often inflexible
because they are pre-configured. As a result, they typically do not deliver the
competitive advantage, speed of implementation and time-to-market benefits
required in today's business environment.
Internet-based enterprise information portals, commonly referred to as EIPs,
which provide personalized access to limited types of information, have
recently been introduced. However, much of the critical data that a Company's
extended enterprise needs to access is "structured" data, meaning that it
resides in packaged enterprise applications and databases, and is not easily
accessible through EIPs. Because information access provided by EIPs is
passive, end-user interaction with the information presented is limited
primarily to clicking on predefined Web-based links, reducing the value of the
portal and the information it presents. As a result, EIPs provide a limited
solution to information access and fail to fully integrate enterprise
applications across the extended enterprise.
Market Opportunity
In order to exploit business opportunities that are provided by the
Internet, companies must deploy an eBusiness platform that provides an up-to-
date, integrated view into all information resources throughout the extended
enterprise and enables a broad range of end users to directly access, navigate
and manipulate this information. This platform must directly connect all
existing data sources within and outside a company, significantly improve the
accessibility to that information, and allow end users to act upon that
information in real time. In addition, this platform must be easy to deploy
throughout the extended enterprise and inherently flexible to adapt to
continuing changes as new partnerships are formed, business combinations occur
and existing relationships evolve. By integrating all data sources, companies
leverage and extend the useful life of their existing information technology
assets. Making the information easily available to all members of the extended
enterprise through an intuitive and effective interface significantly increases
the value of that information and the operational efficiency of the extended
enterprise.
The TopTier Solution
We are a leading provider of eBusiness portal technologies and products that
integrate information residing in a business' internal and external enterprise
applications, databases, text documents, Web sites and other data sources. Our
eBusiness Integration Portal software products are designed to enable a
business' extended enterprise of employees, customers, suppliers and business
partners to directly access, navigate and manipulate this integrated
information using an intuitive and effective portal interface. Our software
products have been developed around our patented HyperRelational technology.
This technology rapidly de-constructs sources of structured or unstructured
data into components representing common business elements and processes that
are familiar to the end user. It then creates representations of these
components to the end user that contain meta-data information that allows them
to be "related" to relevant data in other data sources. As a result, this
integration occurs at the presentation layer, or the portal. This allows an end
user to navigate through simple drag and drop actions to related information
residing in the various associated components. We refer to this operation as
"drag and relate." By using our HyperRelational technology, end users are
unhindered by the fundamental limitation of hypertext links, which only point
to one, predetermined data location. End users may use our software to access
data that reside in both internal and external data sources. Our
HyperRelational technology provides benefits to extended business networks that
are similar to the benefits that hypertext markup language offers to Internet
users generally. Hypertext made different Web sites easily accessible from
other Web sites. As the number of Web sites that became linked together
increased, so did the value of the information accessible through the Internet.
Similarly, HyperRelational technology links data elements residing in multiple
data sources, creating a larger network of components and business partners and
greatly increasing the value of each component and member of this network.
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We design our products with the following objectives:
Integration. We integrate structured and unstructured data that resides in
enterprise applications, databases, text documents, Web sites and other data
sources. We present this information on our eBusiness Integration Portal, while
maintaining it in its original application. This allows the end user to access
and interact with the actual data, not merely a subset of the underlying
application data that is often extracted and aggregated.
Navigation. Our patented HyperRelational technology supports and enhances
the current Internet navigation capabilities. Hypertext links limit end users
to point and click navigation leading to related information defined by the
author of the Web page. Our HyperRelational navigation adds the ability to drag
and relate hyperlinks to navigate to related information as determined by the
end user. This greatly expands the value of the information presented to end
users.
Ease-of-Use. Our solution is designed to dramatically expand the number of
end users that can access and interact with corporate data by making that
access and interaction easy and intuitive. We effectively mask the complexity
of underlying enterprise applications in much the same way as a graphical user
interface of a personal computer disguises the complexity of its underlying
operating system commands.
Our solutions are designed to provide our customers with integration and
portal technologies and products that:
Increase Competitiveness and Responsiveness. Our products provide real-time
access to critical business information from internal applications, databases,
text documents and the Internet, promoting the end user's ability to promptly
respond to new information. Our products take an otherwise passive software
infrastructure investment, and convert it into an event driven platform. Every
end user can be notified of relevant events that originate in any application,
and can intelligently and immediately act upon this information. This allows
companies to compete more effectively by reacting more swiftly to changing
market conditions and business events, retain customers by being more
responsive to their demands, and generate additional revenues while increasing
operational efficiency and reducing transaction costs.
Rapidly Create Collaborative Business Networks. Using our eBusiness
Integration Portal software, a business' extended enterprise can rapidly become
a large network that shares information. Shared access to information
throughout the extended enterprise enables companies to achieve a high degree
of collaboration. For example, a regional manager who receives an alert that a
customer shipment is delayed due to a shortage of parts from one supplier can
drag the name of the part onto a "Suppliers" component on our portal and
instantly access information about alternative suppliers and their inventory,
coming directly from those suppliers' information systems.
Promote Wide Scale Deployment. Due to the value created when members of a
network interact, we believe that the overall value of the business network
created by our platform increases with the addition of each new member, which,
in turn, attracts additional members and promotes further deployment. In
addition, we believe that a business benefits most when the largest number of
employees participates in its eBusiness operations. Our software is designed to
be easy to use and features an effective and intuitive interface that is
appropriate for end users with a broad range of technical competencies. Our
portal allows full and customizable access to a company's internal and external
data sources by its employees, customers, suppliers and business partners. This
wide scale deployment is further facilitated because our software scales to
accommodate the growth of our customers' extended enterprises and because no
software other than a browser is required on the desktop to operate our
software.
Increase the Value of Existing Enterprise Applications. Our solution
leverages the existing investments made in enterprise applications and
increases their value by increasing accessibility to their data, integrating
disparate applications and providing full view and update capability from an
easy to use, HyperRelational
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portal. Our solution significantly increases the return on existing and new
enterprise technology investments by extending the functionality provided by
these applications and making them easily accessible by collaborative business
networks. Our software can be implemented over existing information technology
infrastructure or sold as an embedded solution by independent software vendors.
Our software is currently embedded and ships within eBusiness applications such
as mySAP.com Workplace, sold by SAP AG, and Baan Data Navigator, sold by Baan
Company.
Provide Rapid and Flexible Implementation. Our solution is designed to be
rapidly implemented to integrate an enterprise's existing applications. Our
software can be implemented in as little as a week, depending on the number of
applications to be integrated and components to be created, allowing our
customers to realize benefits quickly. In addition, because our components can
be built independently from each other yet inter-operate seamlessly, our
customers can implement our solution in stages by integrating or enabling one
application at a time.
To date, over 75 customers have successfully adopted our solution,
including:
. SAP AG: mySAP.com Workplace
SAP AG, the leading enterprise software developer in the world, sought to
create a complete enterprise information portal that would integrate
SAP's software applications and other existing software, as well as Web
sites. SAP licensed our HyperRelational technology and our eBusiness
Integration Portal software products, and built its product mySAP.com
Workplace using our HyperRelational technology. As a result, customers
who buy mySAP.com Workplace will deploy a HyperRelational system that is
compatible with other HyperRelational systems within the extended
enterprise. We believe that SAP selected our technology to gain an
advantage in becoming the preferred desktop for every employee in a
corporation and to provide an open integration framework under mySAP.com
Workplace. We believe that the functionality provided by our technology
allows SAP to sell more products to its existing customers, and to
enhance their presence to more desktops within those customers.
. The Baan Company: Simplified Web-Based Integration and Information
Analysis
The Baan Company sought to differentiate itself by reducing the
complexity associated with its suite of enterprise applications. The Baan
Company licensed several of our products and our HyperRelational
technology to extend and enhance their existing product offerings. We
believe that our products were chosen by the Baan Company because of the
unique capabilities of our products to simplify, integrate and navigate
the various disconnected applications that the Baan Company markets.
These products are sold primarily by us and Baan Company to their
existing customers, which creates incremental sales opportunities for
Baan Company. The Baan Data Navigator and the Baan OLAP Navigator are
Baan-labeled products that are based on our products and technology. The
Baan Workshop combines Baan's Dynamic Enterprise Modeler with our
HyperRelation Navigation technology in one product.
. Herman Miller: Real-Time Supply Chain Management Over The Internet
Herman Miller, a premier office furniture manufacturer, sought to
differentiate itself from its competitors by enabling its suppliers to
perform self-service look-ups of information directly from its enterprise
resource planning, or ERP, application via the Internet. Herman Miller's
Baan ERP application had been significantly modified and had a
proprietary interface to the data stored within the application. We
believe that our solution was selected because of our ability to meet
their needs due to our Internet integration and the tight integration
with Baan ERP, and the proven scalability, security and ease of use of
our products. Once deployed, it allowed Herman Miller's suppliers to
track material requirements, receipt, quality and payment information and
plan future shipments. Our solution provides Herman Miller's suppliers
with a unified location for product procurement and inventory information
from Herman Miller's various data sources, enabling its suppliers to
proactively ship high volume, low stock items. This leads to reduction in
Herman Miller's costs and improved predictability on its ability to
timely deliver products to customers.
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The TopTier Strategy
Our objective is to become the leading provider of eBusiness integration and
portal technologies and products. To achieve this goal, we are implementing the
following strategies:
Establish our HyperRelational Technology as an Industry Standard. We intend
to establish our patented HyperRelational technology as the standard protocol
for accessing and interacting with business and Internet-based information. We
intend to do this by accelerating the adoption of this technology through
strategic relationships with leading systems integrators and by entering into
technology licensing agreements with independent software vendors such as SAP
and Baan Company. These relationships also provide us with credibility and
access to a large number of highly referenceable customers. A cornerstone of
this effort will be our commitment to componentizing widely used package
applications, e-marketplaces and Internet portals. Once componentized, the
underlying data in these sources can be directly accessed by any company that
deploys our eBusiness Integration Portal software products. In addition, we
believe that a strong network effect will increase the value of that network
and attract additional businesses, accelerating adoption of our products.
Leverage Strategic Relationships with Independent Software Vendors. We
intend to expand our direct sales force to support independent software vendors
in geographic regions in which they have a strong presence. Independent
software vendors, such as SAP and Baan Company, embed our technology in their
eBusiness applications, mySAP.com and Baan Data Navigator. Together these
companies have sold their products to more than 20,000 customers, representing
well over 10 million end users. SAP and Baan Company offer restricted versions
of our software that is embedded in their enterprise integration portal
products that integrate only the data in their respective applications. We
believe that when end users use these restricted versions, they will become
familiar with our products. As a result, we believe this will increase
awareness of the benefits of our products and accelerate adoption of our
technology. We intend to leverage this channel to sell to the end users of
these limited versions additional product functionality that will extend the
HyperRelational capabilities to integrate other enterprise applications,
databases, text documents and Web sites.
Extend Strategic Relationships with Systems Integrators. We intend to extend
our strong relationships with systems integrators by assisting them in the
creation of a large, highly trained consulting workforce. To date, we have
trained over 500 external professional consultants on our products, tools and
methodologies and we anticipate that over 2000 external professional
consultants will have been trained within the next 18 months. We believe that
the relationships that systems integrators have with our prospects' senior
management facilitate our access to strategic projects and can significantly
reduce the length of our sales cycles. In addition, we believe the software
deployment expertise and industry knowledge of systems integrators shortens the
implementation time of our product. Systems integrators also help us to secure
additional business and enable us to penetrate and leverage success within
vertical markets. We intend to expand our direct sales force to match our
systems integrators' presence in vertical markets and geographic locations, to
assist them in identifying, creating and closing sales opportunities.
Develop Market-Focused Solutions. We intend to develop packaged eBusiness
solutions that are built on our eBusiness Integration Portal software products.
These solutions will package pre-selected business components that are used
widely in specific industries. We intend to leverage the vertical industry
knowledge of our systems integration partners and combine it with our flexible
eBusiness Integration Portal software products to rapidly build these industry-
focused solutions. We believe that our customers and partners will derive
significant time-to-market benefits by deploying these pre-packaged business
solutions which they can use as a basis for their own implementations. This
provides us with the ability to leverage successes in an industry segment to
penetrate other customer accounts in that segment, while generating additional
revenue opportunities.
Extend Technology and Product Leadership. We intend to enhance our
comprehensive software solutions that support an increasing number of data
sources and enterprise applications. We also intend to drive adoption of our
HyperRelational technology by ensuring that our products incorporate other
emerging technologies and industry standards. We have been a pioneer in the
creation of eBusiness integration and portal technologies and
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products and believe that we have created the most compelling methods to
represent and interact with structured data on the Internet. We have done so by
adopting technologies and emerging standards for information presentation and
integration including XML, DOM, XSL, COM, OLE-DB and integrating with leading
applications such as mySAP.com Workplace, Baan ERP, Microsoft Back Office and
Lotus Notes, among others. We will continue to invest in research and
development to increase the performance, functionality and ease of use of our
software. We will also continue to analyze new technologies and integrate them
into our products where appropriate.
Products
Our TopTier eBusiness Integration Portal software products are designed to
enable businesses to integrate enterprise applications throughout the extended
enterprise and allow end users to access, navigate and manipulate this
integrated information. Our products have been developed around our patented
HyperRelational technology platform.
TopTier eBusiness Integration Portal Client. Our eBIP Client is a
personalized browser-based work environment. It presents end users with
individually customized and integrated information elements, called iViews.
Each iView contains one information element, which can come from any number of
applications underlying the portal. End users can select multiple iViews,
position them on the portal page and have that information presented and
automatically updated. Deploying these portals across an extended enterprise
presents a personalized and integrated view of the business to any end user.
TopTier Web Navigator Client. Our TopTier Web Navigator Client enables the
end user to pick any of the HyperRelational information presented in the
iViews, and drag and drop it on any other component made available to the end
user. Our Web Navigator Client performs this drag and relate operation by
sending a request to the eBIP Server, which responds with the appropriate
related data, and by presenting the results on the end user's browser. An end
user may drag and relate this information or any other related information
repeatedly until reaching a resolution.
TopTier eBusiness Integration Portal Server. Our TopTier eBIP Server
generates personalized portal pages for each end user throughout the extended
enterprise. In addition, it enables navigation across multiple components
representing different sources of information within and outside the
enterprise. The eBIP Server runs alongside our HyperRelational server and
processes all navigational requests across one or many applications. Our
HyperRelational server is an "Integration Server" that correlates all the
underlying enterprise data sources into a unified object model. These
navigational requests are primarily received from the Web Navigator Client in
response to end users' drag and relate operations.
Unlike most other enterprise portals, our TopTier eBIP Server includes and
leverages a robust set of repositories, storing object models, presentation
components and end-user personalization requirements. The repositories enable
our product to represent data and related meta-data combined as a
HyperRelational link, and not merely as a hypertext link. As a result,
information is presented in context and end users may seamlessly navigate from
information presented on any portal page to any related information within the
unified object model representing the business.
TopTier eBusiness Integration Portal Deployment Environment. Our TopTier
eBIP Deployment Environment is a development, testing and management
environment used by software developers, systems integrators and system
administrators. This environment is used to define object models, create
related components, correlate and integrate models, create roles for end users
and manage security and ongoing administration of the portal. The deployment
environment uses familiar tools and works within the framework of Microsoft
Visual Studio, leveraging developers' familiarity with these tools. Our tools,
which are highly intuitive, create open source components which can be edited
with a variety of third-party tools. Most of the management tools are also
integrated into Microsoft's Management Console and can be operated from within
a Web browser, enabling remote system management.
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TopTier Portal Packs. Our TopTier Portal Packs provide functionality
specific to a particular enterprise application, such as Baan ERP or SAP R/3.
This permits each application's unique application programming interface, or
API, to be accessed securely and reliably by our TopTier eBIP Server. The
Portal Packs allow us to leverage knowledge of the application's internal meta-
data structure to automate the object modeling and presentation layers. Our
Portal Packs typically include update capabilities to the underlying data and
are linked to high-level transaction and presentation information in contrast
to the limited, read-only access to partial information offered by most other
portals.
TopTier Business Intelligence Client. Our TopTier Business Intelligence
Client is a fully functional, HyperRelational analysis client that is used to
access aggregated data served by a multi-dimensional Online Analytical
Processing, or OLAP, server. Our Business Intelligence, or BI, Client enables
the end user to analyze information and identify points of interest within the
multi-dimensional data. Once those points are identified the end user has the
ability to use this information in many ways, and may drag and relate the data
element into any other component within the web navigator. This ability creates
a unique OLAP to transactional closed-loop navigation within which end users
can seamlessly navigate these two different information storage models using
our eBusiness Integration Portal software.
Technology
HyperRelational Technology
We have invented and patented aspects of an end-user directed navigation
technology that integrates information systems through a browser, which we call
HyperRelational technology. We believe that our HyperRelational technology is a
novel evolution and conceptual integration of two of the strongest information
representation models in enterprise computing: hypertext and relational. Our
software products are built around our HyperRelational technology and use the
protocol that represents it over the Internet, HyperRelational Navigation
Protocol, or HRNP.
At the core of HyperRelational technology and its related Internet protocol,
is the concept of presenting context (meta-data) rich objects at the end user
interface, or presentation layer, for the purpose of enabling end users to
integrate and navigate information. This process of enriching presentation data
using meta-data is similar to the way eXtensible Markup Language, or XML,
enriches back-end data used for application and business to business
integration. Unlike hypertext, our HyperRelational-based products present to
the end user hyperlinks that point to descriptive meta-data instead of pointing
to a predetermined linked page. The end user is then allowed to combine this
meta-data with other relevant meta-data through a simple drag and relate
operation. As a result, the end user controls the navigation within and across
applications, unhindered by boundaries and predetermined paths through the
information designed by the author of each application. Our technology bridges
the gap between the text-centric Internet and the highly structured environment
of enterprise applications. This gap has hindered the attempts by some other
companies to integrate these sources of data.
Implementations of this patented technology leverage the Internet's latest
technologies and standards, from transport layer to presentation layer. Our
software products make extensive use of XML, a relatively recent standard that
defines a universal method for structuring data, and other technologies to
bring the concept of meta-data rich objects to the end user. We intend to
leverage our strategic relationships to accelerate market adoption of our
HyperRelational technology and to create a de-facto industry standard.
In addition, we have five U.S. patents and several foreign patents pending
for a number of algorithms and technologies relating to the use, extension and
derivatives of HyperRelational technology. Some of these technologies are
currently used in our products, and we intend to use the others in future
releases of our products. We believe that these technologies provide us with a
strong differentiation in this competitive market.
HyperRelational Compatibility Level
We offer multiple HyperRelational compatibility levels to our strategic
independent software vendors. Existing applications do not require extensive
changes to become HyperRelational compatible. Our
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HyperRelational compatibility levels allow these vendors to enjoy increased
value and functionality as developers increase the HyperRelational
compatibility of their software. These vendors may advance to higher levels of
compatibility depending on their needs, or as they make additional improvements
to their software.
Software vendors may choose from the following HyperRelational compatibility
levels:
<TABLE>
<CAPTION>
Compatibility Level Description
------------------- ---------------------------------------------------------
<C> <S>
iView Enabled Creates an iView that represents information from the
enterprise application, presented in its original format,
which can be included within the end user's portal page.
Native iView Adds HyperRelational capabilities to the base iView
through the use of XML and presents information according
to the end user's preferred look and feel.
Component Enabled Enables basic component integration, allowing end users
to represent and activate various parts of their
applications as components.
Drag Out Enabled Adds a representation of various data elements within
components as HyperRelational (meta-data-based) links,
enabling the end user to navigate from the component by a
drag and relate operation.
Drag In Enabled Adds the ability to drag into components by adding
functionality that modifies the request presented to the
component, based on the input element dropped on it.
Automatic Generation Provides the highest level of compatibility by leveraging
all meta-data information about a certain data source to
automatically read and interpret an application metadata
repository and generate the appropriate HyperRelational
components, all without developer intervention.
</TABLE>
Reusable Portal Components Architecture
Our eBusiness Integration Portal software is built around a componentized
model, in which large enterprise applications are de-constructed into reusable
portal components. The components represent diverse business processes and
elements with which end users are familiar such as "Customer," "Purchase
Order," "Top Selling Items," "Sales Report" or "Supplier Inventory." The
reusable nature of these components allows end users to combine their
components to create personalized environments matching their shifting
information needs. As such, components from various applications can be mixed
seamlessly to create homogenous end user experience across these disparate
systems whether running in one company or multiple enterprises. Our TopTier
eBIP Deployment Environment includes graphical development tools that permit
components to be reused and combined across multiple applications throughout
the extended enterprise.
Security
Our eBusiness Integration Portal software contains a comprehensive set of
security features that is designed to allow enterprises distribute information
using the Internet within the company and outside the enterprise firewalls with
confidence. These features can provide security above and beyond current Web
security capabilities, by leveraging the knowledge residing in our eBusiness
Integration Portal repositories, regarding end users' role and object
relevance. Our software supports multiple security standards which can be
generic, such as LDAP3, SSL encryption, or application specific, such as SAP's
end user authentication. The security mechanism can authenticate end users,
limit access to certain components, limit the information fields presented in
those components and limit the instances presented to the end user only to
relevant items. For example, when our portal identifies that an end user is a
customer, it may only provide access to sales orders relevant to this customer.
In addition, because all communications sent through our software can be sent
using both HTTP and secured HTTP protocols, which pass through corporate
firewalls, our customers' business partners are not required to modify their
applications' security infrastructure.
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Support for Large Numbers of End Users
Our eBusiness Integration Portal software products include features that
allow companies to readily manage deployments across a large number of end
users throughout the extended enterprise. For example, role-based desktop setup
enables the administrator to set a small number of end user personalized
starter portals and automatically distribute those portals throughout the
extended enterprise to thousands of end users. Similarly, distribution
mechanisms allow administrators to propagate components and other updates using
the Internet, eliminating lengthy implementation processes associated with
upgrades. The same capabilities allow software vendors and systems integrators
to package business components from past implementations and resell them to
other companies, leveraging the investment made in those components to generate
additional revenue.
Our eBusiness Integration Portal software is designed to handle thousands of
simultaneous requests and service a high volume of transactions in large
enterprise implementations. Using a replicated and load-balanced multi-server
and multi-threaded architecture, our highly scalable software is optimized for
multi-processor systems and supports high-volume processing of requests. Our
architecture allows enterprises to scale their environments by adding more
computing resources as usage increases.
Strategic Relationships
To increase our market leadership, we have formed strategic alliances with
leading independent software vendors, who embed and integrate our software into
their products and services, and resell our products. We believe that these
relationships provide strong endorsement of our technology and introduce our
products to their customer base. Our strategic relationships include the
following:
SAP AG. In October 1999, we entered into a license and distribution
agreement with SAP AG. SAP uses our software as part of a solution that they
market to their customers under the name mySAP.com Workplace. As the largest
enterprise application vendor worldwide, with over 12,000 customers
representing more than 10 million end users, SAP provides a very important
endorsement of our software. mySAP.com Workplace includes a restricted version
of our HyperRelational technology, under which SAP can use our HyperRelational
technology to integrate with SAP and Web data sources only. This creates an
opportunity for us, as well as for SAP and systems integrators, to sell to the
SAP customer base the unrestricted TopTier Extension for mySAP.com, extending
the use of our HyperRelational technology to other enterprise applications and
data sources. We believe that, within the SAP customer base, the SAP
application set is the cornerstone for any information platform, providing us
with a clear advantage over other portals not embedded into SAP applications.
Under the license and distribution agreement, we granted to SAP a non-
exclusive and perpetual right to embed our HyperRelational technology into
SAP's software products. In addition, we granted to SAP a non-exclusive and
perpetual right to distribute our HyperRelational technology as embedded in
their software products and to resell licenses to our TopTier Extension for
mySAP.com products. We are obligated to provide various development, support
and maintenance services under the agreement and SAP is obligated to pay us
license, maintenance and royalty fees. Upon expiration of the initial term of
the agreement in December 2002, the agreement will automatically renew for one
year periods unless terminated by us or SAP.
Baan Company. Baan Company uses our software products and HyperRelational
technology to extend and enhance their existing product offerings. The Baan
Data Navigator and the Baan OLAP Navigator are Baan-labeled products that are
based on our products and technology. The Baan Worktop combines Baan's Dynamic
Enterprise Modeler with our HyperRelational navigation technology in one
product. Our software products and technology have been shipping inside Baan
Data Navigator for over 21 months to hundreds of customers representing
thousands of end users. Our relationship with Baan Company provides us with an
endorsement of our software by a major independent software vendor and provides
us with an opportunity to sell additional products to Baan Company's existing
customer base.
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Prior to March 2000, we entered into various agreements with Baan Company
under which Baan Company licensed and distributed our technology. In March
2000, we entered into a perpetual, original equipment manufacturer, or OEM,
agreement and a reseller agreement with Baan Development B.V., an affiliate of
Baan Company. These agreements supersede our prior agreements with Baan
Company. Under the OEM agreement, we granted to Baan Development a non-
exclusive, perpetual and worldwide right to embed our HyperRelational
technology into Baan's software products. In addition, we granted to Baan
Development a non-exclusive, perpetual and worldwide right to distribute our
HyperRelational technology as embedded in their software products. We are
obligated to provide various development, support and maintenance services
under the agreement, and Baan Development is obligated to pay us license,
maintenance and royalty fees. Under the reseller agreement, we granted to Baan
Development a non-exclusive license to distribute Baan Data Navigator, Baan
OLAP Navigator, Baan Data Navigator Development Environment, TopTier Web
Navigator, TopTier Portal Pack, TopTier Development Environment and TopTier
Business Integration Portal to end users. We are also obligated to provide
various maintenance and support services. Under the agreement, each of us and
Baan Development is obligated to pay royalties to the other depending on which
party licenses the software to end users. Baan Development is also obligated to
pay to us a portion of any maintenance and support fees that is collects. Upon
expiration of the initial term of the agreement in March 2004, the reseller
agreement will automatically renew for one year periods unless terminated by us
or Baan Development.
Key Business Relationships
We have established business relationships with a number of leading systems
integrators, including Andersen Consulting and Deloitte Consulting. Many of
these systems integrators have established relationships across a broad range
of enterprise customers, and our relationships with these systems integrators
often enable us to reach key decision-makers within these enterprises more
quickly, reducing sales cycles. Working with systems integrators enables us to
leverage our service organization and reduce implementation times. In addition,
by leveraging these systems integrators' domain expertise, we can more
effectively and rapidly build complete portal solutions that contain business
content representing best business practices and recommended processes targeted
at vertical markets.
Customers
To date, we have licensed our software directly to over 75 companies. In
1999, revenues from Baan Company, SAP and Computer Curriculum Corporation
accounted for 60%, 15% and 6% of our total revenues. Our customers are
predominantly Global 2000 companies and represent a broad spectrum of
enterprises within diverse industry sectors, including independent software
developers, technology and manufacturing. The following is a list of customers
who have purchased at least $100,000 of licenses or related services:
<TABLE>
<S> <C>
Altera Hewlett-Packard
American Can Company Huber & Sunher
Baan Company KPN Dutch Telecom
Basic American Food Nortel Networks
BICC Overtoom
Computer Curriculum Corporation Philips Group
Dutch Ministry of Defense Pretoria Cement Company
EMS Ricoh, Canada
Equilon (consortium of Royal Dutch Shell, Rolls-Royce Marine
Texaco and Aramco)
Floserve SAP AG
Griffiths Labs V&S Vin & Spirit
Herman Miller
</TABLE>
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Sales & Marketing
We sell our products through our direct sales force, which we augment by
relationships with systems integrators. A large percentage of our sales are the
direct result of leads generated by these relationships with systems
integrators. In addition, we have established product resell agreements with
independent software vendors that license our technology. The sales cycle for
our software typically ranges from three to six months. As of March 1, 2000,
our sales and marketing group consisted of 39 professionals located in our
headquarters in San Jose, California, and our offices in New York, New York;
Chicago, Illinois; Houston, Texas; Toronto, Canada; Utrecht, The Netherlands;
Munich, Germany; Malmo, Sweden; and London, United Kingdom. We plan to expand
our sales and marketing group through the recruitment of qualified individuals.
Our sales strategy involves targeting entities that have large existing
enterprise application deployments and have a critical need for an eBusiness
portal, which are generally Global 2000 companies. Because we believe that our
products can increase a company's return on assets, we direct our marketing
efforts to officers and executives with responsibility for overall business
profitability such as chief executive officers, chief financial officers and
chief operating officers, as well as chief information officers. In addition,
we frequently participate in trade shows, seminars and conferences. We intend
to leverage the collaborative business network of our corporate customers who
are exposed to our software through their daily interaction with our customers'
portals. In addition, we conduct joint marketing and selling efforts such as
conferences and joint sales calls with independent software vendors and system
integrators to identify, create and close joint sales opportunities. In the
past, we have conducted such joint efforts with SAP, Baan Company, and Deloitte
Consulting.
Our sales process requires that we work closely with prospective and
existing customers to identify short-term technical needs and long-term goals.
Our sales team, which includes both sales and technical professionals, then
works with these entities to develop proposals to address these needs. In many
cases, we collaborate with their senior executive team to develop mission-
critical solutions. The level of customer analysis and financial commitment
required for many of our product implementations has caused our sales cycle to
range from three to six months.
We focus our marketing efforts on educating systems integrators, software
developers and prospective customers, generating new sales opportunities and
creating awareness of our products and their value proposition. We conduct a
variety of market education programs including market research, product and
strategy updates with industry analysts, public relations activities, direct
mail and relationship marketing programs, seminars, trade shows, speaking
engagements, advertising and Web site marketing. In addition to marketing our
products directly to prospective customers, we focus a directed effort on
customers that have received HyperRelational-enabled products from SAP and Baan
Company and that may require extensions to those products.
Services
We offer comprehensive professional services that complement our products,
including strategic planning, project management and systems integration, as
well as consulting services and training relating to our software products. As
of March 1, 2000, our professional services and customer care group consisted
of 38 employees.
A majority of our customers make use of our systems integrators professional
services or our own professional services and customer support to help them
design and develop a successful business solution. Our experienced consultants
support our certified systems integrators or work directly with customers to
design a solution based on our customers' existing applications and required
functionality, to facilitate the successful implementation and ongoing
maintenance of our solution. Our consultants have a diverse set of skills and
experiences, combining both business and technical expertise to effectively
meet our customers' requirements. To expand our professional services
capabilities, we have established business relationships with several systems
integrators, including Andersen Consulting, Deloitte Consulting, SE Technology
and Origin. To date, we have trained over 500 external consultants on our
products, tools and methodologies, and we anticipate that
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over 2,000 will have been trained within the next 18 months. Services provided
by either our professional services group or third-party systems integrators
trained on our products, tools and methodologies include the following:
. architecture and application design services;
. application development;
. installation services;
. class-based or computer-based training, including "train the trainer"
programs;
. testing and implementation services and maintenance services; and
. on-site and remote support and coaching.
We charge for professional and customer care services on a time and
materials basis and provide them through our professional services groups based
in San Jose, California; Houston, Texas; London, United Kingdom; Munich,
Germany; and Ra'anana, Israel. We plan to increase the number of our
professional services consultants and add additional service locations
throughout the United States and Europe.
We offer our customers a choice of several levels of customer support that
are designed to quickly and effectively resolve customer technical inquiries.
Our most comprehensive option offers support 24 hours a day, seven days a week.
In addition, our customers can access a portal that we maintain that provides
information to our customers about the experiences of other companies using our
software.
Through our training department, we provide our customers with education and
training. We regularly offer training courses for the software professionals
responsible for implementing our software. These training courses provide
practical instruction on a wide variety of topics. Standard courses are offered
at our headquarters, and we also provide customized classes at our customers'
locations. We also offer computer-based training equivalent to some of our
courses which can be taken over the Internet.
Research and Development
Since inception, we have made substantial investments in research and
development. While we evaluate, license and incorporate externally developed
technologies, substantially all of our investment in research and development
has been made to develop new products internally. We expect to continue to
develop substantially all of our technologies internally. We believe that we
have demonstrated significant innovations in our new technology and products in
the fields of portals and eBusiness integration, leveraging technologies such
as XML, Dynamic Hypertext Markup Language (DHTML) and Microsoft COM+. The
majority of our research and development activity consists of developing new
versions of, and enhancements to, our products and HyperRelational technology
to better serve the needs of our customers. We commercially released the
initial version of our eBusiness Integration Portal software in late June 1998.
We have added a number of enhancements in subsequent releases.
As of March 1, 2000, we had 86 employees dedicated to research and
development. Our development groups are divided around horizontal technologies
initiatives and strategic partners' product development support. We have a
large quality assurance group that manages a process designed to identify and
prevent software defects throughout the development cycle. Our research and
development expenditures in 1998 and 1999 were approximately $3.5 million and
$5.4 million.
In addition, we have a dedicated advanced technology group, which works
independently from our product development teams to research, develop and
patent advanced architectures and new concepts in our field. This group also
closely monitors emerging development and industry standards related to
eBusiness, Internet, knowledge management, visualization technology and
enterprise applications.
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In addition to our proprietary research, we actively participate in a number
of major industry consortia sponsored by the Israeli Chief Scientist. These
consortia provide us with government grants toward improving generic research
in areas of knowledge management and Internet applications. As part of our
participation in these consortia we build strong relationships with other
vendors who are part of the consortia, and try to leverage their technologies
to create better complete offerings with faster time-to-market metrics. In 1998
and 1999, we received approximately $419,000 and $617,000 in grants due to our
participation in those projects. We have an approved grant budget for 2000 of
over $1.0 million, which we intend to fully use.
Competition
Although we believe that our HyperRelational technology is a highly
differentiated solution to integration and access of information within the end
user layer, our eBusiness Integration Portal software products face competition
from independent software vendors, systems integrators that produce their own
solutions, enterprise application vendors that will attempt to enhance their
solutions, and vendors of proprietary Web application server products who have
announced portal capabilities within their future products. In addition, our
customers and other companies with whom we have strategic relationships may
become competitors in the future.
We believe that the principal competitive factors affecting our market
require superior technology for:
. componentized information access;
. end user integration of various data types;
. tight integration with leading enterprise applications; and
. highly flexible personalized portal framework.
We believe that our ability to address all four of these requirements is an
important differentiating factor. Most competitive products focus on either
information integration or information access. Customers and competitors may
attempt to enhance their products to provide truly integrated information
access. We believe though that our fundamental technology differentiation,
embodied in our HyperRelational patents, provides us with a significant
advantage over these companies. We believe that our tight integration with more
applications will provide another layer of differentiation that will be
difficult for competitors to imitate.
We believe that other principal competitive factors in our market include:
. the breadth and depth of solutions;
. product quality and performance;
. ability of products to operate with multiple software applications;
. ability to implement solutions;
. customer service;
. relationship with systems integrators;
. establishment of a significant base of reference customers;
. strength of core technology;
. product price; and
. patentable, differentiated technology.
Although we believe that our solutions compete favorably with respect to
these factors, our market is relatively new and is evolving rapidly. We may not
be able to maintain our competitive position against current and potential
competitors, especially those with significantly greater resources.
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Intellectual Property and Other Proprietary Rights
Our success is dependent upon our ability to develop and protect our
proprietary technology and intellectual property rights. We rely primarily on a
combination of contractual provisions, confidentiality procedures, and trade
secret, patent, copyright and trademark laws to accomplish these goals.
We license eBusiness Integration Portal software products and
HyperRelational technology pursuant to non-exclusive license agreements, which
impose restrictions on customers' ability to utilize the software. In addition,
we seek to avoid disclosure of our trade secrets, including but not limited to,
requiring employees, customers and others with access to our proprietary
information to execute confidentiality agreements with us. We severely restrict
access to our source code, and seek to protect our software, documentation and
other written materials under trade secret and copyright laws.
As of March 1, 2000, we had one issued United States patent related to data
navigation with a drag and relate interface over the Internet. We also had five
United States patent applications pending, as well as foreign counterparts with
respect to some of these applications. In addition, we currently hold trademark
registrations in the United States for the trade names TopTier and
HyperRelational. We also have pending applications for the registration of the
TopTier name in the European Union, Japan and Australia. It is possible that
the patents that we have applied for, if issued, or our potential future
patents may be successfully challenged or that no patents will be issued from
our patent applications. It is also possible that we may not develop
proprietary products or technologies that may be patented, that any patent
issued to us may not provide us with any competitive advantages, or that the
patents of others will seriously harm our ability to do business. It is also
possible that our copyrights or trademarks could be challenged and invalidated.
In addition, existing patent, copyright and trademark laws afford only limited
protection. Effective protection of intellectual property rights may be
unavailable or limited in certain countries, because the laws of some foreign
countries do not protect our proprietary rights to the same extent as do the
laws of the United States. Monitoring unauthorized use of our patents and
trademarks is difficult and expensive, particularly given the global nature and
reach of the Internet. Furthermore, it is possible that our competitors will
adopt product or service names similar to ours, impeding our ability to protect
our intellectual property and possibly leading to customer confusion. While we
are not aware that our products, patents, trademarks, copyrights or other
proprietary rights infringe the proprietary rights of third parties, any
infringement claims, with or without merit, brought by such third parties could
be time-consuming and expensive to defend.
Despite our efforts to protect our proprietary rights, existing laws afford
only limited protection. Attempts may be made to copy or reverse engineer
aspects of our product or to obtain and use information that we regard as
proprietary. Accordingly, there can be no assurance that we will be able to
protect our proprietary rights against unauthorized third-party copying or use.
Use by others of our proprietary rights could materially harm our business.
Furthermore, policing the unauthorized use of our product is difficult and
expensive litigation may be necessary in the future to enforce our intellectual
property rights.
It is also possible that third parties will claim that we have infringed
their intellectual property rights. We expect that eBusiness developers will
increasingly be subject to infringement claims as the number of products in
different industry segments overlap. Any claims, with or without merit, could
be time-consuming, result in costly litigation, prevent product shipment, cause
delays, or require us to enter into royalty or licensing agreements, any of
which could harm our business. Patent litigation in particular has complex
technical issues and inherent uncertainties. In the event an infringement claim
against us was successful and we could not obtain a license on acceptable terms
or license a substitute technology or redesign to avoid infringement, our
business would be harmed.
Employees
As of March 1, 2000, we employed 178 full-time employees. These included 39
in sales and marketing, 38 in professional services and customer care, 86 in
research and development and 15 in administration and
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finance. Our future success will depend in part on our ability to attract,
retain and motivate highly qualified technical and management personnel, for
whom competition is intense. From time to time, we have employed, and will
continue to employ, independent contractors and consultants to support research
and development, marketing and sales, and business development. Our employees
are not represented by a collective bargaining agreement and we have never
experienced a strike or similar work stoppage. We consider our relations with
our employees to be good.
Facilities
Our principal administrative and sales and marketing facility is located in
San Jose, California and consists of approximately 15,000 square feet of office
space held under a lease that expires in February 2002. Our research and
development facility is located in Ra'anana, Israel, and consists of 16,000
square feet of office space held under a five-year lease expiring in March
2003. We also maintain offices for sales and support personnel in New York, New
York; Chicago, Illinois; Toronto, Canada; Houston, Texas; Utrecht, The
Netherlands; Munich, Germany; Malmo, Sweden; and London, United Kingdom.
Legal Proceedings
We are not a party to any material legal proceedings.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors, and their ages and positions as of
March 1, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Shai Agassi............. 32 Chairman of the Board, Chief Executive Officer and President
David Blumstein......... 55 Vice Chairman of the Board
Gregory S. Ayers........ 38 Chief Financial Officer and Corporate Secretary
Greg Turner............. 48 Senior Vice President, Worldwide Sales
Gil Perez............... 32 Senior Vice President, Professional Services
Joseph Zarb............. 34 Senior Vice President, Marketing
Udi Ziv................. 33 Senior Vice President, Research and Development
Jan Baan................ 54 Director
Andries Bottema......... 38 Director
Martin Lechner.......... 30 Director
</TABLE>
Shai Agassi, a co-founder of TopTier, has been our Chairman of the Board
since September 1996 and our Chief Executive Officer and President since
October 1999. From September 1996 to October 1999, Mr. Agassi was our Chief
Technical Officer. From 1994 to 1996, Mr. Agassi was Vice President, Business
Development of TopTier Israel, which later became our subsidiary upon our
incorporation in August 1996. Mr. Agassi received his B.A. in Computer Science
from Israel Institute of Technology.
David Blumstein has been our Vice Chairman of the Board since October 1999.
From 1996 to October 1999, Mr. Blumstein was our President and Chief Executive
Officer. Prior to joining TopTier, Mr. Blumstein was President and Chief
Executive Officer of Softbank OnHand, Inc. (U.S.), from 1994 to 1996 and
President and Chief Executive Officer of Alexander & Lord, Inc. from 1990 to
1994. He was President and Chief Operating Officer of Peter Norton Computing,
from 1989 to 1990, and President and Chief Executive Officer of Ingram
Distribution from 1987 to 1989. Prior to Ingram Distribution, Mr. Blumstein
founded Softsel Computer Products, a software distributor, where he spent seven
years as Executive Vice President of Sales and Marketing. Mr. Blumstein
received his B.A. from Brooklyn College, NY.
Gregory S. Ayers has been our Chief Financial Officer since January 2000 and
Corporate Secretary since March 2000. Mr. Ayers was Chief Financial Officer of
Xanthon, Inc. from February 1999 to December 1999. From October 1997 to January
1999, he was Vice President, New Business Development of Occulogix Corporation.
From April 1994 to August 1997, Mr. Ayers was Vice President, Chief Financial
Officer and Treasurer of UroQuest Medical Corporation. Mr. Ayers also held
various positions with KPMG Peat Marwick, including manager, from 1983 to 1991.
Mr. Ayers received his B.S. in Accounting from Stetson University, and he is a
certified public account.
Greg Turner has been our Senior Vice President, Worldwide Sales since
January 1999. From July 1990 to October 1998, he served in a variety of
management positions with QAD Inc., most recently Vice President--Sales for
QAD's Consumer Products and Pharmaceutical sectors. Mr. Turner received his
B.Eng. (Honors) from the Sydney University of Technology.
Gil Perez has been our Senior Vice President, Professional Services since
October 1999. From July 1996 to September 1999, Mr. Perez was Vice President
Presales and Account Management. From April 1994 to July 1996, he was Software
Developer and Project Manager of TopTier Israel. Mr. Perez received his B.S. in
Computer Science from Tel Aviv University and served as a Captain in the Israel
Defense Force from 1989 to 1993.
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Joseph J. Zarb has been our Senior Vice President, Marketing since August
1999. From August 1998 to August 1999, Mr. Zarb was Vice President, Corporate
Marketing. From August 1997 to May 1998, he was Vice President, Major Accounts,
and from May 1998 to August 1998, Mr. Zarb was Vice President, Business
Development. From September 1989 to August 1997, he worked in a product
marketing management position with IBM. Mr. Zarb received his B.S. in Computer
Science from Marist College.
Udi Ziv has been our Senior Vice President, Research and Development since
November 1999. From May 1995 to November 1999, Mr. Ziv was Vice President,
Research and Development. From July 1991 to May 1995, he was the Development
Manager of TopTier Israel. Mr. Ziv received his B.S. in Computer Engineering
from Israel Institute of Technology.
Jan Baan has been a director since June 1997. From 1978 to 1998, Mr. Baan
served as Chief Executive Officer and Chairman of the Board of Baan Company
N.V., which he founded in 1978. Since June 1999, Mr. Baan has served as a
member of the supervisory board of Vanenburg Group B.V., and has been Chairman
and Chief Executive Officer since December 1999.
Andries Bottema has been a director since December 1999. He is currently a
partner in Vanenburg Group B.V. where he is responsible for strategy and
positioning. From 1997 to 1998, Mr. Bottema was president of Vanenburg
Institute and Research. From 1987 to 1997, he held several positions at senior
and executive management level for consulting, product marketing and business
development in Baan Company.
Martin Lechner has been a director since October 1999. He is a director of
IQ Capital AG. From April 1998 to December 1999, Mr. Lechner served as Chief
Executive Officer of IQ Capital AG, which he co-founded in April 1998. From
November 1996 to March 1998, Mr. Lechner served as a Proprietary Trader for
Dresdner Kleinwort Benson. Mr. Lechner received his Dipl. Kaufmann from
University of Passau (Germany).
The board of directors elects executive officers on an annual basis.
Executive officers serve until their successors have been duly elected and
qualified. There are no family relationships among any of our directors or
executive officers.
Board Composition
We currently have five directors. Upon the completion of this offering, our
board will be reorganized into a classified board, in which our directors will
be divided into three classes with overlapping three-year terms as follows:
. Class I directors will include Messrs. Agassi and Blumstein, and their
terms will expire at the first annual meeting of stockholders following
this offering;
. Class II directors will include Messrs. Lechner and Bottema, and their
terms will expire at the second annual meeting of stockholders following
this offering; and
. Class III directors will include Mr. Baan, and his term will expire at
the third annual meeting of stockholders following this offering.
Any additional directorships resulting from an increase in the number of
directors will be distributed among the three classes so that, as nearly as
possible, each class will consist of an equal number of directors.
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<PAGE>
Board Committees
Our board of directors currently has two standing committees, an audit
committee and a compensation committee.
Audit Committee. The board established an audit committee in March 2000,
which currently consists of Messrs. Bottema and Lechner. The audit committee
has the following responsibilities:
. to make such examinations as are necessary to monitor our corporate
financial reporting and the internal and external audits;
. to provide to the board the results of its examinations and
recommendations;
. to outline to the board improvements made, or to be made, in internal
accounting controls;
. to nominate independent auditors; and
. to provide such additional information and materials as it may deem
necessary to make the board aware of significant financial matters.
Compensation Committee. The board established a compensation committee in
March 2000, which currently consists of Messrs. Baan and Lechner. The
compensation committee has the following responsibilities:
. to review our executive compensation policy;
. to administer our stock purchase and stock option plans; and
. to make recommendations to the board regarding such matters.
Director Compensation
Our directors currently do not receive any cash compensation for their
services as members of the board of directors or any committees, but directors
are reimbursed for reasonable expenses incurred in connection with attendance
of board or committee meetings. In addition, our non-employee directors are
eligible to participate in our 1996 Stock Option Plan and 2000 Stock Plan, and,
on the date of the offering and each year thereafter, will automatically be
granted an option to purchase shares of common stock. For details of directors'
participation in these plans, see "Stock Plans."
Compensation Committee Interlocks and Insider Participation
Prior to March 2000, all compensation decisions were made by the board of
directors. In March 2000, the board established the compensation committee
consisting of Messrs. Baan and Lechner. No interlocking relationship exists
between our board of directors or compensation committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past. For a discussion of transactions
that the compensation committee members or their affiliates have entered into
with us, please see "Related Party Transactions."
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Executive Compensation
The following table presents compensation information received by each
person serving as our chief executive officer and our other most highly
compensated executive officers in 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
------------ ------------
Securities
Underlying All Other
Name and Principal Position Salary Options Compensation
- --------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Shai Agassi............................. $144,000 666,666 --
President, Chief Executive Officer and
Chairman of the Board
David Blumstein......................... $144,000 350,000 --
Vice Chairman of the Board and Former
Chief Executive Officer
Gil Perez............................... $129,385 150,000 $149,096
Senior Vice President, Professional
Services
Joseph Zarb............................. $125,539 50,000 $ 47,479
Senior Vice President, Marketing
Udi Ziv................................. $120,000 250,000 $329,000
Senior Vice President, Research and
Development
</TABLE>
The amounts listed under "All Other Compensation" represent distributions
that were made in connection with Vanenburg's acquisition of us, which closed
in October 1998. The distributions were conditioned upon the continued
employment of each individual 12 months after the closing of the acquisition.
Options Granted in 1999
The following table sets forth information concerning stock options granted
in 1999 to the executive officers included in the summary compensation table.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------
Potential Realized Value at
Number of Percent of Assumed Annual Rates of
Securities Total Options Exercise Stock Price Appreciation for
Underlying Granted to Price Options Term
Options Employees in Per Expiration -----------------------------
Name Granted Fiscal Year Share Date 5% 10%
- ---- ---------- ------------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Shai Agassi............. 666,666 17.76% $0.95 10/04/09
David Blumstein......... 350,000 9.33 0.95 10/04/09
Gil Perez............... 150,000 4.00 0.95 10/04/09
Joseph Zarb............. 50,000 1.33 0.95 10/04/09
Udi Ziv................. 250,000 6.66 0.95 10/04/09
</TABLE>
The options in this table are incentive stock options, to the extent
permissable, and non-statutory options granted under our 1996 Stock Option Plan
and have exercise prices equal to the fair market value of our common stock on
the date of grant as determined by our board of directors at that time. These
options have ten-year terms and vest over a period of four years as follows:
. 25% of the shares subject to the option vested on October 5, 1999; and
. 1/48th of the shares subject to the option vest each month thereafter.
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In February 2000, we granted Mr. Shai Agassi an option to purchase 1,368,334
shares of our common stock with an exercise price of $3.50, the fair market
value of our common stock on the date of grant as determined by our board. This
option vests over a 32-month period, with approximately 42,761 options vesting
each month.
Under the rules of the SEC, the amounts in the last two columns represent
the hypothetical gain or option spread that would exist for the options in this
table if the assumed initial public offering price of our common stock
appreciates at assumed annual rates of 5% or 10% over the ten-year terms of
such options. Annual compounding results in total appreciation of 63%, assuming
5% appreciation per year, and 159%, assuming 10% appreciation per year. If the
price of our common stock were to increase at such rates from the assumed
initial public offering price of $ per share over the next 10 years, the
resulting stock price at 5% would be $ per share and at 10% would be $ per
share. The 5% and 10% assumed annual rates of appreciation are specified in SEC
rules and do not represent our estimate or projection of future stock price
growth. We do not necessarily agree that this method can properly determine the
value of an option.
1999 Year-End Option Values
The following table sets forth information, as to the executive officers
included in the summary compensation table, concerning the number of shares
subject to both exercisable and unexercisable stock options as of December 31,
1999. Also reported are the aggregate dollar value realized upon exercise of
these options based on the assumed initial public offering price of $ per
share and values for in-the-money options that represent the positive spread
between the respective exercise prices of these options and the assumed initial
public offering price of $ per share.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Shares Options at December 31, 1999 December 31, 1999
Acquired Value ---------------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Shai Agassi............. -- 666,666 --
David Blumstein......... 350,000 -- --
Gil Perez............... -- 173,750 --
Joseph Zarb............. 119,062 -- --
Udi Ziv................. -- 250,000 --
</TABLE>
Under our early exercise program our employees have the ability to purchase
shares of common stock underlying their unvested options, subject to our
repurchase right.
Employment and Severance Agreements
Messrs. Agassi, Blumstein and Ziv each entered into a one-year employment
agreement with us in October 1998, which was subsequently extended for an
additional one-year period in October 1999. Each of these agreements provides
for annual salary and participation in our benefit plans. The agreements also
provide that if the party to the agreement is terminated without cause or
voluntarily terminates his employment with us for good reason, then he is
entitled to continue to receive his salary for the longer of six months or the
remainder of the agreement's term. In addition, our right to repurchase any
unvested shares of common stock purchased by the executive officer lapses in
the event we are acquired or there is a change in control.
Stock Plans
2000 Stock Plan
Our board of directors adopted the 2000 Stock Plan in March 2000, and the
plan will be submitted to our stockholders for their approval prior to the
completion of this offering. The purpose of the 2000 Plan is to
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<PAGE>
provide us with the means to retain and attract employees, directors and
consultants who are essential to our future growth and success by providing
these individuals with an opportunity to acquire shares of our common stock.
Our 2000 Plan provides for the grant of nonstatutory stock options to our
employees, directors and consultants, and to the employees, directors and
consultants of our subsidiary corporations, and for the grant of incentive
stock options, within the meaning of Section 422 of the Internal Revenue Code,
to our employees and employees of our subsidiaries.
Number of Shares of Common Stock Available under the 2000 Plan. A total of
2,500,000 shares of common stock have initially been authorized for issuance
under the 2000 Plan. In addition, upon completion of this offering, the
following shares reserved under the 1996 Stock Option Plan will be added to the
2000 Plan:
. any additional shares reserved under the 1996 Stock Option Plan that
were not issued and that are not subject to outstanding grants on the
date of this prospectus, the effective date of the 2000 Plan; and
. any shares issued under the 1996 Stock Option Plan that are forfeited or
repurchased by us or that are issuable upon exercise of options that
expire or become unexercisable for any reason without having been
exercised in full.
In addition, the following shares will again be available for grant and
issuance under the 2000 Plan:
. shares that are subject to issuance upon exercise of an option granted
under the 2000 Plan that cease to be subject to that option for any
reason other than exercise of the option;
. shares that have been issued in connection with the exercise of an
option granted under the 2000 Plan that are subsequently forfeited or
repurchased by us at the original purchase price; and
. shares that are subject to an award granted under a restricted stock
purchase agreement under the 2000 Plan that are subsequently forfeited
or repurchased by us at the original issue price.
Moreover, on the first day of each fiscal year during the term of the 2000
Plan, beginning with our fiscal year 2001, the number of shares available for
issuance under our 2000 Plan will increase by an amount of shares equal to the
lesser of 5% of the outstanding shares of our common stock on the last day of
our immediately preceding fiscal year, 2,500,000 shares, or a lesser amount as
our board may determine.
Administration of the Incentive Plan. Our board of directors or a committee
of our board administers the 2000 Plan. In the case of options intended to
qualify as "performance-based compensation" within the meaning of Section
162(m) of the Internal Revenue Code, the committee must consist of two or more
"outside directors." The administrator has the power to determine the terms of
the options granted, including the exercise price, the number of shares subject
to each option, the exercisability of the options and the form of consideration
payable upon exercise.
Options. The administrator determines the exercise price of options granted
under the 2000 Plan, but with respect to nonstatutory stock options intended to
qualify as "performance-based compensation" within the meaning of Section
162(m) of the Internal Revenue Code and all incentive stock options, the
exercise price must at least be equal to the fair market value of our common
stock on the date of grant. The term of an incentive stock option may not
exceed 10 years, except that with respect to any participant who owns 10% of
the voting power of all classes of our outstanding capital stock, the term must
not exceed five years and the exercise price must equal at least 110% of the
fair market value on the grant date. The administrator is free to determine the
term of all other options.
No person may be granted an option to purchase more than 1,000,000 shares in
any fiscal year; provided that, in connection with his or her initial service,
an optionee may be granted options to purchase up to an additional 750,000
shares.
After termination of one of our employees, directors or consultants, he or
she may exercise his or her option for the period of time stated in his or her
option agreement. Generally, if termination is due to death or
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<PAGE>
disability, the option will remain exercisable for 12 months. In all other
cases, the option will generally remain exercisable for three months. However,
an option may never be exercised later than the expiration of its term.
Automatic Grants to Nonemployee Directors. The 2000 Plan provides for the
periodic automatic grant of options to our non-employee directors who do not
beneficially own 5% or more of our outstanding voting securities. Each option
granted under this automatic grant provision will have an exercise price per
share equal to 100% of the fair market value per share of our common stock on
the date of grant, and will have a term of 10 years, unless terminated earlier
upon the optionee's termination of service as a director. Two types of options
that will automatically be granted to non-employee directors under the 2000
Plan:
. Initial Grant. An eligible non-employee director who does not
beneficially own 5% or more of our outstanding voting securities will
automatically be granted an option to purchase 40,000 shares of common
stock on the later of the date of this offering and the date the
individual first becomes a non-employee director, whether by appointment
by our board or election by our stockholders. An employee director who
ceases to be an employee will not be eligible to receive this initial
grant. Each initial grant will become vested and exercisable in four
successive equal annual installments, measured from the option grant
date.
. Annual Grants. Each eligible non-employee director who does not
beneficially own 5% or more of our outstanding voting securities will
automatically be granted an option to purchase 10,000 shares of our
common stock on each anniversary of the date the director first became an
eligible non-employee director. Each annual grant will become vested and
exercisable on the first anniversary of the option grant date.
The other terms and conditions of the options automatically granted to non-
employee directors are generally the same as those for other options granted
under the 2000 Plan.
Transferability of Options. The 2000 Plan generally does not allow for the
transfer of options, and only the optionee may exercise an option during his or
her lifetime. The administrator may, however, allow options to be transferable.
Adjustments upon Merger or Asset Sale. The 2000 Plan provides that in the
event of our merger with or into another corporation or a sale of substantially
all of our assets, the successor corporation will assume or substitute each
option. If the outstanding options are not assumed or substituted, the
administrator will provide notice to each optionee that he or she has the right
to exercise the option as to all of the shares subject to the option, including
shares which would not otherwise be exercisable, for a period of 15 days from
the date of the notice. The option will then terminate upon the expiration of
this 15-day period.
Amendment and Termination of the 2000 Plan. The 2000 Plan will automatically
terminate in 2010, unless we terminate it sooner. In addition, our board of
directors has the authority to amend, suspend or terminate the 2000 Plan,
provided that such change may not adversely affect any option previously
granted under the 2000 Plan.
2000 Employee Stock Purchase Plan
Our board of directors adopted the 2000 Employee Stock Purchase Plan in
March 2000, and the plan will be submitted to our stockholders for their
approval prior to completion of this offering. Our Purchase Plan provides
eligible employees the opportunity to purchase shares of our common stock at a
discount through payroll deductions.
Number of Shares of Common Stock Available under the Purchase Plan. A total
of 500,000 shares of common stock have initially been authorized for issuance
under the Purchase Plan. In addition, the number of shares authorized for
issuance under the Purchase Plan will increase automatically on the first day
of each fiscal year, beginning with our fiscal year 2001, equal to the lesser
of 1% of the outstanding shares of our common
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<PAGE>
stock on the last day of the immediately preceding fiscal year, 500,000 shares,
or a lesser amount as our board of directors may determine.
Administration of the Purchase Plan. Our board of directors or a committee
of our board administers the Purchase Plan. The administrator has full and
exclusive authority to interpret the terms of the Purchase Plan and determine
eligibility.
Eligibility to Participate. Our employees are eligible to participate in the
Purchase Plan if they are customarily employed by us or a participating
subsidiary for at least 20 hours per week and more than five months in any
calendar year. Nonetheless, an employee may not participate in the Purchase
Plan if:
. he or she owns stock possessing 5% or more of the total voting power or
value of all classes of our capital stock; or
. his or her rights to purchase stock under all employee stock purchase
plans accrue at a rate that exceeds $25,000 worth of stock in any
calendar year.
Offering Periods and Contributions. The Purchase Plan is intended to qualify
under Section 423 of the Internal Revenue Code and contains consecutive,
overlapping 24-month offering periods. Each offering period includes four 6-
month purchase periods. The offering periods generally start on the first
trading day on or after February 1 and August 1 of each year, except for the
first such offering period which will commence on the first trading day on or
after the date of this offering and will end on the last trading day on or
after August 1, 2002.
Our Purchase Plan permits participants to purchase common stock through
payroll deductions of up to 15% of their eligible compensation, which includes
a participant's base straight time gross earnings and commissions and bonuses.
A participant may purchase a maximum of 2,000 shares during any six month
purchase period.
Purchase of Shares. Amounts deducted from a participant's eligible
compensation and accumulated during a six month offering period are used to
purchase shares of our common stock at the end of the six month offering
period. The price is 85% of the lower of the fair market value of our common
stock at the beginning or end of the offering period. Participants may end
their participation at any time during an offering period and will be refunded
their payroll deductions to date. Participation ends automatically upon
termination of employment with us.
Transferability of Rights. A participant may not transfer rights granted
under the Purchase Plan other than by will, by the laws of descent and
distribution or as otherwise provided under the Purchase Plan.
Adjustments upon Merger or Asset Sale. In the event of our merger with or
into another corporation or a sale of all or substantially all of our assets, a
successor corporation may assume or substitute for all outstanding
participation rights under the Purchase Plan. If the successor corporation
refuses to assume or substitute for these rights, the offering period then in
progress will be shortened, and a new exercise date will be set.
Amendment and Termination of the Purchase Plan. The Purchase Plan will
terminate in 2010. Nonetheless, our board of directors has the authority to
amend or terminate the Purchase Plan, except that, subject to certain
exceptions described in the Purchase Plan, no such action may adversely affect
any outstanding rights to purchase stock under the Purchase Plan.
1996 Stock Option Plan
Our board of directors and stockholders adopted our 1996 Stock Option Plan
in October 1996. A total of 8,372,936 shares of common stock have been
authorized for issuance under the 1996 Plan. As of December 31, 1999, options
to acquire a total of 4,022,840 shares of our common stock were issued and
outstanding, and a
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total of 1,006,031 shares of our common stock had been issued upon the exercise
of options granted under the 1996 Plan. In addition, 1,097,223 shares were
purchased and cancelled by Vanenburg in October 1998 upon its acquisition of
us. Our board of directors has decided not to grant any additional options
under the 1996 Plan as of the effective date of this offering. However, the
1996 Plan will continue to govern the terms and conditions of outstanding
options already granted under the 1996 Plan.
Our board of directors or a committee of our board administers the 1996
Plan. The administrator of the 1996 Plan has the authority to determine the
terms and conditions of the options granted under the 1996 Plan.
Our 1996 Plan provides for the grant of nonstatutory stock options to our
employees, directors and consultants or employees, directors and consultants of
our parent or subsidiary corporations, and for the grant to our employees or
employees of our parent or subsidiary corporations of incentive stock options,
within the meaning of Section 422 of the Internal Revenue Code. The exercise
price of options granted under our 1996 Plan may not be less than 85% of the
fair market value of our common stock on the date of grant and the term of an
option may not exceed 10 years. An outstanding option may terminate prior to
the end of its 10 year term if the optionee ceases to be a service provider.
Our 1996 Plan provides that in the event of our merger with or into another
corporation or a sale of substantially all of our assets, the successor
corporation will assume or substitute each option. If the outstanding options
are not assumed or substituted, the options will terminate. However, the
administrator of the 1996 Plan has the discretionary authority to provide that
each option that is not assumed or substituted in a merger or asset sale will
accelerate and become fully exercisable prior to termination.
Limitations of Liability and Indemnification Matters
As permitted by Delaware law, our certificate of incorporation eliminates
the personal liability of our directors for monetary damages for breach of
their fiduciary duties as directors, except for liability for any of the
following:
. any breach of a director's duty of loyalty to us or our stockholders;
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;
. unlawful payments of dividends or unlawful stock repurchases or
redemptions; or
. any transaction from which a director derives an improper personal
benefit.
Our certificate of incorporation also provides that if Delaware law is in the
future amended to authorize corporate action further limiting or eliminating
the personal liability of directors, then the liability of our directors will
be limited or eliminated to the fullest extent permitted by the amended
Delaware law.
As permitted by Delaware law, our bylaws provide for the following:
. we must indemnify our directors and executive officers to the fullest
extent permitted by Delaware law;
. we may indemnify our other officers, employees and agents to the fullest
extent permitted by Delaware law; and
. we must advance all expenses, as incurred, of our directors and executive
officers in connection with a legal proceeding to the fullest extent
permitted by Delaware law, subject to limited exceptions.
We believe that indemnification under our bylaws covers at least negligence and
gross negligence on the part of an indemnified party.
We have entered into separate indemnification agreements with each of our
directors and executive officers. These agreements provide for the following:
. we must indemnify the director or officer against expenses (including
attorney's fees), judgments, fines and settlements paid by the individual
in connection with any action, suit or proceeding arising out of
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the individual's status or service as a director or officer (other than
liabilities arising from willful misconduct or conduct that is knowingly
fraudulent or deliberately dishonest); and
. we must advance expenses incurred by the individual in connection with
any proceeding against the individual with respect to which he or she may
be entitled to indemnification by us.
We believe that our certificate of incorporation, the above bylaw provisions
and the indemnification agreements are necessary to attract and retain
qualified persons as directors and officers. Following completion of this
offering, we will also maintain directors' and officers' liability insurance.
These limitation of liability and indemnification provisions may discourage
stockholders from bringing a lawsuit against the directors for breach of their
fiduciary duty. They may also have the effect of reducing the likelihood of
derivative litigation against directors and officers, even though such an
action, if successful, might otherwise benefit us and our stockholders.
Furthermore, a stockholder's investment may be adversely affected to the extent
we pay the costs of settlement and damage awards against directors and officers
as a result of these indemnification provisions.
We are not aware of any pending litigation or proceeding involving any of
our directors, officers, employees or agents where indemnification will be
sought, required or permitted. Furthermore, we are not aware of any threatened
litigation or proceeding that might result in a claim for indemnification.
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RELATED PARTY TRANSACTIONS
Acquisition of Quicksoft Development (1992) Ltd.
In September 1996, we exchanged all of the outstanding shares of Quicksoft
Development (1992) Ltd., an Israel-based research and development company owned
primarily by Shai Agassi, our Chief Executive Officer, and Mr. Agassi's family,
for 6,375,000 shares of our common stock. Of the shares that were issued in
this transaction, Mr. Agassi and Quicksoft Limited (a holding company
affiliated with Mr. Agassi) each received 3,187,500 shares of common stock.
After the acquisition, Quicksoft Development (1992) Ltd. changed its name to
Top Tier Israel, Ltd.
Of the 1000 common shares of Top Tier Israel now outstanding, we own 999
shares and Mr. Agassi owns one share in order to satisfy Israel corporate law
requirements that a company have at least two shareholders.
Sale of Common Stock
In September 1996, we sold 689,874 shares of our common stock to David
Blumstein, Vice Chairman of the Board, at a price of $0.0067 per share.
Preferred Stock Financings and Acquisition by Vanenburg
From September 1996 through November 1996, we sold an aggregate of 1,491,376
shares of our Series A preferred stock at a price of $0.53 per share. David
Blumstein purchased 366,376 shares for an aggregate purchase price of $195,401.
From June through November 1997, we sold an aggregate of 6,709,264 shares of
our Series B preferred stock to Vanenburg Group B.V. at a price of $2.09 per
share.
On October 6, 1998, we entered into an Agreement and Plan of Reorganization
with Vanenburg, whereby Vanenburg acquired substantially all of our outstanding
capital stock. Two of our directors, Jan Baan and Andries Bottema, are
affiliates of Vanenburg. Under the terms of that agreement, (1) we merged with
a wholly-owned subsidiary of Vanenburg, with Top Tier Software, Inc. as the
surviving corporation; (2) each outstanding share of our common stock and
Series A preferred stock and each vested option to purchase common stock was
converted into the right to receive cash and promissory notes in the aggregate
amount of approximately $6.28 per share; (3) each unvested option to purchase
common stock was converted into a similar option to purchase the common stock
of the surviving corporation with the same rights and vesting period as the
original option; (4) each outstanding share of Series B preferred stock was
converted into one share of Series B preferred stock of the surviving
corporation; and (5) we issued to Vanenburg 10,500,000 shares of Series C
preferred stock. The promissory notes, which were guaranteed by Vanenburg,
included promissory notes that we issued to the following executive officers in
the following amounts:
<TABLE>
<CAPTION>
Executive Officer Aggregate Amount of Notes
----------------- -------------------------
<S> <C>
Shai Agassi...................................... $13,340,441
David Blumstein.................................. $ 5,676,229
Gil Perez........................................ $ 392,366
</TABLE>
We repaid all of these promissory notes in full in April and October 1999.
Of the aggregate amount that Vanenburg paid in cash and promissory notes,
Vanenburg withheld an aggregate amount of approximately $2.9 million, and
placed this amount in an employee pool. We distributed the entire pool to those
individuals, other than Shai Agassi and David Blumstein, who were still
employed by us on the first anniversary date of the Vanenburg transaction.
In addition, on October 6, 1998, we sold 763,746 shares of Series A
preferred stock at a price of $4.143 per share to Shai Agassi, David Blumstein
and Quicksoft Limited. The Series A preferred stock was issued in three equal
installments of 254,582 shares on or about the following dates: October 6,
1998, April 6, 1999 and October 6, 1999.
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On October 27, 1999, we sold an aggregate of 2,008,032 shares of our Series
D preferred stock at a price of $4.98 per share.
The following table summarizes the shares of capital stock purchased by
executive officers, directors and 5% or more stockholders and their affiliates
in these transactions:
<TABLE>
<CAPTION>
Series A Series B Series C Series D
Stockholder Preferred Stock Preferred Stock Preferred Stock Preferred Stock
- ----------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Vanenburg Group B.V..... -- 6,709,264 10,500,000 --
Entities affiliated with
Ferman AG.............. -- -- -- 1,708,032
Shai Agassi............. 318,748 -- -- --
Quicksoft Limited....... 318,748 -- -- --
David Blumstein......... 126,247 -- -- --
</TABLE>
Jan Baan and Andries Bottema, two of our directors, are also affiliated with
the Vanenburg Group. Martin Lechner, one of our directors, is affiliated with
Ferman AG. Shai Agassi is affiliated with Quicksoft Limited.
Agreements with Baan
In August 1998, we entered into a memorandum of understanding with Baan
Company. Under this memorandum of understanding, we agreed to license to Baan
Company various products that incorporate our HyperRelational navigation
technology, which products Baan Company distributes to its customers. Baan
Company is obligated to pay us various fees in connection with the sale,
development and maintenance of the distributed products. Both parties agree to
split all maintenance and upgrade fees from the customers who purchase these
products. This agreement has since been superseded.
In March 2000, we entered into a perpetual, original equipment manufacturer,
or OEM, agreement and a reseller agreement with Baan Development B.V., an
affiliate of Baan Company. These agreements supersede our prior agreements with
Baan Company. Under the OEM agreement, we granted to Baan Development a non-
exclusive, perpetual and worldwide right to embed our HyperRelational
technology into Baan's software products. In addition, we granted to Baan
Development a non-exclusive, perpetual and worldwide right to distribute our
HyperRelational technology as embedded in their software products. We are
obligated to provide various development, support and maintenance services
under the agreement, and Baan Development is obligated to pay us license,
maintenance and royalty fees. This agreement is perpetual. Under the reseller
agreement, we granted to Baan Development a non-exclusive and worldwide license
to distribute Baan Data Navigator, Baan OLAP Navigator, Baan Data Navigator
Development Environment, TopTier Web Navigator, TopTier Portal Pack, TopTier
Development Environment and TopTier Business Integration Portal to end users.
Under the agreement, each of us and Baan Development is obligated to pay
royalties to the other depending on which party licenses the software to end
users. Baan Development is also obligated to pay to us a portion of any
maintenance and support fees that it collects. Upon expiration of the initial
term of the agreement in March 2004, the reseller agreement will automatically
renew for one year periods unless terminated by us or Baan Development B.V.
Jan Baan, one of our directors, was an executive officer of Baan Company at
the time that we entered into the memorandum of understanding with Baan Company
in August 1998. In 1999, we received approximately 71% of our total revenues
from this memorandum of understanding. In addition, Jan Baan and Andries
Bottema, two of our directors, are affiliated with Vanenburg Group B.V., which
beneficially owns over 10% of Baan Company's outstanding capital stock and is
our majority stockholder.
Loans to Executive Officers
We permit holders of options under our 1996 Stock Option Plan to purchase
shares of common stock underlying unvested options, subject to our right to
repurchase these shares, which right lapses over time. In
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addition, we allow employees to borrow from us the full exercise price of their
options by signing a promissory note. The following executive officers listed
in the summary compensation table have received such loans:
. In February 2000, we loaned Shai Agassi an aggregate of $5,422,502
secured by two promissory notes and a stock pledge agreement, in
connection with his purchase of 2,035,000 shares of our common stock.
The notes are due and payable in February 2005.
. In December 1999, we loaned David Blumstein an aggregate of $332,500
secured by a promissory note and a stock pledge agreement, in connection
with his purchase of 350,000 shares of our common stock. The note is due
and payable in December 2005.
. In January 2000, we loaned Gil Perez an aggregate of $143,766 secured by
two promissory notes and a stock pledge agreement, in connection with
his purchase of 173,750 shares of our common stock. The note is due and
payable in January 2005.
. In December 1999, we loaned Joseph Zarb an aggregate of $61,773 secured
by a promissory note and a stock pledge agreement, in connection with
his purchase of 119,062 shares of our common stock. The note is due and
payable in December 2004.
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PRINCIPAL STOCKHOLDERS
The following table sets forth information concerning the beneficial
ownership of our common stock as of December 31, 1999, and as adjusted to
reflect the sale of shares of common stock in this offering, by the
following persons and entities:
. each person or entity who owns beneficially 5% or more of our outstanding
common stock;
. each of the members of our board of directors;
. each of our executive officers included in the summary compensation
table; and
. all members of our board of directors and executive officers as a group.
Under rules promulgated by the SEC, the number and percentage of shares
beneficially owned is determined in accordance with Rule 13d-3 of the Exchange
Act, and the information is not necessarily indicative of beneficial ownership
for any other purpose. Under such rule, beneficial ownership includes any
shares as to which the individual or entity has voting power or investment
power and any shares which the individual or entity has the right to acquire
within 60 days of December 31, 1999 through the exercise of any stock option,
warrant or other right. Unless otherwise indicated in the footnotes, each
person or entity has sole voting and investment power (or shares such powers
with his or her spouse) for the shares shown as beneficially owned. Except as
otherwise noted, the address of each person listed on the table is c/o Top Tier
Software, Inc., 6203 San Ignacio Avenue, Suite 101, San Jose, California 95119.
The percentage of common stock outstanding as of December 31, 1999 is based
on 20,671,699 shares of common stock outstanding on that date, assuming that
all outstanding preferred stock has been converted into common stock.
<TABLE>
<CAPTION>
Percent
Beneficially
Owned
Shares -----------------
Beneficially Before After
Name of Beneficial Owner Owned Offering Offering
- ------------------------ ------------ -------- --------
<S> <C> <C> <C>
Entities affiliated with Vanenburg Group
B.V.(1)....................................... 17,209,265 83.3%
Jan Baan(1).................................... 17,209,265 83.3
Andries Bottema(1)............................. 17,209,265 83.3
Entities affiliated with Ferman AG(2).......... 1,708,032 8.3
Martin Lechner(2).............................. 1,708,032 8.3
Shai Agassi(3)................................. 1,304,162 6.1
David Blumstein(4)............................. 476,247 2.3
Udi Ziv(5)..................................... 250,000 1.2
Gil Perez(6)................................... 173,750 *
Joseph Zarb(7)................................. 119,062 *
All executive officers and directors as a group
(10 persons)(8)............................... 21,240,519 97.6
</TABLE>
- --------
* Less than 1% beneficially owned.
(1) Represents shares held by Vanenburg Group B.V. All of the shares of
Vanenburg Group B.V. are held by the Share Administration Foundation,
which foundation therefore has the right to vote all the shares of
Vanenburg Group B.V. The Share Administration Foundation transferred to
the Oikonomos Foundation (a charitable foundation) depositary receipts
representing the economic interest in the shares of Vanenburg Group B.V.
Jan Baan and Paul Baan are directors of the Share Administration
Foundation and effectively retain voting control of Vanenburg Group B.V.
Messrs. Jan Baan and Andries Bottema are directors of Vanenburg Group B.V.
Messrs. Baan and Bottema disclaim beneficial ownership of the shares held
by entities of Vanenburg Group B.V., except to the extent of their
proportionate interest therein. The address of these individuals and
entities is Vanenburgerallee 13, P.O. Box 231, 3880 AE Putten, The
Netherlands.
(2) Represents shares held by Ferman AG, IQ Capital and pre-IPO AG. Mr. Lechner
is chairman of the supervisory board and Chief Executive Officer of Ferman
AG. He is also a board member and stockholder
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of IQ Capital, one of our stockholders. IQ Capital owns approximately 12.5%
of the capital stock of pre-IPO AG, one of our stockholders. Mr. Lechner
may be deemed to beneficially own all shares of TopTier held by Ferman AG,
IQ Capital and pre-IPO AG. Mr. Lechner disclaims beneficial ownership of
such shares, except to the extent of his proportionate interest therein.
The address for Mr. Lechner and these entities is c/o IQ Capital,
Aktiengesellschaft, Borsenplatz 1, 60313, Frankfurt, Germany.
(3) Includes 318,748 shares held by Quicksoft Ltd., an Israeli company
affiliated with Mr. Agassi, and 666,666 shares issuable upon exercise of
outstanding options within 60 days of December 31, 1999.
(4) Includes 350,000 shares which were issued upon exercise of options granted
in October 1999. A portion of these shares are subject to repurchase by
us, which right lapses progressively over time.
(5) Represents 250,000 shares issuable upon exercise of outstanding options
within 60 days of December 31, 1999. If exercised, a portion of these
shares would be subject to repurchase by us, which right lapses
progressively over time.
(6) Represents 173,750 shares issuable upon exercise of outstanding options
within 60 days of December 31, 1999. If exercised, a portion of these
shares would be subject to repurchase by us, which right lapses
progressively over time.
(7) Represents 119,062 shares which were issued upon exercise of options. A
portion of these shares are subject to repurchase by us, which right
lapses progressively over time.
(8) Includes 916,666 shares issuable upon exercise of outstanding options
within 60 days of December 31, 1999. A portion of the shares issuable upon
exercise of these options are subject to repurchase by us, which right
lapses progressively over time.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
Following completion of this offering, our authorized capital stock will
consist of 200,000,000 shares of common stock, $0.001 par value per share, and
5,000,000 shares of preferred stock, $0.001 par value per share.
Common Stock
As of December 31, 1999, there were 20,671,699 shares of common stock
outstanding held of record by approximately 32 stockholders, after giving
effect to the conversion of all outstanding preferred stock into common stock
at a one-to-one ratio and assuming no exercise of outstanding options after
December 31, 1999. There will be shares of common stock outstanding
(assuming no exercise of the underwriters' over-allotment option and no
exercise of outstanding options after December 31, 1999) after giving effect to
the sale of shares of common stock in this offering.
The holders of common stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to any preferences that
may be applicable to any outstanding preferred stock, the holders of common
stock are entitled to receive ratably any dividends that may be declared from
time to time by the board of directors out of funds legally available for that
purpose. In the event of a liquidation, dissolution or winding up of TopTier,
the holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities, subject to any prior rights of any
preferred stock then outstanding. The common stock has no preemptive,
conversion or other subscription rights. There are no redemption or sinking
fund provisions applicable to the common stock. All outstanding shares of
common stock are fully paid and non-assessable.
Preferred Stock
Effective upon completion of this offering, our board will be authorized to
issue 5,000,000 shares of undesignated preferred stock. The board will have the
authority to issue the undesignated preferred stock in one or more series and
to determine the powers, preferences and rights granted to, and the
qualifications, limitations or restrictions imposed upon, any wholly unissued
series of undesignated preferred stock, and to fix the number of shares
constituting any series and the designation of that series, without any further
vote or action by the stockholders. The issuance of preferred stock may have
the effect of delaying, deferring or preventing a change in control of TopTier
without further action by the stockholders and may adversely affect the voting
and other rights of the holders of common stock. At present, we have no plans
to issue any shares of preferred stock.
Registration Rights of Stockholders
The holders of 19,981,041 shares of common stock or their transferees are
entitled to rights to have these shares, called "registrable securities,"
registered under the Securities Act. These rights are provided under the terms
of an agreement between us and these holders. Subject to limitations in this
agreement, the holders of the registrable securities may require us, on one
occasion at any time after six months of the date of this offering, to use our
best efforts to register registrable securities for public resale, provided
that the proposed aggregate offering price is in excess of $10,000,000. In
addition, the holders of the registrable securities may require, on three
occasions in any 12-month period, to register their shares for public resale on
Form S-3, once we are eligible to use Form S-3, provided that the aggregate
offering price is at least $1,000,000. In addition, if we register any of our
common stock, either for our own account or for the account of other security
holders, the holders of registrable securities are entitled to include their
shares in the registration. A holder's right to include shares in an
underwritten registration is subject to conditions and limitations, including
the right of the underwriters to limit the number of shares included in that
offering. All fees, costs and expenses of these registrations must be borne by
us, other than selling expenses (including underwriting discounts, selling
commissions and stock transfer taxes, which must be borne by the holders of the
securities being registered).
Anti-Takeover Provisions of Delaware Law and Charter Provisions
The provisions of Delaware law, and of our certificate of incorporation and
bylaws, described below may have the effect of delaying, deferring or
discouraging another person from acquiring control of our company.
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Delaware Law
We are subject to Section 203 of the Delaware General Corporation Law
regulating corporate takeovers. This section prevents certain Delaware
corporations from engaging, under limited circumstances, in a "business
combination," which includes a merger or sale of more than 10% of the
corporation's assets, with any "interested stockholder," or a stockholder who
owns 15% or more of the corporation's outstanding voting stock, as well as
affiliates and associates of stockholders, for three years following the date
that the stockholder became an interested stockholder, unless:
. the transaction is approved by the board prior to the date the interested
stockholder attained that status;
. upon the closing 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; or
. on or subsequent to the date the stockholder became an interested
stockholder, the business combination is approved by the board and
authorized at an annual or special meeting of stockholders by at least
two-thirds of the outstanding voting stock that is not owned by the
interested stockholder.
A Delaware corporation may opt out of Section 203 by including an express
provision in its original certificate of incorporation or amending its
certificate of incorporation or bylaws to include such an express provision,
which amendment is approved by at least a majority of the outstanding voting
shares. However, we have not opted out of this provision. Section 203 could
prohibit or delay mergers or other takeover or change-in-control attempts and,
accordingly, may discourage attempts to acquire us.
Charter and Bylaw Provisions
Our certificate of incorporation provides that, following the completion of
this offering, our board of directors will be reorganized into a classified
board, divided into three classes. The directors in each class will serve for a
three-year term, with our stockholders electing one class each year. For more
information on the classification of our board, see "Management--Board
Composition." This system of electing and removing directors may tend to
discourage a third party from making a tender offer or otherwise attempting to
obtain control of us, because it generally makes it more difficult for
stockholders to replace a majority of the directors.
Our bylaws provide that any action required or permitted to be taken by our
stockholders at an annual or special meeting may be taken only if it is
properly brought before the meeting, including having provided required notice.
Our stockholders may not take any action by written consent. Our bylaws also
provide that special meetings of the stockholders may only be called by our
board, the chairman of our board or our chief executive officer. Our
certificate of incorporation provides that our board of directors may issue
preferred stock with voting or other rights without stockholder action.
As described below, our bylaws provide that we must indemnify officers and
directors against losses that they may incur in legal proceedings and
investigations resulting from their services to us, including actions in
connection with takeover defense measures. These provisions may have the effect
of preventing changes in our management.
Nasdaq National Market Listing
We have applied to list our common stock on The Nasdaq Stock Market's
National Market under the trading symbol "TOPT."
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is ChaseMellon
Shareholder Services, L.L.C.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Therefore, future sales of substantial amounts of our common stock could
negatively affect the market price of our common stock. Furthermore, since only
shares will be available for sale after this offering because of the
contractual and legal restrictions on the resale of our outstanding shares
described below, sales of substantial amounts of our common stock after these
restrictions lapse could have a negative effect on the market price.
Following this offering, we will have shares of common stock
outstanding, assuming no exercise of outstanding options after December 31,
1999. Of these shares, all of the shares sold in this offering will be
freely tradable without restriction or further registration under the
Securities Act, unless these shares are purchased by our affiliates. The
remaining 20,671,699 shares of common stock held by existing stockholders are
restricted securities. Restricted securities may be sold in the public market
only if they are registered or they qualify for an exemption from registration
under Rules 144 or 701 under the Securities Act, as summarized below.
As a result of the contractual and legal restrictions described below, the
20,671,699 shares of common stock that are restricted securities will be
available for sale in the public market as follows:
. shares on , 2000, the date of this prospectus;
. shares on , 2000, 180 days after the date of
this prospectus;
. shares on , 2001, one year after the date of
this prospectus; and
. shares at various times thereafter.
Lock-Up Agreements
All of our executive officers and directors and substantially all of our
stockholders and option holders have agreed not to (1) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of common
stock or any securities convertible into or exercisable or exchangeable for
common stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
common stock, without the prior written consent of Credit Suisse First Boston
Corporation, for a period of 180 days after the date of this prospectus.
Rule 144
Shares Held for Less Than Two Years. In general, under Rule 144 as currently
in effect, beginning 90 days after the date of this prospectus, a person who
has beneficially owned shares of our common stock for at least one year would
be entitled to sell within any three-month period a number of shares that is
not more than the greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks before a notice of the
sale on Form 144 is filed.
In order for stockholders to sell their shares under Rule 144, they must
also comply with manner of sale provisions and notice requirements, and there
must be current public information available about us.
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Shares Held for More Than Two Years. Under Rule 144(k), a person may sell
their shares without complying with the manner of sale, public information,
volume limitation or notice requirements of Rule 144, if they meet the
following two requirements:
. they have beneficially owned the shares for at least two years; and
. they have not been an affiliate of ours at any time during the 90 days
before a sale.
Rule 701
In general, under Rule 701 of the Securities Act as currently in effect, any
of our employees, consultants or advisors who purchased shares from us under a
stock option plan or other written agreement can resell those shares 90 days
after the effective date of this offering in reliance on Rule 144, but without
complying with some of the restrictions, including the holding period, of Rule
144.
Stock Options
Following the completion of this offering, we intend to file a registration
statement under the Securities Act covering shares of common
stock subject to outstanding options or reserved for issuance under our stock
plans. See "Management--Stock Plans" for a more detailed description of our
stock plans. Shares registered under this registration statement will, subject
to vesting provisions and Rule 144 volume limitations applicable to our
affiliates, be available for sale in the open market immediately after the 180
day lock-up agreements expire. Each year as the number of shares reserved for
issuance under our 2000 Stock Plan increases, we will file new registration
statements to register the additional shares.
59
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Dain Rauscher
Incorporated and U.S. Bancorp Piper Jaffray Inc. are acting as representatives,
the following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
of
Underwriter Shares
----------- ------
<S> <C>
Credit Suisse First Boston Corporation................................
Dain Rauscher Incorporated ...........................................
U.S. Bancorp Piper Jaffray Inc. ......................................
----
Total...............................................................
====
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions paid by
us .................... $ $ $ $
Expenses payable by us
....................... $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act of 1933
(the "Securities Act") relating to, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of
our common stock, or publicly disclose the intention to make any such offer,
sale, pledge, disposition or filing, without the prior written consent of
Credit Suisse First Boston Corporation for a period of 180 days after the date
of this prospectus. We can, however, issue stock pursuant to the exercise of
currently outstanding options.
60
<PAGE>
Our officers and directors and substantially all of our stockholders have
agreed that they will not offer, sell, contract to sell, pledge or otherwise
dispose of, directly or indirectly, any shares of our common stock or
securities convertible into or exchangeable or exercisable for any shares of
our common stock, enter into a transaction which would have the same effect, or
enter into any swap, hedge or other arrangement that transfers, in whole or in
part, any of the economic consequences of ownership of our common stock,
whether any such aforementioned transaction is to be settled by delivery of our
common stock or such other securities, in cash or otherwise, or publicly
disclose the intention to make any such offer, sale, pledge or disposition, or
to enter into any such transaction, swap, hedge or other arrangement, without,
in each case, the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be
required to make in that respect.
We have made application to list the shares of common stock on The Nasdaq
Stock Market's National Market, under the symbol "TOPT."
Prior to this offering, there has been no public market for our common
stock. The initial public offering price will be determined by negotiation
between us and the underwriters. The principal factors to be considered in
determining the public offering price include:
. the information in this prospectus and otherwise available to the
underwriters;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. the prospects for our future earnings;
. the present state of our development and our current financial condition;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
A prospectus in electronic format may be made available on the web sites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters
for sale to their online brokerage account holders. Internet distributions will
be allocated by the underwriters that will make internet distributions on the
same basis as other allocations.
61
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under
the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
62
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered in this
offering will be passed upon by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Legal matters in connection with this
offering will be passed upon for the underwriters by Morrison & Foerster, LLP,
Palo Alto, California.
EXPERTS
The audited consolidated financial statements and schedule included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act of 1933 with respect to the shares of common stock to be sold in
this offering. Although this prospectus is part of the registration statement,
it does not contain all of the information set forth in the registration
statement and the related exhibits and schedules thereto. For further
information with respect to us and the common stock to be sold in this
offering, we refer you to the registration statement and the exhibits and
schedules filed with the registration statement. Statements contained in this
prospectus as to the contents of any contract or any other document referred to
are not necessarily complete, and, in each instance, we refer you to the copy
of such contract or other document filed as an exhibit to the registration
statement. A copy of the registration statement, and the related exhibits and
schedules, may be inspected without charge at the public reference facilities
maintained by the SEC in the following locations:
. Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549;
. Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and
. Seven World Trade Center, 13th Floor, New York, New York 10048.
Copies of all or any part of the registration statement may be obtained from
such offices upon the payment of the fees prescribed by the SEC. The public may
obtain information on the operations of the public reference facilities in
Washington, D.C. by calling the SEC at 1-800-SEC-0330. The SEC maintains a web
site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the SEC. The
web site is located at www.sec.gov.
63
<PAGE>
TOP TIER SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................... F-2
Consolidated Balance Sheets................................................ F-3
Consolidated Statements of Operations...................................... F-4
Consolidated Statements of Stockholders' Equity............................ F-5
Consolidated Statements of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Top Tier Software, Inc.:
We have audited the accompanying consolidated balance sheets of Top Tier
Software, Inc. (a Delaware corporation) and subsidiaries as of December 31,
1999 and 1998 and the related consolidated statements of operations,
stockholders' equity and cash flows for the year ended December 31, 1997, the
nine months ended September 30, 1998, the three months ended December 31, 1998
and the year ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Top Tier Software, Inc. and
subsidiaries as of December 31, 1998 and 1999, and the results of their
operations and their cash flows for the year ended December 31, 1997, the nine
months ended September 30, 1998, the three months ended December 31, 1998 and
the year ended December 31, 1999 in conformity with accounting principles
generally accepted in the United States.
/s/ Arthur Andersen llp
March 30, 2000
San Jose, California
F-2
<PAGE>
TOP TIER SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
December 31, 1999 Pro forma
-------------------------- Stockholders'
1998 1999 Equity (Note 8)
------------ ------------ ---------------
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 3,458,401 $ 2,529,096
Restricted cash.................. 225,000 1,116,885
Marketable securities............ 455,099 2,210,144
Accounts receivable, net of
allowance for doubtful accounts
of $24,558 and $114,874,
respectively.................... 271,230 2,494,037
Prepaid expenses and other
current assets.................. 543,268 572,187
Due from Vanenburg............... 40,988,191 --
------------ ------------
Total current assets............ 45,941,189 8,922,349
Property and equipment, net........ 1,297,756 1,446,661
Goodwill, net...................... 59,843,900 38,082,300
Intangible assets, net............. 4,839,400 3,820,600
Other assets....................... 72,660 72,660
------------ ------------
Total assets.................... $111,994,905 $ 52,344,570
============ ============
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................. $ 91,398 $ 400,025
Accrued expenses................. 1,321,903 2,136,105
Deferred revenue................. 994,450 158,712
Due to Vanenburg................. -- 304,750
Notes due to selling
stockholders.................... 40,988,191 --
------------ ------------
Total current liabilities....... 43,395,942 2,999,592
Accrued severance payable.......... 117,782 166,618
------------ ------------
Total liabilities............... 43,513,724 3,166,210
------------ ------------
Commitments (Note 6)
Stockholders' equity:
Convertible preferred stock,
$0.001 par value, aggregate
liquidation preference of
$91,982,347:
Series A:
763,746 shares authorized;
254,582 and 763,746 shares
outstanding at 1998 and 1999;
no shares outstanding pro
forma ........................ 255 764 --
Series B:
9,150,430 shares authorized;
6,709,265 shares outstanding;
no shares outstanding pro
forma......................... 6,709 6,709 --
Series C:
10,500,000 shares authorized
and outstanding; no shares
outstanding pro forma......... 10,500 10,500 --
Series D:
3,100,000 shares authorized;
2,008,032 shares outstanding
at 1999; no shares outstanding
pro forma..................... -- 2,008 --
Common stock, $0.001 par value
33,125,000 shares authorized;
690,656 shares outstanding at
1999; 20,671,699 shares
outstanding pro forma........... -- 691 20,672
Additional paid-in capital......... 79,794,650 111,438,499 111,438,499
Deferred stock compensation........ -- (12,520,946) (12,520,946)
Notes receivable................... -- (466,251) (466,251)
Accumulated deficit................ (11,330,933) (49,293,614) (49,293,614)
------------ ------------ ------------
Total stockholders' equity...... 68,481,181 49,178,360 49,178,360
------------ ------------ ------------
Total liabilities and
stockholders' equity......... $111,994,905 $ 52,344,570
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
TOP TIER SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine months Three months
Year ended ended ended Year ended
December September 30, December 31, December 31,
31, 1997 1998 1998 1999
----------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
License revenues...... $ 29,925 $ 2,483,247 $ 244,464 $ 7,260,115
Service revenues...... 64,584 151,743 72,765 2,384,989
----------- ----------- ------------ ------------
Total revenues...... 94,509 2,634,990 317,229 9,645,104
----------- ----------- ------------ ------------
Cost of revenues:
Cost of license
revenues............. -- 825 174 30,169
Cost of service
revenues............. 80,084 191,361 90,785 1,668,327
----------- ----------- ------------ ------------
Total cost of
revenues........... 80,084 192,186 90,959 1,698,496
----------- ----------- ------------ ------------
Gross profit.......... 14,425 2,442,804 226,270 7,946,608
----------- ----------- ------------ ------------
Operating expenses:
Sales and marketing... 665,214 4,240,251 1,127,316 8,200,044
Research and
development, net..... 1,053,302 2,644,363 806,004 5,443,480
General and
administrative....... 1,822,255 1,913,122 433,644 2,385,687
Purchased in-process
research and
development.......... -- -- 3,556,700 --
Amortization of
deferred stock
compensation(*)...... -- -- -- 7,213,392
Amortization of
goodwill and
intangibles.......... -- -- 5,695,100 22,780,400
----------- ----------- ------------ ------------
Total operating
expenses........... 3,540,771 8,797,736 11,618,764 46,023,003
----------- ----------- ------------ ------------
Operating loss...... (3,526,346) (6,354,932) (11,392,494) (38,076,395)
Other income (expense):
Interest income....... 189,510 382,381 60,664 119,587
Other, net............ (98,173) 44,540 897 (5,873)
----------- ----------- ------------ ------------
Total other income,
net................ 91,337 426,921 61,561 113,714
Net loss............ $(3,435,009) $(5,928,011) $(11,330,933) $(37,962,681)
=========== =========== ============ ============
Basic net loss per
share.................. $ (0.48) $ (0.80) $ -- $ (1,660.81)
=========== =========== ============ ============
Shares used in computing
basic net loss per
share.................. 7,189,806 7,375,124 -- 22,858
=========== =========== ============ ============
Pro forma basic net loss
per share (unaudited).. $ (2.10)
============
Shares used in computing
pro forma unaudited
basic net loss per
share.................. 18,040,467
- ------------------------ ============
(*) Amortization of
deferred stock based
compensation
excluded from the
following expenses:
Cost of service
revenues............. 432,745
Sales and marketing... 926,705
Research and
development, net..... 3,353,028
General and
administrative....... 2,500,914
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
TOP TIER SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Convertible
Preferred Stock Common Stock Deferred Total
------------------- ------------------ Paid-in Stock Notes Accumulated Stockholders'
Shares Amount Shares Amount Capital Compensation Receivable Deficit Equity
---------- ------- ---------- ------ ------------ ------------ ---------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1996........... 1,491,377 $ 1,491 7,064,874 $7,065 $ 801,202 $ -- $ -- $ (598,686) $ 211,072
Issuance of
common stock
upon exercise
of options..... -- -- 300,000 300 15,700 -- -- -- 16,000
Issuance of
Series B
convertible
preferred stock
at $2.09 per
share, net of
issuance costs
of $39,319..... 6,709,265 6,709 -- -- 13,953,971 -- -- -- 13,960,680
Net loss........ -- -- -- -- -- -- -- (3,435,009) (3,435,009)
---------- ------- ---------- ------ ------------ ------------ --------- ------------ ------------
Balance,
December 31,
1997........... 8,200,642 8,200 7,364,874 7,365 14,770,873 -- -- (4,033,695) 10,752,743
Issuance of
common stock
upon exercise
of options..... -- -- 15,375 15 805 -- -- -- 820
Net loss........ -- -- -- -- -- -- -- (5,928,011) (5,928,011)
---------- ------- ---------- ------ ------------ ------------ --------- ------------ ------------
Balance,
September 30,
1998........... 8,200,642 8,200 7,380,249 7,380 14,771,678 -- -- (9,961,706) 4,825,552
Issuance of
Series C
convertible
preferred stock
upon Vanenburg
acquisition.... 10,500,000 10,500 -- -- 64,785,846 -- -- 9,961,706 74,758,052
Retirement of
Series A
convertible
preferred stock
and common
stock upon
Vanenburg
acquisition.... (1,491,377) (1,491) (7,380,249) (7,380) (817,707) -- -- -- (826,578)
Issuance of
Series A
convertible
preferred stock
at $4.14 per
share.......... 254,582 255 -- -- 1,054,833 -- -- -- 1,055,088
Net loss........ -- -- -- -- -- -- -- (11,330,933) (11,330,933)
---------- ------- ---------- ------ ------------ ------------ --------- ------------ ------------
Balance,
December 31,
1998........... 17,463,847 17,464 -- -- 79,794,650 -- -- (11,330,933) 68,481,181
Issuance of
Series A
convertible
preferred stock
at $4.14 per
share.......... 509,164 509 -- -- 2,108,902 -- -- -- 2,109,411
Issuance of
Series D
convertible
preferred stock
at $4.98 per
share, net of
offering costs
of $670,116.... 2,008,032 2,008 -- -- 9,327,876 -- -- -- 9,329,884
Issuance of
common stock
upon exercise
of options..... -- -- 690,656 691 472,733 -- (466,251) -- 7,173
Deferred stock
compensation... -- -- -- -- 19,734,338 (19,734,338) -- -- --
Amortization of
deferred stock
compensation... -- -- -- -- -- 7,213,392 -- -- 7,213,392
Net loss........ -- -- -- -- -- -- -- (37,962,681) (37,962,681)
---------- ------- ---------- ------ ------------ ------------ --------- ------------ ------------
Balance,
December 31,
1999........... 19,981,043 $19,981 690,656 $ 691 $111,438,499 $(12,520,946) $(466,251) $(49,293,614) $ 49,178,360
========== ======= ========== ====== ============ ============ ========= ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TOP TIER SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months Three months
Year ended ended ended Year ended
December 31, September 30, December 31, December 31,
1997 1998 1998 1999
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net loss............... $ (3,435,009) $(5,928,011) $(11,330,933) $(37,962,681)
Adjustments to
reconcile net loss to
net cash used in
operating activities:
Depreciation and
amortization.......... 85,967 181,440 5,813,130 30,585,843
Purchased in-process
research and
development........... -- -- 3,556,700 --
Gain on sale of
property and
equipment............. -- -- -- (2,687)
Changes in operating
assets and
liabilities:
Accounts receivable,
net.................. 241,505 (767,019) 549,714 (2,222,807)
Prepaid expenses and
other current
assets............... (176,034) (512,194) 243,529 (28,919)
Other assets.......... (34,203) (1,765) (34,368) --
Accounts payable...... 335,420 161,188 (609,740) 308,627
Accrued expenses...... 175,878 1,281,230 (564,343) 814,202
Deferred revenue...... 1,260,090 (255,380) (80,260) (835,738)
Due to Vanenburg and
other liabilities.... -- 151,080 117,782 353,586
------------ ----------- ------------ ------------
Net cash used in
operating
activities.......... (1,546,386) (5,689,431) (2,338,789) (8,990,574)
------------ ----------- ------------ ------------
Cash flows from
investing activities:
Purchases of property
and equipment......... (470,779) (798,118) (305,207) (750,507)
Proceeds from sale of
property and
equipment............. -- -- -- 12,238
Proceeds from sale of
marketable
securities............ 13,102,459 24,053,769 2,051,963 1,839,859
Purchase of marketable
securities............ (22,201,790) (16,574,279) (887,221) (3,594,904)
Receipts from
Vanenburg............. -- -- -- 42,126,123
Payments to selling
stockholders.......... -- -- -- (42,126,123)
------------ ----------- ------------ ------------
Net cash (used in)
provided by
investing
activities.......... (9,570,110) 6,681,372 859,535 (2,493,314)
------------ ----------- ------------ ------------
Cash flows from
financing activities:
Proceeds from issuance
of:
Common stock.......... 16,000 820 -- 7,173
Preferred stock, net
of offering costs.... 13,960,680 -- 1,055,088 11,439,295
Increase in restricted
cash.................. -- (225,000) -- (891,885)
------------ ----------- ------------ ------------
Net cash provided by
(used in) financing
activities.......... 13,976,680 (224,180) 1,055,088 10,554,583
------------ ----------- ------------ ------------
Net increase (decrease)
in cash and cash
equivalents............ 2,860,184 767,761 (424,166) (929,305)
Cash and cash
equivalents at
beginning of period.... 254,622 3,114,806 3,882,567 3,458,401
------------ ----------- ------------ ------------
Cash and cash
equivalents at end of
period................. $ 3,114,806 $ 3,882,567 $ 3,458,401 $ 2,529,096
============ =========== ============ ============
Supplemental disclosure
of noncash investing
and financing
activities:
Resulting from the
Vanenburg
acquisition:
Goodwill and
intangible assets... $ -- $ -- $ 73,931,474 $ --
Due from Vanenburg... $ -- $ -- $ 40,988,191 $ --
Notes due to selling
stockholders........ $ -- $ -- $(40,988,191) $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND BASIS OF PRESENTATION
Top Tier Software, Inc. (the "Company") began operations in 1992 as an
Israeli-based research and development company, which became a subsidiary of
the Company when it incorporated in Delaware on August 22, 1996. The Company is
a provider of eBusiness portal technologies and products that integrate
information residing in a business' internal and external enterprise
applications, databases, text documents, Web sites and other data sources. The
Company's eBusiness Integration Portal software products are designed to enable
a business' extended enterprise of employees, customers, suppliers and partners
to directly access, navigate and manipulate this integrated information using
an intuitive and effective portal interface. The Company's software products
are developed around its patented HyperRelational technology, a protocol for
accessing and interacting with structured and unstructured data. Through a
combination of hypertext and relational models, the Company's HyperRelational
technology directs the end user to related meta-data in multiple data sources.
As a result, end users of the software are able to directly access, use and
manipulate information that is relevant to their query and are not merely
directed to one, predetermined data location.
On October 6, 1998, the Vanenburg Group ("Vanenburg") completed the
acquisition of the Company. As a result of acquisition, a change in control
occurred, and a new reporting entity exists. For purposes of presentation, a
dark bar has been inserted in the accompanying financial statements to clearly
separate the results of operations and cash flows of the Company before and
after the change in control. The financial statements also reflect "push-down"
accounting in accordance with SEC Staff Accounting Bulletin No. 54, "SAB 54"
and accordingly, the carrying amounts of identifiable assets and liabilities
were adjusted at September 30, 1998 to reflect their fair values at the date of
acquisition of the Company by Vanenburg--(see also Note 3). Vanenburg is
committed to provide financial support to the Company through June 2001, if
necessary.
The Company has incurred net operating losses since inception and, as of
December 31, 1999, had an accumulated deficit of $49.3 million. The Company is
subject to various risks associated with companies in a comparable stage of
development, including, but not limited to, dependence on key individuals and
customers, competition from larger, more established entities, the risk that
rapid technological advances could render its products obsolete and
unmarketable and the need to obtain adequate financing to support its growth.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Functional Currency
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries in Israel and the United Kingdom after
elimination of intercompany transactions and balances. The functional currency
of the Company's foreign subsidiaries is the U.S. dollar; accordingly, all
gains and losses arising from currency transactions in currencies other than
the U.S. dollar are included in other income in the accompanying consolidated
statements of operations.
Use of Estimates in Preparation of Financial Statements
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.
Cash Equivalents and Short-Term Investments
The Company considers all highly liquid investments with an original
maturity of three months or less from the date of purchase to be cash
equivalents. As of December 31, 1998 and 1999, the Company's cash was
F-7
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
deposited in checking and money market accounts, U.S. Government Treasury
Bills, and short-term certificates of deposit. The Company classifies its
investments in debt and equity securities as available-for-sale in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting
for Certain Investments in Debt and Equity Securities." All investments in debt
and equity securities as of December 31, 1999 were classified as available-for-
sale by the Company. Securities classified as available-for-sale are reported
at fair market value, the related unrealized holding gains and losses have not
been material to date.
Software Development Costs
Software development costs incurred prior to the establishment of
technological feasibility are included in research and development expenses.
The Company defines establishment of technological feasibility as the
completion of a working model. Software development costs incurred subsequent
to the establishment of technological feasibility through the period of general
market availability of the products are capitalized, if material, after
consideration of various factors, including net realizable value. To date,
software development costs that are eligible for capitalization have not been
material and have been expensed.
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets (or over
the lease term if it is shorter for leasehold improvements), which range
primarily from three to five years.
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
December 31
----------------------
1998 1999
---------- ----------
<S> <C> <C>
Computer software and equipment.................. $1,042,666 $1,661,516
Furniture, fixtures, equipment and leasehold
improvements.................................... 337,317 451,661
Vehicles......................................... 35,803 37,993
---------- ----------
1,415,786 2,151,170
Less: Accumulated depreciation and amortization.. (118,030) (704,509)
---------- ----------
$1,297,756 $1,446,661
========== ==========
</TABLE>
Goodwill and Intangible Assets
Goodwill and certain intangible assets were recorded through the application
of "push-down" accounting in accordance with SAB 54 in connection with the
Vanenburg transaction described in Note 3. Goodwill and identifiable intangible
assets are amortized on a straight-line basis over the estimated period of
benefit, which ranges from 3 to 5 years.
The Company periodically evaluates the carrying value of its long-lived
assets. Impairment charges are recorded when indicators of impairment are
present and the undiscounted future cash flows estimated to be generated by the
underlying assets are less than the assets' carrying amounts. If such assets
are determined to be impaired, the impairment to be recognized is measured as
the amount by which the carrying amount of the assets exceeds the estimated
fair value of the assets. To date, no such impairment charges have been
required.
Revenue Recognition
The Company's revenues are derived from license fees from licensing its
products from distribution and reseller agreements, and fees for other
services, including maintenance, consulting and training.
F-8
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company recognizes license fees in accordance with the American
Institute of Certified Public Accountants Statement of Position 97-2 "Software
Revenue Recognition" ("SOP 97-2"), as amended by Statement of Position 98-9.
Under SOP 97-2 license revenues are recognized when a license agreement has
been executed or a definitive purchase order has been received and the product
has been delivered, no significant obligations with regard to implementation
remain, the fee is fixed and determinable and collectibility is probable. The
Company enters into reseller arrangements that typically provide for sublicense
fees payable to the Company based on a percent of the resellers net revenues.
These license revenues are recognized when the distributor has met all
provisions of SOP 97-2 and when such revenues are reported by the distributor
or reseller.
Maintenance revenues from ongoing customer support and product upgrades are
recognized ratably over the term of the applicable maintenance period, which is
typically 12 to 36 months. Consulting and training revenues are recognized as
services are performed or ratably over the term of the consulting agreement. If
a transaction includes both license and service elements, license fee revenue
is generally recognized in accordance with the provisions above, provided
services do not include significant customization or modification of the base
product and payment terms are not subject to customer acceptance.
Fair Value of Financial Instrument
Unless otherwise noted, the carrying amount of financial instruments
approximates fair value.
Concentration of Credit Risk and Significant Customers
Financial instruments which potentially subject the Company to a
concentration of credit risk principally consist of accounts receivable. The
Company generally does not require collateral on accounts receivable as the
majority of the Company's customers are large, well established companies.
Amounts due from significant customers as a percentage of accounts
receivable were as follows:
<TABLE>
<CAPTION>
December 31,
--------------
1998 1999
------ ------
<S> <C> <C>
Customer A................................................. 9.7% 18.7%
Customer B................................................. -- 52.0%
Customer C................................................. 9.6% --
Customer D................................................. 40.4% 2.2%
</TABLE>
Revenues from significant customers, representing approximately 10% or more
of total revenue for the respective periods, are summarized as follows:
<TABLE>
<CAPTION>
Nine months Three months
Year ended ended ended Year ended
December 31, September 30, December 31, December 31,
1997 1998 1998 1999
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Customer A......... * * * 71.0%
Customer B......... * * * 15.9%
Customer C......... * 70.9% 63.8% *
Customer D......... * * 28.8% *
Customer E......... 41.2% * * *
Customer F......... 42.9% * * *
Customer G......... 10.6% * * *
</TABLE>
- --------
(* = less than 10%)
F-9
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Comprehensive Income
Effective January 1, 1998, the Company adopted SFAS No. 130 "Reporting
Comprehensive Income" which establishes standards for reporting and displaying
comprehensive income in a full set of financial statements. Comprehensive
income includes unrealized gains and losses on equity securities that have been
previously excluded from net income and reflected, instead, in equity. For all
periods presented, the Company has no material components of comprehensive
income (loss).
Stock-Based Compensation
The Company accounts for its stock-based compensation under Accounting
Principles Board Opinion ("APB") No. 25. Companies that elect to employ APB No.
25 are required to disclose the pro forma net income (loss) that would have
resulted from using the fair value method described in SFAS No. 123,
"Accounting for Stock-Based Compensation," to value stock-based compensation.
Note 8 to the financial statements contains a summary of the disclosure
provisions under SFAS No. 123.
Basic Net Loss Per Share and Pro Forma Basic Net Loss Per Share
Historical net loss per share has been calculated under SFAS No. 128,
"Earnings Per Share." Basic net loss per share on a historical basis is
computed using the weighted average number of shares of common stock
outstanding. No diluted loss per share information has been presented in the
accompanying consolidated statements of operations since potential common
shares from conversion of the convertible preferred stock and stock options are
antidilutive. The total number of shares excluded from diluted loss per share
relating to these securities was 9,409,642, 10,496,392, 18,539,874 and
24,003,883 for the year ended December 31, 1997, the nine months ended
September 30, 1998, the three months ended December 31, 1998 and the year ended
December 31, 1999, respectively.
Pro forma basic net loss per share has been calculated assuming the
conversion of convertible preferred stock into an equivalent number of common
shares, as if the shares had converted on the dates of their issuance.
F-10
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table presents the calculation of basic and pro forma basic
net loss per share:
<TABLE>
<CAPTION>
Nine months Three months
Year ended ended ended Year ended
December 31, September 30, December 31, December 31,
1997 1998 1998 1999
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net loss................ $(3,435,009) $(5,928,011) $(11,330,933) $(37,962,681)
=========== =========== ============ ============
Basic:
Weighted average
shares of common
stock outstanding.... 7,189,806 7,375,124 -- 39,689
Less: Weighted average
shares of common
stock subject to
repurchase........... -- -- -- (16,831)
----------- ----------- ------------ ------------
Weighted average shares
used in computing basic
net loss per share..... 7,189,806 7,375,124 -- 22,858
=========== =========== ============ ============
Basic net loss per
share.................. $ (0.48) $ (0.80) $ -- $ (1,660.81)
=========== =========== ============ ============
Pro forma:
Net loss.............. $(37,962,681)
============
Shares used above 22,858
Pro forma adjustment
to reflect weighted
average effect of
assumed conversion of
convertible preferred
stock (unaudited).... 18,017,609
------------
Weighted average
shares used in
computing pro forma
basic net loss per
share (unaudited).... 18,040,467
============
Pro forma basic net loss
per share (unaudited).. $ (2.10)
============
</TABLE>
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 requiring that every derivative
instrument be recorded in the balance sheet at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement. SFAS No. 133 is effective
for the Company at the beginning of 2001. The Company believes that the
adoption of SFAS No. 133 will not have a material effect on its financial
statements.
In December 1998, the AICPA issued Statement of Position ("SOP") 98-9,
"Modification of SOP 97-2, Software Revenue Recognition, with Respect to
Certain Transactions." SOP 98-9 amends SOP 97-2 and SOP 98-4 by extending the
deferral of the application of certain provisions of SOP 97-2 amended by SOP
98-4 through fiscal years beginning on or before March 15, 1999. All other
provisions of SOP 98-9 are effective for transactions entered into in fiscal
years beginning after March 15, 1999. The Company does not anticipate that this
statement will have a material impact on its statements of operations.
3. PURCHASE OF THE COMPANY BY THE VANENBURG GROUP
On October 6, 1998 (the "Closing Date"), Vanenburg completed the acquisition
of the Company, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement"), whereby a wholly-owned subsidiary
F-11
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
of Vanenburg merged with and into the Company. As a result of this merger, the
Company became a wholly-owned subsidiary of Vanenburg as of the Closing Date.
As consideration in the merger, the holders of shares of the Company's common
stock, Series A convertible preferred stock (assuming conversion of all Series
A convertible preferred stock to common stock) and vested options to purchase
the Company's common stock received total consideration of $63,314,181 or
approximately $6.28 per share. Each holder of unvested options to purchase
common stock outstanding as of the closing date received a similar option to
purchase the common stock of the surviving company with the same rights and
vesting period as the original option. The value of these options, estimated
using the Black-Scholes option-pricing model, amounted to $4,913,979. All
outstanding common stock, Series A convertible preferred stock and vested
options to purchase the Company's common stock as of the date of the agreement
were cancelled and Vanenburg was issued 10,500,000 shares of Series C
convertible preferred stock. In addition to the above consideration, the Merger
Agreement stipulated that certain employees of the Company shall receive cash
bonuses to be paid by Vanenburg upon the first anniversary of the Closing Date
if that employee is still employed by the Company. The aggregate amount of the
bonuses paid was $2,892,207. Prior to October 6, 1998, Vanenburg had purchased
all of the then outstanding Series B convertible preferred stock of the
Company. As holders of Series B convertible preferred stock as of the closing
date, Vanenburg received an equivalent number of shares of Series B convertible
preferred stock of the surviving company. The total consideration paid by
Vanenburg for the purchase of the Series B convertible preferred stock of the
Company, taking into account equity in the results of the Company and
amortization of excess of cost over net assets acquired for the period over
which the investment was held prior to the closing date, amounted to $7,601,
990.
The acquisition of the Company by Vanenburg was accounted for using the
purchase method of accounting. Accordingly, the carrying amount of identifiable
assets and liabilities on the Company's balance sheet as of September 30, 1998
were adjusted to reflect their fair values at the date of acquisition and the
stockholder's net investment was adjusted to reflect the full purchase amount
paid by Vanenburg. The fair value of the Company's tangible assets acquired and
liabilities assumed was $8,445,728 and $3,654,845, respectively. At the date of
acquisition, $3,556,700 of the purchase price was allocated to the Company's
in-process research and development that had not reached technological
feasibility and had no probable future uses. The in-process research and
development was expensed during the three months ended December 31, 1998. An
amount of $5,094,100 was allocated to the Company's intangible assets and is
being amortized over five years. An amount of $65,280,674 of the purchase price
was pushed down to the Company and was recorded as excess of cost over net
assets acquired (goodwill) in the accompanying consolidated balance sheets and
is being amortized over three years.
The following unaudited pro forma information shows consolidated operating
results for the year ended December 31, 1998, as if the Vanenburg acquisition
had occured at the beginning of 1998.
<TABLE>
<S> <C>
Net revenues.................................................. $ 2,952,219
Net loss...................................................... $(34,344,244)
Basic and net loss per share.................................. $ (0.00)
</TABLE>
Of the total consideration payable to the selling stockholders one third was
paid in cash as of the closing date. The remaining two thirds of the
consideration was evidenced by two promissory notes issued by the Company
payable to each individual selling shareholder. One note bore interest at an
annual interest rate of 5.35% and was paid in full, both principal and
interest, six months from the closing date. The other note bore interest at an
annual interest rate of 5.42% and was paid in full, both principal and
interest, twelve months from the closing date. The Company's obligations under
these notes were payable and guaranteed by Vanenburg who pledged 3,400,000
shares of Baan Company N.V. as collateral for this guarantee. As of December
31, 1998 an amount of $40,988,191, including accrued interest, was due to
stockholders and due from Vanenburg.
F-12
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In addition, on October 6, 1998, the Company entered into an agreement for
the sale and issuance of 763,746 shares of Series A convertible preferred stock
at $4.143 per share. The agreement was with two officers of the Company and a
related party requiring the purchase of the shares that were issued on three
dates: within ten days of signing, six months and a year thereafter, in equal
installments of 254,582 shares of Series A convertible preferred stock each.
4. ACCRUED SEVERANCE PAY
Under Israeli law and labor agreements, the Company's subsidiary in Israel
is required to make severance payments to its dismissed employees and employees
leaving its employment in certain other circumstances. The calculation is based
on the employee's latest salary and the period employed. For certain employees,
including officers, the obligation for severance pay is discharged by payment
of premiums to insurance companies under approved plans and by the accruals
presented in the balance sheets. The amounts maintained with insurance
companies are not under the control of the Company and therefore are not
reflected in the financial statements.
5. LINES OF CREDIT
The Company has entered into a $750,000 line of credit agreement with a bank
that expires in November 2000. Amounts withdrawn bear interest at one percent
over the bank's prime rate. As of December 31, 1999 no amounts had been
withdrawn on this line of credit. In addition, the Company has entered into
agreements with banks for credit card facilities amounting to $100,000 and
$250,000 that expire in July 2000 and October 2000, respectively. To secure
these lines of credit the Company has deposits of $225,000 and $1,116,885 as of
December 31, 1998 and 1999, respectively, which are presented as restricted
cash in the accompanying balance sheets.
6. COMMITMENTS
The Company leases its facilities under operating lease agreements expiring
through February 2004 (excluding renewal options). Rent expense for all
operating leases totaled $148,697, $305,044, $126,163 and $757,394 for the year
ended December 31, 1997, the nine months ended September 30, 1998, the three
months ended December 31, 1998 and the year ended December 31, 1999,
respectively. Minimum future lease payments under all noncancellable operating
leases as of December 31, 1999 are as follows:
<TABLE>
<S> <C>
2000.......................................................... $ 801,884
2001.......................................................... 824,334
2002.......................................................... 796,837
2003.......................................................... 374,583
2004.......................................................... 98,878
----------
$2,896,516
==========
</TABLE>
The Company's research and development efforts have been partially financed
through both royalty bearing and non-royalty bearing grants by the Office of
the Chief Scientist of the government of Israel ("OCS"). Such amounts are
deducted from research and development costs (see Note 9). The Company is
committed to repay royalty bearing grants to the OCS at the rate of 3% to 5% of
sales of the products, up to 100% of the amount of such grants received. As of
December 31, 1999, the Company has received cumulative royalty bearing grants
amounting to $217,542.
7. CONVERTIBLE PREFERRED STOCK
The Company is authorized to issue up to 26,075,000 shares of convertible
preferred stock with a par value of $0.001 per share, of which it has
designated 736,746 shares as Series A preferred stock, and 9,150,430
F-13
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
shares as Series B preferred stock 10,500,000 as Series C preferred stock and
3,100,000 as Series D preferred stock. At a meeting of the Board of Directors
in October 1999 a three for two split of preferred stock was authorized. All
references to per share amounts and number of shares in these financial
statements have been retroactively restated to reflect this stock split. The
rights and preferences of Series A, B, C and D preferred stock are as follows:
Dividends
The holders of preferred stock are entitled to receive dividends when and as
declared by the Board of Directors at a rate of $0.0424, $0.1664, $0.5152 and
$0.40 per share of Series A, B, C, and D preferred stock, respectively.
Dividends may be declared and paid upon shares of common stock in any fiscal
year only if dividends have been declared or paid upon all the shares of
preferred stock at such annual rates. No dividends in excess of the annual
rates shall be paid to the holders of preferred stock unless equivalent
dividends are paid to the holders of common stock. The rights to dividends on
shares of preferred stock are not cumulative.
Liquidation Preference
In the event of any liquidation, dissolution or winding up of the Company,
holders of Series A, B, C and D preferred stock are entitled to receive, in
preference to holders of common stock, the amount of $0.533, $2.08. $6.44 and
$4.98 per share, respectively. Such amounts will be adjusted for any stock
split, combination, distribution or dividend. After payment of the above
amounts, the remaining assets of the Company will be distributed to the holders
of Series A, B, C and D preferred stock and the common stock pro rata based on
the number of shares of common stock held by each (assuming conversion of all
Series A, B, C and D preferred stock) until Series A, B, C and D preferred
stockholders have received an aggregate of $1.07, $4.16, $12.88 and $9.96,
respectively, including amounts paid pursuant to the preference discussed
above.
Voting Rights
The holders of the Series A, B, C and D preferred stock are entitled to the
number of votes equal to the number of shares of common stock into which such
preferred stock is convertible.
Holders of Series A preferred stock, voting separately as a class, are
entitled to elect two members of the Board of Directors. Holders of Series B
and C preferred stock, voting separately as a class, are entitled to elect two
members of the Board of Directors. Holders of Series D preferred stock, voting
separately as a class, are entitled to elect one member of the Board of
Directors.
Holders of Series A, B, C and D preferred stock, voting together as a single
class, are entitled to elect the remaining directors.
Conversion
Each share of Series A and B preferred stock is convertible into one share
of common stock, at the option of the holder thereof, at any time after the
date of issuance. The conversion rate is subject to adjustment for dilution,
including, but not limited to, stock splits, stock dividends and stock
combinations.
In addition, each share of Series A, B, C and D preferred stock will
automatically convert into common stock at the then conversion rate upon the
written consent of holders of 66.67% of all outstanding Series A, B and C
preferred stock and 50% of all outstanding Series D preferred stock. Each share
of Series A, B, C and D preferred stock will also automatically convert upon
the closing of an underwritten public offering of the Company's common stock
with a public offering price per share not less than $14.94 and an aggregate
offering price of $20 million.
F-14
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. COMMON STOCK
The Company is authorized to issue up to 33,125,000 shares of three for two
common stock with a par value of $0.001 per share. At a meeting of the Board of
Directors in October 1999 a stock split of common stock was authorized. All
references to per share amounts and number of shares in these financial
statements have been retroactively restated to reflect this stock split.
Common Stock Reserved for Future Issuance
As of December 31, 1999, the Company has reserved the following shares of
common stock for future issuance:
<TABLE>
<S> <C>
Conversion of Series A preferred stock........................ 763,746
Conversion of Series B preferred stock........................ 6,709,265
Conversion of Series C preferred stock........................ 10,500,000
Conversion of Series D preferred stock........................ 2,008,032
Stock Option Plan............................................. 6,269,682
----------
26,250,725
==========
</TABLE>
Pro forma Stockholders' Equity (Unaudited)
In March 2000, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with a proposed initial public
offering ("IPO"). If the IPO is consummated under the terms presently
anticipated, all of the currently outstanding convertible preferred stock will
be converted into 19,981,043 shares of common stock upon the closing of the
IPO. The effect of the conversions has been reflected as unaudited pro forma
stockholders' deficit in the accompanying balance sheet as of December 31,
1999.
Stock Option Plan
In October 1996, the Company established the 1996 Stock Option Plan (the
"1996 Plan") and has reserved 8,372,936 shares of common stock for issuance.
The board of directors or a committee of the board administers the 1996 Plan.
The administrator of the 1996 Plan has the authority to determine the terms and
conditions of the options granted under the 1996 Plan. Under the Plan, the
Board of Directors may grant incentive and nonqualified stock options to
employees, consultants and directors of the Company. The exercise price per
share for an incentive stock option cannot be less than the fair market value,
as determined by the Board of Directors, on the date of grant. The exercise
price per share for nonqualified stock options cannot be less than 85% of fair
market value, as determined by the Board of Directors, on the date of grant.
The term of an option may not exceed 10 years after the date of grant and the
options generally vest over a four-year period. Options may be exercised prior
to full vesting. Any unvested shares so purchased are subject to a repurchase
right in favor of the Company with the repurchase price to be equal to the
original purchase price of the stock.
F-15
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Option activity under the 1996 Plan was as follows:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Available Options Price
For Grant Outstanding Per Share
---------- ----------- ---------
<S> <C> <C> <C>
Balance at December 31, 1996.................. 936,126 999,000 $0.053
Authorized.................................. 1,437,810 -- --
Granted..................................... (510,000) 510,000 $0.053
Exercised................................... -- (300,000) $0.053
---------- ----------
Balance at December 31, 1997.................. 1,863,936 1,209,000 $0.053
Granted..................................... (1,182,750) 1,182,750 $0.207
Exercised................................... -- (15,375) $0.053
Cancelled................................... 80,625 (80,625) $0.053
---------- ----------
Balance at September 30, 1998................. 761,811 2,295,750 $0.118
Purchased and cancelled by Vanenburg........ -- (1,097,223) $0.058
Cancelled................................... 122,500 (122,500) $0.053
---------- ----------
Balance at December 31, 1998.................. 884,311 1,076,027 $0.187
Authorized.................................. 5,000,000 -- --
Granted..................................... (3,752,756) 3,752,756 $0.950
Exercised................................... -- (690,656) $0.766
Cancelled................................... 115,287 (115,287) $0.270
---------- ----------
Balance at December 31, 1999.................. 2,246,842 4,022,840 $0.799
========== ==========
</TABLE>
At the closing date of the Vanenburg transaction (see Note 3), Vanenburg
purchased all the vested options of 1,097,223 under the 1996 Stock Option Plan
at a price of $6.28 per share. The options were subsequently cancelled. The
unvested options of 1,198,527 remained outstanding.
<TABLE>
<CAPTION>
Options Outstanding and Exercisable
----------------------------------------------------------------------------
Number Weighted Exercise Price
Outstanding at Average and
December 31, Remaining Weighted Average
1999 Years Exercise Price
-------------- --------- ----------------
<S> <C> <C>
68,397 6.84 $0.053
735,287 8.50 $0.207
3,219,156 9.74 $0.950
--------- ------
4,022,840 $0.799
========= ======
</TABLE>
F-16
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Fair Value Disclosures
The Company accounts for these Plans under APB Opinion No. 25, "Accounting
for Stock Issued to Employees." Had compensation expense for the stock plans
been determined consistent with SFAS No. 123, "Accounting for Stock-Based
Compensation," the impact on the Company's net loss would be as follows:
<TABLE>
<CAPTION>
Nine months Three months
Year ended ended ended Year ended
December 31, September 30, December 31, December 31,
1997 1998 1998 1999
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net loss:
As reported........... $(3,435,009) $(5,928,011) $(11,330,933) $(37,962,681)
Pro forma............. $(3,442,004) $(5,939,971) $(11,339,343) $(38,375,768)
Basic net loss per
share:
As reported........... $ (0.48) $ (0.80) $ -- $ (1,660.81)
Pro forma............. $ (0.48) $ (0.81) $ -- $ (1,678.88)
</TABLE>
The weighted average fair value of options granted in the year ended
December 31, 1997, the nine months ended September 30, 1998, the three months
ended December 31, 1998 and the year ended December 31, 1999 was $3.81. The
fair value of each option grant is estimated on the date of the grant using the
Black-Scholes option pricing model with the following assumptions for grants in
all reported periods: (1) average expected life of the options is 5 years; (2)
dividend yield of 0%; (3) expected volatility of 0%; and (4) risk free interest
rate ranging from 5.34% to 6.07%.
Deferred Stock Compensation
Deferred stock compensation represents the aggregate difference, at the
grant date, between the respective exercise price of stock options and the fair
value of the underlying stock. Deferred stock compensation is amortized over
the vesting period of the applicable options in a manner consistent with FASB
Interpretation No. 28. The Company had recorded unearned stock-based
compensation of $19,734,338 for the year ended December 31, 1999 and amortized
deferred stock compensation of $7,213,392.
The total unearned stock-based compensation recorded at December 31, 1999 of
$12,520,946 will be amortized as follows: $6,811,836, $3,565,021, $1,673,087,
and $471,002 during the year ended 2000, 2001, 2002 and 2003, respectively. The
amount of deferred stock compensation expense to be recorded in future periods
could decrease if options for which accrued but unvested compensation has been
recorded are forfeited.
Stock Repurchase Agreements
In connection with the exercise of options pursuant to the 1996 Plan,
employees entered into restricted stock purchase agreements with the Company.
Under the terms of these agreements, the Company has a right to repurchase any
unvested shares at the original exercise price of the shares upon termination
of the employee. The repurchase right lapses ratably over the vesting term of
the original grant. As of December 31, 1999, 383,957 shares were subject to
repurchase by the Company.
F-17
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. RESEARCH AND DEVELOPMENT, NET
Research and development expenses are comprised of the following:
<TABLE>
<CAPTION>
Nine months Three months
Year ended ended ended Year ended
December 31, September 30, December 31, December 31,
1997 1998 1998 1999
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Research and development
expenses................ $1,415,479 $2,958,294 $ 910,647 $6,060,522
Less--OCS participations:
Royalty bearing
participation......... (24,815) -- -- --
Non-royalty bearing
participation......... (337,362) (313,931) (104,643) (617,042)
---------- ---------- --------- ----------
Research and development
expenses, net........... $1,053,302 $2,644,363 $ 806,004 $5,443,480
========== ========== ========= ==========
</TABLE>
10. INCOME TAXES
The Company accounts for income taxes pursuant to SFAS No. 109, "Accounting
for Income Taxes". Deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recorded or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
As a result of the Company's continued losses, there was no provision for
income taxes for each of the year ended December 31, 1997, the nine months
ended September 30, 1998, the three months ended December 31, 1998 and the year
ended December 31, 1999.
The components of the net deferred income tax asset were as follows:
<TABLE>
<CAPTION>
December 31,
------------------------
1998 1999
----------- -----------
<S> <C> <C>
Net operating losses............................. $ 4,778,398 $ 7,743,092
Other timing differences......................... 82,327 142,876
----------- -----------
4,860,725 7,885,968
Less valuation allowance......................... (4,860,725) (7,885,968)
----------- -----------
Net deferred tax asset........................... $ -- $ --
=========== ===========
</TABLE>
No deferred income taxes have been included in these financial statements in
respect of net operating losses of the Company's Israeli subsidiary as during
the period in which these tax losses are utilized the subsidiary's income would
be substantially tax exempt and accordingly there will be no tax benefit
available.
At December 31, 1999, the Company had net cumulative operating loss
carryforwards for federal and state income tax reporting purposes of
approximately $15 million and $12.5 million, respectively. The federal net
operating loss carryforwards expire on various dates through 2019. The state
net operating loss carryforwards expire on various dates through 2005. To the
extent that net operating losses, when realized, relate to stock option
deductions, the resulting benefits will be credited to stockholders' equity.
Under current tax law, net operating loss and credit carryforwards available in
any given year may be limited upon the occurrence of certain events, including
significant changes in ownership interests. The Company's subsidiaries in
Israel and the UK had carryforward tax losses of approximately $4 million and
$3 million, respectively, that have no expiration date.
F-18
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company's Israeli subsidiary's initial investment plan of $80,000 and
additional investment plans of $644,000 have been granted "Approved Enterprise"
status, under the Israeli Law for Encouragement of Capital Investments. In
accordance with this law, the income from the approved enterprises for a seven
year period, commencing with the first year in which taxable income is
generated but limited to twelve years from commencement of production or
fourteen years from the date of approval, whichever is earlier ("benefit
period"), will be subject to tax benefits. The Company has chosen to receive
its benefits in respect of its plans through the "Alternative Benefits"
program. These benefits include a tax exemption on income derived from the
"Approved Enterprise" for a period of two years and a reduced income tax rate
of 25% (instead of the regular rate of 36%) for the additional five years of
the benefit period. A company in which foreign investment exceeds 25% is
entitled to a benefit period of ten years. If the proportion of foreign
investment is between 25% and 49%, the Company will be taxed at a rate of 25%;
if between 49% and 74%, at a rate of 20%; if between 74% and 90%, at a rate of
15%; and if in excess of 90%, at a rate of 10%. The proportion of holdings of
foreign shareholders is measured annually based on the lowest level of foreign
investment during the year.
11. SEGMENT INFORMATION
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," establishes standards for disclosures about operating segments,
products and services, geographic areas and major customers. The Company is
organized and operates in one reportable segment which is the development,
manufacture and sales of database connectivity software and development tools.
The Company's revenues by geographic area is as follows:
<TABLE>
<CAPTION>
Nine months Three months
Year ended ended ended Year ended
December 31, September 30, December 31, December 31,
1997 1998 1998 1999
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Netherlands................ $ -- $ -- $ 15,000 $6,786,986
U.S........................ 53,925 2,634,990 293,778 1,431,390
Germany.................... -- -- -- 833,494
Other...................... 40,584 -- 8,451 593,234
------- ---------- -------- ----------
Total...................... $94,509 $2,634,990 $317,229 $9,645,104
======= ========== ======== ==========
</TABLE>
- --------
12. RELATED PARTY TRANSACTIONS
In December 1999, the Company sold 469,062 shares of its common stock to
officers of the Company in consideration for full recourse promissory notes in
the amount approximately $395,000. Should the officers terminate employment,
these shares are subject to a right of repurchase by the Company. The right of
repurchase lapses over a four year period and as of December 31, 1999, 323,956
shares were subject to repurchase. The notes bear interest at 8.5% and mature
at various dates through December 2004.
13. SUBSEQUENT EVENTS
Amendment to the Articles of Incorporation
In March 2000, the Company's Board of Directors increased its authorized
shares of common and undesignated preferred stock to 200,000,000 and 5,000,000
shares, respectively. In addition the Board of Directors approved a 7 for 4
stock split, to become effective subsequent to the Company's initial filing of
a
F-19
<PAGE>
TOP TIER SOFTWARE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
registration statement on Form S-1. The share and per share amounts in these
financial statements have not been affected by this split.
2000 Stock Plan
In March 2000, the Board of Directors approved the Company's 2000 Stock Plan
(the "2000 Plan"), subject to stockholder approval. The 2000 Plan will become
effective upon the Company's initial public offering. Upon the closing of the
initial public offering and the stockholder approval of the 2000 Plan, the
Company's 1996 Plan will be terminated and no further options shall be granted
under the 1996 Plan.
2000 Employee Stock Purchase Plan
In March 2000, the Board of Directors approved the adoption of the 2000
Employee Stock Purchase Plan (the "Purchase Plan"), subject to stockholder
approval. The Purchase Plan will become effective upon the Company's initial
public offering.
Stockholders' Notes
In January and February 2000, the Company sold 2,208,750 shares of its
common stock to officers of the Company in consideration for full recourse
promissory notes in the amount of approximately $5.6 million. Should the
officers employment terminate, these shares are subject to a right of
repurchase by the Company. The right of repurchase lapses over a four year
period. The notes bear interest at 8.5% and mature at various dates through
February 2005.
F-20
<PAGE>
[LOGO OF TOP TIER SOFTWARE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following is an itemized statement of the costs and expenses, other than
underwriting discounts and commissions, incurred and to be incurred by the
Registrant in connection with the issuance and distribution of the securities
registered in this offering. All amounts are estimates except the Securities
and Exchange Commission ("SEC") registration fee and the National Association
of Securities Dealers, Inc. ("NASD") filing fee.
<TABLE>
<S> <C>
SEC registration fee.............................................. $27,628
NASD filing fee................................................... 11,500
Nasdaq National Market listing fee................................ 1,000
Printing fees and expenses........................................ *
Legal fees and expenses........................................... *
Accounting fees and expenses...................................... *
Director and officer liability insurance.......................... *
Blue sky fees and expenses........................................ *
Transfer agent and registrar fees................................. *
Miscellaneous..................................................... *
-------
Total........................................................... $ *
=======
</TABLE>
- --------
*To be disclosed by amendment
Item 14. Indemnification of Directors and Officers
Section 145 of the General Corporation Law of Delaware (the "DGCL") provides
that a Delaware corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such corporation) by
reason of the fact that any such person is or was a director, officer, employee
or agent of such corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise. The indemnity may
include expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection
with such action, suit or proceeding, provided that such officer or director
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his or her
conduct was unlawful. A Delaware corporation may indemnify officers and
directors against expenses (including attorneys' fees) in connection with the
defense or settlement of an action by or in the right of the corporation under
the same conditions, except that no indemnification is permitted without
judicial approval if the officer or director is adjudged to be liable to the
corporation. Where an officer or director is successful on the merits or
otherwise in the defense of any action referred to above, the corporation must
indemnify him or her against the expenses (including attorney's fees) which
such officer or director actually and reasonably incurred. The foregoing
description is qualified in its entirety by reference to the more detailed
provisions of Section 145 of the DGCL.
Section 102 of the DGCL allows a Delaware corporation to eliminate or limit
the personal liability of a director to the corporation or to any of its
stockholders for monetary damage for a breach of fiduciary duty as a director,
except in the case where the director (i) breaches such person's duty of
loyalty to the corporation or its stockholders, (ii) fails to act in good
faith, engages in intentional misconduct or knowingly violates a law, (iii)
authorizes the payment of a dividend or approves a stock purchase or redemption
in violation of Section 174 of the DGCL or (iv) obtains an improper personal
benefit.
II-1
<PAGE>
In accordance with the DGCL, the Registrant's Certificate of Incorporation
contains a provision to limit the personal liability of its directors for
monetary damages for breach of their fiduciary duty to the fullest extent
permitted by the DGCL now or as it may hereafter be amended.
In addition, as permitted by the DGCL, the Registrant's Bylaws provide that
(i) the Registrant is required to indemnify its directors and officers and
persons serving in such capacities in other business enterprises at the
Registrant's request, to the fullest extent permitted by Delaware law; (ii) the
Registrant may indemnify its employees and agents to the fullest extent
permitted by Delaware law; (iii) the Registrant is required to advance expenses
incurred by its directors and officers in connection with defending a
proceeding (except that a director or officer must undertake to repay any
advances if it should ultimately be determined that the director or officer is
not entitled to indemnification); (iv) the rights conferred in the Bylaws are
not exclusive; and (v) the Registrant may not retroactively amend the Bylaw
provisions in a way that adversely affects any director or officer.
The Registrant maintains insurance covering its directors and officers
against certain liabilities incurred by them in their capacities as such,
including among other things, certain liabilities under the Securities Act of
1933, as amended (the "Securities Act"). The Registrant also intends to enter
into indemnification agreements with its directors and officers prior to the
closing of this offering that provide the maximum indemnity allowed to
directors and officers by the DGCL and the Registrant's Bylaws.
The Underwriting Agreement provides for indemnification by the Underwriters
of the Registrant and its directors and officers who sign this Registration
Statement against certain liabilities, including liabilities under the
Securities Act.
Reference is made to the following documents filed as exhibits to this
Registration Statement regarding relevant indemnification provisions described
above and elsewhere herein:
<TABLE>
<CAPTION>
Exhibit
Document Number
-------- -------
<S> <C>
Form of Underwriting Agreement..................................... 1.1
Certificate of Incorporation of Registrant......................... 3.1
Bylaws of Registrant............................................... 3.2
Form of Indemnification Agreement to be entered into by the
Registrant with each of its directors and officers................ 10.4
</TABLE>
Item 15. Recent Sales of Unregistered Securities
Since the Registrant's incorporation inception in August 1996, it has issued
and sold the following unregistered securities.
1. The Registrant granted options to purchase 6,444,506 shares of common
stock at exercise prices ranging from $0.05 to $0.95 per share to employees,
consultants, directors and other service providers under its 1996 Stock Option
Plan. 1,097,223 of these options were purchased and cancelled in October 1998
in connection with the acquisition by Vandenburg. Through December 31, 1999,
the Registrant issued and sold an aggregate of 1,006,031 shares of common stock
to employees, consultants, directors and other service providers at prices
ranging from $0.05 to $0.95 per share pursuant to exercises of the options
referred to above.
2. In September 1996, the Registrant issued and sold 6,375,000 shares of
common stock to its founder in exchange for all of the outstanding shares of
Quicksoft Development (1992) Ltd. All 7,380,249 shares of common stock
outstanding in October 1998 were subsequently repurchased by the Registrant in
connection with the acquisition by Vandenburg Ventures B.V.
3. In September and November 1996, the Registrant issued and sold 1,491,377
shares of Series A Preferred Stock to 17 private investors for an aggregate
purchase price of $795,401. All 1,491,377 shares of Series A Preferred Stock
were subsequently repurchased by the Registrant in October 1998 in connection
with the acquisition by Vandenburg Ventures B.V..
II-2
<PAGE>
4. In June and November 1997, the Registrant issued and sold 6,709,265
shares of Series B Preferred Stock to Vanenburg Group B.V. and Baan Company
N.V. for an aggregate purchase price of $13,999,999.
5. In October 1998, the Registrant issued and sold 10,500,000 shares of our
Series C Preferred Stock to Vanenburg Group B.V. as part of a restructuring of
the Registrant capital stock structure in connection with the acquisition by
Vanenburg Group B.V. of substantially all outstanding capital stock of the
Registrant.
6. In October 1999, the Registrant issued and sold 2,008,032 shares of our
Series D Preferred Stock to 6 private investors, all located in Germany, for an
aggregate purchase price of $9,999,999.
For the foregoing issuances of unregistered securities, the Registrant
relied upon the exemptions from registration afforded by Section 4(2) of the
Securities Act and/or Rule 701 and Regulation S thereunder.
Item 16. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2 Certificate of Correction of Certificate of Incorporation.
3.3* Form of Amended and Restated Certificate of Incorporation to be filed
after the closing of this offering.
3.4 Form of Amended and Restated Bylaws to become effective upon the
closing of this offering.
4.1 Reference is made to Exhibits 3.1 through 3.4.
4.2* Specimen Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, with respect to the
securities being issued.
10.1 1996 Stock Option Plan and form of agreement thereunder.
10.2 2000 Stock Plan and form of agreement thereunder.
10.3 2000 Employee Stock Purchase Plan and form of agreement thereunder.
10.4 Form of Indemnification Agreement entered into between the Registrant
and its directors and executive officers.
10.5 Office Lease between the Registrant and State Compensation Insurance
Fund dated December 19, 1996.
10.6 Office Lease between Top Tier Israel Ltd. and Meir Hakharoshet
Investments and Trade Ltd. dated December 5, 1997.
10.7+ OEM License Agreement between Baan Development B.V. and the Registrant
dated as of March 25, 2000.
10.8+ Reseller Agreement between Baan Development B.V. and the Registrant
dated as of March 25, 2000.
10.9+ Master Software License and Distribution Agreement for Embedded
Products between SAP and the Registrant dated October 15, 1999.
10.10 Amended and Restated Investor Rights Agreement dated October 27, 1999
among the Registrant and certain investors.
10.11 Voting Agreement dated October 27, 1999 among the Registrant and
certain investors.
10.12 Form of Restricted Stock Purchase Agreement between the Registrant and
certain executive officers.
10.13 Worldwide Intercompany Management Services and Technical Support
Agreement between the Registrant and Top Tier Israel, Ltd. dated
August 22, 1996.
10.14 International Distributor Agreement between the Registrant and TopTier
Israel, Ltd. dated August 22, 1996.
10.15 Promissory Note dated February 19, 2000 of Shai Agassi.
10.16 Promissory Note dated February 19, 2000 of Shai Agassi.
10.17 Promissory Note dated December 30, 1999 of David Blumstein.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.18 Promissory Note dated January 22, 2000 of Gil Perez.
10.19* Promissory Note dated January 22, 2000 of Gil Perez.
10.20 Promissory Note dated December 30, 1999 of Joseph Zarb.
10.21 Employment Agreement between the Registrant and Shai Agassi dated
October 6, 1998.
10.22 Employment Agreement between the Registrant and David Blumstein dated
October 6, 1998.
10.23 Employment Agreement between the Registrant and Udi Ziv dated October
6, 1998.
10.24 Offer letter dated July 28, 1997 from the Registrant to Joseph Zarb.
21.1 List of Subsidiaries.
23.1 Consent of Arthur Andersen, Independent Public Accountants.
23.2* Consent of Wilson Sonsini Goodrich & Rosati.
24.1 Power of Attorney (filed herewith on the signature page of this
Registration Statement).
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the SEC.
Item 17. Undertakings
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing, as specified in the Underwriting Agreement, certificates in
such denominations and registered in such names as required by the Underwriters
to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act,
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer, or controlling person of the
Registrant in the successful defense of any action, suit, or proceeding) is
asserted by such director, officer, or controlling person in connection with
the securities being registered hereunder, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of the prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Jose, State of
California, on the fifth day of April 2000.
TOP TIER SOFTWARE, INC.
/s/ Shai Agassi
By: _________________________________
Shai Agassi
Name: _______________________________
Chairman, President and Chief
Executive Officer
Title: ______________________________
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
each of Shai Agassi, David Blumstein and Gregory S. Ayers, or any of them, each
acting alone, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for such person and in his name, place and
stead, in any and all capacities, in connection with this Registration
Statement, including to sign and file in the name and on behalf of the
undersigned as director or officer of the Registrant (i) any and all amendments
or supplements (including any and all stickers and post-effective amendments)
to this Registration Statement, with all exhibits thereto, and other documents
in connection therewith, and (ii) any and all additional registration
statements, and any and all amendments thereto, relating to the same offering
of securities as those that are covered by this Registration Statement that are
filed pursuant to Rule 462(b) under the Securities Act of 1933, with the
Securities and Exchange Commission and any applicable securities exchange or
securities self-regulatory body, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on April 5,
2000 in the capacities indicated:
<TABLE>
<CAPTION>
Signature Title
--------- -----
<C> <S>
/s/ Shai Agassi Chairman of the Board of
___________________________________________ Directors, President and Chief
Shai Agassi Executive Officer (principal
executive officer)
/s/ Gregory S. Ayers Chief Financial Officer
___________________________________________ (principal financial officer and
Gregory S. Ayers principal accounting officer)
/s/ Jan Baan Director
___________________________________________
Jan Baan
/s/ David Blumstein Director
___________________________________________
David Blumstein
/s/ Andries Bottema Director
___________________________________________
Andries Bottema
/s/ Martin Lechner Director
___________________________________________
Martin Lechner
</TABLE>
II-5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Stockholders
of Top Tier Software, Inc.
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Top Tier Software, Inc. included in
this Registration Statement and have issued our report thereon dated March 30,
2000. Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule is the
responsibility of the Company's management and is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
as a whole.
San Jose, California /s/ Arthur Andersen LLP
March 30, 2000
S-1
<PAGE>
TOP TIER SOFTWARE, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Balance at Charged to Balance
beginning costs and at end
Description of period expenses Deductions of period
- ----------------------------------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Year ended December 31, 1997:
Allowance for doubtful accounts... $ -- $ -- $ -- $ --
Nine-month period ended September
30, 1998:
Allowance for doubtful accounts... $ -- $ -- $ -- $ --
Three-month period ended December
31, 1998:
Allowance for doubtful accounts... $ -- $24,558 $ -- $ 24,558
Year ended December 31, 1999:
Allowance for doubtful accounts... $24,558 $90,316 $ -- $114,874
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation.
3.2 Certificate of Correction of Certificate of Incorporation.
3.3* Form of Amended and Restated Certificate of Incorporation to be filed
after the closing of this offering.
3.4 Form of Amended and Restated Bylaws to become effective upon the
closing of this offering.
4.1 Reference is made to Exhibits 3.1 through 3.4.
4.2* Specimen Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, with respect to the
securities being issued.
10.1 1996 Stock Option Plan and form of agreement thereunder.
10.2 2000 Stock Plan and form of agreement thereunder.
10.3 2000 Employee Stock Purchase Plan and form of agreement thereunder.
10.4 Form of Indemnification Agreement entered into between the Registrant
and its directors and executive officers.
10.5 Office Lease between the Registrant and State Compensation Insurance
Fund dated December 19, 1996.
10.6 Office Lease between Top Tier Israel Ltd. and Meir Hakharoshet
Investments and Trade Ltd. dated December 5, 1997.
10.7+ OEM License Agreement between Baan Development B.V. and the Registrant
dated as of March 25, 2000.
10.8+ Reseller Agreement between Baan Development B.V. and the Registrant
dated as of March 25, 2000.
10.9+ Master Software License and Distribution Agreement for Embedded
Products between SAP and the Registrant dated October 15, 1999.
10.10 Amended and Restated Investor Rights Agreement dated October 27, 1999
among the Registrant and certain investors.
10.11 Voting Agreement dated October 27, 1999 among the Registrant and
certain investors.
10.12 Form of Restricted Stock Purchase Agreement between the Registrant and
certain executive officers.
10.13 Worldwide Intercompany Management Services and Technical Support
Agreement between the Registrant and Top Tier Israel, Ltd. dated
August 22, 1996.
10.14 International Distributor Agreement between the Registrant and TopTier
Israel, Ltd. dated August 22, 1996.
10.15 Promissory Note dated February 19, 2000 of Shai Agassi.
10.16 Promissory Note dated February 19, 2000 of Shai Agassi.
10.17 Promissory Note dated December 30, 1999 of David Blumstein.
10.18 Promissory Note dated January 22, 2000 of Gil Perez.
10.19* Promissory Note dated January 22, 2000 of Gil Perez.
10.20 Promissory Note dated December 30, 1999 of Joseph Zarb.
10.21 Employment Agreement between the Registrant and Shai Agassi dated
October 6, 1998.
10.22 Employment Agreement between the Registrant and David Blumstein dated
October 6, 1998.
10.23 Employment Agreement between the Registrant and Udi Ziv dated October
6, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
10.24 Offer letter dated July 28, 1997 from the Registrant to Joseph Zarb.
21.1 List of Subsidiaries.
23.1 Consent of Arthur Andersen, Independent Public Accountants.
23.2* Consent of Wilson Sonsini Goodrich & Rosati.
24.1 Power of Attorney (filed herewith on the signature page of this
Registration Statement).
27.1 Financial Data Schedule
</TABLE>
- --------
* To be filed by amendment.
+ Confidential treatment has been requested with respect to certain portions of
this exhibit. Omitted portions have been filed separately with the SEC.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
TOP TIER SOFTWARE, INC.
The undersigned Shai Agassi and Armando Castro hereby certify that:
1. They are the duly elected and acting President and Secretary,
respectively of TopTier Software, Inc. (the "Corporation").
-----------
2. The Certificate of Incorporation of the Corporation was
originally filed on August 22, 1996 under the name "Datasurf Inc." and amended
on May 27, 1997. The Amended and Restated Certificate of Incorporation of the
Corporation shall be amended and restated in its entirety to read as follows:
"ARTICLE I
The name of the corporation is Top Tier Software, Inc.
ARTICLE II
The address of the Corporation's registered office in the State of
Delaware is 9 E. Loockerman Street, Dover, County of Kent. The name of its
registered agent at such address is National Corporate Research, Ltd.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of Delaware.
ARTICLE IV
(A) Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Preferred
------------ ---------
Stock." The total number of shares which the corporation is authorized to issue
- -----
is 59,200,000 shares, of which 33,125,000 shares shall be Common Stock and
26,075,000 shares shall be Preferred Stock, each with a par value of $0.001. The
Preferred Stock shall consist of four series. The first series shall be
designated "Series A Preferred Stock" and shall consist of 688,081 shares. The
------------------------
second series shall be designated "Series B Preferred Stock" and shall consist
------------------------
of 5,971,245 shares. The third series shall be designated "Series C Preferred
------------------
Stock" and shall consist of 9,345,000 shares. The fourth series shall be
- -----
designated "Series D Preferred Stock" and shall consist of 8,100,000 shares.
------------------------
(B) Rights, Preferences and Restrictions of Preferred Stock. The
-------------------------------------------------------
rights, preferences, privileges, and restrictions granted to and imposed on the
Preferred Stock are as follows:
<PAGE>
(1) Dividends.
---------
(a) The holders of outstanding Preferred Stock shall be entitled
to receive in any fiscal year, when and as declared by the Board of Directors,
out of any assets at the time legally available therefor, dividends in cash at
the rate of $0.0424 per share of Series A Preferred Stock, $0.1664 per share of
Series B Preferred Stock, $0.5152 per share of Series C Preferred Stock and
$0.040 per share of Series D Preferred Stock, per annum, before any dividend
payable other than in Common Stock or other securities and rights convertible
into or entitling the holder thereof to receive, directly or indirectly,
additional shares of Common Stock of this Corporation, is paid on Common Stock.
Such dividend or distribution may be payable annually or otherwise as the Board
of Directors may from time to time determine. Dividends or distributions (other
than dividends payable solely in shares of Common Stock) may be declared and
paid upon shares of Common Stock in any fiscal year of the corporation only if
dividends shall have been paid on or declared and set apart upon all shares of
Preferred Stock at such annual rates; and no further dividends shall be paid to
holders of shares of Preferred Stock in excess of such annual rates in any
fiscal year unless at the same time equivalent dividends are paid to holders of
shares of Common Stock. The right to such dividends on shares of Preferred Stock
shall not be cumulative and no right shall accrue to holders of shares of
Preferred Stock by reason of the fact that dividends on said shares are not
declared in any prior year, nor shall any undeclared or unpaid dividend bear or
accrue interest.
(b) In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each such case, the holders of the Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the
Preferred Stock were the holders of the number of shares of Common Stock of the
corporation into which their respective shares of Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
(2) Voting Rights.
-------------
(a) Subject to subsection 2(b), each holder of shares of the
Preferred Stock shall be entitled to the number of votes equal to the number of
shares of Common Stock into which such shares of Preferred Stock could be
converted on the record date for the vote or consent of stockholders and shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock. The holder of each share of the Preferred Stock shall be entitled
to notice of any stockholders' meeting in accordance with the Bylaws of the
corporation and shall vote with holders of the Common Stock upon the election of
directors and upon any other matter submitted to a vote of stockholders, except
in those matters required by law to be submitted to a class vote. Fractional
votes by the holders of Preferred Stock shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number.
2
<PAGE>
(b) The holders of shares of Series A Preferred Stock, voting
separately as a class, shall elect two members of the Board of Directors of the
Corporation. The holders of shares of Series B and Series C Preferred Stock,
voting together as a single class, shall elect two members of the Board of
Directors of the Corporation. The holders of shares of Series D Preferred Stock,
voting separately as a class, shall elect one member of the Board of Directors
of the Corporation. The holders of shares of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Common
Stock, voting together as a single class, shall elect any remaining members of
the Board of Directors. If a vacancy on the Board of Directors is to be filled
by the Board of Directors, only a director or directors elected by the same
class of shareholders as those who would be entitled to vote to fill such
vacancy, if any, shall vote to fill such vacancy. A director may be removed from
the Board of Directors with or without cause by the vote or consent of the
holders of the outstanding class or series with voting power to elect him or her
in accordance with this Certificate of Incorporation.
(3) Conversion. The holders of the Series A Preferred Stock, Series
----------
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
-----------------
(a) Right to Convert. Subject to Section 3(c), each share of
----------------
Series A, Series B, Series C and Series D Preferred Stock shall be convertible,
at the option of the holder thereof, at any time after the date of issuance of
such share, at the office of the Corporation or any transfer agent for such
stock, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing (i) $0.53 in the case of the Series A Preferred
Stock, (ii) $2.08 in the case of the Series B Preferred Stock, (iii) $6.44 in
the case of the Series C Preferred Stock and (iv) $4.98 in the case of the
Series D Preferred Stock by the Conversion Price applicable to such share,
determined as hereafter provided, in effect on the date the certificate is
surrendered for conversion. The initial Conversion Price per share shall be
$0.53 for shares of Series A Preferred Stock, $2.08 for shares of Series B
Preferred Stock, $6.44 for shares of Series C Preferred Stock and $4.98 for
shares of Series D Preferred Stock. Such initial Conversion Price shall be
subject to adjustment as set forth in Section 3(d) below.
(b) Automatic Conversion. Each share of Series A, Series B,
--------------------
Series C or Series D Preferred Stock shall automatically be converted into
shares of Common Stock at the Conversion Price at the time in effect for such
share immediately upon the earlier of the Corporation's sale of its Common Stock
in a firm commitment underwritten public offering pursuant to a registration
statement under the Securities Act of 1933, as amended, at a public offering
price per share not less than $14.94 and an aggregate offering price of
$20,000,000 or (i) as to the Series A, Series B and Series C Preferred Stock,
the date specified by written consent or agreement of the holders of at least
66-2/3% of the then outstanding shares of Series A, Series B and Series C
Preferred Stock, voting together as a class and (ii) as to the Series D
Preferred Stock, the date specified by written consent or agreement of the
holders of at least 50% of the then outstanding shares of Series D Preferred
Stock, voting together as a class.
(c) Mechanics of Conversion. Before any holder of Series A,
-----------------------
Series B, Series C or Series D Preferred Stock shall be entitled to convert the
same into shares of Common Stock, he shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series A, Series B, Series C or Series D
3
<PAGE>
Preferred Stock, and shall give written notice to the Corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The Corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Series A, Series
B, Series C or Series D Preferred Stock, or to the nominee or nominees of such
holder, a certificate or certificates for the number of shares of Common Stock
to which such holder shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Series A, Series B, Series C or Series D
Preferred Stock to be converted, and the person or persons entitled to receive
the shares of Common Stock issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such shares of Common Stock as
of such date. If the conversion is in connection with an underwritten offering
of securities registered pursuant to the Securities Act of 1933, the conversion
may, at the option of any holder tendering Series A, Series B, Series C or
Series D Preferred Stock for conversion, be conditioned upon the closing with
the underwriters of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive Common Stock upon conversion of such
Preferred Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such sale of securities.
(d) Conversion Price Adjustments of Preferred Stock for Certain
-----------------------------------------------------------
Dilutive Issuances, Splits and Combinations. The Conversion Price of the Series
- -------------------------------------------
A, Series B, Series C or Series D Preferred Stock shall be subject to adjustment
from time to time as follows:
(i) (A) If the Corporation shall issue, after the date
upon which any shares of Series A, Series B, Series C or Series D Preferred
Stock were first issued (the "Purchase Date" with respect to such series), any
-------------
Additional Stock (as defined below) without consideration or for a consideration
per share less than the Conversion Price for such series in effect immediately
prior to the issuance of such Additional Stock, the Conversion Price for such
series in effect immediately prior to each such issuance shall automatically
(except as otherwise provided in this clause (i)) be adjusted to a price
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding and/or issuable
upon conversion of Preferred Stock immediately prior to such issuance (the
"Outstanding Common") plus the number of shares of Common Stock that the
------------------
aggregate consideration received by the Corporation for such issuance would
purchase at such Conversion Price, and the denominator of which shall be the
number of Outstanding Common plus the number of shares of such Additional Stock.
(B) No adjustment of the Conversion Price for the
Series A, Series B, Series C or Series D Preferred Stock shall be made in an
amount less than one cent per share, provided that any adjustments which are not
required to be made by reason of this sentence shall be carried forward and
shall be either taken into account in any subsequent adjustment made prior to
three years from the date of the event giving rise to the adjustment being
carried forward, or shall be made at the end of three years from the date of the
event giving rise to the adjustment being carried forward. Except to the limited
extent provided for in Sections 3(d)(i)(E)(3) and 3(d)(i)(E)(4), no adjustment
of such Conversion Price pursuant to this Section 3(d)(i) shall have the effect
of increasing the Conversion Price above the Conversion Price in effect
immediately prior to such adjustment.
4
<PAGE>
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the Corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined by
the Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance (whether before, on or
after the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into or
exchangeable for Common Stock or options to purchase or rights to subscribe for
such convertible or exchangeable securities, the following provisions shall
apply for all purposes of this Section 3(d)(i) and Section 3(d)(ii):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage of time,
but without taking into account potential antidilution adjustments) of such
options to purchase or rights to subscribe for Common Stock shall be deemed to
have been issued at the time such options or rights were issued and for a
consideration equal to the consideration (determined in the manner provided in
Sections 3(d)(i)(C) and 3(d)(i)(D)), if any, received by the Corporation upon
the issuance of such options or rights plus the minimum exercise price provided
in such options or rights (without taking into account potential antidilution
adjustments) for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability, including,
without limitation, the passage of time, but without taking into account
potential antidilution adjustments) for any such convertible or exchangeable
securities or upon the exercise of options to purchase or rights to subscribe
for such convertible or exchangeable securities and subsequent conversion or
exchange thereof shall be deemed to have been issued at the time such securities
were issued or such options or rights were issued and for a consideration equal
to the consideration, if any, received by the Corporation for any such
securities and related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the minimum additional
consideration, if any, to be received by the Corporation (without taking into
account potential antidilution adjustments) upon the conversion or exchange of
such securities or the exercise of any related options or rights (the
consideration in each case to be determined in the manner provided in Sections
3(d)(i)(C) and 3(d)(i)(D)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to the
Corporation upon exercise of such options or rights or upon conversion of or in
exchange for such convertible or exchangeable securities, including, but not
limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of each of the Series A, Series B, Series C or Series D
Preferred Stock, to the extent in any way affected by or computed using such
options, rights or
5
<PAGE>
securities, shall be recomputed to reflect such change, but no further
adjustment shall be made for the actual issuance of Common Stock or any payment
of such consideration upon the exercise of any such options or rights or the
conversion or exchange of such securities.
(4) Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of each of the Series A, Series B, Series C and
Series D Preferred Stock, to the extent in any way affected by or computed using
such options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable securities which remain
in effect) actually issued upon the exercise of such options or rights, upon the
conversion or exchange of such securities or upon the exercise of the options or
rights related to such securities.
(5) The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to Sections
3(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either Section 3(d)(i)(E)(3)
or (4).
(ii) "Additional Stock" shall mean any shares of Common
----------------
Stock issued (or deemed to have been issued pursuant to Section 3(d)(i)(E)) by
the Corporation after the Purchase Date) other than
(A) Common Stock issued pursuant to a transaction
described in Section 3(d)(iii) hereof,
(B) Common Stock issuable or issued to employees,
consultants or directors of the Corporation directly or pursuant to a stock
option plan or restricted stock plan approved by the Board of Directors of the
Corporation,
(C) Capital stock, or options or warrants to purchase
capital stock, issued to financial institutions or lessors in connection with
commercial credit arrangements, equipment financings or similar transactions,
(D) Shares of Common Stock or Preferred Stock issuable
upon exercise of warrants outstanding as of the date of this Amended and
Restated Certificate of Incorporation,
(E) Capital stock or warrants or options to purchase
capital stock issued in connection with bona fide acquisitions, mergers or
similar transactions, the terms of which are approved by the Board of Directors
of the Corporation,
(F) Shares of Common Stock issued or issuable upon
conversion of the Series A, Series B, Series C or Series D Preferred Stock,
(G) Shares of Series D Preferred Stock, and
6
<PAGE>
(H) Shares of Common Stock issued or issuable in a
public offering prior to or in connection with which all outstanding shares of
Series A, Series B, Series C and Series D Preferred Stock will be converted to
Common Stock.
(iii) In the event the Corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
------------------------
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of each of the Series A, Series B, Series C and Series D Preferred Stock
shall be appropriately decreased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be increased in
proportion to such increase of the aggregate of shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents
with the number of shares issuable with respect to Common Stock Equivalents
determined from time to time in the manner provided for deemed issuances in
Section 3(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for each of the Series A, Series B, Series C
and the Series D Preferred Stock shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of each share of such
series shall be decreased in proportion to such decrease in outstanding shares.
(e) Other Distributions. In the event the Corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 3(d)(iii), then, in
each such case for the purpose of this Section 3(e), the holders of Series A,
Series B, Series C and Series D Preferred Stock shall be entitled to a
proportionate share of any such distribution as though they were the holders of
the number of shares of Common Stock of the Corporation into which their shares
of Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the Corporation entitled to
receive such distribution.
(f) Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 3 or Section 4) provision shall be made so that the holders of the
Series A, Series B, Series C and Series D Preferred Stock shall thereafter be
entitled to receive upon conversion of the Series A, Series B, Series C and
Series D Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 3 with respect to the rights of the holders of the
7
<PAGE>
Series A, Series B, Series C and Series D Preferred Stock after the
recapitalization to the end that the provisions of this Section 4 (including
adjustment of the Conversion Price then in effect and the number of shares
purchasable upon conversion of the Series A, Series B, Series C and Series D
Preferred Stock) shall be applicable after that event and be as nearly
equivalent as practicable.
(g) No Impairment. The Corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 3 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of Preferred Stock against Impairment.
(h) No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A, Series B, Series C or Series
D Preferred Stock, and the number of shares of Common Stock to be issued shall
be rounded to the nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis of the total
number of shares of Series A, Series B, Series C or Series D Preferred Stock the
holder is at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A, Series B, Series C or Series D Preferred
Stock pursuant to this Section 3, the Corporation, at its expense, shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Series A, Series B, Series C or
Series D Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Series A, Series B, Series C or Series D Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting forth
(A) such adjustment and readjustment, (B) the Conversion Price for such series
of Preferred Stock at the time in effect, and (C) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of a share of such series of Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the Corporation
shall mail to each holder of Series A, Series B, Series C or Series D Preferred
Stock, at least 20 days prior to the date specified therein, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right.
8
<PAGE>
(j) Reservation of Stock Issuable Upon Conversion. The
---------------------------------------------
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A, Series B, Series C and Series D
Preferred Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of Series
A, Series B, Series C and Series D Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of Series A, Series B,
Series C and Series D Preferred Stock, in addition to such other remedies as
shall be available to the holder of such Preferred Stock, the Corporation will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purposes, including, without limitation,
engaging in best efforts to obtain the requisite stockholder approval of any
necessary amendment to this Certificate of Incorporation.
(k) Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders of shares of Series A, Series B, Series C
or Series D Preferred Stock shall be deemed given if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at his
address appearing on the books of the Corporation.
(4) Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up
of the corporation, either voluntary or involuntary, the holders of the Series
A, Series B, Series C and Series D Preferred Stock shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the corporation to the holders of the Common Stock by reason of their
ownership thereof, an amount per share equal to $0.533 per share for each share
of Series A Preferred Stock then held by them, $2.08 per share for each share of
Series B Preferred Stock then held by them, $6.44 per share for each share of
Series C Preferred Stock held by them, $4.98 per share for each share of Series
D Preferred Stock held by them, plus an amount equal to all declared but unpaid
dividends on the Preferred Stock. If, upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Preferred Stock shall
be insufficient to permit the payment to such holders of the full preferential
amount, then the entire assets and funds of the corporation legally available
for distribution shall be distributed ratably among the holders of the Preferred
Stock in proportion to the preferential amount each such holder is otherwise
entitled to receive.
(b) Upon the completion of the distribution required by Section
B(4)(a) above, and subject to the provisions of Section B(4)(c) hereof, the
remaining assets of the Corporation available for distribution to stockholders
shall be distributed among the holders of the Series A, Series B, Series C and
Series D Preferred Stock and the Common Stock pro rata based on the number of
shares of Common stock held by each (assuming conversion of all such Series A,
Series B, Series C and Series D Preferred Stock) until (i) with respect to the
holders of Series A Preferred Stock, such holders shall have received an
aggregate of $1.07 per share (including amounts paid pursuant to Section B(4)(a)
above), and (ii) with respect to the holders of Series B Preferred Stock, such
holders shall have received an aggregate of $4.16 per share (including any
amounts paid pursuant to Section B(4)(a) above); (iii) with respect to the
holders of Series C Preferred Stock, such holders shall have received an
aggregate of $12.88 per share
9
<PAGE>
(including amounts paid pursuant to Section B(4)(a) above), and (iv) with
respect to the holders of Series D Preferred Stock, such holders shall have
received an aggregate of $9.96 per share (including any amounts paid pursuant to
Section B(4)(a) above).
(c) In the event the liquidation, dissolution or winding up of
the corporation, either voluntary or involuntary occurs on a date after
September 29, 2000, then in such event, in lieu of the distribution set forth in
Section B(4)(b) hereof, the remaining assets of the Corporation available for
distribution to stockholders after completion of the distribution required by
Section B(4)(a), shall be distributed among the holders of the Series A, Series
B, Series C and Series D Preferred Stock and the Common Stock pro rata based on
the number of shares of Common stock held by each (assuming conversion of all
such Series A, Series B, Series C and Series D Preferred Stock) until (i) with
respect to the holders of Series A Preferred Stock, such holders shall have
received an aggregate of $1.60 per share (including amounts paid pursuant to
Section B(4)(a) above), and (ii) with respect to the holders of Series B
Preferred Stock, such holders shall have received an aggregate of $6.24 per
share (including any amounts paid pursuant to Section B(4)(a) above); (iii) with
respect to the holders of Series C Preferred Stock, such holders shall have
received an aggregate of $19.32 per share (including amounts paid pursuant to
Section B(4)(a) above), and (iv) with respect to the holders of Series D
Preferred Stock, such holders shall have received an aggregate of $14.94 per
share (including any amounts paid pursuant to Section B(4)(a) above).
(d) A merger of the corporation with or into any other
corporation or corporations or a sale of all or substantially all of the assets
of the corporation, shall be treated as a liquidation, dissolution or winding up
for purposes of this Section (B)(4), excluding any consolidation or merger
effected solely to change the domicile of the Corporation.
(e) In any of the events specified in (d) above, if the
consideration received by the Corporation is other than cash, its value will be
deemed its fair market value. Any securities shall be valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or the Nasdaq
National Market System, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty-day period
ending three (3) days prior to the closing;
(B) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale prices (whichever
is applicable) over the thirty-day period ending three (3) days prior to the
closing; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined by the
Corporation and the holders of at least a majority of the voting power of all
then outstanding shares of Preferred Stock.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability (other than
restrictions arising solely by virtue of a stockholder's status as an affiliate
or former affiliate) shall be to make an appropriate discount
10
<PAGE>
from the market value determined as above in (i) (A), (B) or (C) to reflect the
approximate fair market value thereof, as mutually determined by the Corporation
and the holders of at least a majority of the voting power of all then
outstanding shares of Preferred Stock.
(5) No Reissuance of Preferred Stock. No share or shares of
--------------------------------
Preferred Stock acquired by the Company by reason of purchase, conversion or
otherwise shall be reissued, and all such shares shall be canceled, retired and
eliminated from the shares that the corporation shall be authorized to issue.
The corporation may from time to time take such appropriate corporate action as
may be necessary to reduce the authorized number of shares of Preferred Stock
accordingly.
(6) Protective Provisions.
---------------------
(a) So long as any shares of Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval of the holders
of at least a majority of the then outstanding shares of Preferred Stock, voting
together as a class:
(i) alter or change the rights, preferences or privileges
of the shares of Series A, Series B, Series C or Series D Preferred Stock so as
to affect adversely the shares of such series;
(ii) increase or decrease (other than by conversion) the
total number of authorized shares of any series of Preferred Stock;
(iii) authorize or issue, or obligate itself to issue, any
other equity security, including any other security convertible into or
exercisable for any equity security having a preference over, or being on parity
with any series of Preferred Stock with respect to voting, dividend or upon
liquidation;
(iv) change the number of directors of the Corporation; or
(v) redeem, purchase or otherwise acquire (or pay or set
aside for a sinking fund for such purpose) any share or shares of Preferred
Stock or Common Stock; provided however, that this restriction shall not apply
to (i) the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons performing services for the Corporation
or any subsidiary pursuant to which the Corporation has the option to repurchase
such shares upon the occurrence of certain events, such as the termination of
employment, or (ii) the exercise by the Company of a contractual right of first
refusal to purchase any share or shares of Preferred Stock or Common Stock.
(b) So long as any shares of Series D Preferred Stock remain
outstanding, the Corporation shall not without first obtaining the approval of
the holders of at least a majority of the then outstanding shares of Series D
Preferred Stock, voting together as a series:
(i) alter or change the rights, preferences or privileges
of the shares of Series D Preferred Stock;
11
<PAGE>
(ii) authorize, create, or issue any new class or
securities of equity securities, other than an issuance pursuant to the
Corporation's conversion of any of the Corporation's outstanding debt to equity
securities;
(iii) increase or decrease the authorized number of
directors constituting the entire Board of Directors;
(iv) consolidate, sell or merge the Corporation with or to
any entity, on enter into any other transaction in which control of the Company
is transferred;
(v) amend or waive any provision of this Certificate of
Incorporation or the Corporation's Bylaws; or
(vi) redeem, repurchase or declare a dividend with regard
to any security of the Company prior to August 1, 2006, except for the Company's
repurchase of capital stock granted pursuant to a stock benefits plan.
(7) Residual Rights. All rights accruing to the outstanding shares of
---------------
this corporation not expressly provided for to the contrary herein shall be
vested in the Common Stock.
(C) Common Stock.
------------
(1) Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
(2) Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Article IV(B)(4) hereof.
(3) Voting Rights. Subject to the provisions of Section B(2) hereof
-------------
each holder of shares of Common Stock shall have the right to one vote per share
of Common Stock held by such holder, and shall be entitled to notice of any
stockholders' meeting in accordance with the Bylaws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation, but the stockholders may make
additional Bylaws and may alter or repeal any Bylaw whether adopted by them or
otherwise.
12
<PAGE>
ARTICLE VI
Elections of directors need not be by written ballot unless otherwise
provided in the Bylaws of the Corporation.
ARTICLE VII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(B) The Corporation shall indemnify to the fullest extent permitted by
law any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation, or serves or served at
any other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
(C) Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of this Corporation's Certificate of Incorporation inconsistent
with this Article VII, shall eliminate or reduce the effect of this Article VIII
in respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article VIII, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
The Corporation is to have perpetual existence.
ARTICLE IX
The number of directors which will constitute the whole Board of
Directors of the Corporation shall be five (5).
ARTICLE X
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any statutory provision) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of Directors in
the Bylaws of the Corporation."
* * *
13
<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by the Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Palo Alto, California on this 29/th/ day of September, 1999.
/s/ Shai Agassi
----------------------------------
Shai Agassi, President
/s/ Armando Castro
----------------------------------
Armando Castro, Secretary
14
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF CORRECTION TO
CERTIFICATE OF INCORPORATION OF
TOP TIER SOFTWARE, INC.
Shai Agassi hereby certifies that:
1. He is the President and Chief Executive Officer of Top Tier Software,
Inc., a Delaware corporation (the "Company").
2. On October 1, 1999, the Corporation filed an Amended and Restated
Certificate of Incorporation with the office of Secretary of State of the State
of Delaware.
3. Article Four, which currently reads:
"Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, `Common Stock' and `Preferred
------------ ---------
Stock.' The total number of shares which the corporation is authorized
-----
to issue is 59,200,000 shares, of which 33,125,000 shares shall be
Common Stock and 26,075,000 shares shall be Preferred Stock, each with
a par value of $0.001. The Preferred Stock shall consist of four
series. The first series shall be designated `Series A Preferred
------------------
Stock' and shall consist of 688,081 shares. The second series shall be
-----
designated `Series B Preferred Stock' and shall consist of 5,971,245
------------------------
shares. The third series shall be designated `Series C Preferred
------------------
Stock' and shall consist of 9,345,000 shares. The fourth series shall
-----
be designated `Series D Preferred Stock' and shall consist of
------------------------
8,100,000 shares."
is corrected to read in full as follows:
"Classes of Stock. This corporation is authorized to issue two classes
----------------
of stock to be designated, respectively, `Common Stock' and `Preferred
------------ ---------
Stock.' The total number of shares which the corporation is authorized
-----
to issue is 59,200,000 shares, of which 33,125,000 shares shall be
Common Stock and 26,075,000 shares shall be Preferred Stock, each with
a par value of $0.001. The Preferred Stock shall consist of four
series. The first series shall be designated `Series A Preferred
------------------
Stock' and shall consist of 763,744 shares. The second series shall be
-----
designated `Series B Preferred Stock' and shall consist of 9,105,430
------------------------
shares. The third series shall be designated `Series C Preferred
------------------
Stock' and shall consist of 10,500,000 shares. The fourth series shall
-----
be designated `Series D Preferred Stock' and shall consist of
------------------------
3,100,000 shares."
4. This certificate does not alter the wording of any resolution or
written consent which was in fact adopted by the Board of Directors or the
stockholders of this corporation.
<PAGE>
I further declare under penalty of perjury under the laws of the State of
Delaware that the matters set forth in this certificate are true and correct of
my knowledge.
Date: March 29, 2000
/s/ Shai Agassi
---------------------------------------
Shai Agassi
President and Chief Executive Officer
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED BYLAWS
OF
TOP TIER SOFTWARE, INC.
Adopted on
March 30, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I CORPORATE OFFICES................................................. 1
1.1 EFFECTIVE DATE................................................... 1
1.2 REGISTERED OFFICE................................................ 1
1.3 OTHER OFFICES.................................................... 1
ARTICLE II MEETINGS OF STOCKHOLDERS......................................... 1
2.1 PLACE OF MEETINGS................................................ 1
2.2 ANNUAL MEETING................................................... 1
2.3 SPECIAL MEETING.................................................. 2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS................................. 2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS.. 2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE..................... 4
2.7 QUORUM........................................................... 4
2.8 ADJOURNED MEETING; NOTICE........................................ 5
2.9 VOTING........................................................... 5
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT................ 5
2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS...... 6
2.12 PROXIES.......................................................... 6
2.13 ORGANIZATION..................................................... 6
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE............................ 7
2.15 INSPECTORS OF ELECTION........................................... 7
ARTICLE III DIRECTORS....................................................... 8
3.1 POWERS........................................................... 8
3.2 NUMBER OF DIRECTORS.............................................. 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS......................... 8
3.4 RESIGNATION AND VACANCIES........................................ 9
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE......................... 10
3.6 FIRST MEETINGS................................................... 10
3.7 REGULAR MEETINGS................................................. 11
3.8 SPECIAL MEETINGS; NOTICE......................................... 11
3.9 QUORUM........................................................... 11
3.10 WAIVER OF NOTICE................................................. 11
3.11 ADJOURNED MEETING; NOTICE........................................ 12
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................ 12
3.13 FEES AND COMPENSATION OF DIRECTORS............................... 12
3.14 APPROVAL OF LOANS TO OFFICERS.................................... 12
3.15 REMOVAL OF DIRECTORS............................................. 12
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE IV COMMITTEES.................................................... 13
4.1 COMMITTEES OF DIRECTORS....................................... 13
4.2 COMMITTEE MINUTES............................................. 13
4.3 MEETINGS AND ACTION OF COMMITTEES............................. 13
ARTICLE V OFFICERS....................................................... 14
5.1 OFFICERS...................................................... 14
5.2 ELECTION OF OFFICERS.......................................... 14
5.3 SUBORDINATE OFFICERS.......................................... 14
5.4 REMOVAL AND RESIGNATION OF OFFICERS........................... 14
5.5 VACANCIES IN OFFICES.......................................... 15
5.6 CHAIRMAN OF THE BOARD......................................... 15
5.7 PRESIDENT..................................................... 15
5.8 VICE PRESIDENT................................................ 15
5.9 SECRETARY..................................................... 15
5.10 CHIEF FINANCIAL OFFICER....................................... 16
5.11 ASSISTANT SECRETARY........................................... 16
5.12 AUTHORITY AND DUTIES OF OFFICERS.............................. 16
ARTICLE VI INDEMNITY..................................................... 16
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS..................... 17
6.2 INDEMNIFICATION OF OTHERS..................................... 17
6.3 INSURANCE..................................................... 18
6.4 SAVINGS CLAUSE................................................ 18
6.5 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES... 18
ARTICLE VII RECORDS AND REPORTS.......................................... 18
7.1 MAINTENANCE AND INSPECTION OF RECORDS......................... 18
7.2 INSPECTION BY DIRECTORS....................................... 19
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.............................. 19
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS................ 19
ARTICLE VIII GENERAL MATTERS............................................. 19
8.1 CHECKS........................................................ 19
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.............. 20
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES........................ 20
8.4 SPECIAL DESIGNATION ON CERTIFICATES........................... 20
8.5 LOST CERTIFICATES............................................. 21
8.6 TRANSFER AGENTS AND REGISTRARS................................ 21
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
8.7 CONSTRUCTION; DEFINITIONS................................. 21
8.8 DIVIDENDS................................................. 21
8.9 FISCAL YEAR............................................... 22
8.10 SEAL...................................................... 22
8.11 TRANSFER OF STOCK......................................... 22
8.12 STOCK TRANSFER AGREEMENTS................................. 22
8.13 REGISTERED STOCKHOLDERS................................... 22
ARTICLE IX AMENDMENTS................................................ 22
ARTICLE X DISSOLUTION................................................ 23
ARTICLE XI CUSTODIAN................................................. 23
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES............... 23
11.2 DUTIES OF CUSTODIAN....................................... 24
</TABLE>
-iii-
<PAGE>
AMENDED AND RESTATED
--------------------
BYLAWS
------
OF
--
TOP TIER SOFTWARE, INC.
-----------------------
ARTICLE I
---------
CORPORATE OFFICES
-----------------
1.1 EFFECTIVE DATE
--------------
These bylaws shall become effective upon the effective date of the
registration of any class of securities of the corporation pursuant to the
requirements of the Securities Exchange Act of 1934, as amended (the "Effective
Date").
1.2 REGISTERED OFFICE
-----------------
The registered office of the corporation shall be at 1209 Orange Street, in
the City of Wilmington, County of New Castle, State of Delaware. The name of the
registered agent of the corporation at such location is The Corporation Trust
Company.
1.3 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such designation,
the annual meeting of stockholders
<PAGE>
shall be held on the 10th of June in each year at 10:00 a.m. Pacific Time.
However, if such day falls on a legal holiday, then the meeting shall be held at
the same time and place on the next succeeding full business day. At the
meeting, directors shall be elected and any other proper business may be
transacted if brought before the meeting in accordance with Section 2.5 hereof.
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
Except as otherwise provided by the General Corporation Law of Delaware or
the certificate of incorporation notices of all meetings with stockholders shall
be sent or otherwise given in accordance with Section 2.6 of these bylaws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date and hour of the meeting and (i) in the case of a special
meeting, the purpose or purposes for which the meeting is called, and no
business other than that specified in the notice may be transacted or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the
stockholders. The notice of any meeting at which directors are to be elected
shall include the name of any nominee or nominees who, at the time of the
notice, the board intends to present for election.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
---------------------------------------------------------------
(a) To be properly brought before an annual meeting, nominations for
the election of directors or other business must be (i) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the board
of directors, (ii) otherwise properly brought before the meeting by or at the
direction of the board of directors or (iii) otherwise properly brought before
the meeting by a stockholder in accordance with Section 2.5(b). To be properly
brought before a special meeting, nominations for the election of directors or
other business must be specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the board of directors.
(b) For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation. To be timely, a stockholder's notice shall be
delivered to the secretary at the principal executive offices of the Corporation
not later than the close of business on the one hundred twentieth (120th) day
prior to the first anniversary of the preceding year's annual meeting; provided,
however, that in the event that the date of the meeting is advanced more than
thirty (30) days prior to or delayed by more than thirty (30) days after the
anniversary of the preceding year's annual meeting, notice by the stockholder to
be timely must be so delivered not earlier than the close of business on the one
hundred twentieth (120th) day prior to such annual meeting and not later than
the close of business on the later of the ninetieth (90th) day prior to such
annual meeting or the tenth (10th) day following the day on which public
announcement of the date of such meeting is first made. A
-2-
<PAGE>
stockholder's notice to the secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief description
of the business desired to be brought before the annual meeting and the reasons
for conducting such business at the annual meeting, (ii) the name and address,
as they appear on the corporation's books, of the stockholder proposing such
business, (iii) the class and number of shares of the corporation which are
beneficially owned by the stockholder, (iv) any material interest of the
stockholder in such business and (v) any other information that is required to
be provided by the stockholder pursuant to Regulation 14A under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), in his capacity as a
proponent to a stockholder proposal. Notwithstanding the foregoing, in order to
include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the Exchange
Act. Notwithstanding anything in these bylaws to the contrary, no business shall
be conducted at any annual meeting except in accordance with the procedures set
forth in this Section 2.5. The chairman of the annual meeting shall, if the
facts warrant, determine and declare at the meeting that business was not
properly brought before the meeting and in accordance with the provisions of
this Section 2.5, and, if he or she should so determine, he or she shall so
declare at the meeting that any such business not properly brought before the
meeting shall not be transacted.
(c) Only persons who are nominated in accordance with the procedures
set forth in this paragraph (c) shall be eligible for election as directors.
Nominations of persons for election to the board of directors of the corporation
may be made at a meeting of stockholders by or at the direction of the board of
directors or by any stockholder of the corporation entitled to vote in the
election of directors at the meeting who complies with the notice procedures set
forth in this paragraph (c). Such nominations, other than those made by or at
the direction of the board of directors, shall be made pursuant to timely notice
in writing to the secretary of the corporation in accordance with the provisions
of paragraph (b) of this Section 2.5. Such stockholder's notice shall set forth
(i) as to such stockholder giving notice, the information required to be
provided pursuant to paragraph (b) of this Section 2.5; and (ii) as to each
person, if any, whom the stockholder proposes to nominate for election or
re-election as a director: (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the corporation which are
beneficially owned by such person, (D) a description of all arrangements or
understandings between the stockholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nominations are to
be made by the stockholder and (E) any other information relating to such person
that is required to be disclosed in solicitations of proxies for elections of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including without limitation such person's written
consent to being named in the proxy statement, if any, as a nominee and to
serving as a director if elected). At the request of the board of directors, any
person nominated by a stockholder for election as a director shall furnish to
the secretary of the corporation that information required to be set forth in
the stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this paragraph (c). The chairman
of the meeting shall, if the facts warrant, determine and declare at the meeting
that a nomination was not made in accordance with
-3-
<PAGE>
the procedures prescribed by these bylaws, and if he should so determine, he
shall so declare at the meeting, and the defective nomination shall be
disregarded.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders shall be given either
personally or by first-class mail or by telegraphic, telefacsimile or other
written communication. Notices not personally delivered shall be sent charges
prepaid and shall be addressed to the stockholder at the address of that
stockholder appearing on the books of the corporation or given by the
stockholder to the corporation for the purpose of notice. Notice shall be deemed
to have been given at the time when delivered personally or deposited in the
mail or sent by telegram, telefacsimile or other means of written communication.
If any notice addressed to a stockholder at the address of that stockholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the stockholder at that address, then
all future notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available to the stockholder on written
demand of the stockholder at the principal executive office of the corporation
for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
stockholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.7 QUORUM
------
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
Where a separate vote by a class or classes is required, a majority, present in
person or by proxy, of the shares of such class or classes entitled to take
action with respect to that vote on that matter shall constitute a quorum. If,
however, such quorum is not present or represented at any meeting of the
stockholders, then either (i) the chairman of the meeting or (ii) the holders of
a majority of the shares represented at the meeting and entitled to vote
thereat, present in person or represented by proxy, shall have power to adjourn
the meeting in accordance with Section 2.8 hereof. When a quorum is present at
any meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which, by express
provision of the laws of the State of Delaware or of the certificate of
incorporation or these bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of the question.
If a quorum be initially present, the stockholders may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum, if any action taken is approved by a
majority of the stockholders initially constituting the quorum.
-4-
<PAGE>
2.8 ADJOURNED MEETING; NOTICE
-------------------------
Any stockholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by (i) the chairman of the meeting
or (ii) the vote of the holders of a majority of the shares represented at that
meeting and entitled to vote thereat, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.7 of these bylaws.
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
------
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation or
these bylaws, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder. Any stockholder entitled to vote on any
matter may vote part of the shares in favor of the proposal, refrain from voting
the remaining shares, or may vote them against the proposal; but, if the
stockholder fails to specify the number of shares which the stockholder is
voting affirmatively, it will be conclusively presumed that the stockholder's
approving vote is with respect to all shares which the stockholder is entitled
to vote.
2.10 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
-------------------------------------------------
The transactions of any meeting of stockholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of stockholders. All such waivers, consents,
and approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
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2.11 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action, and in such
event only stockholders of record on the date so fixed are entitled to notice
and to vote, notwithstanding any transfer of any shares on the books of the
corporation after the record date.
If the board of directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.12 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission, telefacsimile or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
2.13 ORGANIZATION
------------
The president, or in the absence of the president, the chairman of the
board, and in the absence of the chairman of the board, the vice presidents, in
order of their rank as fixed by the board of directors, shall call the meeting
of the stockholders to order, and shall act as chairman of the meeting. In the
absence of the president, the chairman of the board, and all of the vice
presidents, the stockholders shall appoint a chairman for such meeting. The
chairman of any meeting of
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stockholders shall determine the order of business and the procedures at the
meeting, including such matters as the regulation of the manner of voting and
the conduct of business. The date and time of the opening and closing of the
polls for each matter upon which the stockholders will vote at the meeting shall
be announced at the meeting. The secretary of the corporation shall act as
secretary of all meetings of the stockholders, but in the absence of the
secretary at any meeting of the stockholders, the chairman of the meeting may
appoint any person to act as secretary of the meeting.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
The stock ledger shall be the only evidence as to who are the stockholders
entitled to examine the stock ledger, the list of stockholders or the books of
the corporation, or to vote in person or by proxy at any meeting of stockholders
and of the number of shares held by each such stockholder.
2.15 INSPECTORS OF ELECTION
----------------------
The corporation may, and to the extent required by law, shall, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The corporation may designate one or
more persons as alternate inspectors to replace any inspector who fails to act.
If no inspector or alternate is able to act at a meeting of stockholders, the
person presiding at the meeting may, and to the extent required by law, shall,
appoint one or more inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. Every vote taken by ballots shall be
counted by an inspector or inspectors appointed by the chairman of the meeting.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power
of each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
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(c) hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine and certify the result; and
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all stockholders.
ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and to
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
-------------------
The board of directors shall consist of five (5) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation. No reduction of the authorized number of directors
shall have the effect of removing any director before that director's term of
office expires. If for any cause, the directors shall not have been elected at
an annual meeting, they may be elected as soon thereafter as convenient at a
special meeting of the stockholders called for that purpose in the manner
provided in these bylaws.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
----------------------------------------
Except as provided in Section 3.4 of these bylaws, directors shall hold
office until the expiration of the term for which elected and until a successor
has been elected and qualified; except that if any such election shall not be so
held, such election shall take place at a stockholder's meeting called and held
in accordance with the General Corporation Law of Delaware.
The directors of the corporation shall be divided into three classes as
nearly equal in size as is practicable, hereby designated Class I, Class II and
Class III. The term of office of the initial Class I directors shall expire at
the first regularly-scheduled annual meeting of the stockholders following the
Effective Date, the term of office of the initial Class II directors shall
expire at the second annual
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meeting of the stockholders following the Effective Date and the term of office
of the initial Class III directors shall expire at the third annual meeting of
the stockholders following the Effective Date. At each annual meeting of
stockholders, commencing with the first regularly-scheduled annual meeting of
stockholders following the Effective Date, each of the successors elected to
replace the directors of a Class whose term shall have expired at such annual
meeting shall be elected to hold office until the third annual meeting next
succeeding his or her election and until his or her respective successor shall
have been duly elected and qualified. If the number of directors is hereafter
changed, any newly created directorships or decrease in directorships shall be
so apportioned among the classes as to make all classes as nearly equal in
number as is practicable, provided that no decrease in the number of directors
constituting the board of directors shall shorten the term of any incumbent
director.
Directors need not be stockholders unless so required by the certificate of
incorporation or these bylaws, wherein other qualifications for directors may be
prescribed.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, only a majority of the
board of directors then in office, including those who have so resigned (until
the effective date of such resignation), shall have the power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote of
the stockholders or by court order may be filled only by the affirmative vote of
a majority of the shares represented and voting at a duly held meeting at which
a quorum is present (which shares voting affirmatively also constitute a
majority of the required quorum). Each director so elected shall hold office
until the next annual meeting of the stockholders and until a successor has been
elected and qualified.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled only by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships of
such class or classes or series may be filled only by a majority of the
directors elected by such class or classes or series thereof then in office, or
by a sole
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remaining director so elected. In the event that no directors elected by such
class or classes of stock or series remain, the majority of the other directors
then in office, although less than a quorum, or a sole remaining director may
fill such vacancy or vacancies.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
--------------
The first meeting of each newly elected board of directors shall be held at
such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
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3.7 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two (2) directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least two (2) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least four (4) hours before the time of the holding of
the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. If the meeting is to be held at the principal executive
office of the corporation the notice need not specify the place of the meeting.
Moreover, a notice of special meeting need not state the purpose of such
meeting, and, unless indicated in the notice thereof, any and all business may
be transacted at a special meeting.
3.9 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute, by the certificate of incorporation
or by these bylaws. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
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3.11 ADJOURNED MEETING; NOTICE
-------------------------
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee Such action by written consent shall have the same force
and effect as a unanimous vote of the board of directors.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
3.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this Section 3.14 shall be deemed to deny,
limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
--------------------
Unless otherwise restricted by statute, by the certificate of incorporation
or by these bylaws, any director or the entire board of directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of such director's term of office.
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ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution passed by a majority of the whole
board, designate one or more committees, with each committee to consist of one
or more of the directors of the corporation. The board may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, (iv)
recommend to the stockholders a dissolution of the corporation or a revocation
of a dissolution or (v) amend the bylaws of the corporation; and, unless the
board resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
-----------------
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings and meetings by telephone), Section 3.7 (regular meetings),
Section 3.8 (special meetings and notice), Section 3.9 (quorum), Section 3.10
(waiver of notice), Section 3.11 (adjournment and notice of adjournment), and
Section 3.12 (action without a meeting), with such changes in the context of
those bylaws as are
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necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may also be called by resolution of the board of directors and that
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee. The
board of directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, one
or more assistant vice presidents, assistant secretaries, and any such other
officers as may be appointed in accordance with the provisions of Section 5.3 of
these bylaws. Any number of offices may be held by the same person.
5.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
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5.5 VACANCIES IN OFFICES
--------------------
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENT
--------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all
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shareholders and their addresses, the number and classes of shares held by each,
the number and date of certificates evidencing such shares, and the number and
date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
5.11 ASSISTANT SECRETARY
-------------------
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 AUTHORITY AND DUTIES OF OFFICERS
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
---------
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6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the General Corporation Law of Delaware as the same now exists or may hereafter
be amended, indemnify any person against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement actually and reasonably
incurred in connection with any threatened, pending or completed action, suit,
or proceeding in which such person was or is a party or is threatened to be made
a party by reason of the fact that such person is or was a director or officer
of the corporation. For purposes of this Section 6.1, a "director" or "officer"
of the corporation shall mean any person (i) who is or was a director or officer
of the corporation, (ii) who is or was serving at the request of the corporation
as a director or officer of another corporation, partnership, joint venture,
trust or other enterprise or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
The corporation shall be required to indemnify a director or officer in
connection with an action, suit, or proceeding (or part thereof) initiated by
such director or officer only if the initiation of such action, suit, or
proceeding (or part thereof) by the director or officer was authorized by the
board of directors of the corporation.
The corporation shall pay the expenses (including attorney's fees) incurred
by a director or officer of the corporation entitled to indemnification
hereunder in defending any action, suit or proceeding referred to in this
Section 6.1 in advance of its final disposition; provided, however, that payment
of expenses incurred by a director or officer of the corporation in advance of
the final disposition of such action, suit or proceeding shall be made only upon
receipt of an undertaking by the director or officer to repay all amounts
advanced if it should ultimately be determined that the director or officer is
not entitled to be indemnified under this Section 6.1 or otherwise.
The rights conferred on any person by this Article shall not be exclusive
of any other rights which such person may have or hereafter acquire under any
statute, provision of the corporation's Certificate of Incorporation, these
bylaws, agreement, vote of the stockholders or disinterested directors or
otherwise.
Any repeal or modification of the foregoing provisions of this Article
shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware as the same now
exists or may hereafter be amended, to indemnify any person (other than
directors and officers) against expenses (including attorneys' fees), judgments,
fines, and amounts paid in settlement actually and reasonably incurred in
connection with any threatened, pending or completed action, suit, or
proceeding, in which such person was or is a party or is threatened to be made a
party by reason of the fact that such person is or was an employee or agent of
the corporation. For purposes of this Section 6.2, an "employee" or "agent" of
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the corporation (other than a director or officer) shall mean any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving at
the request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.3 INSURANCE
---------
The corporation may purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him against
such liability under the provisions of the General Corporation Law of Delaware.
6.4 SAVINGS CLAUSE
--------------
If this Article VI or any portion thereof shall be invalidated on any
ground by any court of competent jurisdiction, then the corporation shall
nevertheless indemnify each director, officer, employee or agent of the
corporation against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement with respect to any action, suit, proceeding or
investigation, whether civil, criminal or administrative, and whether internal
or external, including a grand jury proceeding and an action or suit brought by
or in the right of the corporation, to the full extent permitted by any
applicable portion of this Article that shall not have been invalidated, or by
any other applicable law.
6.5 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES
-----------------------------------------------------------
The indemnification and advancement of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise prided when authorized or
ratified, continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 MAINTENANCE AND INSPECTION OF RECORDS
-------------------------------------
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
shareholders listing their names and addresses and the number and class of
shares held by each shareholder, a copy of these bylaws as amended to date,
accounting books, and other records.
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<PAGE>
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 INSPECTION BY DIRECTORS
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
--------------------------------
The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 CHECKS
------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other
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evidences of indebtedness that are issued in the name of or payable to the
corporation, and only the persons so authorized shall sign or endorse those
instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
--------------------------------------
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the chief
financial officer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
-----------------------------------
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of
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<PAGE>
stock; provided, however, that, except as otherwise provided in Section 202 of
the General Corporation Law of Delaware, in lieu of the foregoing requirements
there may be set forth on the face or back of the certificate that the
corporation shall issue to represent such class or series of stock a statement
that the corporation will furnish without charge to each stockholder who so
requests the powers, the designations, the preferences, and the relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 TRANSFER AGENTS AND REGISTRARS
------------------------------
The board of directors may appoint one or more transfer agents or transfer
clerks, and one or more registrars, each of which shall be an incorporated bank
or trust company, either domestic or foreign, which shall be appointed at such
times and places as the requirements of the corporation may necessitate and the
board of directors may designate.
8.7 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.8 DIVIDENDS
---------
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
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<PAGE>
8.9 FISCAL YEAR
-----------
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.10 SEAL
----
This corporation may have a corporate seal which may be adopted or altered
at the pleasure of the Board of directors, and may use the same by causing it or
a facsimile thereof, to be impressed or affixed or in any manner reproduced.
8.11 TRANSFER OF STOCK
-----------------
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.12 STOCK TRANSFER AGREEMENTS
-------------------------
The corporation shall have power to enter into and perform any agreement
with any number of shareholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.13 REGISTERED STOCKHOLDERS
-----------------------
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
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<PAGE>
ARTICLE X
DISSOLUTION
-----------
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State shall have
attached to it the affidavit of the secretary or some other officer of the
corporation stating that the consent has been signed by or on behalf of all the
stockholders entitled to vote on a dissolution; in addition, there shall be
attached to the consent a certification by the secretary or some other officer
of the corporation setting forth the names and residences of the directors and
officers of the corporation.
ARTICLE XI
CUSTODIAN
---------
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
-------------------------------------------
The Court of Chancery, upon application of any stockholder, may appoint one
or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
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<PAGE>
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so divided
respecting the management of the affairs of the corporation that the required
vote for action by the board of directors cannot be obtained and the
stockholders are unable to terminate this division; or
(iii) the corporation has abandoned its business and has failed
within a reasonable time to take steps to dissolve, liquidate or distribute its
assets.
11.2 DUTIES OF CUSTODIAN
-------------------
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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<PAGE>
CERTIFICATE OF ADOPTION OF AMENDED AND RESTATED BYLAWS
OF
TOP TIER SOFTWARE, INC.
CERTIFICATE BY SECRETARY OF ADOPTION BY BOARD OF DIRECTORS' VOTE
----------------------------------------------------------------
The undersigned hereby certifies that she is the duly elected, qualified,
and acting Secretary of Top Tier Software, Inc. and that the foregoing Amended
and Restated Bylaws, comprising of 24 pages, were submitted to the Board of
Directors on March 30, 2000, and recorded in the minutes thereof and were
ratified by the unanimous vote of all of the members of the Board of Directors.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 30/th/
day of March, 2000.
/s/ Gregory S. Ayers
---------------------------------------
Gregory S. Ayers
Secretary
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<PAGE>
EXHIBIT 10.1
DATASURF INC.
1996 STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1996 Stock Option Plan
--------------------
are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder.
2. DEFINITIONS. As used herein, the following definitions shall
-----------
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan
(b) "BOARD" means the Board of Directors of the Company.
-----
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
----
(d) "COMMITTEE" means the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
------------
(f) "COMPANY" means DataSurf Inc., a Delaware corporation.
-------
(g) "CONSULTANT" means any person, including an advisor, who
----------
is engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
----------------------------------------------
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
<PAGE>
(i) "EMPLOYEE" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee to a
Director shall not be sufficient to constitute "employment" of such Director by
the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "FAIR MARKET VALUE" means, as of any date, the fair market
-----------------
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
------
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but
not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(1) "INCENTIVE STOCK OPTION" means an Option intended to
----------------------
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable written option agreement.
(m) "NONSTATUTORY STOCK OPTION" means an Option not intended
-------------------------
to qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "OPTION" means a stock option granted pursuant to the Plan.
------
(o) "OPTION STOCK" means the Common Stock subject to an Option.
------------
(p) "OPTIONEE" means an Employee or Consultant who receives an
--------
Option.
<PAGE>
(q) "PARENT" means a "PARENT CORPORATION," whether now or
------ ------------------
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.
(r) "PLAN" means this 1996 Stock Option Plan.
----
(s) "REPORTING PERSON" means an officer, director, or greater
----------------
than ten percent stockholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.
(t) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange
----------
Act, as the same may be amended from time to time, or any successor provision.
(u) "SHARE" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(v) "STOCK EXCHANGE" means any stock exchange or consolidated
--------------
stock price reporting system on which prices for the Common Stock are quoted at
any given time.
(w) "SUBSIDIARY" means a "SUBSIDIARY CORPORATION," whether now
---------- ----------------------
or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section
-------------------------
11 of the Plan, the maximum aggregate number of shares that may be optioned and
sold under the Plan is 1,290,084 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase price for
such Option or any withholding taxes due with respect to such exercise shall be
treated as not issued and shall continue to be available under the Plan. Shares
repurchased by the Company pursuant to any repurchase right which the Company
may have shall not be available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
--------------------------
(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon which
----------------------
the Company becomes subject to the Exchange Act, the Plan shall be administered
by the Board or a committee appointed by the Board.
(b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE COMPANY
-------------------------------------------------------------
BECOMES SUBJECT TO THE EXCHANGE ACT.
- -----------------------------------
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted by Rule
------------------------------
16b-3, grants under the Plan may be made by different bodies with respect to
directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
<PAGE>
(ii) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With
------------------------------------------------
respect to grants of Options to Employees who are Reporting Persons, such grants
shall be made by (A) the Board if the Board may make grants to Reporting Persons
under the Plan in compliance with Rule 16b-3, or (B) a committee designated by
the Board to make grants to Reporting Persons under the Plan, which committee
shall be constituted in such a manner as to permit grants under the Plan to
comply with Rule 16b-3. Once appointed, such committee shall continue to serve
in its designated capacity until otherwise directed by the Board. From time to
time the Board may increase the size of the committee and appoint additional
members thereof, remove members (with or without cause) and appoint new members
in substitution therefor, fill vacancies, however caused, and remove all members
of the committee and thereafter directly make grants to Reporting Persons under
the Plan, all to the extent permitted by Rule 16b-3.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND OTHER
----------------------------------------------------
EMPLOYEES. With respect to grants of Options to Employees or Consultants who are
- ---------
not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of applicable corporate and securities
laws, of the Code and of any applicable Stock Exchange (the "APPLICABLE LAWS").
---------------
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
---------------------------
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any Stock Exchange, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options
may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options or any
combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
<PAGE>
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any option granted hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted;
(ix) to construe and interpret the terms of the Plan and
Options granted under the Plan; and
(x) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options to participants who are
foreign nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determi-
----------------------------------
nations and interpretations of the Administrator shall be final and binding on
all holders of Options.
5. ELIGIBILITY.
-----------
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options may be
--------------------
granted to Employees and Consultants. Incentive Stock Options may be granted
only to Employees. An Employee or Consultant who has been granted an Option may,
if he or she is otherwise eligible, be granted additional Options.
(b) TYPE OF OPTION. Each Option shall be designated in the
--------------
written option agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) EMPLOYMENT RELATIONSHIP. The Plan shall not confer upon
-----------------------
any Optionee any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with such
Optionee's right or the Company's right to terminate his or her employment or
consulting relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier
------------
to occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company as
<PAGE>
described in Section 18 of the Plan. It shall continue in effect for a term of
ten (10) years unless sooner terminated under Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated
--------------
in the Option Agreement; provided, however, that the term shall be no more than
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
---------------------------------------
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant.
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Com-
<PAGE>
pany's earnings, and (y) have a Fair Market Value on the date of surrender equal
to the aggregate exercise price of the Shares as to which such Option shall be
exercised, (5) authorization for the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised, (6) delivery of a properly
executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect an exercise
of the Option and delivery to the Company of the sale or loan proceeds required
to pay the exercise price and any applicable income or employment taxes, (7)
delivery of an irrevocable subscription agreement for the Shares, that
irrevocably obligates the option holder to take and pay for the Shares not more
than twelve months after the date of delivery of the subscription agreement, (8)
any combination of the foregoing methods of payment, or (9) such other
consideration and method of payment for the issuance of Shares to the extent
permitted under Applicable Laws. In making its determination as to the type of
consideration to accept, the Administrator shall consider if acceptance of such
consideration may be reasonably expected to benefit the Company.
9. EXERCISE OF OPTION.
------------------
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
---------------------------------------------------
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance criteria
with respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan; provided that such Option shall become exercisable
at the rate of at least twenty percent (20%) per year over five (5) years from
the date the Option is granted. In the event that any of the Shares issued upon
exercise of an Option should be subject to a right of repurchase in the
Company's favor, such repurchase right shall lapse at the rate of at least
twenty percent (20%) per year over five (5) years from the date the Option is
granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duty authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
<PAGE>
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.
----------------------------------------------------
Subject to Section 9(c), in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant with the Company, such Optionee may, but
only within three (3) months (or such other period of time not less than thirty
(30) days as is determined by the Administrator, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the Option
and not exceeding three (3) months after the date of such termination (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), exercise his or her Option to the extent that the
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at-the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.
(c) DISABILITY OF OPTIONEE
----------------------
(i) Notwithstanding Section 9(b) above, in the event of
termination of an Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as an Employee or Consultant since the
date of grant of the Option,
<PAGE>
or within thirty (30) days following termination of Optionee's Continuous Status
as an Employee or Consultant, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of death or, if earlier, the date
of termination of Optionee's Continuous Status as an Employee or Consultant. To
the extent that Optionee was not entitled to exercise the Option at the date of
death or termination, as the case may be, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
(e) RULE 16B-3. Options granted to Reporting Persons shall
----------
comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
for Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer
-----------------
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "TAX DATE").
--------
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax
Date;
<PAGE>
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval
of the Administrator.
In the event the election to have Shares withheld is made by an Optionee and the
Tax Date is deferred under Section 83 of the Code because no election is filed
under Section 83(b) of the Code, the Optionee shall receive the full number of
Shares with respect to which the Option is exercised but such Optionee shall be
unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.
11. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN
-------------------------------------------------------------
OTHER TRANSACTIONS.
- ------------------
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
-------------------------
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) MERGER OR SALE OF ASSETS. In the event of a proposed sale of
------------------------
all or substantially all of the Company's assets or a merger of the Company with
or into another corporation where the successor corporation issues its
securities to the Company's stockholders, each outstanding Option shall be
assumed or an equivalent option or right shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
successor corporation does not agree to assume the Option or to substitute an
equivalent option, in which case such Option shall terminate upon the
consummation of the merger or sale of assets.
<PAGE>
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to
---------------------
the Company's stockholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee, only by the Optionee.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
------------------------
for all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the determination
shall be given to each Employee or Consultant to whom an Option is so granted
within a reasonable time after the date of such grant.
14. AMENDMENT AND TERMINATION OF THE PLAN.
-------------------------------------
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time
-------------------------------
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of any Stock Exchange), the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
----------------------------------
termination of the Plan shall adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute
<PAGE>
such Shares if, in the opinion of counsel for the Company, such a representation
is required by law.
16. RESERVATION OF SHARES. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. AGREEMENTS. Options shall be evidenced by written agreements in
----------
such form as the Administrator shall approve from time to time.
18. STOCKHOLDER APPROVAL. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any Stock Exchange upon which the Common Stock is listed. All Options
issued under the Plan shall become void in the event such approval is not
obtained.
19. INFORMATION AND DOCUMENTS TO OPTIONEES. The Company shall provide
--------------------------------------
financial statements at least annually to each Optionee during the period such
Optionee has one or more Options outstanding, and in the case of an individual
who acquired Shares pursuant to the Plan, during the period such individual
owns such Shares. The Company shall not be required to provide such information
if the issuance of Options under the Plan is limited to key employees whose
duties in connection with the Company assure their access to equivalent
information. In addition, at the time of issuance of any securities under the
Plan, the Company shall provide to the Optionee a copy of the Plan and a copy
of any agreement(s) pursuant to which securities under the Plan are issued.
<PAGE>
TOP TIER SOFTWARE, INC.
----------------------
1996 STOCK OPTION PLAN
----------------------
STOCK OPTION AGREEMENT
----------------------
1. GRANT OF OPTION. Top Tier Software, Inc., a Delaware corporation (the
---------------
"COMPANY"), hereby grants to _____________________________ ("OPTIONEE") an
------- --------
option (the "OPTION") to purchase a total number of shares of Common Stock (the
------
"SHARES") set forth in the Notice of Stock Option Grant, at the exercise price
------
per share set forth in the Notice of Stock Option Grant (the "EXERCISE PRICE")
--------------
subject to the terms, definitions and provisions of the Top Tier Software, Inc.
1996 Stock Option Plan (the "PLAN") adopted by the Company, which is
----
incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code.
2. EXERCISE OF OPTION. This Option shall be exercisable during its Term in
------------------
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and with the provisions of Section 9 of the Plan as follows:
(a) RIGHT TO EXERCISE.
-----------------
(i) This Option may be exercised in whole or in part at any
time after the Date of Grant, as to Shares which have not yet vested under the
vesting schedule indicated on the Notice of Stock Option Grant; PROVIDED,
--------
HOWEVER, that Optionee shall execute as a condition to such exercise of this
- -------
Option, the Early Exercise Notice and Restricted Stock Purchase Agreement
attached hereto as Exhibit A (the "EARLY EXERCISE AGREEMENT"). If Optionee
------------------------
chooses to exercise this Option solely as to Shares which have vested under the
vesting schedule indicated on the Notice of Stock Option Grant, Optionee shall
complete and execute the form of Exercise Notice and Restricted Stock Purchase
Agreement attached hereto as Exhibit B (the "EXERCISE AGREEMENT").
------------------
Notwithstanding the foregoing, the Company may in its discretion prescribe or
accept a different form of notice of exercise and/or stock purchase agreement if
such forms are otherwise consistent with this Agreement, the Plan and then-
applicable law.
(ii) This Option may not be exercised for a fraction of a share.
(iii) In the event of Optionee's death, disability or other
termination of employment, or consulting relationship the exercisability of the
Option is governed by Sections 5, 6 and 7 below, subject to the limitation
contained in Section 2(a)(iv) below.
(iv) In no event may this Option be exercised after the
Expiration Date of this Option as set forth in the Notice of Stock Option Grant.
(b) METHOD OF EXERCISE. This Option shall be exercisable by execution
------------------
and delivery of the Early Exercise Agreement or the Exercise Agreement,
whichever is applicable, or of any other written notice approved for such
purpose by the Company which shall state the election to exercise the Option,
the number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's investment intent with
respect to such shares of Common Stock as may be required by the Company
pursuant to the provisions of the Plan. Such written notice shall be signed by
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice shall be accompanied by payment of the
Exercise Price. This Option shall be deemed to be exercised upon receipt by the
Company of such written notice accompanied by the Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of
applicable law, including the requirements of any stock exchange upon which
<PAGE>
the Shares may then be listed. Assuming such compliance, for income tax purposes
the Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the Company which
(i) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by Optionee for more than 6 months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the Exercise
Price of the Shares as to which the Option is being exercised;
(d) if there is a public market for the Shares and they are
registered under the Exchange Act, delivery of a properly executed exercise
notice together with irrevocable instructions to a broker to deliver promptly to
the Company the amount of sale or loan proceeds required to pay the Exercise
Price; or
(e) subject to Section 153 of the Delaware General Corporation Law, a
promissory note in the form attached to this Agreement as EXHIBIT C, or in any
---------
other form approved by the Company.
4. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
5. TERMINATION OF RELATIONSHIP. In the event of termination of Optionee's
---------------------------
Continuous Status as an Employee or Consultant, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "TERMINATION DATE"),
----------------
exercise this Option during the Termination Period set forth in the Notice of
Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at such Termination Date, or if Optionee does not exercise this
Option within the Termination Period, the Option shall terminate.
6. DISABILITY OF OPTIONEE.
----------------------
(a) Notwithstanding the provisions of Section 5 above, in the event
of termination of Optionee's Continuous Status as an Employee or Consultant as a
result of his or her total and permanent disability (as defined in Section
22(e)(3) of the Code), Optionee may, but only within twelve months from the
Termination Date (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant and in Section 9 below), exercise this Option
to the extent he or she was entitled to exercise it at such Termination Date. To
the extent that Optionee was not entitled to exercise the Option on the
Termination Date, or if Optionee does not exercise such Option to the extent so
entitled within the time specified in this Section 6(a), the Option shall
terminate.
(b) Notwithstanding the provisions of Section 5 above, in the event
of termination of Optionee's consulting relationship or Continuous Status as an
Employee as a result of a disability not constituting a total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six months from the Termination Date (but in no event later than the
Expiration Date set forth in the Notice of Stock Option Grant and in Section 9
below), exercise the Option to the extent Optionee was entitled to exercise it
as of such Termination Date; provided, however, that if this is an Incentive
Stock Option and Optionee fails to exercise this Incentive Stock Option within
three months from the Termination Date, this Option will cease to qualify as in
Incentive Stock Option (as defined in Section 422 of the Code) and Optionee will
be treated for federal income tax
2
<PAGE>
purposes as having received ordinary income at the time of such exercise in an
amount generally measured by the difference between the Exercise Price for the
Shares and the Fair Market Value of the Shares on the date of exercise. To the
extent that Optionee was not entitled to exercise the Option at the Termination
Date, or if Optionee does not exercise such Option to the extent so entitled
within the time specified in this Section 6(b), the Option shall terminate.
7. Death of Optionee. In the event of the death of Optionee (a) during
-----------------
the Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within 30 days after Optionee's Termination Date,
the Option may be exercised at any time within six months following the date of
death (but in no event later than the Expiration Date set forth in the Notice of
Stock Option Grant and in Section 9 below), by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the Termination
Date.
8. Non-transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him or her. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. Term of Option. This Option may be exercised only within the Term
--------------
set forth in the Notice of Stock Option Grant, subject to the limitations set
forth in Section 7 of the Plan.
10. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise Of Incentive Stock Option. If this Option qualifies as
----------------------------------
an Incentive Stock Option, there will be no regular federal or California income
tax liability upon the exercise of the Option, although the excess, if any, of
the Fair Market Value of the Shares on the date of exercise over the Exercise
Price will be treated as an adjustment to the alternative minimum tax for
federal tax purposes and may subject Optionee to the alternative minimum tax in
the year of exercise.
(b) Exercise of Nonstatutory Stock Option. If this Option does not
-------------------------------------
qualify as an Incentive Stock Option, there may be a regular federal income tax
liability and a California income tax liability upon the exercise of the Option.
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(c) Disposition of Shares. In the case of a Non-statutory Stock
---------------------
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an Incentive Stock Option, if
Shares transferred pursuant to the Option are held for at least one year after
exercise and are disposed of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. In either case, the
long-term capital gain will be taxed for federal income tax and alternative
minimum tax purposes at a maximum rate of 28% if the Shares are held more than
one year but less than 18 months after exercise and at 20% if the Shares are
held more than 18 months after exercise. If Shares purchased under an Incentive
Stock Option are disposed of within one year after exercise or within two years
after the Date of Grant, any gain realized on such disposition will be treated
as compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of (i) the Fair Market
Value of the Shares on the date of exercise, or (ii) the sale price of the
Shares.
3
<PAGE>
(d) Notice of Disqualifying Disposition of Incentive Stock Option
-------------------------------------------------------------
Shares. If the Option granted to Optionee herein is an Incentive Stock Option,
- ------
and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to the Incentive Stock Option on or before the later of (i) the date
two years after the Date of Grant, or (ii) the date one year after the date of
exercise, Optionee shall immediately notify the Company in writing of such
disposition. Optionee Acknowledges and agrees that he or she may be subject to
income tax withholding by the Company on the compensation income recognized by
Optionee from the early disposition by payment in cash or out of the current
earnings paid to Optionee.
11. Withholding Tax Obligations. Optionee understands that, upon
---------------------------
exercising a Non-statutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then Fair Market Value of the
Shares over the Exercise Price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Exchange Act. If Optionee is an employee, the Company will be required to
withhold from Optionee's compensation, or collect from Optionee and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income. Additionally, Optionee may at some point be required to
satisfy tax withholding obligations with respect to the disqualifying
disposition of an Incentive Stock Option. Optionee shall satisfy his or her tax
withholding obligation arising upon the exercise of this Option by one or some
combination of the following methods: (a) by cash payment, (b) out of Optionee's
current compensation, (c) if permitted by the Administrator, in its discretion,
by surrendering to the Company Shares which (i) in the case of Shares previously
acquired from the Company, have been owned by Optionee for more than six months
on the date of surrender, and (ii) have a Fair Market Value on the date of
surrender equal to or greater than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option that number of Shares having
a Fair Market Value equal to the amount required to be withheld. For this
purpose, the Fair Market Value of the Shares to be withheld shall be determined
on the date that the amount of tax to be withheld is to be determined (the "Tax
---
Date").
- ----
If Optionee is subject to Section 16 of the Exchange Act (an "Insider"),
-------
any surrender of previously owned Shares to satisfy tax withholding obligations
arising upon exercise of this Option must comply with the applicable provisions
of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3").
----------
All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or disapproval of
the Administrator.
12. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Optionee agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the Company's initial public offering.
[Signature Page Follows]
4
<PAGE>
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
document.
TOP TIER SOFTWARE, INC.
By:___________________________________
Name:_________________________________
(print)
Title:________________________________
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: ________________________ EMPLOYEE__________________________________
5
<PAGE>
EXHIBIT A
---------
TOP TIER SOFTWARE, INC.
-----------------------
1996 STOCK OPTION PLAN
----------------------
EARLY EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------------
This Agreement ("Agreement") is made as of ________________ by and between
---------
Top Tier Software, Inc. a Delaware corporation (the "Company"), and
-------
______________________________ ("Purchaser"). To the extent any capitalized
---------
terms used in this Agreement are not defined, they shall have the meaning
ascribed to them in the 1996 Stock Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof,
------------------
Purchaser hereby elects to exercise his or her option to purchase ___________
shares of the Common Stock (the "SHARES") of the Company under and pursuant to
the Company's 1996 Stock Option Plan (the "Option Agreement") of those Shares
----------------
which have become vested as of the date hereof under the Vesting Schedule set
forth in the Notice of Stock Option Grant (the "Vested Shares") and ___________
-------------
Shares which have not yet vested under such Vesting Schedule (the "Unvested
--------
Shares"). The purchase price for the Shares shall be ___ per Share for a total
- ------
purchase price of $______________. The term "Shares" refers to the purchased
------
Shares and all securities received in replacement of the Shares or as stock
dividends or splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under
--------------------------
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, (d) subject to Section 153 of the Delaware General Corporation
Law, delivery of a promissory note in the form attached as Exhibit C to the
---------
Option Agreement (or in any form acceptable to the Company), or (e) a
combination of the foregoing. If Purchaser delivers a promissory note as partial
or full payment of the purchase price, Purchaser will also deliver a Pledge and
Security Agreement in the form attached to Exhibit D to the Option Agreement (or
---------
in any form acceptable to the Company).
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below). After any Shares have
been released from such Repurchase Option, Purchaser shall not assign, encumber
or dispose of any interest in such Shares except in compliance with the
provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination
of Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "Termination Date") have an irrevocable,
----------------
exclusive option (the "Repurchase Option") for a period of 60 days from such
-----------------
date to repurchase all or any portion of the Unvested Shares held by Purchaser
as of the Termination Date which have not yet been released from the Company's
Repurchase Option at the original purchase price per Share specified in Section
I (adjusted for any stock splits, stock dividends and the like).
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor with such notice of
a check in the amount of the purchase price for the Shares being purchased, or
(B) in
1
<PAGE>
the event Purchaser is indebted to the Company, by cancellation by the Company
of an amount of such indebtedness equal to the purchase price for the Shares
being repurchased, or (C) by a combination of (A) and (B) so that the combined
payment and cancellation of indebtedness equals such purchase price. Upon
delivery of such notice and payment of the purchase price in any of the ways
described above, the Company shall become the legal and beneficial owner of the
Shares being repurchased and all rights and interest therein or related thereto,
and the Company shall have the right to transfer to its own name the number of
Shares being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Unvested Shares shall
initially be subject to the Repurchase Option. The Unvested Shares shall be
released from the Repurchase Option in accordance with the Vesting Schedule set
forth in the Notice of Stock Option Grant until all Shares are released from the
Repurchase Option. Fractional shares shall be rounded to the nearest whole
share.
(b) Right of First Refusal. Before any Shares held by Purchaser or
----------------------
any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "RIGHT OF FIRST REFUSAL").
----------------------
(i) Notice of Proposed Transfer. The Holder of the Shares
---------------------------
shall deliver to the Company a written notice (the "Notice") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
-------------------
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "Offered Price") and upon the same
-------------
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) Exercise of Right of First Refusal. At any time within 30
----------------------------------
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
(iii) Purchase Price. The purchase price ("Purchase Price") for
-------------- --------------
the Shares purchased by the Company or its assignee(s) under this Section 3(b)
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at
-------
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) Holder's Right To Transfer. If all of the Shares proposed
--------------------------
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section 3(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 60 days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the
--------------------------------------
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or
2
<PAGE>
on Purchaser's death by will or intestacy to Purchaser's Immediate Family (as
defined below) or a trust for the benefit of Purchaser's Immediate Family shall
be exempt from the provisions of this Section 3(b). "Immediate Family" as used
----------------
herein shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister. In such case, the transferee or other recipient shall receive
and hold the Shares so transferred subject to the provisions of this Section,
and there shall be no further transfer of such Shares except in accordance with
the terms of this Section 3.
(c) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In the
-----------------------------------------------------
event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding, in the event of death, a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the Fair Market Value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be
------------------------------
transferred pursuant to Section 3(c)(i), the price per Share shall be a price
set by the Board of Directors of the Company that will reflect the current value
of the stock in terms of present earnings and future prospects of the Company.
The Company shall notify Purchaser or his or her executor of the price so
determined within 30 days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with
the valuation as determined by the Board of Directors of the Company, the
Purchaser shall be entitled to have the valuation determined by an independent
appraiser to be mutually agreed upon by the Company and the Purchaser and whose
fees shall be borne equally by the Company and the Purchaser.
(d) Assignment. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the Parent or a 100% owned Subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and Fair Market Value, if
the original purchase price is less than the Fair Market Value of the Shares
subject to the assignment.
(e) Restrictions Binding on Transferees. All transferees of Shares or any
-----------------------------------
interest therein will receive and hold such Shares or interest subject to the
provisions of this Agreement, including, insofar as applicable, the Repurchase
Option. Any sale or transfer of the Shares shall be void unless the provisions
of this Agreement are satisfied.
(f) Termination of Rights. The Right of First Refusal and the Company's
---------------------
right to repurchase the Shares in the event of an involuntary transfer pursuant
to Section 3(c) above shall terminate upon the first sale of Common Stock of the
Company to the general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Securities Act").
--------------
(g) Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of'
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the Company's initial public offering.
3
<PAGE>
4. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Attachment A executed
------------
by Purchaser and by Purchaser's spouse (if required for transfer), in blank, to
the Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable to any party hereof (or to any other party). The escrow holder may rely
upon any letter, notice or other document executed by any signature purported to
be genuine and may resign at any time. Purchaser agrees that if the Secretary of
the Company, or the Secretary's designee, resigns as escrow holder for any or no
reason, the Board of Directors of the Company shall have the power to appoint a
successor to serve as escrow holder pursuant to the terms of this Agreement.
5. Investment And Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted securities"
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, Purchaser must hold the Shares indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
4
<PAGE>
(ii) THE SHARES REPRESENTED-ID BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY
OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
(d) Removal of Legend. When all of the following events have
-----------------
occurred, the Shares then held by Purchaser will no longer be subject to the
legend referred to in Section 6(a)(ii); (i) the termination of the Right of
First Refusal; (ii) the expiration or termination of the market standoff
provisions of Section 3(g) (and of any agreement entered pursuant to Section
3(g)); and (iii) the expiration or exercise in full of the Repurchase Option.
After such time, and upon Purchaser's request, a new certificate or certificates
representing the Shares not repurchased shall be issued without the legend
referred to in Section 6(a)(ii), and delivered to Purchaser.
7. No Employment. Rights Nothing in this Agreement shall affect in any
-------------
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of the
----------------------
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
----
for a Nonstatutory Stock Option and as alternative minimum taxable income for an
Incentive Stock Option the difference between the amount paid for the Shares and
the Fair Market Value of the Shares as of the date any restrictions on the
Shares lapse. In this context, "Restriction" means the right of the Company to
-----------
buy back the Shares pursuant to the Repurchase Option set forth in Section 3(a)
of this Agreement. Purchaser understands that Purchaser may elect to be taxed at
the time the Shares are purchased, rather than when and as the Repurchase Option
expires, by filing an election under Section 83(b) (an "83(b) Election") of the
--------------
Code with the Internal Revenue Service within 30 days from the date of purchase.
Even if the Fair Market Value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income and alternative minimum tax treatment under Section 83(a) in the
future. Purchaser understands that failure to file such an election in a timely
manner may result in adverse tax consequences for Purchaser. Purchaser further
understands that an additional copy of such election form should be filed with
his or her federal income tax return for the calendar year in which the date of
this Agreement falls. Purchaser acknowledges that the foregoing is only a
summary of the effect of United States federal income taxation with respect to
purchase of the Shares hereunder, and does not purport to be complete. Purchaser
further acknowledges that the Company has directed Purchaser to seek independent
advice regarding the applicable provisions of the Code, the income tax laws of
any municipality, state or foreign country in which Purchaser may reside, and
the tax consequences of Purchaser's death.
Purchaser agrees that he or she will execute and deliver to the Company
with this executed Agreement a copy of the Acknowledgment and Statement of
Decision Regarding Section 83(b) Election (the "Acknowledgement") attached
---------------
hereto as Attachment B. Purchaser further agrees that he or she will execute and
------------
submit with the Acknowledgment a copy of the 83(b) Election attached hereto as
Attachment C if Purchaser has indicated in the Acknowledgment his or her
- ------------
decision to make such an election.
5
<PAGE>
9. Miscellaneous.
-------------
(a) Governing Law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[SIGNATURE PAGE FOLLOWS]
6
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
COMPANY:
TOP TIER SOFTWARE, INC.
By:_________________________________
Name:_______________________________
(print)
Title:______________________________
6203 San Ignacio Ave.
San Jose, CA 95119
PURCHASER:
EMPLOYEE
____________________________________
(Signature)
____________________________________
(Print Name)
Address:
I,______________________ spouse of___________________ have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be bound irrevocably by the Agreement and further agree that any
community property or similar interest that I may have in the Shares shall
hereby be similarly bound by the Agreement. I hereby appoint my spouse as my
attorney in-fact with respect to any amendment or exercise of any rights under
the Agreement.
--------------------------------------------
Spouse of EMPLOYEE
1
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Early Exercise and
Restricted Stock Purchase Agreement between the undersigned ("Purchaser")
---------
and Top Tier Software, Inc. (the "Company") dated May 21, 1998
-------
(the "Agreement"), Purchaser hereby sells, assigns and transfers unto the
---------
Company shares of the Common Stock of the Company, standing in Purchaser's name
on the books of the Company and represented by Certificate No. and hereby
irrevocably appoints to transfer said stock on the books of the Company with
full power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS THERETO.
Dated:______________________________
Signature:_______________________________
-----------------------------------------
EMPLOYEE
-----------------------------------------
Spouse of EMPLOYEE
(if applicable)
Instruction: Please do not fill in any blanks other than the signature
line. The purpose of this assignment is to enable the Company to exercise
its Repurchase Option set forth in the Agreement without requiring
additional signatures on the part of Purchaser.
1
<PAGE>
ATTACHMENT B
------------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
----------------------------------------
REGARDING SECTION 83(B) ELECTION
--------------------------------
The undersigned (which term includes the undersigned's spouse), a
purchaser of _______________shares of Common Stock of Top Tier Software, Inc. a
Delaware corporation (the "Company") by exercise of an option (the "Option")
------- ------
granted pursuant to the Company's 1996 Stock Option Plan (the "Plan"), hereby
----
states as follows:
1. The undersigned acknowledges receipt of a copy of the Plan
relating to the offering of such shares. The undersigned has carefully reviewed
the Plan and the option agreement pursuant to which the Option was granted.
2. The undersigned either [check and complete as applicable]:
(a) ___ has consulted, and has been fully advised by, the
undersigned's own tax advisor, whose business address is regarding the federal,
state and local tax consequences of purchasing shares under the Plan, and
particularly regarding the advisability of making elections pursuant to Section
83(b) of the Internal Revenue Code of 1986, as amended (the "CODE") and pursuant
----
to the corresponding provisions, if any, of applicable state law; or
(b) ___ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has
decided [check as applicable]:
(c) ___ to make an election pursuant to Section 83(b) of the Code,
and is submitting to the Company, together with the undersigned's executed Early
Exercise Notice and Restricted Stock Purchase Agreement, an executed form
entitled "Election Under Section 83(b) of the Internal Revenue Code of 1986;"
(d) ___ not to make an election pursuant to Section 83(b) of the
Code.
4. Neither the Company nor any subsidiary or representative of
the Company has made any warranty or representation to the undersigned with
respect to the tax consequences of the undersigned's purchase of shares under
the Plan or of the making or failure to make an election pursuant to Section
83(b) of the Code or the corresponding provisions, if any, of applicable state
law.
Date:______________________ _______________________________
EMPLOYEE
Date:______________________ _______________________________
EMPLOYEE
1
<PAGE>
ATTACHMENT C
------------
ELECTION UNDER SECTION 83(B)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: EMPLOYEE NAME OF SPOUSE:
--------
ADDRESS:
IDENTIFICATION NO. OF TAXPAYER: _______________________________
IDENTIFICATION NO. OF SPOUSE: _______________________________
TAXABLE YEAR: _______________________________
2. The property with respect to which the election is made is described as
follows:
____________ shares of the Common Stock $0.00 1 par value, of Top Tier
Software, Inc. a Delaware corporation (the "Company").
-------
3. The date on which the property was transferred is:____________________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The Fair Market Value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $_____________
6. The amount (if any) paid for such property: $
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
except with the consent of the Commissioner.
Date:______________________ _______________________________
EMPLOYEE
Date:______________________ _______________________________
Spouse of EMPLOYEE
1
<PAGE>
EXHIBIT B
---------
TOP TIER SOFTWARE, INC.
-----------------------
1996 STOCK OPTION PLAN
----------------------
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
This Agreement ("Agreement") is made as of _____________________, by
---------
and between Top Tier Software, Inc. a Delaware corporation (the "Company"), and
-------
EMPLOYEE ("Purchaser"). To the extent any capitalized terms used in this
---------
Agreement are not defined, they shall have the meaning ascribed to them in the
1996 Stock Option Plan.
1. Exercise of Option. Subject to the terms and conditions hereof,
------------------
Purchaser hereby elects to exercise his or her option to purchase ____________
shares of the Common Stock (the "Shares") of the Company under and pursuant to
------
the Company's 1996 Stock Option Plan (the "Plan") and the Stock Option Agreement
dated May 21, 1998, (the "Option Agreement"). The purchase price for the Shares
----------------
shall be $0.31 per Share for a total purchase price of $__________. The term
"Shares" refers to the purchased Shares and all securities received in
------
replacement of the Shares or as stock dividends or splits, all securities
received in replacement of the Shares in a re-capitalization, merger,
reorganization, exchange or the like, and all new, substituted or additional
securities or other properties to which Purchaser is entitled by reason of
Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares
--------------------------
under this Agreement shall occur at the principal office of the Company
simultaneously with the execution and delivery of this Agreement in accordance
with the provisions of Section 2(b) of the Option Agreement. On such date, the
Company will deliver to Purchaser a certificate representing the Shares to be
purchased by Purchaser (which shall be issued in Purchaser's name) against
payment of the purchase price therefor by Purchaser by (a) check made payable to
the Company, (b) cancellation of indebtedness of the Company to Purchaser, (c)
delivery of shares of the Common Stock of the Company in accordance with Section
3 of the Option Agreement, (d) subject to Section 153 of the Delaware General
Corporation Law, delivery of a promissory note in the form attached as Exhibit C
---------
to the Option Agreement (or in any form acceptable to the Company), or (e) a
combination of the foregoing. If Purchaser delivers a promissory note as partial
or full payment of the purchase price, Purchaser will also deliver a Pledge and
Security Agreement in the form attached as Exhibit D to the Option Agreement (or
---------
in any form acceptable to the Company).
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
(a) Right of First Refusal. Before any Shares held by Purchaser
----------------------
or any transferee of Purchaser (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the "Right of First Refusal").
(i) Notice of Proposed Transfer. The Holder of the Shares
---------------------------
shall deliver to the Company a written notice (the "NOTICE") stating: (i) the
------
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("PROPOSED TRANSFEREE");
-------------------
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the terms and conditions of each proposed sale or transfer. The Holder
shall offer the Shares at the same price (the "OFFERED PRICE") and upon the same
-------------
terms (or terms as similar as reasonably possible) to the Company or its
assignee(s).
(ii) Exercise of Right of First Refusal. At any time within 30
----------------------------------
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
1
<PAGE>
(iii) Purchase Price. The purchase price ("Purchase Price") for the
--------------- ---------------
Shares purchased by the Company or its assignee(s) under this Section 3(a) shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(v) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(a), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 60 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section 3(a) notwithstanding, the transfer of any or all of
the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family (as defined below) or a trust for the
benefit of Purchaser's Immediate Family shall be exempt from the provisions of
this Section 3(a). "Immediate Family" as used herein shall mean spouse, lineal
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred
subject to the provisions of this Section, and there shall be no further
transfer of such Shares except in accordance with the terms of this Section 3.
(b) Involuntary Transfer.
--------------------
(i) Company's Right to Purchase upon Involuntary Transfer. In the
-----------------------------------------------------
event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding, in the event of death, a transfer to Immediate Family as set forth in
Section 3(a)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the Fair Market Value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) Price for Involuntary Transfer. With respect to any stock to be
------------------------------
transferred pursuant to Section 3(b)(i), the price per Share shall be a price
set by the Board of Directors of the Company that will reflect the current value
of the stock in terms of present earnings and future prospects of the Company.
The Company shall notify Purchaser or his or her executor of the price so
determined within 30 days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with
the valuation as determined by the Board of Directors of the Company, the
Purchaser shall be entitled to have the valuation determined by an independent
appraiser to be mutually agreed upon by the Company and the Purchaser and whose
fees shall be borne equally by the Company and the Purchaser.
(c) Assignment. The right of the Company to purchase any part of the Shares
----------
may be assigned in whole or in part to any shareholder or shareholders of the
Company or other persons or organizations; provided, however, that an assignee,
other than a corporation that is the Parent or a 100% owned Subsidiary of the
2
<PAGE>
Company, must pay the Company, upon assignment of such right, cash equal to the
difference between the original purchase price and Fair Market Value, if the
original purchase price is less than the Fair Market Value of the Shares subject
to the assignment.
(d) Restrictions Binding on Transferees. All transferees of Shares
-----------------------------------
or any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement. Any sale or transfer of the Shares shall be
void unless the provisions of this Agreement are satisfied.
(e) Termination of Rights. The Right of First Refusal and the
---------------------
Company's right to repurchase the Shares in the event of an involuntary transfer
pursuant to Section 3(b) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "SECURITIES ACT").
--------------
(f) Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the Company's initial public offering.
4. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted securities"
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, Purchaser must hold the Shares indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
5. Restrictive Legends and Stop-transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
3
<PAGE>
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A
FORM SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER
THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
(b) Stop-transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
(d) Removal of Legend. When all of the following events have
-----------------
occurred, the Shares then held by Purchaser will no longer be subject to the
legend referred to in Section 5(a)(ii): (i) the termination of the Right of
First Refusal; and (ii) the expiration or termination of the market standoff
provisions of Section 3(f) (and of any agreement entered pursuant to Section
3(f)). After such time, and upon Purchaser's request, a new certificate or
certificates representing the Shares not repurchased shall be issued without the
legend referred to in Section 5(a)(ii), and delivered to Purchaser.
6. No Employment Right. Nothing in this Agreement shall affect in any
-------------------
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
7. Miscellaneous.
-------------
(a) Governing-law. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be
4
<PAGE>
deemed to be the product of all of the parties hereto, and no ambiguity shall be
construed in favor of or against any one of the parties hereto.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
(f) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) California Corporate Securities Law. The SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[SIGNATURE PAGE FOLLOWS]
5
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
TOP TIER SOFTWARE, INC.
By:_______________________________________
Name:_____________________________________
(print)
Title:____________________________________
6203 San Ignacio Ave.
San Jose, CA 95119
PURCHASER:
EMPLOYEE
------------------------------------------
(Signature)
------------------------------------------
(Print Name)
Address:
I, ________________________, spouse of EMPLOYEE, have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting my
spouse the right to purchase the Shares as set forth in the Agreement, I hereby
agree to be bound irrevocably by the Agreement and further agree that any
community property or similar interest that I may have in the Shares shall
hereby be similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.
------------------------------------------
Spouse of EMPLOYEE
1
<PAGE>
EXHIBIT C
---------
PROMISSORY NOTE
---------------
$________________________ San Jose, California
_____________________________________
______________, 19__
For value received, the undersigned promises to pay Top Tier Software,
Inc. a Delaware corporation (the "Company"), at its principal office the
-------
principal sum of $_____________ with interest from the date hereof at a rate of
% per annum, compounded semiannually, on the unpaid balance of such principal
sum. Such principal and interest shall be due and payable five (5) years after
the date hereof.
If the undersigned's employment or consulting relationship with the
Company is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States
of America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT
INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such
sum as the Court may deem reasonable shall be added hereto as attorneys' fees.
The makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain
shares of Common Stock of the Company and is subject to the terms of a Pledge
and Security Agreement between the undersigned and the Company of even date
herewith.
EMPLOYEE ___________________________________
2
<PAGE>
EXHIBIT D
---------
PLEDGE AND SECURITY AGREEMENT
-----------------------------
This Pledge and Security Agreement (the "Agreement") is entered into
this _____ day of ________by and between Top Tier Software, Inc. a Delaware
corporation (the "Company") and EMPLOYEE ("Purchaser").
------- ---------
RECITALS
--------
In connection with Purchaser's exercise of an option to purchase
certain shares of the Company's Common Stock (the "Shares") pursuant to an
------
Option Agreement dated May 21, 1998 between Purchaser and the Company, Purchaser
is delivering a promissory note of even date herewith (the "Note") in full or
----
partial payment of the exercise price for the Shares. The company requires that
the Note be secured by a pledge of the Shares or the terms set forth below.
AGREEMENT
---------
In consideration of the Company's acceptance of the Note as full or
partial payment of the exercise price of the Shares, and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:
1. The Note shall become payable in full upon the voluntary or
involuntary termination or cessation of employment of Purchaser with the
Company, for any reason, with or without cause (including death or disability).
2. Purchaser shall deliver to the Secretary of the Company, or his
or her designee (hereinafter referred to as the "Pledge Holder"), all
certificates representing the Shares, together with an Assignment Separate from
Certificate in the form attached to this Agreement as Attachment A executed by
Purchaser and by Purchaser's spouse (if required for transfer), in blank, for
use in transferring all or a portion of the Shares to the Company if, as and
when required pursuant to this Agreement. In addition, if Purchaser is married,
Purchaser's spouse shall execute the signature page attached to this Agreement.
3. As security for the payment of the Note and any renewal,
extension or modification of the Note, Purchaser hereby grants to the Company a
security interest in and pledges with and delivers to the Company Purchaser's
Shares (sometimes referred to herein as the "Collateral").
4. In the event that Purchaser prepays all or a portion of the Note,
in accordance with the provisions thereof, Purchaser intends, unless written
notice to the contrary is delivered to the Pledge Holder, that the Shares
represented by the portion of the Note so repaid, including annual interest
thereon, shall continue to be so held by the Pledge Holder, to serve as
independent collateral for the outstanding portion of the Note for the purpose
of commencing the holding period set forth in Rule 144(d) promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
5. In the event of any foreclosure of the security interest created
by this Agreement, the Company may sell the Shares at a private sale or may
repurchase the Shares itself. The parties agree that, prior to the establishment
of a public market for the Shares of the Company, the securities laws affecting
sale of the Shares make a public sale of the Shares commercially unreasonable.
The parties further agree that the repurchasing of such Shares by the Company,
or by any person to whom the Company may have assigned its rights under this
Agreement, is commercially reasonable if made at a price determined by the Board
of Directors in its discretion, fairly exercised, representing what would be the
Fair Market Value of the Shares reduced by any limitation on transferability,
whether due to the size of the block of shares or the restrictions of applicable
securities laws .
6. In the event of default in payment when due of any indebtedness
under the Note, the Company may elect then, or at any time thereafter, to
exercise all rights available to a secured party under the California Commercial
Code including the right to sell the Collateral at a private or public sale or
repurchase the Shares as provided above. The proceeds of any sale shall be
applied in the following order:
1
<PAGE>
(a) To the extent necessary, proceeds shall be used to pay all
reasonable expenses of the Company in enforcing this Agreement and the Note,
including, without limitation, reasonable attorney's fees and legal expenses
incurred by the Company.
(b) To the extent necessary, proceeds shall be used to satisfy any
remaining indebtedness under Purchaser's Note.
(c) Any remaining proceeds shall be delivered to Purchaser.
7. Upon full payment by Purchaser of all amounts due under the Note,
Pledge Holder shall deliver to Purchaser all Shares in Pledge Holder's
possession belonging to Purchaser, and Pledge Holder shall thereupon be
discharged of all further obligations under this Agreement; PROVIDED, HOWEVER,
-------- -------
that Pledge Holder shall nevertheless retain the Shares as escrow agent if at
the time of full payment by Purchaser said Shares are still subject to a
Repurchase Option in favor of the Company.
2
<PAGE>
The parties have executed this Pledge and Security Agreement as of the
date first set forth above.
COMPANY:
TOP TIER SOFTWARE, INC.
By:_____________________________________
Name:___________________________________
(print)
Title:__________________________________
6203 San Ignacio Ave.
San Jose, CA 95119
PURCHASER:
EMPLOYEE
----------------------------------------
(Signature)
----------------------------------------
(Print Name)
Address:
1
<PAGE>
ATTACHMENT A
------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Pledge and Security
Agreement between the undersigned ("Purchaser") and Top Tier Software, Inc.
("Company") dated ________________ (the "Agreement"), Purchaser hereby sells,
assigns and transfers unto the Company ________________________________________
shares of the Common Stock of the Company, standing in Purchaser's name on the
books of the Company and represented by Certificate No. I and hereby irrevocably
appoints to transfer said stock on the books of the Company with full power of
substitution in the premises.
THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT.
Dated:
Signature:
-----------------------------------------
EMPLOYEE
-----------------------------------------
Spouse of EMPLOYEE
(if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to perfect the security interest of the
Company pursuant to the Agreement.
1
<PAGE>
EXHIBIT 10.2
TOP TIER SOFTWARE, INC.
2000 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this 2000 Stock Plan are:
--------------------
. to attract and retain the best available personnel for positions
of substantial responsibility,
. to provide additional incentive to Employees, Directors and
Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.
2. DEFINITIONS. As used herein, the following definitions shall apply:
-----------
(a) "ADMINISTRATOR" means the Board or any of its Committees as shall
-------------
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options are granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
-----
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
----
(e) "COMMITTEE" means a committee of Directors appointed by the Board
---------
in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the common stock of the Company.
------------
(g) "COMPANY" means Top Tier Software, Inc., a Delaware corporation.
-------
(h) "CONSULTANT" means any natural person, including an advisor,
----------
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "DIRECTOR" means a member of the Board.
--------
(j) "DISABILITY" means total and permanent disability as defined in
----------
Section 22(e)(3) of the Code.
<PAGE>
(k) "EMPLOYEE" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three (3) months following the 91st day of
such leave any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system on
the day of determination, as reported in THE WALL STREET JOURNAL or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the day of determination, as reported in THE WALL
STREET JOURNAL or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "INSIDE DIRECTOR" means a Director who is an Employee.
----------------
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(q) "NOTICE OF GRANT" means a written or electronic notice evidencing
---------------
certain terms and conditions of an individual Option grant. The Notice of Grant
is part of the Option Agreement.
-2-
<PAGE>
(r) "OFFICER" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "OPTION" means a stock option granted pursuant to the Plan.
------
(t) "OPTION AGREEMENT" means an agreement between the Company and an
----------------
Optionee evidencing the terms and conditions of an individual Option grant. The
Option Agreement is subject to the terms and conditions of the Plan.
(u) "OPTIONED STOCK" means the Common Stock subject to an Option.
--------------
(v) "OPTIONEE" means the holder of an outstanding Option granted
--------
under the Plan.
(w) "OUTSIDE DIRECTOR" means a Director who is not an Employee and
----------------
who is not the beneficial owner (within the meaning of Rule 13d-3 of the
Exchange Act) of five percent (5%) or more of the total combined voting
power of the Company's outstanding securities.
(x) "PARENT" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(y) "PLAN" means this 2000 Stock Plan.
----
(z) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(aa) "SECTION 16(B) " means Section 16(b) of the Exchange Act.
------------
(bb) "SERVICE PROVIDER" means an Employee, Director or Consultant.
----------------
(cc) "SHARE" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(dd) "SUBSIDIARY" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 13 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 2,500,000 Shares, plus an annual increase to be added on the
first day of the Company's fiscal year, beginning fiscal year 2001, equal to
the lesser of (i) 2,500,000 shares, (ii) 5% of the outstanding shares of common
stock on the last day of the immediately preceding fiscal year or (iii) an
amount determined by the board. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated); PROVIDED, however, that Shares that have actually been issued under
--------
the Plan upon exercise of an Option shall not be returned to the Plan and shall
not become available for future distribution under the Plan, except that if
unvested Shares are
-3-
<PAGE>
repurchased by the Company at their original purchase price, such Shares shall
become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
--------------------------
(a) PROCEDURE.
---------
(i) MULTIPLE ADMINISTRATIVE BODIES. Different Committees with
------------------------------
respect to different groups of Service Providers may administer the Plan.
(ii) SECTION 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) RULE 16B-3. To the extent desirable to qualify transactions
----------
hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder
shall be structured to satisfy the requirements for exemption under Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may be
granted hereunder;
(iii) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(iv) to approve forms of agreement for use under the Plan;
(v) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any Option granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
-4-
<PAGE>
(vii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of satisfying applicable foreign laws;
(viii) to modify or amend each Option (subject to Section 15(c)
of the Plan), including the discretionary authority to extend the post-
termination exercisability period of Options longer than is otherwise provided
for in the Plan;
(ix) to allow Optionees to satisfy withholding tax obligations
by electing to have the Company withhold from the Shares to be issued upon
exercise of an Option that number of Shares having a Fair Market Value equal to
the minimum amount required to be withheld. The Fair Market Value of the Shares
to be withheld shall be determined on the date that the amount of tax to be
withheld is to be determined. All elections by an Optionee to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(x) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xi) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Shares issued under the Plan.
5. ELIGIBILITY. Nonstatutory Stock Options may be granted to Service
-----------
Providers. Incentive Stock Options may be granted only to Employees.
6. LIMITATIONS.
-----------
(a) Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.
(c) The following limitations shall apply to grants of Options:
-5-
<PAGE>
(i) No Service Provider shall be granted, in any fiscal year of
the Company, Options to purchase more than 1,000,000 Shares.
(ii) In connection with his or her initial service, a Service
Provider may be granted Options to purchase up to an additional 750,000 Shares,
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 13.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan shall become
------------
effective upon its adoption by the Board. It shall continue in effect for a term
of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in the Option
--------------
Agreement. In the case of an Incentive Stock Option, the term shall be ten (10)
years from the date of grant or such shorter term as may be provided in the
Option Agreement. Moreover, in the case of an Incentive Stock Option granted to
an Optionee who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the total combined voting power of
all classes of stock of the Company or any Parent or Subsidiary, the term of the
Incentive Stock Option shall be five (5) years from the date of grant or such
shorter term as may be provided in the Option Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
---------------------------------------
(a) EXERCISE PRICE. The per share exercise price for the Shares to be
--------------
issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
-6-
<PAGE>
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which, in the case of Shares acquired
directly or indirectly from the Company, (A) have been owned by the Optionee for
more than six (6) months on the date of surrender, and (B) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised;
(v) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment; or
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
Notwithstanding the foregoing, the Administrator may permit an Option to be
exercised by delivery of a full-recourse promissory note secured by the
purchased shares. All other terms of such promissory note shall be determined by
the Administrator in its sole discretion.
10. EXERCISE OF OPTION.
------------------
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be suspended during any unpaid leave
of absence. An Option may not be exercised for a fraction of a Share.
-7-
<PAGE>
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a STOCKHOLDER shall exist
-----------
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee
-------------------------------------------------
ceases to be a Service Provider, other than upon the Optionee's death or
Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option shall revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider,
-----------------
the Option may be exercised following Optionee's death within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of death (but in no event may the option be exercised later
than the expiration of the term of such Option as set forth in the Option
Agreement) by the Optionee's designated beneficiary, provided such beneficiary
has been designated
-8-
<PAGE>
prior to Optionee's death in a form acceptable by the Administrator. If no such
beneficiary has been designated by the Optionee, then such Option may be
exercised by the personal representative of the Optionee's estate or by the
person(s) to whom the Option is transferred pursuant to the Optionee's will or
in accordance with the laws of descent and distribution. In the absence of a
specified time in the Option Agreement, the Option shall remain exercisable for
twelve (12) months following Optionee's death. If, at the time of death, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall immediately revert to the Plan. If the
Option is not so exercised within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
11. FORMULA OPTION GRANTS TO OUTSIDE DIRECTORS. Outside Directors shall
------------------------------------------
automatically be granted Options in accordance with the following provisions:
(a) All Options granted pursuant to this Section shall be
Nonstatutory Stock Options and, except as otherwise provided herein, shall be
subject to the other terms and conditions of the Plan.
(b) Each Outside Director shall be automatically granted an Option to
purchase 40,000 Shares (the "First Option") on the date on which the later of
the following events occurs: (A) the effective date of this Plan, as determined
in accordance with Section 7 hereof, or (B) the date on which such person first
becomes an Outside Director, whether through election by the stockholders of the
Company or appointment by the Board to fill a vacancy; provided, however, that
an Inside Director who ceases to be an Inside Director but who remains a
Director shall not receive a First Option.
(c) Each Outside Director shall be automatically granted an Option to
purchase 40,000 Shares (a "Subsequent Option") on each anniversary of the date
the Director first became an Outside Director.
(d) Notwithstanding the provisions of subsections (b) and (c) hereof,
any exercise of an Option granted before the Company has obtained stockholder
approval of the Plan in accordance with Section 19 hereof shall be conditioned
upon obtaining such stockholder approval of the Plan in accordance with Section
19 hereof.
(e) The terms of a First Option granted pursuant to this Section
shall be as follows:
(i) the term of the First Option shall be ten (10) years.
(ii) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company.
(iii) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the First Option.
-9-
<PAGE>
(iv) subject to Section 13, the First Option shall become
exercisable as to 25% of the Shares subject to the First Option on each
anniversary of its date of grant, provided that the Optionee continues to serve
as a Director on such dates.
(f) The terms of a Subsequent Option granted hereunder shall be as
follows:
(i) the term of the Subsequent Option shall be ten (10) years.
(ii) the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company.
(iii) the exercise price per Share shall be 100% of the Fair
Market Value per Share on the date of grant of the Subsequent Option.
(iv) subject to Section 13 hereof, the Subsequent Option shall
become exercisable as to 100% of the Shares subject to the Subsequent Option on
the first anniversary of its date of grant, provided that the Optionee continues
to serve as a Director on such date.
12. LIMITED TRANSFERABILITY OF OPTIONS. Unless determined otherwise by the
----------------------------------
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable, such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
------------------------------------------------------------------
ASSET SALE.
- ----------
(a) CHANGES IN CAPITALIZATION. Subject to any required action by
-------------------------
the stockholders of the Company, the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, the number of Shares that may be added annually to the
Plan pursuant to Section 3(i), the number of shares granted under First Options
and Subsequent Options under Section 11, and the number of shares of Common
Stock covered by each outstanding Option as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may
-10-
<PAGE>
provide for an Optionee to have the right to exercise his or her Option until
ten (10) days prior to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not otherwise be
exercisable. In addition, the Administrator may provide that any Company
repurchase option applicable to any Shares purchased upon exercise of an Option
shall lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated. To the
extent it has not been previously exercised, an Option will terminate
immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of assets, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the merger or sale of assets is
not solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
14. Date of Grant. The date of grant of an Option shall be, for all
-------------
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
--------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Stockholder Approval. The Company shall obtain stockholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise
-11-
<PAGE>
between the Optionee and the Administrator, which agreement must be in writing
and signed by the Optionee and the Company. Termination of the Plan shall not
affect the Administrator's ability to exercise the powers granted to it
hereunder with respect to Options granted under the Plan prior to the date of
such termination.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise
--------------------------
of an Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
17. Inability to Obtain Authority. The inability of the Company
-----------------------------
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Stockholder Approval. The Plan shall be subject to approval by
--------------------
the stockholders of the Company within twelve (12) months after the date the
Plan is adopted. Such stockholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
-12-
<PAGE>
TOP TIER SOFTWARE, INC.
2000 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number ____________________________________
Date of Grant ____________________________________
Vesting Commencement Date ____________________________________
Exercise Price per Share $___________________________________
Total Number of Shares Granted ____________________________________
Total Exercise Price $___________________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: ____________________________________
Vesting Schedule:
----------------
This Option shall be exercisable, in whole or in part, in accordance
with the following schedule:
25% of the Shares subject to the Option shall vest twelve (12) months
following the Vesting Commencement Date, and 1/48 of the Shares subject to the
Option shall vest each month thereafter, subject to the Optionee continuing to
be a Service Provider on such dates.
<PAGE>
Termination Period:
------------------
This Option may be exercised for three months after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for twelve months after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
---------
A. Grant of Option.
---------------
The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per Share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 15(c) of
the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
------------------
(a) Right to Exercise. This Option shall be exercisable during
-----------------
its term in accordance with the Vesting Schedule set out in the Notice of Grant
and the applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option shall be exercisable by
------------------
delivery of an exercise notice, in the form attached as Exhibit A (the "Exercise
Notice"), which shall state the election to exercise the Option, the number of
Shares in respect of which the Option is being exercised (the "Exercised
Shares"), and such other representations and agreements as may be required by
the Company. The Exercise Notice shall be accompanied by payment of the
aggregate Exercise Price as to all Exercised Shares. This Option shall be deemed
to be exercised upon receipt by the Company of such fully executed Exercise
Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable Laws. Assuming
such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
-2-
<PAGE>
C. Method of Payment.
-----------------
Payment of the aggregate Exercise Price shall be by any of the
following, or a combination thereof, at the election of the Optionee:
1. cash; or
2. check; or
3. consideration received by the Company from a brokerage firm under
a formal cashless exercise program approved by the Company in connection with
the Plan; or
4. surrender of other Shares which (i) in the case of Shares acquired
from the Company, either directly or indirectly, have been owned by the Optionee
for more than six (6) months on the date of surrender, and (ii) have a Fair
Market Value on the date of surrender equal to the aggregate Exercise Price of
the Exercised Shares.
D. Non-Transferability of Option.
-----------------------------
This Option may not be transferred in any manner otherwise than by
will or by the laws of descent or distribution and may be exercised during the
lifetime of Optionee only by the Optionee. The terms of the Plan and this Option
Agreement shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
E. Term of Option.
--------------
This Option may be exercised only within the term set out in the
Notice of Grant, and may be exercised during such term only in accordance with
the Plan and the terms of this Option Agreement.
F. Tax Obligations.
---------------
1. Withholding Taxes. Optionee agrees to make appropriate
-----------------
arrangements with the Company (or the Parent or Subsidiary employing or
retaining Optionee) for the satisfaction of all Federal, state, local and
foreign income and employment tax withholding requirements applicable to the
Option exercise. Optionee acknowledges and agrees that the Company may refuse to
honor the exercise and refuse to deliver Shares if such withholding amounts are
not delivered at the time of exercise.
2. Notice of Disqualifying Disposition of ISO Shares. If the Option
-------------------------------------------------
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
-3-
<PAGE>
G. ENTIRE AGREEMENT; GOVERNING LAW.
-------------------------------
The Plan is incorporated herein by reference. The Plan and this Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Optionee with respect to the subject matter
hereof, and may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
H. NO GUARANTEE OF CONTINUED SERVICE.
---------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED THIS OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE IN ANY WAY WITH
OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS
A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: TOP TIER SOFTWARE, INC.
- --------------------------- ----------------------------
Signature By
- --------------------------- ----------------------------
Print Name Title
- ---------------------------
Residence Address
- ---------------------------
-4-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
--------------------------
Spouse of Optionee
<PAGE>
EXHIBIT A
---------
TOP TIER SOFTWARE, INC.
2000 STOCK PLAN
EXERCISE NOTICE
Top Tier Software, Inc.
6203 San Ignacio Avenue
Suite 101
San Jose, CA 95119
Attention: Stock Plan Administrator
1. Exercise of Option. Effective as of today, ________________, _____,
------------------
the undersigned ("Purchaser") hereby elects to purchase ______________ shares
(the "Shares") of the Common Stock of Top Tier Software, Inc. (the "Company")
under and pursuant to the 2000 Stock Plan (the "Plan") and the Stock Option
Agreement dated, _____ (the "Option Agreement"). The purchase price for the
Shares shall be $_____, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares, and any and all withholding taxes due in
connection with the exercise of the Option.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser
----------------------------
has received, read and understood the Plan and the Option Agreement and agrees
to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE>
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Exercise Notice Agreement, the Plan and
the Option Agreement constitute the entire agreement of the parties with respect
to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser with respect to the
subject matter hereof, and may not be modified adversely to the Purchaser's
interest except by means of a writing signed by the Company and Purchaser. This
agreement is governed by the internal substantive laws, but not the choice of
law rules, of California.
Submitted by: Accepted by:
PURCHASER: TOP TIER SOFTWARE, INC.
- --------------------------- ---------------------------
Signature By
- ---------------------------
Print Name Its
ADDRESS: ADDRESS:
- ------- -------
TOP TIER SOFTWARE, INC.
- ----------------------------------- 6203 San Ignacio Avenue
Suite 101
San Jose, CA 95119
- -----------------------------------
---------------------------
Date Received
-2-
<PAGE>
EXHIBIT 10.3
TOP TIER SOFTWARE, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2000 Employee Stock Purchase
Plan of Top Tier Software, Inc.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company or any
-----
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean Top Tier Software, Inc. and any Designated
-------
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings,
------------
commissions and bonuses, but exclusive of payments for overtime, shift premium,
incentive payments, and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.
(i) "Exercise Date" shall mean the first Trading Day on or after
-------------
February 1st and August 1st of each year.
<PAGE>
(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system on
the date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately
----------------
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after February 1st and
August 1st of each year and terminating on the first Trading Day on or after
the February 1st and August 1st Offering Period commencement date approximately
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the first Trading Day on or after
August 1, 2002. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this 2000 Employee Stock Purchase Plan.
----
(m) "Purchase Period" shall mean the approximately six month period
---------------
commencing on one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
--------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
--------
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
-2-
<PAGE>
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after February 1st and August 1st each year, or on such other
date as the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the first Trading Day on or after
August 1, 2002. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without stockholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
-3-
<PAGE>
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding fifteen percent (15%) of
the Compensation which he or she receives on each pay day during the Offering
Period; provided, however, that should a pay day occur on an Exercise Date, a
participant shall have the payroll deductions made on such day applied to his or
her account under the new Offering Period or Purchase Period, as the case may
be.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate of
his or her payroll deductions during the Offering Period by completing or filing
with the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Company may, in its discretion, limit the nature and/or
number of participation rate changes during any Offering Period, and may
establish such other conditions or limitations as it deems appropriate for Plan
administration. The change in rate shall be effective with the first full
payroll period following five (5) business days after the Company's receipt of
the new subscription agreement unless the Company elects to process a given
change in participation more quickly. A participant's subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
2,000 shares of the Company's Common Stock
-4-
<PAGE>
(subject to any adjustment pursuant to Section 19), and provided further that
such purchase shall be subject to the limitations set forth in Sections 3(b) and
12 hereof. The Board may, for future Offering Periods, increase or decrease, in
its absolute discretion, the maximum number of shares of the Company's Common
Stock an Employee may purchase during each Purchase Period of such Offering
Period. Exercise of the option shall occur as provided in Section 8 hereof,
unless the participant has withdrawn pursuant to Section 10 hereof. The option
shall expire on the last day of the Offering Period.
8. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
stockholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on which
--------
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
-5-
<PAGE>
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant promptly after
receipt of notice of withdrawal and such participant's option for the Offering
Period shall be automatically terminated, and no further payroll deductions for
the purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 500,000 shares, plus an annual increase to be added on the first day
of the Company's fiscal year, beginning in 2001, equal to the lesser of (i)
500,000 shares, (ii) 1% of the outstanding shares of Common Stock on the last
day of the immediately preceding fiscal year, or (iii) an amount determined by
the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
-6-
<PAGE>
14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use Of Funds. All payroll deductions received or held by the Company
------------
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each participant
-------
in the Plan. Statements of account shall be given to participating Employees at
least annually, which statements shall set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
-7-
<PAGE>
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
- --------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the Reserves (including the number of shares
automatically added annually to the Plan pursuant to Section 13(a)(i)), the
maximum number of shares each participant may purchase each Purchase Period
(pursuant to Section 7), as well as the price per share and the number of shares
of Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
-8-
<PAGE>
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its stockholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.
(b) Without stockholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant
-9-
<PAGE>
thereto shall comply with all applicable provisions of law, domestic or foreign,
including, without limitation, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period.
-10-
<PAGE>
EXHIBIT A
---------
TOP TIER SOFTWARE, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the Top Tier
Software, Inc. Employee Stock Purchase Plan (the "Employee Stock Purchase
Plan") and subscribes to purchase shares of the Company's Common Stock in
accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to ___ %) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to stockholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at the
time such shares were purchased by me over the price which I paid for the
shares. I hereby agree to notify the Company in writing within 30 days
--------------------------------------------------------------
after the date of any disposition of my shares and I will make adequate
-----------------------------------------------------------------------
provision for Federal, state or other tax withholding obligations, if any,
--------------------------------------------------------------------------
which arise upon the
--------------------
<PAGE>
disposition of the Common Stock. The Company may, but will not be obligated to,
- -------------------------------
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any time after
the expiration of the 2-year and 1-year holding periods, I understand that I
will be treated for federal income tax purposes as having received income only
at the time of such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market value
of the shares on the first day of the Offering Period. The remainder of the
gain, if any, recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary (ies) to receive all payments and shares due me under the Employee
Stock Purchase Plan:
NAME: (Please print)_________________________________________________________
(First) (Middle) (Last)
_________________________ _______________________________________________
Relationship
_______________________________________________
(Address)
<PAGE>
Employee's Social
Security Number: __________________________________
Employee's Address: __________________________________
__________________________________
__________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:___________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature (If beneficiary other than
spouse)
<PAGE>
EXHIBIT B
---------
TOP TIER SOFTWARE, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Top Tier
Software, Inc. Employee Stock Purchase Plan which began on__________'_____ (the
"Enrollment Date") hereby notifies the Company that he or she hereby withdraws
from the Offering Period. He or she hereby directs the Company to pay to the
undersigned as promptly as practicable all the payroll deductions credited to
his or her account with respect to such Offering Period. The undersigned
understands and agrees that his or her option for such Offering Period will be
automatically terminated. The undersigned understands further that no further
payroll deductions will be made for the purchase of shares in the current
Offering Period and the undersigned shall be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:___________________________
<PAGE>
EXHIBIT 10.4
TOP TIER SOFTWARE, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is effective as of ________,
2000, by and between Top Tier Software, Inc., a Delaware corporation (the
"COMPANY" or "TOP TIER"), and ________________ ("INDEMNITEE").
WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve the Company and its related
entities;
WHEREAS, in order to induce Indemnitee to continue to provide services to
the Company, the Company wishes to provide for the indemnification of, and the
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Company and Indemnitee recognize the continued difficulty in
obtaining liability insurance for the Company's directors, officers, employees,
agents and fiduciaries, the significant increases in the cost of such insurance
and the general reductions in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting directors, officers,
employees, agents and fiduciaries to expensive litigation risks at the same time
as the availability and coverage of liability insurance has been severely
limited; and
WHEREAS, in view of the considerations set forth above, the Company desires
that Indemnitee shall be indemnified and advanced expenses by the Company as set
forth herein;
NOW, THEREFORE, the Company and Indemnitee hereby agree as set forth below.
1. CERTAIN DEFINITIONS.
-------------------
(a) "CHANGE IN CONTROL" shall mean, and shall be deemed to have
occurred if, on or after the date of this Agreement, (i) any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended), other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company acting in such capacity or a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing more than 50% of the total
voting power represented by the Company's then outstanding Voting Securities (as
defined below), (ii) during any period of two consecutive years, individuals who
at the beginning of such period constitute the Board of Directors of the Company
and any new director whose
<PAGE>
election by the Board of Directors or nomination for election by the Company's
stockholders was approved by a vote of at least two thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof, or (iii) the stockholders
of the Company approve a merger or consolidation of the Company with any other
corporation other than a merger or consolidation which would result in the
Voting Securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least 80% of the total voting
power represented by the Voting Securities of the Company or such surviving
entity outstanding immediately after such merger or consolidation, or the
stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company of (in one
transaction or a series of related transactions) all or substantially all of the
Company's assets.
(b) "CLAIM" shall mean with respect to a Covered Event (as defined
below): any threatened, pending or completed action, suit, proceeding or
alternative dispute resolution mechanism, or any hearing, inquiry or
investigation that Indemnitee in good faith believes might lead to the
institution of any such action, suit, proceeding or alternative dispute
resolution mechanism, whether civil, criminal, administrative, investigative or
other.
(c) References to the "COMPANY" shall include, in addition to Top
Tier, any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger to which Top Tier (or any of its wholly
owned subsidiaries) is a party which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
employees, agents or fiduciaries, so that if Indemnitee is or was a director,
officer, employee, agent or fiduciary of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee, agent or fiduciary of another corporation, partnership, joint
venture, employee benefit plan, trust or other enterprise, Indemnitee shall
stand in the same position under the provisions of this Agreement with respect
to the resulting or surviving corporation as Indemnitee would have with respect
to such constituent corporation if its separate existence had continued.
(d) "COVERED EVENT" shall mean any event or occurrence related to the
fact that Indemnitee is or was a director, officer, employee, agent or fiduciary
of the Company, or any subsidiary of the Company, or is or was serving at the
request of the Company as a director, officer, employee, agent or fiduciary of
another corporation, partnership, joint venture, trust or other enterprise, or
by reason of any action or inaction on the part of Indemnitee while serving in
such capacity.
(e) "EXPENSES" shall mean any and all expenses (including attorneys'
fees and all other costs, expenses and obligations incurred in connection with
investigating, defending, being a witness in or participating in (including on
appeal), or preparing to defend, to be a witness in or to participate in, any
action, suit, proceeding, alternative dispute resolution mechanism, hearing,
inquiry or investigation), judgments, fines, penalties and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably
-2-
<PAGE>
withheld), actually and reasonably incurred, of any Claim and any federal,
state, local or foreign taxes imposed on the Indemnitee as a result of the
actual or deemed receipt of any payments under this Agreement.
(f) "EXPENSE ADVANCE" shall mean a payment to Indemnitee pursuant to
Section 3 of Expenses in advance of the settlement of or final judgement in any
action, suit, proceeding or alternative dispute resolution mechanism, hearing,
inquiry or investigation which constitutes a Claim.
(g) "INDEPENDENT LEGAL COUNSEL" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(d) hereof,
who shall not have otherwise performed services for the Company or Indemnitee
within the last three years (other than with respect to matters concerning the
rights of Indemnitee under this Agreement, or of other indemnitees under similar
indemnity agreements).
(h) References to "OTHER ENTERPRISES" shall include employee benefit
plans; references to "FINES" shall include any excise taxes assessed on
Indemnitee with respect to an employee benefit plan; and references to "SERVING
AT THE REQUEST OF THE COMPANY" shall include any service as a director, officer,
employee, agent or fiduciary of the Company which imposes duties on, or involves
services by, such director, officer, employee, agent or fiduciary with respect
to an employee benefit plan, its participants or its beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to
be in the interest of the participants and beneficiaries of an employee benefit
plan, Indemnitee shall be deemed to have acted in a manner "NOT OPPOSED TO THE
BEST INTERESTS OF THE COMPANY" as referred to in this Agreement.
(i) "REVIEWING PARTY" shall mean, subject to the provisions of
Section 2(d), any person or body appointed by the Board of Directors in
accordance with applicable law to review the Company's obligations hereunder and
under applicable law, which may include a member or members of the Company's
Board of Directors, Independent Legal Counsel or any other person or body not a
party to the particular Claim for which Indemnitee is seeking indemnification.
(j) "SECTION" refers to a section of this Agreement unless otherwise
indicated.
(k) "VOTING SECURITIES" shall mean any securities of the Company that
vote generally in the election of directors.
2. INDEMNIFICATION.
---------------
(a) INDEMNIFICATION OF EXPENSES. Subject to the provisions of Section
---------------------------
2(b) below, the Company shall indemnify Indemnitee for Expenses to the fullest
extent permitted by law if Indemnitee was or is or becomes a party to or witness
or other participant in, or is threatened to be made a party to or witness or
other participant in, any Claim (whether by reason of or arising in part out of
a Covered Event), including all interest, assessments and other charges paid or
payable in connection with or in respect of such Expenses.
-3-
<PAGE>
(b) REVIEW OF INDEMNIFICATION OBLIGATIONS. Notwithstanding the
-------------------------------------
foregoing, in the event any Reviewing Party shall have determined (in a written
opinion, in any case in which Independent Legal Counsel is the Reviewing Party)
that Indemnitee is not entitled to be indemnified hereunder under applicable
law, (i) the Company shall have no further obligation under Section 2(a) to make
any payments to Indemnitee not made prior to such determination by such
Reviewing Party, and (ii) the Company shall be entitled to be reimbursed by
Indemnitee (who hereby agrees to reimburse the Company) for all Expenses
theretofore paid in indemnifying Indemnitee; PROVIDED, HOWEVER, that if
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee is entitled to
be indemnified hereunder under applicable law, any determination made by any
Reviewing Party that Indemnitee is not entitled to be indemnified hereunder
under applicable law shall not be binding and Indemnitee shall not be required
to reimburse the Company for any Expenses theretofore paid in indemnifying
Indemnitee until a final judicial determination is made with respect thereto (as
to which all rights of appeal therefrom have been exhausted or lapsed).
Indemnitee's obligation to reimburse the Company for any Expenses shall be
unsecured and no interest shall be charged thereon.
(c) INDEMNITEE RIGHTS ON UNFAVORABLE DETERMINATION; BINDING EFFECT.
--------------------------------------------------------------
If any Reviewing Party determines that Indemnitee substantively is not entitled
to be indemnified hereunder in whole or in part under applicable law, Indemnitee
shall have the right to commence litigation seeking an initial determination by
the court or challenging any such determination by such Reviewing Party or any
aspect thereof, including the legal or factual bases therefor, and, subject to
the provisions of Section 15, the Company hereby consents to service of process
and to appear in any such proceeding. Absent such litigation, any determination
by any Reviewing Party shall be conclusive and binding on the Company and
Indemnitee.
(d) SELECTION OF REVIEWING PARTY; CHANGE IN CONTROL. If there has not
-----------------------------------------------
been a Change in Control, any Reviewing Party shall be selected by the Board of
Directors, and if there has been such a Change in Control (other than a Change
in Control which has been approved by a majority of the Company's Board of
Directors who were directors immediately prior to such Change in Control), any
Reviewing Party with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnification of Expenses under this Agreement or any
other agreement or under the Company's certificate of incorporation or bylaws as
now or hereafter in effect, or under any other applicable law, if desired by
Indemnitee, shall be Independent Legal Counsel selected by Indemnitee and
approved by the Company (which approval shall not be unreasonably withheld).
Such counsel, among other things, shall render its written opinion to the
Company and Indemnitee as to whether and to what extent Indemnitee would be
entitled to be indemnified hereunder under applicable law and the Company agrees
to abide by such opinion. The Company agrees to pay the reasonable fees of the
Independent Legal Counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys' fees), claims, liabilities
and damages arising out of or relating to this Agreement or its engagement
pursuant hereto. Notwithstanding any other provision of this Agreement, the
Company shall not be required to pay Expenses of more than one Independent Legal
Counsel in connection with all matters concerning a single Indemnitee, and such
Independent Legal Counsel shall be the Independent Legal Counsel for any or all
other Indemnitees unless (i) the Company otherwise determines or (ii) any
Indemnitee shall provide a
-4-
<PAGE>
written statement setting forth in detail a reasonable objection to such
Independent Legal Counsel representing other Indemnitees.
(e) MANDATORY PAYMENT OF EXPENSES. Notwithstanding any other
-----------------------------
provision of this Agreement other than Section 10 hereof, to the extent that
Indemnitee has been successful on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, in defense of any
Claim, Indemnitee shall be indemnified against all Expenses incurred by
Indemnitee in connection therewith.
3. EXPENSE ADVANCES.
----------------
(a) OBLIGATION TO MAKE EXPENSE ADVANCES. The Company shall make
-----------------------------------
Expense Advances to Indemnitee upon receipt of a written undertaking by or on
behalf of the Indemnitee to repay such amounts if it shall ultimately be
determined that the Indemnitee is not entitled to be indemnified therefor by the
Company.
(b) FORM OF UNDERTAKING. Any written undertaking by the Indemnitee to
-------------------
repay any Expense Advances hereunder shall be unsecured and no interest shall be
charged thereon.
(c) DETERMINATION OF REASONABLE EXPENSE ADVANCES. The parties agree
--------------------------------------------
that for the purposes of any Expense Advance for which Indemnitee has made
written demand to the Company in accordance with this Agreement, all Expenses
included in such Expense Advance that are certified by affidavit of Indemnitee's
counsel as being reasonable shall be presumed conclusively to be reasonable.
4. PROCEDURES FOR INDEMNIFICATION AND EXPENSE ADVANCES.
---------------------------------------------------
(a) TIMING OF PAYMENTS. All payments of Expenses (including without
------------------
limitation Expense Advances) by the Company to the Indemnitee pursuant to this
Agreement shall be made to the fullest extent permitted by law as soon as
practicable after written demand by Indemnitee therefor is presented to the
Company, but in no event later than forty-five (45) business days after such
written demand by Indemnitee is presented to the Company, except in the case of
Expense Advances, which shall be made no later than twenty (20) business days
after such written demand by Indemnitee is presented to the Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
--------------------------------
condition precedent to Indemnitee's right to be indemnified or Indemnitee's
right to receive Expense Advances under this Agreement, give the Company notice
in writing as soon as practicable of any Claim made against Indemnitee for which
indemnification will or could be sought under this Agreement. Notice to the
Company shall be directed to the Chief Executive Officer of the Company at the
address shown on the signature page of this Agreement (or such other address as
the Company shall designate in writing to Indemnitee). In addition, Indemnitee
shall give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
-5-
<PAGE>
(c) NO PRESUMPTIONS; BURDEN OF PROOF. For purposes of this Agreement,
--------------------------------
the termination of any Claim by judgment, order, settlement (whether with or
without court approval) or conviction, or upon a plea of NOLO CONTENDERE, or its
equivalent, shall not create a presumption that Indemnitee did not meet any
particular standard of conduct or have any particular belief or that a court has
determined that indemnification is not permitted by this Agreement or applicable
law. In addition, neither the failure of any Reviewing Party to have made a
determination as to whether Indemnitee has met any particular standard of
conduct or had any particular belief, nor an actual determination by any
Reviewing Party that Indemnitee has not met such standard of conduct or did not
have such belief, prior to the commencement of legal proceedings by Indemnitee
to secure a judicial determination that Indemnitee should be indemnified under
this Agreement or applicable law, shall be a defense to Indemnitee's claim or
create a presumption that Indemnitee has not met any particular standard of
conduct or did not have any particular belief. In connection with any
determination by any Reviewing Party or otherwise as to whether the Indemnitee
is entitled to be indemnified hereunder, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
(d) NOTICE TO INSURERS. If, at the time of the receipt by the Company
------------------
of a notice of a Claim pursuant to Section 4(b) hereof, the Company has
liability insurance in effect which may cover such Claim, the Company shall give
prompt notice of the commencement of such Claim to the insurers in accordance
with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay,
on behalf of the Indemnitee, all amounts payable as a result of such Claim in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be obligated
--------------------
hereunder to provide indemnification for or make any Expense Advances with
respect to the Expenses of any Claim, the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(which approval shall not be unreasonably withheld) upon the delivery to
Indemnitee of written notice of the Company's election to do so. After delivery
of such notice, approval of such counsel by Indemnitee and the retention of such
counsel by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees or expenses of separate counsel subsequently employed by
or on behalf of Indemnitee with respect to the same Claim; PROVIDED, HOWEVER,
that (i) Indemnitee shall have the right to employ Indemnitee's separate counsel
in any such Claim at Indemnitee's expense and (ii) if (A) the employment of
separate counsel by Indemnitee has been previously authorized by the Company,
(B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense,
or (C) the Company shall not continue to retain such counsel to defend such
Claim, then the fees and expenses of Indemnitee's separate counsel shall be
Expenses for which Indemnitee may receive indemnification or Expense Advances
hereunder.
5. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
-------------------------------------------------
(a) SCOPE. The Company hereby agrees to indemnify the Indemnitee to
-----
the fullest extent permitted by law, notwithstanding that such indemnification
is not specifically
-6-
<PAGE>
authorized by the other provisions of this Agreement, the Company's certificate
of incorporation, the Company's bylaws or by statute. In the event of any change
after the date of this Agreement in any applicable law, statute or rule which
expands the right of a Delaware corporation to indemnify a member of its board
of directors or an officer, employee, agent or fiduciary, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits afforded by such change. In the event of any change in any applicable
law, statute or rule which narrows the right of a Delaware corporation to
indemnify a member of its board of directors or an officer, employee, agent or
fiduciary, such change, to the extent not otherwise required by such law,
statute or rule to be applied to this Agreement, shall have no effect on this
Agreement or the parties' rights and obligations hereunder except as set forth
in Section 10(a) hereof.
(b) NONEXCLUSIVITY. The indemnification and the payment of Expense
--------------
Advances provided by this Agreement shall be in addition to any rights to which
Indemnitee may be entitled under the Company's certificate of incorporation, its
bylaws, any other agreement, any vote of stockholders or disinterested
directors, the General Corporation Law of the State of Delaware, or otherwise.
The indemnification and the payment of Expense Advances provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though subsequent thereto
Indemnitee may have ceased to serve in such capacity.
6. NO DUPLICATION OF PAYMENTS. The Company shall not be liable under this
--------------------------
Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's certificate of
incorporation, bylaws or otherwise) of the amounts otherwise payable hereunder.
7. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision
-----------------------
of this Agreement to indemnification by the Company for some or a portion of
Expenses incurred in connection with any Claim, but not, however, for all of the
total amount thereof, the Company shall nevertheless indemnify Indemnitee for
the portion of such Expenses to which Indemnitee is entitled.
8. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge
----------------------
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees, agents or
fiduciaries under this Agreement or otherwise. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the Securities and Exchange Commission to submit the question of
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.
9. LIABILITY INSURANCE. To the extent the Company maintains liability
-------------------
insurance applicable to directors, officers, employees, agents or fiduciaries,
Indemnitee shall be covered by such policies in such a manner as to provide
Indemnitee the same rights and benefits as are provided to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the
-7-
<PAGE>
Company's key employees, agents or fiduciaries, if Indemnitee is not an officer
or director but is a key employee, agent or fiduciary.
10. EXCEPTIONS. Notwithstanding any other provision of this Agreement, the
----------
Company shall not be obligated pursuant to the terms of this Agreement:
(a) EXCLUDED ACTION OR OMISSIONS. To indemnify Indemnitee for
----------------------------
Expenses resulting from acts, omissions or transactions for which Indemnitee is
prohibited from receiving indemnification under this Agreement or applicable
law; PROVIDED, HOWEVER, that notwithstanding any limitation set forth in this
Section 10(a) regarding the Company's obligation to provide indemnification,
Indemnitee shall be entitled under Section 3 to receive Expense Advances
hereunder with respect to any such Claim unless and until a court having
jurisdiction over the Claim shall have made a final judicial determination (as
to which all rights of appeal therefrom have been exhausted or lapsed) that
Indemnitee has engaged in acts, omissions or transactions for which Indemnitee
is prohibited from receiving indemnification under this Agreement or applicable
law.
(b) CLAIMS INITIATED BY INDEMNITEE. To indemnify or make Expense
------------------------------
Advances to Indemnitee with respect to Claims initiated or brought voluntarily
by Indemnitee and not by way of defense, counterclaim or crossclaim, except (i)
with respect to actions or proceedings brought to establish or enforce a right
to indemnification under this Agreement or any other agreement or insurance
policy or under the Company's certificate of incorporation or bylaws now or
hereafter in effect relating to Claims for Covered Events, (ii) in specific
cases if the Board of Directors has approved the initiation or bringing of such
Claim, or (iii) as otherwise required under Section 145 of the Delaware General
Corporation Law (relating to indemnification of officers, directors, employees
and agents; and insurance), regardless of whether Indemnitee ultimately is
determined to be entitled to such indemnification or insurance recovery, as the
case may be.
(c) LACK OF GOOD FAITH. To indemnify Indemnitee for any Expenses
------------------
incurred by the Indemnitee with respect to any action instituted (i) by
Indemnitee to enforce or interpret this Agreement, if a court having
jurisdiction over such action determines as provided in Section 13 that each of
the material assertions made by the Indemnitee as a basis for such action was
not made in good faith or was frivolous, or (ii) by or in the name of the
Company to enforce or interpret this Agreement, if a court having jurisdiction
over such action determines as provided in Section 13 that each of the material
defenses asserted by Indemnitee in such action was made in bad faith or was
frivolous.
(d) CLAIMS UNDER SECTION 16(B). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute; PROVIDED, HOWEVER, that
notwithstanding any limitation set forth in this Section 10(d) regarding the
Company's obligation to provide indemnification, Indemnitee shall be entitled
under Section 3 to receive Expense Advances hereunder with respect to any such
Claim unless and until a court having jurisdiction over the Claim shall have
made a final judicial determination (as to which all rights of appeal therefrom
have been exhausted or lapsed) that Indemnitee has violated said statute.
-8-
<PAGE>
11. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. BINDING EFFECT; SUCCESSORS AND ASSIGNS. This Agreement shall be
--------------------------------------
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors, assigns (including any direct or
indirect successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), spouses, heirs and
personal and legal representatives. The Company shall require and cause any
successor (whether direct or indirect, and whether by purchase, merger,
consolidation or otherwise) to all, substantially all, or a substantial part, of
the business or assets of the Company, by written agreement in form and
substance satisfactory to Indemnitee, expressly to assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform if no such succession had taken place. This Agreement
shall continue in effect regardless of whether Indemnitee continues to serve as
a director, officer, employee, agent or fiduciary (as applicable) of the Company
or of any other enterprise at the Company's request.
13. EXPENSES INCURRED IN ACTION RELATING TO ENFORCEMENT OR INTERPRETATION.
---------------------------------------------------------------------
In the event that any action is instituted by Indemnitee under this Agreement or
under any liability insurance policies maintained by the Company to enforce or
interpret any of the terms hereof or thereof, Indemnitee shall be entitled to be
indemnified for all Expenses incurred by Indemnitee with respect to such action
(including without limitation attorneys' fees), regardless of whether Indemnitee
is ultimately successful in such action, unless as a part of such action a court
having jurisdiction over such action makes a final judicial determination (as to
which all rights of appeal therefrom have been exhausted or lapsed) that each of
the material assertions made by Indemnitee as a basis for such action was not
made in good faith or was frivolous; PROVIDED, HOWEVER, that until such final
judicial determination is made, Indemnitee shall be entitled under Section 3 to
receive payment of Expense Advances hereunder with respect to such action. In
the event of an action instituted by or in the name of the Company under this
Agreement to enforce or interpret any of the terms of this Agreement, Indemnitee
shall be entitled to be indemnified for all Expenses incurred by Indemnitee in
defense of such action (including without limitation costs and expenses incurred
with respect to Indemnitee's counterclaims and cross-claims made in such
action), unless as a part of such action a court having jurisdiction over such
action makes a final judicial determination (as to which all rights of appeal
therefrom have been exhausted or lapsed) that each of the material defenses
asserted by Indemnitee in such action was made in bad faith or was frivolous;
PROVIDED, HOWEVER, that until such final judicial determination is made,
Indemnitee shall be entitled under Section 3 to receive payment of Expense
Advances hereunder with respect to such action.
14. NOTICE. All notices, requests, demands and other communications under
------
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and signed for by the party addressed, on the date of such
delivery, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement
or as subsequently modified by written notice.
-9-
<PAGE>
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
-----------------------
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be commenced, prosecuted and continued only in the Court of
Chancery of the State of Delaware in and for New Castle County, which shall be
the exclusive and only proper forum for adjudicating such a claim.
16. SEVERABILITY. The provisions of this Agreement shall be severable in
------------
the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) are held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable, and the remaining
provisions shall remain enforceable to the fullest extent permitted by law.
Furthermore, to the fullest extent possible, the provisions of this Agreement
(including without limitation each portion of this Agreement containing any
provision held to be invalid, void or otherwise unenforceable, that is not
itself invalid, void or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
17. CHOICE OF LAW. This Agreement, and all rights, remedies, liabilities,
-------------
powers and duties of the parties to this Agreement, shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
principles of conflicts of laws.
18. SUBROGATION. In the event of payment under this Agreement, the Company
-----------
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
19. AMENDMENT AND TERMINATION. No amendment, modification, termination or
-------------------------
cancellation of this Agreement shall be effective unless it is in writing signed
by both the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed to be or shall constitute a waiver of any other provisions
hereof (whether or not similar), nor shall such waiver constitute a continuing
waiver.
20. INTEGRATION AND ENTIRE AGREEMENT. This Agreement sets forth the entire
--------------------------------
understanding between the parties hereto and supersedes and merges all previous
written and oral negotiations, commitments, understandings and agreements
relating to the subject matter hereof between the parties hereto.
21. NO CONSTRUCTION AS EMPLOYMENT AGREEMENT. Nothing contained in this
---------------------------------------
Agreement shall be construed as giving Indemnitee any right to be retained in
the employ of the Company or any of its subsidiaries or affiliated entities.
-10-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
TOP TIER SOFTWARE, INC.
By:
--------------------------------------
Name
-------------------------------------
Title:
-----------------------------------
Address: Top Tier Software, Inc.
6203 San Ignacio Avenue
Suite 101
San Jose, CA 95119
AGREED TO AND ACCEPTED BY:
INDEMNITEE
----------------------------
(signature)
-11-
<PAGE>
EXHIBIT 10.5
LEASE COVERING PREMISES KNOWN AS
PARTIES
THIS LEASE is made this 19th day of December 1996, by and between State
Compensation Insurance Fund, a public enterprise fund, herein called "Landlord"
and DATASURF herein called "Tenant".
WITNESSETH: Landlord and Tenant mutually agree as follows:
PREMISES
1.
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord
that certain office space herein called "Premises" outlined in red on Exhibit
"A" attached hereto and made a part hereof, situated on the floor of that
certain building known as 6203 San Ignacio Avenue, San Jose, CA. This Lease is
subject to the terms, covenants, and conditions herein set forth and Tenant
covenants as a material part of the consideration for this Lease to keep and
perform each and all of the terms, covenants, and conditions to be kept and
performed by it and that this Lease is made upon the conditions of faithful
performance.
TERM
The five (5) year term of the Lease shall commence on the 1st day of March
1997, and end on the 28th day of February 2002.
POSSESSION
3.a
If Landlord for any reason whatsoever cannot deliver possession of the
Premises to Tenant at the commencement of the term hereof, this Lease shall not
be void or voidable, nor shall Landlord be liable to Tenant for any loss or
damage resulting therefrom, but in that event, all rent shall be abated during
the period between the commencement of the term and the time when Landlord
delivers possession. Late possession shall not extend the termination date
herein provided. Said Space is described as approximately 6,424 useable square
feet and approximately 7,195 rentable square feet located on the second floor
and more particularly shown in EXHIBIT A attached hereto.
---------
3.b
<PAGE>
In the event that Landlord shall permit Tenant to occupy the Premises prior
to the commencement date of the term, such occupancy shall be subject to all the
provisions of this Lease except the obligation to pay rent. Early possession
shall not advance the termination date herein provided.
MONTHLY BASIC RENT
4.a
Tenant agrees to pay to Landlord as Basic Rent, the sum of Ten Thousand
Nine Hundred Fifty and 79/100 Dollars ($10,950.79) per month in advance on the
first day of each month, beginning on the date the term commences and continuing
throughout the term. Monthly rent for the first month or any portion thereof
shall be paid on the day the term commences. Monthly rent for any partial month
shall be prorated at a rate of 1/30 of the monthly rent per day. In addition to
the monthly Basic Rent Tenant agrees to pay as additional rent the amount of any
adjustments and other charges required by this Lease. All rent shall be paid to
Landlord, without prior notice or demand, deduction or offset at 1275 Market
Street, San Francisco, CA 94103 or to such other party or at such other place as
Landlord may from time to time designate in writing. Further, all charges to be
paid by Tenant hereunder, including, without limitation, payments for real
property taxes, operating expense adjustments, parking fees, insurance and
repairs, but excluding security deposit, shall be considered Additional Rent for
the purpose of this Lease, and the word "rent" in this Lease shall include such
additional rent unless the context specifically states or clearly implies that
only the monthly Basic Rent is referenced. (Note: See "Abated Rent" for 1,800
sq. ft. for six months, paragraph 35 in Addendum).
SEE ADDENDUM
4.b
Tenant waives the right to make payment of rent under protest unless
payment is made in full. Landlord has the right to cash any partial payment
check without surrendering the right to collect the balance due.
SECURITY DEPOSIT
5.
Tenant has deposited with Landlord the sum of Ten Thousand Nine Hundred
Fifty and 79/100 Dollars ($10,950.79). This sum shall be held by Landlord as
security for the faithful performance by Tenant of all the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the term
hereof. If Tenant defaults with respect to any provision of this Lease,
including, but not limited to the provisions relating to the payment of rent,
Landlord may (but shall not be required to) use, apply, or retain all or any
part of this security deposit for the payment of any rent or any other sum in
default, and for the payment of any amount which Landlord may spend or become
obligated to spend by
2
<PAGE>
reason of Tenant's default, or to compensate Landlord for any other loss or
damage which Landlord may suffer by reason of Tenant's default. If any portion
of the deposit is so used or applied, Tenant shall within ten (10) days after
written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the security deposit to its original amount and Tenant's failure to do
so shall be a material breach of this Lease. Landlord's obligations with
respects to the security deposit are those of a debtor and not a trustee.
Landlord may maintain the security deposit separate and apart from Landlord's
general funds or may commingle the security deposit with Landlord's general and
other funds. Landlord shall not be required to pay Tenant interest on the
security deposit. If Tenant shall fully and faithfully perform every provision
of the Lease to be performed by it, the security deposit or any balance thereof
shall be returned to Tenant (or, at Landlord's option, to the last assignee of
Tenant's interest hereunder) at the expiration of the Lease term. In the event
of termination of Landlord's interest in this Lease, Landlord shall transfer the
deposit to Landlord's successor in interest. (Note: See Item # 37.)
OPERATING EXPENSE ADJUSTMENTS
6.
Operating Expense Adjustments are made with respect to the "Base Year" and
each "Comparison Year," defined as follows:
Base Year: The calendar year, January 1 through December 31, 1997, in
which this Lease term commences.
Comparison Year: Each calendar year of the term of the Lease after the
Base Year.
For the purposes of this Article, Operating Expenses are defined as all
expenses, costs, and amounts of every kind and nature which Landlord shall pay
or incur because of or in connection with, the ownership, management, repair,
restoration, or operation of the Building and all Building systems. By way of
illustration, Operation Expenses include, but are not limited to, real property
taxes, excise taxes, gross receipts taxes, rent taxes, and all other taxes,
licenses, and any assessments levied, assessed, or charged against Landlord or
Tenant or both; Building management costs, Building personnel salaries, security
services, water and sewer charges, insurance premiums (including earthquake
insurance), utilities, janitorial services, landscape maintenance, operation and
maintenance of the mechanical, electrical, and elevator systems, upkeep of all
common areas, and other labor, materials, supplies, equipment and tools; and any
improvements required by governmental laws or regulations that were not
applicable to the Building at the time it was originally constructed, including
expenses relative to the implementation of any transportation management
program.
The following shall not constitute Operating Expenses for the purposes of this
Lease, and nothing contained herein shall be deemed to require Tenant to pay any
of the following: (1)
3
<PAGE>
legal fees, brokerage commissions, advertising costs and other related expenses
incurred in connection with the leasing of the Building: (ii) repairs,
alterations, additions, improvements or replacements made to rectify or correct
any defect in the design, materials or workmanship of the Building or Common
Areas or to comply with any requirements of any governmental authority in effect
as of the date of the Lease; (iii) damage and repairs attributable to
condemnation, fire or other casualty; (iv) damage and repairs covered under any
warranty or insurance policy carried by Landlord in connection with the Building
or Property; (v) damage and repairs necessitated by the negligence or willful
misconduct of Landlord or Landlord's employees, contractors or agents; (vi)
executive salaries of Landlord; (vii) salaries of service personnel to the
extent that such service personnel perform services not solely in connection
with the management, operation, repair or maintenance of the Building or Common
Areas; (viii) Landlord's general overhead expenses not related to the Building;
(ix) payments of principal or interest on any mortgage or other encumbrance
including ground lease payments and points, commissions and legal fees
associated with financing; (x) depreciation; (xi) legal fees, accountants' fees
and other expenses incurred in connection with disputes with Tenant or other
tenants or occupants of the Building or associated with the enforcement of any
leases or defense of Landlord's title to or interest in the Building or any part
thereof; (xii) costs renovating or otherwise improving, decorating, painting or
altering space for other tenants or other occupants or vacant space in the
Building except as deemed necessary in the common areas; (xiii) costs incurred
due to violation by Landlord or any other tenant in the Building of the terms
and conditions of any lease; (xiv) the cost of any service provided to Tenant or
other occupants of the Building for which Landlord is entitled to be reimbursed;
(xv) charitable or political contributions; (xvi) any cost or expense related to
the testing for, removal, transportation or storage of hazardous materials from
the Property, Building or Premises; (xvii) interest penalties or other costs
arising out of Landlord's failure to make timely payments of its obligations;
(xviii) costs incurred in parking and for which parking fees are charged during
the initial term; (xix) property management fees of any property management firm
in excess of three percent (3%) of the gross revenues of the Building; (xx)
costs incurred in advertising and promotional activities for the Building; and
(xxi) any other expense which under generally accepted accounting principles and
practice would not be considered a normal maintenance and operating expense.
If, during the term of the Lease, Landlord is required to alter, convert, or
replace the heating, ventilating and air conditioning system, or any part
thereof, serving the Premises in order to comply with any law, statute,
ordinance, or governmental rules, regulations, or requirements now in force or
which may hereafter be in force, including but not limited to those concerning
energy conservation, and indoor air quality, Tenant shall be responsible for
paying Tenant's pro-rata share of the costs of any such conversion or
replacement, which cost shall be amortized over the useful life of such
conversion or replacement, as determined by generally accepted accounting
principles. The costs of any such conversion
4
<PAGE>
or replacement shall include, but are not limited to, the purchase and
installation of new equipment and the alteration of existing equipment in the
Building to accommodate any new equipment.
Operating Expense Adjustments: Rent payable under this Lease for each
Comparison Year, (each calendar year after the Base Year) shall be adjusted as
herein provided for any increase or decrease in Operating Expenses paid or
incurred by Landlord. A statement shall be furnished to the Tenant on or about
the first day of April each year following each Comparison Year. Tenant shall
pay 6.6% of any excess of such expenses over the amount of Operating Expenses
paid or incurred by Landlord for the Base Year. This percentage of expenses is
the amount thereof prorated to Tenant in proportion to the area of the Building
leased to Tenant. Any increase for the first Comparison Year shall be paid to
Landlord by Tenant within twenty (20) days of being furnished with any such
statement for the first Comparison Year, as Additional Rent for said year.
Further, the amount of any such increase shall be used as an estimate for said
current year and for later calendar years for payment in twelve (12) equal
monthly installments, for each such year as Additional Rent, subject to increase
or decrease as disclosed by any subsequent annual statement. Provided, however,
that any increase for any Comparison Year so prorated to twelve months, shall
for the months January to March both inclusive, of any Comparison Year, adjusted
for any increase or decrease, be paid by Tenant to Landlord forthwith upon being
furnished with any such statement.
Landlord's failure to furnish an annual statement as provided for herein shall
not constitute a waiver by Landlord of its right to require an increase in rent.
If, in any Comparison Year of this Lease, Tenant's share of Operating Expenses
should be less than for the immediately preceding Comparison Year, as shown by
the annual statement, Tenant shall be credited with any overpayment of rent
resulting therefrom on the next monthly rent failing due and the estimated
monthly rent shall be adjusted to reflect the decrease, except at the end of the
Term, when any excess will be refunded to Tenant upon discovery thereof.
Even though the term has expired and Tenant has vacated the Premises, when the
final determination is made of Tenant's share of Operating Expenses for the year
in which this Lease terminates, Tenant shall immediately pay any increase due
over the estimated expenses paid and conversely any overpayment made in the
event expenses decrease shall be immediately rebated by Landlord to Tenant.
Notwithstanding anything contained in this Article, the rent payable by Tenant
shall in no event be less than the Basic Rent specified in Article 4a.
5
<PAGE>
USE
8.
Tenant shall use the Premises for general office purposes and shall not use
or permit the Premises to be used for any other purpose without the prior
written consent of Landlord, when consent shall not be unreasonably withheld or
delayed.
Tenant shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which will in any way increase the existing
rate of or affect any fire or other insurance policy covering said Building or
any part thereof or any of its contents. Tenant shall not do or permit anything
to be done in or about the Premises which will in any way obstruct or interfere
with the rights of other tenants or occupants of the Building or injure or annoy
them or use or allow the Premises to be used for any improper, immoral, unlawful
or objectionable purpose nor shall Tenant cause, maintain or permit any nuisance
in, or about the Premises. Tenant shall not commit or suffer to be committed any
waste in or upon the Premises.
COMPLIANCE WITH LAW
9.
Tenant shall not use the Premises or permit anything to be done in or about
the Premises which will in any way conflict with any law, statute, ordinance, or
governmental rules or regulations now in force or which may hereafter be enacted
or promulgated. Tenant, at Tenant's sole cost and expense, shall promptly comply
with all laws, statutes,
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ordinances, rules, regulations, requirements, orders and directions of federal,
state, county, and municipal authorities, now in force or which may hereafter be
in force, which shall impose any duty upon Landlord or Tenant with respect to
the use, occupancy, or alteration of the Premises. The judgement of any court of
competent jurisdiction or the admission of Tenant whether Landlord be a party
thereto or not, that Tenant has violated any law, statute, ordinance,
governmental rule, regulation, or requirement, shall be conclusive of that fact
as between Landlord and Tenant.
Both Landlord and Tenant shall comply with all state and federal laws,
rules, regulations, or statuses requiring the submission, reporting, or filing
of information regarding the storage, use, or discharge of chemical or other
substances at the Premises or in the Building. Each shall provide to the other a
full copy any such report or filing within fifteen (15) days of submission.
Landlord shall provide Tenant with a copy of any such report or filing made by
any other Tenant in the Building within thirty (30) days of the date Landlord
files or receives a copy of any such submission.
ALTERATIONS AND ADDITIONS
10.
Tenant shall not make or suffer to be made any alterations, additions, or
improvements to or of the Premises or any part thereof without the prior written
consent of Landlord, which consent shall not be unreasonably withheld, and any
alterations, additions, or improvements to or of the Premises, including, but
not limited to, wall covering, paneling and built-in cabinet work, but excepting
movable furniture and trade fixtures, shall on the expiration of the term become
a part of the real property and belong to Landlord and shall be surrendered by
Tenant with the Premises. Notwithstanding the foregoing, Landlord's consent
shall not be necessary for any non-structural alterations to the Premises made
by Tenant which do not affect the Building systems and which cost less than Five
Thousand Dollars ($5,000) each, provided that such alterations are otherwise
made in accordance with the terms of this Lease and Tenant provides Landlord
with written notice thereof at least five (5) days in advance. In the event
Landlord consents to the making of any alterations, additions, or improvements
to the Premises by Tenant, the same shall be made by Tenant at Tenant's sole
cost or expense, and any contractor or person selected by Tenant to make the
same must first be approved in writing by the Landlord. Landlord's approval of
the plans, specifications, or working drawings for Tenant's alterations shall
create no responsibility or liability on the part of the Landlord for their
completeness, design sufficiency, or compliance with all laws, rules, and
regulations of governmental agencies or authorities. Upon the expiration of the
Lease or sooner termination thereof, Tenant shall, upon written demand by
Landlord, at Tenant's sole cost and expense, forthwith and with all due
diligence remove any alterations, additions or improvements made by Tenant,
designated by Landlord to be removed including, but not limited to, Tenant's
telephone and network cabling throughout the Premises from Tenant's telephone
closet, and any intra-Building wiring installed to exclusively serve all or a
portion of the Premises. Any person or contractor selected by Tenant to remove
alterations
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must first be approved in writing by Landlord. Tenant shall be solely liable for
any damage caused by the removal of any alterations and shall forthwith and with
all due diligence at its sole cost and expense, repair any damage to the
Premises caused by such removal.
If Tenant shall fail to remove such alterations at the expiration or earlier
termination of the Lease, Landlord may, at its option, remove any or all
alterations and Tenant shall pay to Landlord the reasonable cost of such removal
within ten (10) days of Tenant's receipt of an appropriate invoice with
supporting documentation.
REPAIRS
11.a
Tenant takes the Premises without any representations or warranties from
Landlord about its condition, either express or implied. By taking possession of
the Premises, Tenant shall be deemed to have accepted the Premises as being in
good, sanitary order, condition and repair. Tenant shall at Tenant's sole cost
and expense, keep the interior, non-structural portion of the Premises and every
part thereof in good condition and repair, damage thereto from causes beyond the
reasonable control of Tenant and ordinary wear and tear excepted. However, in no
event shall Tenant's obligation to repair under this subsection extend to (1)
damage caused by any defects in the design, construction or materials of the
Building, including the Premises and improvements installed therein by Landlord;
(ii) damage caused in whole or in part by the negligence or willful misconduct
of Landlord or Landlord's agents, employees, invitees or licensees; (iii)
repairs covered under Operating Expenses; (iv) reasonable wear and tear, (v)
conditions covered under any warranties of Landlord's contractors; or (vi)
damage by fire and other casualties, or acts of governmental authorities, or
acts of God and the elements. Tenant agrees, at Tenant's sole cost and expense,
to keep carpeting and drapery in good condition and repair and to replace
carpeting and drapery as wear and tear necessitates. Tenant shall upon the
expiration or early termination of this Lease surrender the Premises to Landlord
in good condition., ordinary wear and tear and damage from causes beyond the
reasonable control of Tenant excepted. Landlord shall have no obligation
whatsoever to alter, remodel, improve, repair, decorate, or paint the Premises
or any part thereof and the parties hereto affirm that Landlord has made no
representations to Tenant respecting the condition of the Premises or the
Building except as specifically set forth by addendum hereto, if any.
11.b
Notwithstanding the provisions of Article 11.a hereinabove, Landlord shall
repair and maintain the structural portions of the Building, including the basic
plumbing, air conditioning, heating, and electrical systems, installed or
furnished by Landlord. If maintenance and repairs are caused in part or in whole
by the act, neglect, fault, or omission of any duty by Tenant, its agents,
servants, employees or invitees, Tenant shall pay to Landlord the reasonable
cost of the maintenance or repairs. Landlord shall not be
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liable for any failure to make any repairs or to perform any maintenance unless
the failure persists for an unreasonable time after written notice of the need
for repairs or maintenance is given to Landlord by Tenant. Except as provided in
Article 21 hereof, there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant's business
arising from the making of any repairs, alterations or improvements in or to any
portion of the Building or the Premises or to fixtures, appurtenances and
equipment therein.
11.c
To the extent that Landlord, rather than a public utility, is the owner of
telecommunications risers and cabling contents, Landlord is responsible for the
repair of all basic intra-Building telephone and network cabling and riser
systems providing service to all tenants in the Building. Tenant, however, is
solely responsible for the repair of any intra-Building telephone and network
cabling installed to exclusively serve all or a portion of the Premises,
including all distribution throughout the Premises from Tenant's telephone
closet. Any person or contractor selected by Tenant to repair any intra-Building
telephone and network cabling must first be approved in writing by Landlord.
LIENS
12.
Tenant shall keep the Premises and the Building in which the Premises are
situated free from any liens arising out of any work performed, materials
furnished, or obligations incurred by Tenant. Landlord may require, at
Landlord's sole option, that Tenant shall provide to Landlord, at Tenant's sole
expense, a lien and completion bond in an amount equal to the amount of any and
all estimated costs of any improvements, additions or alterations in the
Premises to insure against any liability for mechanics' and materialmen's liens
and to insure completion of the work.
ASSIGNMENTS AND SUBLETTING
13.
Tenant shall not transfer, assign, mortgage, or hypothecate this Lease or
any right or interest hereunder, or sublet the Premises or any part thereof,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed. No assignment, subletting, or other transfer
in violation of the terms of this Article, whether voluntary or involuntary, by
operation of law, under legal process or proceedings, by receivership, in
bankruptcy, or otherwise, shall be valid or effective, should Landlord consent
to any subletting or assignment, such consent shall not constitute a waiver of
any of the restrictions of this Article and the same shall apply to each
successive assignment or subletting hereunder, if any. In no event shall
Landlord's consent to an assignment or subletting relieve Tenant of any of its
obligations hereunder without an express written release being given by
Landlord. If this Lease is assigned or if Premises or any portion
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thereof are sublet, Landlord may collect rent and all other charges due
hereunder directly from the Assignee or Subtenant, but such collection shall not
constitute a consent or a waiver of the necessity of consent to such assignment
or subletting, nor shall such collection constitute a recognition of such
Assignee or Subtenant as the Tenant hereunder or a release of Tenant from the
performance of all its obligations hereunder. Tenant agrees that it shall not be
unreasonable for Landlord to withhold its consent to a proposed assignment or
subletting if:
1. Landlord believes that the proposed Assignee or Subtenant is not as
financially responsible as Tenant on the date hereof;
2. Landlord believes that the proposed Assignee or Subtenant will not conduct
on the Premises a business of quality equal to that conducted by Tenant; or
3. Landlord believes that the business of the proposed Assignee or
Subtenant,conducted on the Premises will have an impact upon the common
facilities or will require services of the Landlord that are materially in
excess of the services provided to Tenant under this Lease. If Tenant shall
assign, sublease or otherwise transfer all or any portion of the Leased Premises
to a party other than Tenant Affiliate, Landlord and Tenant shall evenly divide
any rent or other consideration paid to Tenant in connection with such
assignment, sublease or other transfer which is in excess of the base rent due
under this Lease, after first deducting out for the Tenant's account the cost of
(1) broker's commissions paid by Tenant with regard to the transfer; (ii) legal
fees; (iii) the cost of improvements made to the Leased Premises by Tenant at
Tenant's expense as of the date of such transfer, or any tenant improvements
made by the Tenant at Tenant's expense for the purpose of transfer; (iv) the
unamortized portions of improvements made in the transferred area by Tenant for
Tenant's use during the original tenancy; (v) all rent paid by Tenant to
Landlord while the Leased Premises were vacant prior to such transfer; and (vi)
any other expenses incurred by Tenant in effectuating the transfer. The terms of
this section shall survive the expiration or earlier termination of the Lease.
4. Landlord believes that the proposed Assignee or Subtenant is Landlord's
business competitor, or would create a conflict of interest, or the
appearance of a conflict of interest.
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If Tenant is a corporation, an incorporated association, or a partnership,
the transfer assignment of hypothecation of any stock or interest is such
corporation, association or partnership in the aggregate in excess of twenty-
five percent (25%) shall be deemed an assignment within the meaning and
provisions of this Article, shareholder or member to his spouse, children, or
grandchildren, is included in the foregoing provisions.
If Landlord consents to an assignment or subletting by Tenant of all or
portion of Tenant's interest under this Lease, Tenant shall pay to Landlord a
transfer fee of $250.00; provided however, that such transfer fee shall be
payable upon Landlord's consent to a transfer or assignment of Tenant's interest
hereunder as security for a loan.
Provided further and not withstanding anything to the contrary contained herein:
1 In the event that Tenant seeks to assign or sublet all or a portion of the
Premises (a "Transfer"), Landlord shall have the right to terminate this Lease
or, in the case of a sublease of less than all of the Premises, terminate this
lease as to that part of the Premises proposed to be so sublet so that Landlord
is thereafter free to lease the Premises (or, in the case of a partial sublease,
the portion proposed to be so sublet) to whomever it pleases on whatever terms
are acceptable to Landlord. In the event Landlord elects to so terminate this
Lease, then, if Landlord elects simply to terminate this Lease (or, in the case
of a partial sublease, terminate this Lease as to the portion to be so sublet),
the lease shall so terminate in its entirety (or as to the space to be so
sublet), upon the date the Transfer was to become effective. Upon such
termination, Tenant shall be released from any further obligation under this
Lease if it is terminated in its entirety, or shall be released from any further
obligation under the Lease with respect to the space proposed to be sublet in
the case of a proposed partial sublease. In the case of a partial termination of
the Lease, the base rent and Tenant's pro rata share shall be reduced to an
amount which bears the same relationship to the original amount thereof as the
area of that part of the Premises which remains subject to the Lease bears to
the original area of the Premises. Landlord and Tenant shall execute a
cancellation and release with respect to the Lease to affect such termination.
2. If Landlord indicates the intent to exercise this option, Tenant has the
right to withdraw its request for assigning or subletting a portion of the
Lease.
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3. if Landlord exercises its option, Landlord may subsequently lease the
premises to Tenant's proposed transferee or to any other party.
4. If Landlord fails to exercise such option, and Tenant fails to complete
negotiations for valid and bona fide assignment to or sublease with a third
party within sixty (60) days after receipt of the Transfer Notice by
Landlord in accordance with the terms of the Transfer Notice, Tenant shall
again comply with all of the conditions of this Article as if the notice
and option hereinabove referred to had not been given or received. In the
event Landlord does not exercise its option and Tenant completes
negotiations for an assignment or sublease with a third party within the
sixty (60) day period, Tenant shall deliver an executed copy of such
assignment or sublease to Landlord to obtain its consent as required
herein. If Landlord consents to a sublease or assignment (hereinafter
"Transfer"), then such Transfer shall be subject to and made upon the
following terms:
a. Any such Transfer shall be subject to the terms of this Lease and the
term thereof may not extend beyond the expiration of the term of this
Lease.
b. The use to be made of the transferred space shall be a legal use and
in keeping with the character of the Building.
C. Such Transfer shall not violate any negative covenant as to use
contained in any deed affecting the Building.
d. No transferee shall have the right to further transfer.
INDEMNIFICATION OF LANDLORD
14. Landlord shall not be liable to Tenant and Tenant
hereby waives all claims against Landlord for any injury or damage to any person
or property in or about the Premises by or from any cause whatsoever other than
the negligence or willful misconduct of Landlord or Landlord's agents, employees
or contractors, and without limiting the generality of the foregoing whether
caused by water leakage of any character from the roof, walls, basement or other
portion of the Premises or the Building, or caused by gas, fire, oil,
electricity or any cause whatsoever in, on, or about the Premises or the
Building.
Tenant shall indemnify Landlord and hold Landlord harmless from and defend
Landlord against any and all claims or liability for any injury or damage to any
person or property whatsoever: (1) occurring in or about the premises or any
part thereof, and (2) occurring in or about any facilities (including, without
prejudice to the generality of the term "facilities", elevators, stairways,
parking areas, passageways or hallways) the use of which Tenant may have in
common with other tenants of the Building to the extent such
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injury or damage shall be caused by the act, neglect, fault of, or omission of
any duty with respect to the same, by Tenant, its agents, servants, employees or
invitees.
SUBROGATION
15.
Landlord and Tenant hereby mutually waive their respective rights of
recovery against each other for any loss insured by fire, extended
coverage, and other property insurance policies existing for the benefit of
the respective parties. Each party shall obtain any special endorsements,
if required by their insurer, to evidence compliance with the
aforementioned waiver.
LIABILITY INSURANCE
16.
Tenant agrees to provide and pay for public liability insurance written by
a responsible insurance company, in which the limits of liability coverage shall
be not less than $1,000,000 personal injury and property damage. The amount of
insurance coverage shall not, however, limit the liability of Tenant hereunder.
Said policy shall also provide that the same may not be canceled without fifteen
(15) days prior written notice to Landlord. Landlord shall be furnished a copy
of the policy or suitable certificate evidencing insurance coverage prior to
occupancy of the Premises and a certificate evidencing renewal of said policy
upon the scheduled termination date.
SERVICES AND UTILITIES
17.
Provided that Tenant is not in default hereunder, Landlord agrees to
furnish to the Premises during 6:30am to 5:30pm on weekdays, nationally
recognized holidays excluded, and subject to the rules and regulations of the
Building of which the Premises are a part, electricity for normal lighting and
fractional horsepower office machines, heat and air conditioning required in
Landlord's reasonable judgment for the comfortable use and occupation of the
Premises, and janitorial services. Janitorial services shall not include
cleaning of carpets and drapes other than vacuuming. Landlord shall also
maintain and keep lighted the common stairs, common entries and toilet rooms in
the Building of which Premises are a part. Landlord agrees to provide Tenant
with reasonable use of the intra-Building telephone and network cabling.
Landlord shall meet any need Tenant may have for extraordinary
telecommunications services, provided that Tenant shall pay as Additional Rent,
the actual charges for such use, including the cost of installing any necessary
additional riser capacity as reasonably determined by Landlord.
Tenant will not, without written consent of Landlord, use any apparatus or
device in the Premises, including, but not limited to electronic data processing
machines and machines using in excess of 120 volts which will in any way
increase the amount of
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electricity usually furnished or supplied for the use of the Premises as general
office space; nor connect with electric current, except through existing
electrical outlets in the Premises, any apparatus or device for the purpose of
using electric current. If Tenant shall require water or electric current in
excess of that usually furnished or supplied for the use of the Premises as
general office space, Tenant shall first procure the written consent of
Landlord, which Landlord may refuse. Landlord may cause a water meter or
electrical current meter to be installed in the Premises to measure the amount
of water and electrical current consumed for any such use. The cost of
installation, maintenance, and repair of such meters shall be paid for by
Tenant, and Tenant agrees to pay to Landlord promptly upon demand for all such
water and electric current consumed as shown by said meters at the rates charged
for such services by the local utility furnishing the same. If a separate meter
is not installed, the excess cost for such water and electric current will be
established by an estimate made by the utility company or an electrical
engineer, at Landlord's discretion. Wherever heat generating machines or
equipment are used in the Premises which affect the temperature otherwise
maintained by the air conditioning system, Landlord reserves the right to
install supplementary air conditioning units in the Premises and the cost
thereof, including the cost of installation and the cost of operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord.
Except as may be provided elsewhere in this Lease, Landlord shall not be
liable for any loss or damage to Tenant, and Tenant shall not be entitled to any
abatement or reduction of rent as a result of Landlord's failure to provide
access, utilities or services that Landlord is required to provide hereunder,
when such failure is beyond Landlord's reasonable control including, without
limitation, accident, breakage, repairs, shortage of materials or supplies,
strike, lockout, boycott, labor dispute, fire, earthquake, acts of God, rioting,
insurrection, war, government action, or acts of the public enemy.
PROPERTY TAXES
18.
Tenant agrees to pay, before delinquency, any and all taxes levied or
assessed and which become payable during the term hereof upon Tenant's
equipment, furniture, fixtures, leasehold improvements and other personal
property located in the Premises.
RULES AND REGULATIONS
19.
Tenant agrees to observe and comply with the Rules and Regulations attached
to this Lease and all reasonable modifications of and additions thereto from
time to time put into effect by Landlord provided that the terms thereof do not
contradict or contravene the terms of the Lease. Landlord shall not be
responsible to Tenant for the nonperformance by any other Tenant or occupant of
the Building of these Rules and Regulations.
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ENTRY BY LANDLORD
20.
Landlord reserves and shall at any and all times have the right, upon
written notice to Tenant at least twenty four (24) hours in advance (except in
case of emergencies or routine janitorial services), to enter the Premises,
inspect the same, supply janitorial service and any other service to be provided
by Landlord to Tenant hereunder, to submit said Premises to prospective
purchasers or tenants, to post notices of non-responsibility, and to alter,
improve or repair the Premises and any portion of the Building of which the
Premises are a part that landlord may deem necessary or desirable, without
abatement of rent, and may for that purpose erect scaffolding and other
necessary structures where reasonably required by the character of the work to
be performed, always providing that the entrance of the Premises shall not be
blocked thereby and further providing that the business of the Tenant shall not
be interfered with unreasonably. Tenant hereby waives any claim for damages or
for any injury or inconvenience to or interference with Tenant's business, any
loss of occupancy or quiet enjoyment of the Premises, and any other loss
occasioned thereby, unless caused by the negligence or willful misconduct of
Landlord or Landlord's agents, employees or contractors. For each of the
aforesaid purposes, Landlord shall at all times have and retain a key with which
to unlock all of the doors in, upon and about the Premises, excluding Tenant's
vaults, safes and files, and Landlord shall have the right to use any and all
means which Landlord may deem proper to open said doors in an emergency in order
to obtain entry to the Premises without liability to Tenant except for any
failure to exercise due care for Tenant's property. Any entry to the Premises
obtained by Landlord by any of said means, or otherwise, shall not under any
circumstances be construed or deemed to be a forceable or unlawful entry into,
or a detainer of, the Premises or an eviction of Tenant from the Premises or any
portion thereof.
DAMAGE BY FIRE, ETC.
21.
In the event the Premises or the Building of which the Premises are a part
is damaged by fire or other casualty, Landlord shall forthwith repair the same
provided such repairs can be made within one hundred eighty (180) days, under
the laws and regulations of the state, federal, county and municipal authorities
and this Lease shall remain in full force and effect except that Tenant shall be
entitled to a proportionate abatement in rent while such repairs are being made,
such reduction to be based pro rata to the extent to which the making of such
repairs shall interfere with the use and occupancy of Tenant in the Premises. If
the damage is due to the fault or neglect of Tenant or its employees, there
shall be no abatement of rent. If such repairs cannot be made within one hundred
eighty (180) days, Landlord shall have the option either (1) to repair or
restore such damage, this lease continuing in full force and effect with rent to
be proportionately abated as provided in this Article, or (2) give notice to
Tenant at any time within thirty (30) days after such damage terminating this
Lease as of the date specified in the notice, which date shall be not fewer than
thirty (30) nor more than sixty (60) days after giving such notice. In the event
of the giving of such notice this Lease shall expire and all interest of the
Tenant in
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the Premises shall terminate on the date specified in the notice and the rent,
reduced by any proportionate reduction based upon the extent, if any, to which
said damage interfered with the use and occupancy of Tenant, shall be paid to
the date of termination, Landlord agreeing to refund to the Tenant any rent paid
in advance for any period of time subsequent to such date. Landlord shall not be
required to repair any injury or damage by fire or other cause, or to make any
repairs or replacements of any panelings, decorations, partitions, railings,
ceilings, floor coverings, office textures or any other property installed in
the Premises by Tenant.
If the Building is damaged or destroyed to the extent that the Building
cannot with reasonable diligence be fully repaired or restored by Landlord
within one hundred eighty (180) days after the date of the damage or
destruction, Tenant may terminate this lease immediately upon notice thereof to
Landlord and the obligation of Tenant, if any, to pay Rent to Landlord shall
terminate as of the date of such notice. If this lease is not terminated despite
damage or destruction to the Building, and Landlord fails to proceed with
reasonable diligence to rebuild, or if the building is not rebuilt within one
hundred eighty (180) days of the event causing the damage or destruction, Tenant
may, at its option, terminate this Lease upon notice to Landlord. If the
Building is damaged or destroyed during the last twelve (12) months of the term
of the Lease, and the Building cannot be fully repaired or restored by landlord
within sixty (60) days after the date of damage or destruction, either Landlord
or Tenant may terminate this lease upon notice to the other.
Tenant shall not be entitled to any compensation or damages from landlord
from loss of the use of the whole or any part of the Premises, Tenant's personal
property, or any inconvenience or annoyance occasioned by such damage, repair,
reconstruction, or restoration.
INVOLUNTARY ASSIGNMENT
22.
No interest of Tenant in this Lease shall be assignable by operation of
law (including, without limitation, the transfer of this Lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary
assignment:
1. If Tenant is or becomes bankrupt or insolvent, makes an assignment for
the benefit of creditors, or institutes a proceeding under the Bankruptcy
Act in which Tenant is the bankrupt; or, if Tenant is a partnership or
consists of more than one person or entity, if any partner of the
partnership or other person or entity is or becomes bankrupt or insolvent,
or makes an assignment for the benefit of creditors;
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2. If a writ of attachment or execution is levied on this Lease;
3. If, in any proceeding or action to which Tenant is a party, a receiver
is appointed with authority to take possession of the Premises.
An involuntary assignment shall constitute a default by Tenant and Landlord
shall have the right to elect to terminate this Lease, in which case this Lease
shall not be treated as an asset of Tenant.
TENANT'S DEFAULT
23.
The occurrence of any of the following shall constitute a default by
Tenant:
1. Failure to pay rent when due, if the failure continues for three (3)
business days after written notice has been given to Tenant.
2. Abandonment and vacation of the Premises (failure to occupy and
operate the Premises for fifteen (15) consecutive days shall be deemed an
abandonment and vacation).
3. Failure to perform any other provision of this Lease if the failure to
perform is not cured within thirty (30) days after notice has been given to
Tenant. If the default cannot reasonably be cured within thirty (30) days,
Tenant shall not be in default of this Lease if Tenant commences to cure
the default within the thirty- day period and diligently and in good faith
continues to cure the default.
Notices given under this Article shall specify the alleged default and the
applicable Lease provisions, and shall demand that Tenant perform the provisions
of this Lease or pay the rent that is in arrears, as the case may be, within the
applicable period of time, or quit the Premises. No such notice shall be deemed
a forfeiture or a termination of this Lease unless Landlord so elects in the
notice.
REMEDIES IN DEFAULT
24.
Landlord shall have the following remedies if Tenant commits a default.
These remedies are not exclusive; they are cumulative and are in addition to any
remedies now or later allowed by law.
1. Landlord may continue this Lease in full force and effect, and the
Lease will continue in effect as long as landlord does not terminate
Tenant's right to possession, and Landlord shall have the right to collect
rent when due. During the period Tenant is in default, Landlord may enter
the Premises and relet them, or any part of them, to third parties for
Tenant's account. Tenant shall be liable
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immediately to Landlord for all costs Landlord incurs in reletting the
Premises, including, without limitation, brokers' commissions, expenses of
remodeling the Premises required by the reletting, and like costs.
Reletting may be for a period shorter or longer than the remaining term of
this Lease. Tenant shall pay to Landlord the rent due under this Lease on
the dates the rent is due, less the rent Landlord receives from any
reletting. No act by Landlord allowed by this Article shall terminate this
Lease unless Landlord notifies Tenant that Landlord elects to terminate
this Lease. After Tenant's default and for as long as Landlord does not
terminate Tenant's right to possession of the Premises, if Tenant obtains
Landlord's consent, Tenant shall have the right to assign or sublet its
interest in this Lease, subject to the provisions of Article 13 of this
Lease, but Tenant shall not be released from liability. Landlord's consent
to a proposed assignment or subletting shall not be unreasonably withheld.
2. Landlord may terminate Tenant's right to possession of the Premises at
any time. No act by Landlord other than giving notice to Tenant shall
terminate this Lease. Acts of maintenance, efforts to relet the Premises,
or the appointment of a receiver on Landlord's initiative to protect
Landlord's interest under this Lease shall not constitute a termination of
Tenant's right to possession. On termination, Landlord has the right to
recover from Tenant:
a. The worth, at the time of the award issued by a court of law or equity
(hereinafter "award"), of the unpaid rent that had been earned at the
time of termination of this Lease;
b. The worth, at the time of the award, of the amount by which the unpaid
rent that would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent
that Tenant proves could have been reasonably avoided;
c. The worth, at the time of the award, of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the
amount of the loss of rent that Tenant proves could have been
reasonably avoided; and
d. Any other amount, and court costs, necessary to compensate Landlord
for all detriment proximately caused by Tenant's default.
"The worth, at the time of the award," as used in subdivisions (a) and (b)
of this Article, is to be computed by allowing interest at the maximum rate an
individual is permitted by law to charge. "The worth, at the time of the award,"
as referred to in subdivision (c) of this Article, is to be computed by
discounting the amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus 1%
18
<PAGE>
3. If Tenant is in default of this Lease, Landlord shall have the right
to have a receiver appointed to collect rent and conduct Tenant's business.
Neither the filing of a petition for the appointment of a receiver nor the
appointment itself shall constitute an election by Landlord to terminate
this Lease.
4. Landlord, at any time after Tenant commits a default, may cure the
default at Tenant's cost. If Landlord at any time, by reason of Tenant's
default, pays any sum or does any act that requires the payment of any sum,
the sum paid by Landlord shall be due immediately from Tenant to Landlord
at the time the sum is paid, and if paid at a later date shall bear
interest at the maximum rate an individual is permitted by law to charge
from the date the sum is paid by Landlord until Landlord is reimbursed by
Tenant. The sum, together with interest on it, shall be Additional Rent.
EMINENT DOMAIN
25.
If more than twenty-five percent (25% ) of the Premises shall be taken or
appropriated by any public or quasi-public authority under the power of eminent
domain, either party hereto shall have the right, at its option, to terminate
this Lease, and Landlord shall be entitled to any and all income, rent, award,
or any interest therein whatsoever which may be paid or made in connection with
such public or quasi-public use or purpose, and Tenant shall have no claim
against Landlord for the value of any unexpired term of this Lease. If either
less than or more than twenty-five percent (25%) of the Premises is taken, and
neither party elects to terminate as herein provided, the rental thereafter to
be paid shall be equitably reduced. If any part of the Building other than the
Premises may be so taken or appropriated, Landlord shall have the right at its
option to terminate this Lease and shall be entitled to the entire award as
above provided.
PARKING
26.
Throughout the term hereof, Tenant shall have the right to the use of
twenty five (25) parking stalls on a non-exclusive basis for parking on such
terms and conditions as may be established and modified in writing by Landlord,
provided that the terms thereof do not contradict or contravene the terms of
this Lease. Use of parking stalls is limited to passenger cars and vans.
Landlord retains the right to impose parking fees and to change the rates from
time to time as it so determines with the exception that during the initial term
there shall be no parking fees. Tenant shall not use any loading area without
the prior written consent of Landlord.
19
<PAGE>
SURRENDER OF PREMISES
28.
On expiration of the term, Tenant shall surrender to Landlord the Premises
and all Tenant improvements and alterations in good condition, except for
alterations that Tenant has a right to remove or obligated to remove under the
provisions of this Lease, reasonable wear and tear and events outside the
reasonable control of Tenant. Tenant shall remove all of its personal property
within the above stated time. Tenant shall perform all restoration made
necessary by the removal of any alterations or Tenant's personal property within
the time period stated in this Article.
Landlord may elect to retain or dispose of in any manner any alterations or
Tenant's personal property that Tenant does not remove from the Premises on
expiration or termination of the term as allowed or required by this Lease by
giving at least ten days' notice to Tenant. Title to any such alterations or
Tenant's personal property that the Landlord elects to retain or dispose of on
expiration of the ten day period shall vest in Landlord. Tenant waives all
claims against Landlord for any damage to Tenant resulting from Landlord's
retention or disposition of any such alterations or Tenant's personal property.
Tenant shall be liable to Landlord for Landlord's costs for storing, removing,
and disposing of any alterations or Tenant's personal property.
If Tenant fails to surrender the Premises to Landlord on expiration of the
term as required by this Article, Tenant shall hold Landlord harmless for
damages resulting from Tenant's failure to surrender the Premises, including,
without limitation, claims made by a succeeding tenant resulting from Tenant's
failure to surrender the Premises.
HOLDING OVER
29.
If Tenant, with Landlord's consent, remains in possession of the Premises
after expiration or termination of the term, or after the date in any notice
given by Landlord to Tenant terminating this Lease, such possession by Tenant
shall be deemed to be a month-to-month tenancy terminable on thirty (30) days'
notice given at any time by either party. During any such month-to-month
tenancy, Tenant shall pay 125% of the rent required by Articles 4 and 7 of this
Lease on or before the first day of each month. All provisions of this Lease
except those pertaining to the term of the Lease shall apply to the month-
to-month tenancy.
LATE PAYMENTS & INTEREST
30.
Tenant hereby acknowledges that late payment by Tenant to Landlord of any
sums due hereunder will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which is extremely difficult to ascertain. Such costs
include, but are not limited
20
<PAGE>
to, processing and accounting charges. Accordingly, any payment of any sum to be
paid by Tenant not paid by its due date shall be subject to a late charge equal
to five percent (5%) of such payment. Landlord and Tenant agree that this late
charge represents a reasonable estimate of such costs and expenses and is fair
compensation to Landlord for its loss suffered by such late payment by Tenant.
Any sum to be paid by Tenant pursuant to this Lease not paid when due shall
bear interest from and after the due date until paid at a rate equal to the
lesser of (a) the greater of the Prime Rate then charged by Wells Fargo Bank
plus two percent (2%) or (b) the maximum rate permitted by law.
ARBITRATION
31.
With the exception of any unlawful detainer action, any dispute concerning
interpretation of the Lease or its enforceability, any dispute concerning
default by either party, and any dispute that may require imposition of an
injunction or other court order to enforce an award, any controversy or claim
arising out of or relating to this Lease, or the breach thereof, shall be
settled by arbitration in accordance with the Rules of the American Arbitration
Association, and judgment upon the award rendered by the Arbitrator(s) may be
entered in any court having jurisdiction thereof. All arbitration hearings shall
be conducted in California.
REAL ESTATE BROKER
32.
Landlord and Tenant each warrants and represents for the benefit of the
other that it has had no dealings with any real estate broker or agent in
connection with the negotiation of this Lease other than Cornish & Carey
("Broker"), and that it knows of no real estate brokers or agents other than
Brokers who are or might be entitled to a real estate brokerage commission or
finder's fee in connection with this Lease. Each party shall indemnify and hold
harmless the other from and against any and all liabilities or expenses arising
out of claims made by any broker or individual other than Brokers for
commissions or fees resulting from the actions of the indemnifying party in
connection with this Lease. Landlord shall pay any commission due to broker with
respect to this Lease in accordance with the separate listing agreement between
CB Commercial and Landlord. Real Estate Fees shall be split 50/50 between
Landlord Broker (CB Commercial) and Tenant Broker (Cornish & Carey) in
accordance with listing agreement an d shall indemnify and hold Tenant harmless
from and against any and all liabilities or expenses arising out of claims made
by Brokers for commissions or fees resulting from this Lease.
21
<PAGE>
GENERAL PROVISIONS
33.
(I) PLATS AND RIDERS. Clauses, plats and riders, if any, signed by the
Landlord and the Tenant and endorsed on or affixed to this Lease are a part
thereof.
(II) WAIVER. The waiver by Landlord of any term, covenant, or condition
herein contained shall not be deemed to be a waiver of such term, covenant, or
condition on any subsequent breach of the same or any other term, covenant, or
condition herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver by Landlord of any preceding breach
by Tenant of any term, covenant and condition of this Lease, other than the
failure of the Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of the acceptance of
such rent.
(III) NOTICES. All Notices herein provided to be given, or which may be
given, by either party to the other, shall be deemed to have been fully given
when made in writing and deposited in the United States mail, certified and
postage prepaid; and addressed as follows: To the Tenant at 6203 San Ignacio,
Suite _, San Jose, CA. and to the Landlord, Attention: Real Property Management,
at 1275 Market Street, San Francisco, California 94103. Nothing herein contained
shall preclude the giving of any such written notice by personal service. The
address to which notices shall be mailed as aforesaid to either party may be
changed by written notice given by such party to the other, as herein provided.
(IV) MARGINAL HEADINGS. The marginal headings and titles to the Articles
of this Lease are not a part of this Lease and shall have no effect upon the
construction or interpretation of any part thereof.
(V) TIME. Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.
(VI) SUCCESSORS AND ASSIGNS. The covenants and conditions herein
contained subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators, and assignees of the parties
hereto.
(VII) RECORDATION. Tenant shall not record this Lease or a short form
memorandum hereof without the prior written consent of the Landlord.
(ViII) QUIET POSSESSION. Upon Tenant paying the rent reserved hereunder
and observing and performing all of the covenants, conditions, and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.
22
<PAGE>
(IX) PRIOR AGREEMENTS. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease and
no prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until executed by both parties hereto.
(X) INABILITY TO PERFORM. This Lease and the obligations of Tenant
hereunder shall not be affected or impaired because Landlord is unable to
fulfill any of its obligations hereunder or is delayed in doing so, if such
inability or delay is caused by reason of strike, labor trouble, acts of God, or
any other cause beyond the reasonable control of the Landlord.
(XI) SUBORDINATION. This Lease is and shall be prior to any encumbrance
now of record and any encumbrance recorded after the date of this Lease
affecting the Building, other improvements, and land of which the Premises are a
part.
If, however, a lender requires that this Lease be subordinate to any such
encumbrance, this Lease shall be subordinate to that encumbrance, if Landlord
first obtains from the lender a written agreement that provides substantially
the following:
As long as Tenant performs its obligations under this Lease, no foreclosure
of, deed given in lieu of, foreclosure of, or sale under the encumbrance, and no
steps or procedures taken under the encumbrance, shall affect Tenant's rights
under this Lease.
The provisions in Article 25 of this Lease concerning the disposition of
any condemnation award, shall prevail over any conflicting provisions in the
encumbrance.
Tenant shall attorn to any purchaser at any foreclosure sale, or to any
grantee or transferee designated in any deed given in lieu of foreclosure.
Tenant shall execute the written agreement and any other documents required by
the lender to accomplish the purposes of this Article.
(XII) ESTOPPEL CERTIFICATE.
(a) Tenant shall at any time upon not fewer than fifteen (15) days prior
written notice from Landlord execute, acknowledge, and deliver to
Landlord a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that his Lease as so
modified, is in full force and effect) and the date to which the rent
and other charges are paid in advance, if any, and (ii) acknowledging
that there are not, to Tenant's knowledge, any uncured
23
<PAGE>
defaults on the part of Landlord hereunder, or specifying such
defaults if any are claimed. Any such statement may be conclusively
relied upon by any prospective purchaser or encumbrancer of the
Premises.
(b) Tenant's failure to deliver such statement within such time shall
be conclusive upon Tenant (i) that this Lease is in full force and
effect, without modification except as may be represented by
Landlord, (ii) that there are no uncured defaults in Landlord's
performance, and (iii) that not more than one month's rent has been
paid in advance.
(c) If Landlord desires to finance or refinance the Premises, or any
part thereof, Tenant hereby agrees to deliver to any lender
designated by Landlord such financial statement of Tenant as may be
reasonably required by such lender. All such financial statements
shall be received by Landlord in confidence and shall be used only
for the purposes herein set forth.
(XIII) SALE BY LANDLORD. In the event of a sale or conveyance by Landlord
of the Building containing the Premises, the same shall operate to release
Landlord from any future liability upon any of the covenants or conditions,
express or implied, herein contained in favor of Tenant and in such event Tenant
agrees to look solely to the responsibility of the successor in interest of
Landlord in and to this Lease. This Lease shall not be affected by any such
sale, and Tenant agrees to attorn to the purchaser or assignee.
(XIV) NAME. Tenant shall not use the name of the Building for any purpose
other than as an address of the business to be conducted by the Tenant in the
Premises without prior written consent of Landlord. Tenant also shall not use
the name State Compensation Insurance Fund for any purpose without prior written
consent of Landlord.
(XV) SEVERABILITY. Any provision of this Lease which shall prove to be
invalid, void, or illegal shall in no way affect, impair or invalidate any other
provisions hereof and such other provisions shall remain in full force and
effect.
(XVI) CUMULATIVE REMEDIES. No remedy or election hereunder shall be
deemed exclusive but shall wherever possible, be cumulative with all other
remedies at law or in equity.
(XVII) CHOICE OF LAW. This Lease shall be governed by the laws of the
State of California.
(XVIII) DELIVERY. Delivery of this Lease to Tenant does not constitute an
offer to lease or reservation of right in Tenant's favor and-this Lease shall
not be binding upon Landlord unless and until such time as Landlord shall have
the Lease signed and delivered to Tenant.
24
<PAGE>
ADDENDUM
BASIC MONTHLY RENT
4a.
<TABLE>
<CAPTION>
Month Sq. Ft. X (Rate/Sq. Ft./Month/F.S.) Monthly Rent
<S> <C> <C> <C>
01 -06 5,395 sq. ft. $1.522 /Sq. Ft./Mo./Full Service $ 8,211.19
07-12 7,195 sq. ft. $1.522 /Sq. Ft./Mo./Full Service $10,950.79
13-24 7,195 sq. ft $1.584 /Sq. Ft./Mo./Full Service $11,396.88
25-36 7,195 sq. ft $1.644 /Sq. Ft./Mo./Full Service $11,828.58
37-48 7,195 sq. ft $1.709 /Sq. Ft./Mo./Full Service $12,296.26
49-60 7,195 sq. ft $1.777 /Sq. Ft./Mo./Full Service $12,785.52
</TABLE>
ABATED RENT
35.
There is a space of 1,800 Sq. Ft. that is not needed by tenant at initial
occupancy. Provided Tenant is not in default beyond any applicable cure period,
Landlord agrees to abate rent on the subject 1,800 Sq. Ft. for a period of six
months (1,800 X $1.522 - $2,739.60 X 6 months - $16,437.60 in total rent
abatement). Said abatement shall be on a monthly basis. Tenant shall receive the
abatement by reducing the monthly contract rent of $10,950.79 by $2,739.60
resulting in monthly payments of $8,211.19 for the first six months.
TENANT IMPROVEMENTS
36.
The Landlord's standard improvement package includes $25.00 per useable sq.
ft. (Approximately $160,600.00). The current tenant improvement cost is
estimated at $174,968.20, see ATTACHED COST BREAKDOWN. This equates to an
additional $2.24 per useable foot (approximately $14,368) for specialized over-
standard improvements. Landlord agrees to absorb 50% ($7,184) of the over-
standard tenant improvements. The remainder ($7,184) of over-standard
improvements shall be reimbursed to Landlord on a repayment schedule over five
(5) year amortization at 8% per annum. The amortization adds approximately
$0.022 per rentable sq. ft. per month to the base rate of $1.50 and is reflected
in item 4a of this addendum.
See mutually agreed upon space plans marked as "Exhibit B".
(Note: The over-standard improvements are based upon the best available cost
estimates at the time of this lease drafting and may be subject to change in
accordance with amortization formula).
ADDITIONAL SECURITY/GUARANTEE
37.
Based on the extent of Tenant Improvements, Landlord and Tenant agree that
one of the
25
<PAGE>
following forms of added security/collateral shall be provided; at final
execution, Tenant shall provide at Tenant's sole election:
(1) three months security deposit (equal to $32,852.37) or
(2) personal lease guarantee by an entity that has a net worth in excess of
$750,000.00 or
(3) DATASURF reaches a net worth of a minimum of $1.5 million and provides
written documentation subject to confirmation by landlord.
In the event DATASURF chooses item (1) or (2) as their collateral, it is hereby
understood and agreed that, provided Tenant is not in default during the first
18 months, Landlord shall deem this to be a sufficient indication of financial
stability and at that time shall implement one of the following adjustments, as
applicable:
In item (1), reduce the security deposit to one month
Or
(2), release the guarantor from further liability.
Further if at any time during the lease term Tenant achieves a net worth in
excess of $1.5 million and shows written documentation, subject to confirmation
by landlord, this shall trigger the release of collateral as stated above.
IN WITNESS WHEREOF, the parties have executed this Lease on the date first
written above.
LANDLORD/STATE COMPENSATION INSURANCE FUND
- ------------------------
By /s/ C. Raiche
- ------------------------
C. RAICHE
- ------------------------
VICE PRESIDENT
- ------------------------
TENANT/DATASURF
DATASURF, INC.
- ------------------------
By /s/ David Blumstein
________________________
President and CEO
- ------------------------
26
<PAGE>
ADDENDUM II TO THAT CERTAIN OFFICE BUILDING LEASE DATED DECEMBER 19,1996, FOR
THE PROPERTY AT 6203 SAN IGNACIO AVENUE, SAN JOSE, CALIFORNIA, BY AND BETWEEN
STATE COMPENSATION INSURANCE FUND, AS LANDLORD, AND DATA SURF (A.K.A. TOP TIER
SOFTWARE, INC.), AS TENANT.
RECITALS
Tenant has requested and Landlord has agreed to lease to Tenant an additional
7,016 rentable square feet (the "Expansion Premises") over and above the amount
of (the "Original Premises") 7,195 square feet leased by Landlord to Tenant in
the above-referenced Lease and its Addendum I. Said additional space shall be
leased to Tenant on all the same terms and conditions as contained in the Lease
except that Landlord and Tenant hereby agree to the following modifications to
the Articles as referenced below by name and number which correspond to the same
Articles of the Lease. Landlord agrees to paint and install carpet in the
Expansion Premises.
PARTIES (PG.1): Data Surf has changed its corporate identity to Top Tier Inc., a
- --------------
Delaware Corporation.
ARTICLE 1. PREMISES: The "Original Premises" (currently 7,195 rentable sq. ft.
- -------------------
on the second floor) shall be increased by 7,016 rentable square feet (the
"Expansion Premises") for a new total of 14,211 rentable square feet.
ARTICLE 2: Terms of this Amendment shall be effective August 1, 1998 and shall
- ---------
end on July 31, 2003. (Note: This term extends the original lease term by 17
months from February 28, 2002 to July 31, 200-' ).)
ARTICLE 3A. MONTHLY BASIC RENT: On August 1, 1998, Tenant agrees to pay Landlord
- ------------------------------
as Basic Rent the sum of Twenty-Five Thousand One Hundred Forty Eight and
24/100ths dollars ($25,148.24) per month in advance on the first day of each
month. (See Exhibit BI Rental Schedule. Attached hereto and made a part hereof
for total rental calculations including the original rental.)
ARTICLE 5. ADDITIONAL SECURITY DEPOSIT: Upon execution hereof, Tenant shall
- --------------------------------------
deposit with Landlord the additional sum of Thirteen Thousand Seven Hundred
Fifty One and 36/100ths dollars ($13,751.36).
ARTICLE 6. OPERATING EXPENSE: Based on the combined total square footage as a
- ----------------------------
percentage of the overall rentable footage in the building. Tenant shall pay
Twelve and 30/100 percent (12.3 %) of any excess of the defined Operating
Expenses over the amount of Operating Expenses paid or incurred by Landlord for
the Base Year.
ARTICLE 7. RENTAL ADJUSTMENTS: See attached Exhibit B I - Rental Schedule.
- -----------------------------
<PAGE>
Except as amended herein, all other terms and conditions of the Lease shall
remain in full force and effect.
Execution this , 1998
Landlord
State Compensation Insurance Fund
/s/ Jim True
_________________________
Jim True
Real Property Manager
TENANT
Top Tier Software
/s/: Herb Blumstein
- ----------------------------
Attachment - Exhibit B I Rental Schedule
<PAGE>
Cont: Article 7
Rental Schedule
Original Premises
(2/nd/ Floor)
- ------------------------------------------------------------------------------
Date SF/MO/FS Monthly Rent
- ------------------------------------------------------------------------------
8/1/98 - 7/31/99 7,195SF@$1.584 SF/MO/FS $11,396.88
- ------------------------------------------------------------------------------
8/1/99 - 7/31/00 7,195SF@$1.644 SF/MO/FS $11,828.58
- ------------------------------------------------------------------------------
8/1/00 - 7/31/01 7,195SF@$1.709 SF/MO/FS $12,296.26
- ------------------------------------------------------------------------------
8/1/01 - 7/31/02 7,195SF@$1.777 SF/MO/FS $12,785.52
- ------------------------------------------------------------------------------
8/1/02 - 7/31/03 7,195SF@$1.83 SF/MO/FS $13,166.85
- ------------------------------------------------------------------------------
Expansion Premises
(1/st/ Floor)
- ------------------------------------------------------------------------------
Date SF/MO/FS Monthly Rent
- ------------------------------------------------------------------------------
8/1/98 - 7/31/99 7,016SF@$1.96 SF/MO/FS $13,751.36
- ------------------------------------------------------------------------------
8/1/99 - 7/31/00 7,016SF@$2.02 SF/MO/FS $14,172.32
- ------------------------------------------------------------------------------
8/1/00 - 7/31/01 7,016SF@$2.08 SF/MO/FS $14,593.28
- ------------------------------------------------------------------------------
8/1/01 - 7/31/02 7,016SF@$2.14 SF/MO/FS $15,014.24
- ------------------------------------------------------------------------------
8/1/02 - 7/31/03 7,016SF@$2.21 SF/MO/FS $15,505.36
- ------------------------------------------------------------------------------
Combined
- ------------------------------------------------------------------------------
Date Blended -- SF/MO/FS Monthly Rent
- ------------------------------------------------------------------------------
8/1/98 - 7/31/99 $1.77 $25,148.24
- ------------------------------------------------------------------------------
8/1/99 - 7/31/00 $1.83 $26,000.90
- ------------------------------------------------------------------------------
8/1/00 - 7/31/01 $1.89 $26,889.54
- ------------------------------------------------------------------------------
8/1/01 - 7/31/02 $1.96 $27,799.76
- ------------------------------------------------------------------------------
8/1/02 - 7/31/03 $2.02 $28,672.21
- ------------------------------------------------------------------------------
EXHIBIT B1
<PAGE>
EXHIBIT 10.6
RENTAL AGREEMENT
----------------
Made and executed in Ra'anana, July 1, 1998
Between: Meir Hakharoshet Investments and Trade Ltd.
Private Company 51-163938-7
Of 4 Hakharoshet St., Industrial Zone
PO Box 2050, Ra'anana; fax: 09-915529
(Hereinafter "THE LESSOR")
And: Toptier Israel Ltd.
Private Company 51-174364-3
Of 11 Hasadna St., Industrial Zone, Ra'anana
(Hereinafter "THE LESSEE")
WHEREAS The Lessor is the sole occupier and is entitled to be registered as the
perpetual lessor of plot 31/1 in block 8981, at 4 Hakharoshet St., Ra'anana
(hereinafter "THE PLOT");
AND WHEREAS The Lessor is establishing/has established on the Plot a building
comprising several floors (hereinafter "THE BUILDING");
AND WHEREAS The Lessor wishes to let to the Lessees, by way of unprotected
rental, and the Lessees wish to rent from the Lessors, by way of unprotected
rental, an area on the 2/nd/ floor of the Building, and 2 parking places in the
parking lot of the Building (when completed), as labeled on the diagram attached
to this contract as APPENDIX A (hereinafter "THE PREMISES") for such period and
time, and on such conditions, as detailed in this contract below;
Accordingly, the Parties have declared, conditioned, and agreed as
------------------------------------------------------------------
follows:
- -------
1. PREAMBLE; APPENDICES
--------------------
<PAGE>
1.1 The Preamble to this agreement constitutes an integral part thereof and is
considered part of its conditions.
1.2 The appendices to this agreement attached thereto constitute an integral
part of the agreement and of its conditions.
2. NON-APPLICABILITY OF THE TENANT PROTECTION LAW
----------------------------------------------
2.1 It is agreed by the Parties that the Lessee has not paid, and has not
undertaken to pay in any manner, and the Lessor has not received, and has not
undertaken to receive in any manner, any key money and/or payment whatsoever on
account of and/or in connection with and/or relating to the rental of the
Premises, with the exception of the rental fees in accordance with this
agreement.
2.2 It is agreed by the Parties that the Tenant Protection Act (Combined
Version), 5732-1972, does not apply to this rental, and accordingly this rental
is not protected. It is further agreed that any provisions of an alternative or
analogous law to be enacted in the future with the purpose of protecting a
tenant in a commercial building shall not apply to this agreement, and that the
Lessee waives any claim in connection with the above.
3. THE RENTAL
----------
3.1 The Lessor hereby lets the Premises to the Lessee, and the Lessee hereby
rents the Premises from the Lessor, all in accordance with and subject to the
provisions of this agreement.
3.2 The purpose of the rental is to pursue a business in the computer and
software industry. The Lessor declares that the Building was properly
constructed, and that there is no impediment to obtaining a business license by
the Lessee for the purpose of the rental.
3.3 The Lessee hereby undertakes not to use the Premises for any purpose other
than as detailed above without receiving the prior and
2
<PAGE>
written approval of the Lessor thereto, at the complete discretion of the
Lessor.
4. RENTAL PERIOD
-------------
4.1 The rental period is commencing from July 1, 1998 and through March 14,
2003 (hereinafter "THE RENTAL PERIOD.") The Rental Period is divided as follows:
(A) The initial period, during which the condition of the Premises shall be a
shell only (i.e., without building works and adaptation) (hereinafter "the Shell
Period;") and (B) the period after the adaptation of the Premises as stated in
para. 8 below (hereinafter "the Adaptation Period.") The Shell Period and the
Adaptation Period together constitute the Rental Period.
4.2 Notwithstanding the above, the Lessee shall be entitled to terminate the
rental at any date, with prior notification of at least 90 days. If the Lessee
terminated the rental prematurely as stated, the Lessee shall pay the Lessor
compensation as follows:
(A) If the Lessee terminates the rental prior to the submission of plans for
the adaptation of the Premises to meet its needs as stated in para. 6 - (1) If
the termination of rental comes into effect prior to June 30, 1999, the
compensation shall be 3 months' rental x $7,500 per month (in addition to
payment of rental fees for the period of notification, viz. 90 days); (2) If the
termination of rental comes into effect after June 30, 1999, the compensation
shall be 2 months' rental x $9,000 per month (in addition to payment of rental
fees for the period of notification, viz. 90 days). It is hereby clarified that
the Lessor is entitled to undertake building works in the Premises as it shall
see fit immediately on receiving notification of the termination of rental
during the Shell Period. If the Lessor lets the Premises to a third party during
the period between the granting of notification of termination and the end of
the compensation period, the compensation shall be reduced by the amount paid by
the alternative tenant for the compensation period.
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(B) If the Lessee terminates the rental after submission of the plans for the
adaptation of the Premises to meet its needs, - a total of $1,500 for each month
remaining in the Rental Period - viz. from the date of termination of the rental
and through March 14, 2003. If the Lessor lets the Premises to another during
the period between the date of termination of the rental and March 14, 2003, the
compensation shall be limited to the lower of the following: (A) The above-
mentioned compensation; (B) The discrepancy between the rental fees paid by
another lessee and the rental fees that should have been paid in accordance with
this agreement (during the period between the date of termination of the rental
and March 14, 2003), with the addition of expenses - up to a ceiling of $25,000
- - actually incurred by the Lessor for the purpose of adapting the Premises to
another lessee.
Payment of compensation shall be every three months, in advance.
4.3 The Lessee has the right to extend the rental for an additional period of 3
years beyond March 14, 2003 (hereinafter "the Optional Period"), provided that
it has notified the Lessor of the realization of this option not later than
October 14, 2002. All the conditions of this agreement shall apply to the
Optional Period, with the exception of the contents of paras. 4.2 and 4.3.
5. RENTAL FEES
-----------
In return for the rental of the Premises, the Lessee shall pay the Lessor
rental fees as detailed below:
5.1 The Shell Period - rental fees for each month of rental during the Shell
----------------
Period, through June 30, 1999, shall be in the amount of $7,500. Rental fees for
each month of rental during the Shell Period after June 30, 1999, shall be in
the amount of $9,000.
4
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5.2 The Adaptation Period - rental fees for each month of rental during the
---------------------
Adaptation Period shall be in the amount of $12,000.
5.3 Rental fees shall be linked to the representative exchange rate of the US
dollar, with the addition of the US cost of living index.
5.4 Rental fees shall be paid every two months in advance.
5.5 Rental fees during the Optional Period (viz. from March 15, 2003) shall be
increased in the proportion of 7.5% above the last rental fees for the period
ending on March 14, 2003, shall be paid every 3 months in advance, and shall be
linked to the representative exchange rate of the US dollar, with the addition
of the cost of living index in the US.
5.6 Value Added Tax (hereinafter "VAT") shall be borne by the Lessee and paid
thereby in accordance with the rate established by law at the time of payment.
VAT shall be added to each payment of the rental fees, and shall be paid against
a proper tax invoice, by a separate check for the 15/th/ day of the following
month.
5.7 Rental fees do not include maintenance fees for the Building, the joint
property, the plumbing, gardening, outside lighting, installation and
maintenance of air-conditioning, subject to the content of para. 6.2. In return
for the said maintenance services, the Lessee shall pay the Lessor the amount of
$1,600 + VAT per month (calculated in accordance with $2 per square meter),
which shall be linked and paid as stated in paras. 5.3 - 5.4, MUTATIS MUTANDIS.
The maintenance fees shall be paid together with the rental fees, every two
months in advance.
5.8 Notwithstanding the content of para. 5.7 above, the maintenance fees for
the Shell Period shall be in the amount of $500 per month.
6. ADAPTATION
----------
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6.1 The Lessee is not permitted to actions for the construction or adaptation
of the Premises by itself. The Lessee is entitled to inform the Lessor at any
time during the rental period of its desire that the Lessor adapt the Premises
to meet the Lessee's needs, and shall submit to the Lessor all the plans for
implementation of the said adaptation. The plans shall be prepared in
coordination with the Lessor. The Lessor undertakes to implement the adaptation
works as stated.
6.2 The program specifications and timetable shall be as similar as possible to
the specifications and timetable for the adaptation of the Lessee's current
office floor in the Building. Any addition above the specifications shall be at
the Lessee' expense.
6.3 After receiving the plans, the Parties shall agree on the date of
completion of the adaptation works. The Adaptation Period shall commence after
the Lessor has completed the adaptation works as stated. In any case, the
adaptation shall be completed within 4 months from the date of receipt of all
the plans. If the Lessor is late in implementing the adaptation works, payment
of the rental fees shall be halted pending completion of the adaptation, and the
Lessor shall be liable to the compensation stated in para. 7.4 of the agreement
dated December 5, 1997. A change in the plan, or force majeure - such as war,
God forbid, closure of the Territories, etc. - shall cause delays in the
implementation of the works accordingly.
6.4 If the Lessor shall not commence the adaptation works within 30 days from
the date of receipt of all the plans, and/or shall not persist in the works in a
reasonable manner, and/or shall not complete the works within 6 months from the
date of receipt of the plans (subject to delays due to changes or force
majeure), the Lessee shall be entitled to undertake the adaptation itself, and
to deduct from the rental fees or from the compensation in accordance with para.
4.2 the amount actually expended on the implementation of the adaptation work.
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7. TAXES AND EXPENSES
------------------
7.1 The Lessor shall bear the payment of property tax, insofar as this shall
apply, on account of the Premises, and any other governmental tax that is and/or
shall be imposed on the owners of properties.
7.2 All payments on account of municipal taxes (ARNONA), business tax, business
license, sign levy for signs erected by the Lessee, electricity accounts
(including electricity for air-conditioning), water, telephone, and all routine
expenses for the possession and maintenance of the inside of the Premises (with
the exception of the maintenance of the Building as stated in para. 5.7, and
defects in the Building) shall be borne and paid by the Lessor, insofar as these
relate to the duration of the rental period, and/or through the date on which
the Lessee shall vacate the Premises and actually return them to the Lessor,
whichever is the later.
8. LESSOR'S DECLARATION AND UNDERTAKINGS
-------------------------------------
The Lessor hereby declares and undertakes as follows:
8.1 The Lessor's rights to the Premises are free of any debt and/or lien and/or
mortgage and/or attachment and/or any other third party right, with the
exception of a mortgage in favor of Bank Leumi Ltd.
8.2 There is no legal, contractual, or other impediment to the rental of the
Premises in accordance with the conditions of this agreement, and for the
purpose for which it is let.
8.3 The Building is intended to serve as a high-class building; the Lessor
shall prevent use of the Building from businesses causing noise, odor, or any
other nuisance liable to impair the image of the Building. For its part, the
Lessee is aware of the existing uses in the Building as of the date of signing
the agreement, and confirms that these are acceptable to it.
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<PAGE>
8.4 To maintain the Building, including: To repair within 7 days any defect in
the structure of the Premises due to defective construction, as well as repairs
to water plumbing, electricity, air-conditioning, faulty materials, and sealing.
If the Lessor fails to repair faults and defects as stated, and/or in urgent
cases when it is impossible to contact a representative of the Lessor, the
Lessee shall be entitled to implement the repair, and the Lessor shall reimburse
its expenses in implementing the repair. The conditions of para. 14.1 shall
apply, mutatis mutandis.
8.5 Insurance of the building of the Premises (including fire, earthquake, and
water risks), excluding the Premises itself and the contents thereof, shall be
made by the Lessor.
8.6 The Lessor shall make available facilities for the disposal of waste and
refuse from the building as instructed by the Municipality.
9. LESSEE'S DECLARATION
--------------------
The Lessee declares that it has viewed and examined the Premises, the
Building, and the environs thereof, and has found these to be suitable for its
needs, and it hereby waives any claim of defect, alternative, or unsuitability.
The Lessee is aware that the Lessor intends - but is not obliged - to undertake
additional works in and around the Building, and hereby waives any claim in
connection with these works, provided that the Lessor shall do its best to
ensure that the implementation of the said works shall not impede the reasonable
use of the Premises.
10. LESSEE'S UNDERTAKINGS
---------------------
The Lessee hereby undertakes:
10.1 To secure all the permits required for the lawful pursuit of its business
for the purpose of the rental as stated in para. 3.2, and which shall be paid
for by the Lessee.
10.2 To meet and implement all the instructions of a law, regulation, order, or
by-law relating to the maintenance and use of the Premises.
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<PAGE>
10.3 Not to hang signs and/or notices on the front of the Premises and/or on the
external wall of the Premises without the Lessor's prior and written consent.
The Lessee is aware that the signs in the Building are supposed to be uniform
signs as determined by the Building architect, and in coordination with the
Municipality of Ra'anana. The Lessee is responsible for obtaining a permit for
its signs, and for payment of the sign levy.
10.4 Not to install air-conditioning or heating (internal or external) or any
external facility on the Premises.
10.5 Not to undertake any change to the structure of the Premises without the
Lessor's prior and written consent at its complete discretion. If the Lessee
requests that an internal change be made to the Premises (or a change to the
structure with the Lessor's agreement as stated above), the Lessee shall ensure,
at its expense, the obtainment of all licenses and/or permits as necessary.
If the Lessor agrees to the implementation of changes as stated above, the
Lessor shall sign any document required to obtain a license for the
implementation of the said changes that shall be submitted thereto by the
Lessee.
10.6 If the Lessee has received the Lessor's prior and written consent to the
implementation of changes to the Premises, these changes shall be implemented at
the Lessor's expense and liability. To prevent any doubt, the Lessee shall be
liable for any damage of any type or kind that shall be caused to the Premises
and/or to other lessees and/or to any person for the work entailed in the
implementation of the said changes and/or during the course thereof, if any such
damage is caused.
10.7 To restore the Premises to their previous state, in the same condition as
delivered, with the exception of wear and tear deriving from
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<PAGE>
reasonable use, and including the removal of all additions or changes as
implemented by the Lessee, on the completion of the rental period, unless
otherwise agreed with the Lessor.
10.8 To maintain the Premises in a proper condition, to use them in a fair and
cautious manner, and to refrain from causing any damage to the Premises.
10.9 To ensure the cleanliness of the Premises and their immediate environs.
The Lessee undertakes not to place scrap, crates, objects, chattels, or refuse
outside the Premises. The Lessee shall bear the payment of any fines imposed by
the municipal authorities and/or the state institutions, if any, on account of
the breach of the provisions of this paragraph.
10.10 To repair any damage and/or defect (with the exception of wear and tear
deriving from reasonable use) as shall be caused to the Premises by the Lessee,
and/or by any person on its behalf, and/or by its visitors, clients, employees,
workers, and/or any other person during the rental period. If the Lessee fails
to comply with the conditions of this paragraph, the Lessor shall be entitled,
without derogating from its right to any other remedy or relief, to implement
the repairs at the Lessee's expense, and the Lessee hereby undertakes to pay the
Lessor any amount incurred by the Lessor for the purpose of implementing the
said repairs, against receipts to be presented to the Lessee by the Lessor for
payments to implement said repairs.
10.11 To pay promptly all payments imposed thereon in accordance with this
agreement. If it fails to make any payment, the Lessor shall be entitled to pay
the said on the Lessee's account, and the Lessee shall reimburse the amount paid
with the addition of interest as stated in para. 14.1.
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<PAGE>
10.12 To pay promptly the full rental fees for each rental period, whether the
Premises were used or not (subject to para. 4.2).
10.13 To insure the contents of the Premises and third party demands by
insurance as customary. The Lessor shall be an insuree and/or an additional
insuree in accordance with this policy. The insurance policies shall include a
clause concerning waiver of the right of indemnification vis-a-vis the Lessor
and its agents for damage caused thereby without malicious intent or gross
negligence; a mutual liability clause; and a clause requiring the Lessee's
insurance company to provide the Lessor with 60 days' notice in advance
concerning the annulment of the insurance policy.
10.14 To permit the Lessor, or its representative, to enter the Premises in a
reasonable manner and through prior arrangement with the Lessee, in order to
examine the condition of the Premises and/or in order to execute repairs therein
and/or in order to show the Premises to others. The Lessor shall be entitled to
enter the Premises in coordination with the Lessee for the purpose of presenting
it to potential lessees during the 6 months preceding the termination of the
rental period, or after the delivery of notification regarding the termination
of rental.
11. TRANSFER OF RIGHTS
------------------
11.1 The Lessee hereby undertakes not to endorse or transfer or deliver or
sell or let (including sub-let) or to lease any or all of its rights in
accordance with this agreement to another or others, in any manner whatsoever,
and not to endorse or transfer or deliver or sell or let or lease any or all of
the Premises to another or others in any manner whatsoever without the prior
consent of the Lessor. The Lessee hereby undertakes not to include another or
others in the possession and/or operation and/or management of the Premises, and
not to grant any other person or body possession and/or permission to use the
Premises or any part thereof, whether as a permitted person, with or without
remuneration, or in any other manner, all this without the prior authorization
of the Lessor. The
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<PAGE>
Lessor shall refuse to give its authorization in accordance with this paragraph
only on reasonable grounds.
11.2 It is hereby agreed that the Lessor shall be entitled to transfer its
rights in the Premises to a third party without requiring the consent of the
Lessor, provided that the Lessor's rights in accordance with this agreement
shall be maintained. The Lessee shall also be entitled to assign and/or attach
to a third party its rights in accordance with this rental agreement.
12. VACATING THE PREMISES
---------------------
12.1 The Lessor undertakes that immediately on the termination of the rental
period or the Optional Period, as the case may be, or on the lawful
nullification of this agreement for any reason whatsoever (hereinafter "THE DATE
OF VACATING THE PREMISES,") it shall vacate the Premises and deliver possession
thereof to the Lessor, when the Premises shall be free of any person or object
belonging to the Lessor, clean and orderly, and in the condition in which it was
received, with the exception of wear and tear deriving from reasonable use. The
Premises shall be delivered to the Lessor after the removal by the Lessee and at
its expenses of all the additions and/or changes added/implemented by the
Lessee, unless otherwise agreed with the Lessor.
To prevent any doubt, it is clarified that any object and/or equipment
and/or accessories and/or stock not removed from the Premises by the Lessor by
the termination of the rental period, and remaining in the Premises after they
have been vacated by the Lessor, shall become the property of the Lessor, and
the Lessee waives any claim and/or demand and/or suit on account thereof.
12.2 The Lessee undertakes that if it fails to vacate the Premises as stated
in para. 12.1, it shall pay the Lessor an amount equal to twice (200%) the
rental fees for the period between the Date of Vacating the Premises and the
date they are actually vacated, for each month or any
12
<PAGE>
part thereof. The Lessee declares that this amount has been determined and
agreed between the Parties as fixed and predetermined damages estimated by the
Parties with consideration and in advance as the reasonable amount of damages
caused to the Lessor pursuant to the failure to vacate the Premises by the set
date.
To prevent any doubt, the Lessee declares that the content of this
paragraph shall not prejudice any right of the Lessor, including, and without
derogating from the generality of the above, the Lessor's right to realize any
security given thereto, and the Lessor's right to demand compliance with all the
Lessee's undertakings in accordance with this agreement; and no payment
whatsoever in accordance with this paragraph shall release the Lessee from the
obligation to vacate the Premises.
12.3 The Lessee declares and undertakes that if it fails to vacate the
Premises as stated in para. 12.1, the Lessor shall be entitled, in addition to
the reliefs provided in accordance with para. 12.2 of this agreement and in
accordance with any law, to demand from the Lessee any amounts, payments, taxes,
liabilities, expenses, losses, and any other payment for the period between the
Date of Vacating the Premises and the actual date of vacating, as if the rental
period had continued - this without prejudicing the Lessee's obligation to
vacate the Premises.
12.4 To prevent any doubt, the Lessee declares that the payment and/or receipt
of damages in accordance with para. 12.2, and/or payments in accordance with
para. 12.3 above, shall not create rental relations between the Parties
regarding the period after the Date of Vacating the Premises.
13. SECURITIES
----------
13.1 To ensure the payments of the rental fees and any other payment the
Lessee is required to make in accordance with this agreement, including damages
caused to the Premises due to unreasonable use by
13
<PAGE>
the Lessee of the Premises, and to ensure that the Premises are promptly vacated
by the Lessee, the Lessee shall deposit with the Lessor, within 10 days of the
date of signing this agreement, an autonomous bank guarantee in an amount equal
to the rental fees for six months.
13.2 The bank guarantee shall be returned to the Lessee after the termination
of rental (insofar as it was not realized through that date), subject to the
provision of all authorizations concerning the payment of all payments imposed
on the Lessee in accordance with this agreement, compliance with the Lessee's
remaining undertakings in accordance with this agreement, and inspection of the
Premises. The Lessor shall realize the guarantee only after giving the Lessee
advance warning of at least 10 days in writing.
14. ARREARS IN PAYMENTS
-------------------
14.1 If the Lessee is in arrears in the payment of any amount it is required
to pay to the Lessor in accordance with this agreement, the Lessee shall pay the
Lessor arrears interest on the amount in arrears, at the rate current at Bank
Leumi LeIsrael Ltd. for deviations in debitory checking accounts; the interest
shall be calculated for the period from the day on which the Lessee was required
to pay the amount in arrears and through the date on which it actually made the
payment. If the arrears in payment relate to an amount paid by the Lessor to a
third party instead of the Lessee, and which the Lessee was required to pay to
that third party, the interest shall be calculated for the period from day on
which the Lessor paid the amount in arrears to the third party and through its
repayment by the Lessee. If the Lessor paid interest or a fine to a third party
for the Lessee's arrears in payment, the interest and/or fine shall be
considered part of the capital of the Lessee's debt.
14.2 The payment of interest in accordance with para. 14.1 above shall not
derogate from the Lessor's right to any other relief determined in this
agreement and/or by law.
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14.3 Arrears of up to 7 days in any payment in accordance with this agreement
shall not constitute grounds for the nullification of the agreement, but shall
constitute a breach and shall entitle the Lessor to interest as stated.
15. LIABILITY AND INDEMNIFICATION
-----------------------------
15.1 The Lessee shall bear liability for any damage, including damage to
person and/or property and/or reputation and/or prevention of profit, caused to
the Lessor and/or a third party (person or corporation) in connection with the
Lessee's negligence and/or that of any person on its behalf, and further for any
tort that shall occur - all in connection with the possession of the Premises
and/or the use made of the Premises and/or of the joint property by the Lessee
and any person on its behalf.
15.2 The Lessee undertakes to compensate and/or indemnify the Lessor for all
damages and/or expenses incurred for any damage as stated above.
15.3 The Lessee undertakes to compensate and/or indemnify the Lessor for any
damage or reasonable expense incurred thereby due to a suit filed against it,
whether civil or criminal, and due to the need to defend itself against such
suit, insofar as this suit derives from the Lessee's non-compliance with an
undertaking in accordance with this agreement or from the breach of the said
undertakings, including any demand for damages not falling within the
circumstances establishing the Lessor's liability as stated above.
16. FINAL RECKONING
---------------
16.1 Upon termination of the rental period, or on the nullification of this
agreement for any reason whatsoever, a final reckoning shall be prepared between
the Lessor and the Lessee.
16.2 For the purpose of implementing the final reckoning, the Lessee shall
furnish authorizations from any municipal and/or governmental
15
<PAGE>
and/or other authority, and/or from any other body to which the Lessee undertook
to make various direct payments in this agreement, testifying that as of the
date of authorization, the Lessee has cleared all payments relating to the
rental period, including capital and/or interest and/or linkage increments
and/or any other debt for the said period.
17. FUNDAMENTAL BREACH
------------------
17.1 Breaches of the provisions of paragraphs 5, 7, 8, 9, 10, 12 shall be
considered fundamental breaches of this agreement.
17.2 If the Lessee fails to pay rental fees and/or any other payment due
therefrom in accordance with this agreement beyond a period of 7 days, and/or if
the Lessee fails to vacate the apartment promptly and/or if the Lessee commits
another fundamental breach of the agreement, the Lessor shall be entitled to
nullify this agreement on the date determined, and the Lessee shall be obliged
to vacate the Premises of any person or object belonging thereto, and to return
it to the Lessor on the said date, without derogating from the Lessor's right to
any other remedy in accordance with this agreement and/or in accordance with the
provisions of any law. If the Lessee fails to vacate the Premises as stated or
after the termination of the rental, the Lessor shall be entitled to enter the
Premises, to remove the Lessee's objects and to place them in any place outside
the Premises, to change the locks on the Premises, to disconnect the supply of
electricity to the Premises, to prevent access to the Premises by the Lessee,
and to let the Premises to others as it shall see fit, and the Lessee shall not
have any claim or suit against the Lessor for these actions.
18. AMENDMENT OF THE AGREEMENT
--------------------------
Any amendment to this agreement shall have no validity unless made in a
written document and signed by the Parties to this agreement.
19. HEADINGS
--------
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The headings of the paragraphs in this agreement are intended solely for
convenience, and shall not be considered for the purposes of its interpretation.
20. MISCELLANEOUS
-------------
20.1 This agreement reflects the totality of the agreements between the Parties
and replaces any agreement, contract, memorandum, understanding, or arrangement
of any type, in writing and orally, signed and/or made and/or secured between
the Parties in any matter that is the subject of this agreement.
20.2 Stamp tax due on this agreement shall be paid by the Lessee.
20.3 The Parties shall take and/or shall act and/or cause to be taken all
additional steps, and to sign all documents and/or furnish additional documents
of any type as required for the application and implementation of this
agreement.
20.4 The Lessee is aware that the parking garage has not yet been approved for
use. The Lessor shall do its best to obtain a permit for the operation of the
parking garage. The Lessee shall not be entitled to compensation or reduction in
payments its is required to make pursuant to the absence of a permit for
operation of the parking garage.
21. NOTIFICATIONS
-------------
The Parties' addresses for the purposes of this agreement are as detailed
in the preamble to this agreement. Any notification sent from one Party to the
other in accordance with the above addresses shall be considered to have reached
its destination, if delivered by hand, immediately on delivery; and if sent by
registered mail - 72 hours after dispatch. Notifications to the Lessee shall
also considered to have been delivered on their placement in the Premises or in
the Lessee's mailbox in the Building.
17
<PAGE>
WITNESSED BY THE PARTIES' SIGNATURES
/s/ Meir Hakharoshet Investments and Trade Ltd /s/ Aliza Peleg
- -------------------- ------------------------- ----------------------
THE LESSOR THE LESSEE
.
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<PAGE>
RENTAL AGREEMENT
----------------
Made and executed in Ra'anana, December 5, 1997
Between: Meir Hakharoshet Investments and Trade Ltd.
Private Company 51-163938-7
Of 4 Hakharoshet St., Industrial Zone
PO Box 2050, Ra'anana; fax: 09-915529
(Hereinafter "THE LESSOR")
And: Toptier Israel Ltd.
Private Company 51-174364-3
Of 11 Hasadna St., Industrial Zone, Ra'anana
(Hereinafter "THE LESSEE")
WHEREAS The Lessor is the sole occupier and is entitled to be registered as the
perpetual lessor of plot 31/1 in block 8981 at 4 Hakharoshet St., Ra'anana
(hereinafter "THE PLOT");
AND WHEREAS The Lessor is establishing/has established on the Plot a building
comprising several floors (hereinafter "THE BUILDING");
AND WHEREAS The Lessor wishes to let to the Lessees, by way of unprotected
rental, and the Lessees wish to rent from the Lessors, by way of unprotected
rental, an area on the 4/th/ floor of the Building, and 4 parking places in the
parking lot of the Building, as labeled on the diagram attached to this contract
as APPENDIX A (hereinafter "THE PREMISES") for such period and time, and on such
conditions, as detailed in this contract below;
ACCORDINGLY, THE PARTIES HAVE DECLARED, CONDITIONED, AND AGREED AS FOLLOWS:
---------------------------------------------------------------------------
1. PREAMBLE; APPENDICES
--------------------
1.1 The Preamble to this agreement constitutes an integral part thereof and is
considered part of its conditions.
19
<PAGE>
1.2 The appendices to this agreement attached thereto constitute an integral
part of the agreement and of its conditions.
2. NON-APPLICABILITY OF THE TENANT PROTECTION LAW
----------------------------------------------
2.1 It is agreed by the Parties that the Lessee has not paid, and has not
undertaken to pay in any manner, and the Lessor has not received, and has not
undertaken to receive in any manner, any key money and/or payment whatsoever on
account of and/or in connection with and/or relating to the rental of the
Premises, with the exception of the rental fees in accordance with this
agreement.
2.2 It is agreed by the Parties that the Tenant Protection Act (Combined
Version), 5732-1972, does not apply to this rental, and accordingly this rental
is not protected. It is further agreed that any provisions of an alternative or
analogous law to be enacted in the future with the purpose of protecting a
tenant in a commercial building shall not apply to this agreement, and that the
Lessee waives any claim in connection with the above.
3. THE RENTAL
----------
3.1 The Lessor hereby lets the Premises to the Lessee, and the Lessee hereby
rents the Premises from the Lessor, all in accordance with and subject to the
provisions of this agreement.
3.2 The purpose of the rental is to pursue a business in the computer and
software industry. The Lessor declares that the Building was properly
constructed, and that there is no impediment to obtaining a business license by
the Lessee for the purpose of the rental.
3.3 The Lessee hereby undertakes not to use the Premises for any purpose other
than as detailed above without receiving the prior and written approval of the
Lessor thereto, at the complete discretion of the Lessor.
4. RENTAL PERIOD
-------------
20
<PAGE>
4.1 Subject to the content of para. 7.4 below, the rental period is 5 years,
commencing on March 15, 1998 and ending on March 14, 2003 (hereinafter "THE
RENTAL PERIOD").
4.2 Notwithstanding the above, the Lessee shall be entitled to terminate the
rental at any date after March 14, 2001, with prior notification of at least 90
days. If the Lessee terminated the rental prematurely as stated, the Lessee
shall pay the Lessor, by way of compensation for preparation of the Premises for
the Lessee's needs, the amount of $1,500 for each month remaining in the Rental
Period - viz. from the date of termination of the rental and through March 14,
2003. The payments shall be made in advance every three months. If the Lessor
lets the Premises to another during the period between the date of termination
of the rental and March 14, 2003, the compensation shall be limited to the lower
of the following: (A) The above-mentioned compensation; (B) The discrepancy
between the rental fees paid by another lessee and the rental fees that should
have been paid in accordance with this agreement (during the period between the
date of termination of the rental and March 14, 2003), with the addition of
expenses - up to a ceiling of $25,000 - actually incurred by the Lessor for the
purpose of adapting the Premises to another lessee.
4.3 The Lessee has the right to extend the rental for an additional period of 3
years beyond March 14, 2003 (hereinafter "the Optional Period"), provided that
it has notified the Lessor of the realization of this option not later than
October 14, 2002. All the conditions of this agreement shall apply to the
Optional Period, with the exception of the contents of paras. 4.2 and 4.3.
5. RENTAL FEES
-----------
In return for the rental of the Premises, the Lessee shall pay the Lessor
rental fees as detailed below:
5.1 Rental fees for the first month of rental shall be in the amount of
$11,500, in accordance with the representative exchange rate of the US dollar as
published immediately prior to implementation of the first payment.
21
<PAGE>
5.2 Rental fees shall be linked - one half to the representative exchange rate
of the US dollar, with the addition of the cost of living index in the US, and
one half to the Israeli consumer price index - the last indexes as known on the
date of commencement of the rental and through the actual date of payment.
5.3 Rental fees shall be paid as follows:
A. Upon signing the agreement, rental fees for 2 months in accordance with the
content of para. 5.1, against a bank guarantee through the date of delivery.
B. On February 1, 1998, rental fees for 2 months in accordance with the
content of para. 5.1, against a bank guarantee through the date of delivery.
C. On March 15, 1998 (or on the date of delivery of the Premises, whichever is
the later), rental fees for 2 additional months [on the date of delivery, the
guarantees in accordance with paras. A and B above shall be returned].
D. Beginning September 15, 1998 (or at the end of 6 months after the date of
delivery, whichever is the later) - every 3 months in advance.
E. The rental fees during the Optional Period (viz. from March 15, 2003) shall
be increased in the proportion of 7.5% above the last rental fees for the period
ending on March 14, 2003, shall be paid every 3 months in advance, and shall be
linked - one half to the representative exchange rate of the US dollar, with the
addition of the cost of living index in the US, and one half to the Israeli
consumer prices index - the last indexes as known on December 15, 2002, and
through the actual date of payment.
5.4 Value Added Tax (hereinafter "VAT") shall be borne by the Lessee and paid
thereby in accordance with the rate established by law at the time of payment.
VAT shall be added to each payment of the rental fees, and shall be
22
<PAGE>
paid against a proper tax invoice, by a separate check for the 15th day of the
following month.
5.5 Rental fees do not include maintenance fees for the Building, the joint
property, the plumbing, gardening, outside lighting, installation and
maintenance of air-conditioning, subject to the content of para. 6.2. In return
for the said maintenance services, the Lessee shall pay the Lessor the amount of
$1,560 + VAT per month (calculated in accordance with $2 per square meter),
which shall be linked and paid as stated in paras. 5.1 - 5.4, MUTATIS MUTANDIS.
The maintenance fees shall be paid from the date of delivery (including for the
pre-period as stated in para. 7.4), each 3 months in advance.
6. TAXES AND EXPENSES
------------------
6.1 The Lessor shall bear the payment of property tax, insofar as this shall
apply, for the Premises, and any other governmental tax that is and/or shall be
imposed on the owners of properties.
6.2 All payments on account of municipal taxes (ARNONA), business tax, business
license, sign levy for signs erected by the Lessee, electricity accounts
(including electricity for air-conditioning), water, telephone, and all routine
expenses for the possession and maintenance of the inside of the Premises (with
the exception of the maintenance of the Building as stated in para. 5.5, and
defects in the Building) shall be borne and paid by the Lessor, insofar as these
relate to the duration of the rental period, and/or through the date on which
the Lessee shall vacate the Premises and actually return them to the Lessor,
whichever is the later.
7. LESSOR'S DECLARATION AND UNDERTAKINGS
-------------------------------------
The Lessor hereby declares and undertakes as follows:
7.1 The Lessor's rights to the Premises are free of any debt and/or lien and/or
mortgage and/or attachment and/or any other third party right, with the
exception of a mortgage in favor of Bank Leumi Ltd.
23
<PAGE>
7.2 There is no legal, contractual, or other impediment to the rental of the
Premises in accordance with the conditions of this agreement, and for the
purpose for which it is let. The Lessor undertakes to enable use of the Premises
on the date of commencement of the rental. The Parties are aware that the
authorities have not yet authorized use of the parking levels, and the Lessor
undertakes to receive authorization as stated for the parking places rented by
the Lessee not later than March 15, 1998, and shall do its best to receive the
authorization by the said date. A delay of up to 4 months in obtaining the
authorization for use of the parking levels, and prevention of use of the
parking places during the said period, shall not be considered as a breach of
the agreement. In the event of a delay in the possibility to use the parking
places beyond 4 months, the amount of $200 per month shall be deducted from the
maintenance fees for so long as the delay shall continue.
7.3 The Building is intended to serve as a high-class building; the Lessor
shall prevent use of the Building from businesses causing noise, odor, or any
other nuisance liable to impair the image of the Building. For its part, the
Lessee is aware of the existing uses in the Building as of the date of signing
the agreement, and confirms that these are acceptable to it. The Lessor
undertakes to complete the finishing works in the Building as follows: entrance
lobby, elevator, entrance door, stairwell; and further to complete, by June 1,
1998, a divider as shall be determined by the Building architect on the southern
limit of the Building. Completion of the finishing works (with the exception of
the southern divider) is a condition for collection of maintenance fees in
accordance with para. 5.5.
7.4 To build and adapt the Premises in accordance with the plans and
specifications enclosed as APPENDIX B. Adaptation of the Premises to the plans
and specifications - Appendix B - in order to enable the use of the Premises by
the date of commencement of the rental is a condition for commencement of
rental. Arrears of up to two weeks in the adaptation of the Premises shall not
be considered a breach, provided that the Lessor has informed the Lessee of the
delay not later than February 15, 1998. If the Lessor was in arrears as stated,
the date of commencement of the rental shall be postponed accordingly. On the
24
<PAGE>
other hand, the Lessor is entitled to bring forward the date of delivery to
March 1, 1998, with prior notice of 15 days, and the Lessee shall pay the Lessor
the amount of $5,000 + VAT in advance as additional rental fees for the pre-
period.
For its part, the Lessor undertakes to deliver to the Lessee implementation
plans for the electricity and air-conditioning systems according to the plans
and specifications attached as Appendix B, not later than December 31, 1997.
If the Lessor is in arrears in completing the works in accordance with
Appendix B later than March 31, 1998, the Lessor shall pay the Lessee
compensation in an amount equal to $250 per day, excluding cases of force
majeure. The compensation shall be doubled after arrears of 30 days. The
compensation in accordance with this paragraph is in addition to any relief due
in accordance with any law.
7.5 To maintain the Building, including: To repair, within 7 days, any defect
in the Building arising from defective construction, as well as repairs in water
plumbing, electricity, air-conditioning, defective materials, and sealing. If
the Lessor fails to repair faults and defects as stated, and/or in urgent cases
when it is impossible to contact a representative of the Lessor, the Lessee
shall be entitled to implement the repair, and the Lessor shall reimburse its
expenses in implementing the repair. The conditions of para. 13.1 shall apply,
MUTATIS MUTANDIS.
7.6 Insurance of the building of the Premises (including fire, earthquake, and
water risks), excluding the Premises itself and the contents thereof, shall be
made by the Lessor.
7.7 The Lessor shall make available facilities for the disposal of waste and
refuse from the building as instructed by the Municipality.
8. LESSEE'S DECLARATION
--------------------
The Lessee declares that it has viewed and examined the Premises, the
Building, and the environs thereof, and has found these to be suitable for its
needs, and it hereby
25
<PAGE>
waives any claim of defect, alternative, or unsuitability, subject to
implementation of the works in accordance with Appendix B, and the finishing
works as stated in para. 7.3. The Lessee is aware that the Lessor intends - but
is not obliged - to undertake additional works in and around the Building, and
hereby waives any claim in connection with these works, provided that the Lessor
shall do its best to ensure that implementation of the said works shall not
impede the reasonable use of the Premises.
LESSEE'S UNDERTAKINGS
---------------------
The Lessee hereby undertakes:
9.1 To secure all the permits required for the lawful pursuit of its business
for the purpose of the rental as stated in para. 3.2, and which shall be paid
for by the Lessee.
9.2 To meet and implement all the instructions of a law, regulation, order, or
by-law relating to the maintenance and use of the Premises.
9.3 Not to hang signs and/or notices on the front of the Premises and/or on the
external wall of the Premises without the Lessor's prior and written consent.
The Lessee is aware that the signs in the Building are supposed to be uniform
signs as determined by the Building architect, and in coordination with the
Municipality of Ra'anana. The Lessee is responsible for obtaining a permit for
its signs, and for payment of the sign levy.
9.4 Not to install air-conditioning or heating (internal or external) or any
external facility on the Premises.
9.5 Not to undertake any change to the structure of the Premises without the
Lessor's prior and written consent at its complete discretion. If the Lessee
requests that an internal change be made to the Premises (or a change to the
structure with the Lessor's agreement as stated above), the Lessee shall ensure,
at its expense, the obtainment of all licenses and/or permits as necessary.
If the Lessor agrees to the implementation of changes as stated above, the
Lessor shall sign any document required to obtain a license for the
26
<PAGE>
implementation of the said changes that shall be submitted thereto by the
Lessee.
9.6 If the Lessee has received the Lessor's prior and written consent to the
implementation of changes to the Premises, these changes shall be implemented at
the Lessor's expense and liability. To prevent any doubt, the Lessee shall be
liable for any damage of any type or kind that shall be caused to the Premises
and/or to other lessees and/or to any person for the work entailed in the
implementation of the said changes and/or during the course thereof, if any such
damage is caused.
9.7 To restore the Premises to their previous state, in the same condition as
delivered, with the exception of wear and tear deriving from reasonable use, and
including the removal of all additions or changes as implemented by the Lessee,
on the completion of the rental period, unless otherwise agreed with the Lessor.
9.8 To maintain the Premises in a proper condition, to use them in a fair and
cautious manner, and to refrain from causing any damage to the Premises.
9.9 To ensure the cleanliness of the Premises and their immediate environs. The
Lessee undertakes not to place scrap, crates, objects, chattels, or refuse
outside the Premises. The Lessee shall bear the payment of any fines imposed by
the municipal authorities and/or the state institutions, if any, on account of
the breach of the provisions of this paragraph.
9.10 To repair any damage and/or defect (with the exception of wear and tear
deriving from reasonable use) as shall be caused to the Premises by the Lessee,
and/or by any person on its behalf, and/or by its visitors, clients, employees,
workers, and/or any other person during the rental period. If the Lessee fails
to comply with the conditions of this paragraph, the Lessor shall be entitled,
without derogating from its right to any other remedy or relief, to implement
the repairs at the Lessee's expense, and the Lessee hereby undertakes to pay the
Lessor any amount incurred by the Lessor for the purpose of implementing the
27
<PAGE>
said repairs, against receipts to be presented to the Lessee by the Lessor for
payments to implement said repairs.
9.11 To pay promptly all payments imposed thereon in accordance with this
agreement. If it fails to make any payment, the Lessor shall be entitled to pay
the said on the Lessee's account, and the Lessee shall reimburse the amount paid
with the addition of interest as stated in para. 13.1.
9.12 To pay promptly the full rental fees for each rental period, whether the
Premises were used or not (subject to para. 4.2).
9.13 To insure the contents of the Premises and third party demands by insurance
as customary. The Lessor shall be an insuree and/or an additional insuree in
accordance with this policy. The insurance policies shall include a clause
concerning waiver of the right of indemnification vis-a-vis the Lessor and its
agents for damage caused thereby without malicious intent or gross negligence; a
mutual liability clause; and a clause requiring the Lessee's insurance company
to provide the Lessor with 60 days' notice in advance concerning the annulment
of the insurance policy.
9.14 To permit the Lessor, or its representative, to enter the Premises in a
reasonable manner and through prior arrangement with the Lessee, in order to
examine the condition of the Premises and/or in order to execute repairs therein
and/or in order to show the Premises to others. The Lessor shall be entitled to
enter the Premises in coordination with the Lessee for the purpose of presenting
it to potential lessees during the 6 months preceding the termination of the
rental period, or after the delivery of notification regarding the termination
of rental.
10. TRANSFER OF RIGHTS
------------------
10.1 The Lessee hereby undertakes not to endorse or transfer or deliver or sell
or let (including sub-let) or to lease any or all of its rights in accordance
with this agreement to another or others, in any manner whatsoever, and not to
endorse or transfer or deliver or sell or let or lease any or all of the
Premises to
28
<PAGE>
another or others in any manner whatsoever without the prior consent of the
Lessor. The Lessee hereby undertakes not to include another or others in the
possession and/or operation and/or management of the Premises, and not to grant
any other person or body possession and/or permission to use the Premises or any
part thereof, whether as a permitted person, with or without remuneration, or in
any other manner, all this without the prior authorization of the Lessor. The
Lessor shall refuse to give its authorization in accordance with this paragraph
only on reasonable grounds.
10.2 It is hereby agreed that the Lessor shall be entitled to transfer its
rights in the Premises to a third party without requiring the consent of the
Lessor, provided that the Lessor's rights in accordance with this agreement
shall be maintained. The Lessee shall also be entitled to assign and/or attach
to a third party its rights in accordance with this rental agreement.
11. VACATING THE PREMISES
---------------------
11.1 The Lessor undertakes that immediately on the termination of the
rental period or the Optional Period, as the case may be, or on the lawful
nullification of this agreement for any reason whatsoever (hereinafter "THE DATE
OF VACATING THE PREMISES,") it shall vacate the Premises and deliver possession
thereof to the Lessor, when the Premises shall be free of any person or object
belonging to the Lessor, clean and orderly, and in the condition in which it was
received, with the exception of wear and tear deriving from reasonable use. The
Premises shall be delivered to the Lessor after the removal by the Lessee and at
its expenses of all the additions and/or changes added/implemented by the
Lessee, unless otherwise agreed with the Lessor.
To prevent any doubt, it is clarified that any object and/or equipment
and/or accessories and/or stock not removed from the Premises by the Lessor by
the termination of the rental period, and remaining in the Premises after they
have been vacated by the Lessor, shall become the property of the Lessor, and
the Lessee waives any claim and/or demand and/or suit on account thereof.
<PAGE>
11.2 The Lessee undertakes that if it fails to vacate the Premises as
stated in para. 11.1, it shall pay the Lessor an amount equal to twice (200%)
the rental fees for the period between the Date of Vacating the Premises and the
date they are actually vacated, for each month or any part thereof. The Lessee
declares that this amount has been determined and agreed between the Parties as
fixed and predetermined damages estimated by the Parties with consideration and
in advance as the reasonable amount of damages caused to the Lessor pursuant to
the failure to vacate the Premises by the set date.
To prevent any doubt, the Lessee declares that the content of this
paragraph shall not prejudice any right of the Lessor, including, and without
derogating from the generality of the above, the Lessor's right to realize any
security given thereto, and the Lessor's right to demand compliance with all the
Lessee's undertakings in accordance with this agreement; and no payment
whatsoever in accordance with this paragraph shall release the Lessee from the
obligation to vacate the Premises.
11.3 The Lessee declares and undertakes that if it fails to vacate the
Premises as stated in para. 11.1, the Lessor shall be entitled, in addition to
the reliefs provided in accordance with para. 11.2 of this agreement and in
accordance with any law, to demand from the Lessee any amounts, payments, taxes,
liabilities, expenses, losses, and any other payment for the period between the
Date of Vacating the Premises and the actual date of vacating, as if the rental
period had continued - this without prejudicing the Lessee's obligation to
vacate the Premises.
11.4 To prevent any doubt, the Lessee declares that the payment and/or
receipt of damages in accordance with para. 11.2, and/or payments in accordance
with para. 11.3 above, shall not create rental relations between the Parties
regarding the period after the Date of Vacating the Premises.
12. SECURITIES
----------
12.1 To ensure the payments of the rental fees and any other payment the
Lessee is required to make in accordance with this agreement, including
<PAGE>
damages caused to the Premises due to unreasonable use by the Lessee of the
Premises, and to ensure that the Premises are promptly vacated by the Lessee,
the Lessee shall deposit with the Lessor, on the date of delivery of the
possession of the Premises, an autonomous bank guarantee in an amount equal to
the rental fees for six months.
12.2 The bank guarantee shall be returned to the Lessee after the
termination of rental (insofar as it was not realized through that date),
subject to the provision of all authorizations concerning the payment of all
payments imposed on the Lessee in accordance with this agreement, compliance
with the Lessee's remaining undertakings in accordance with this agreement, and
inspection of the Premises. The Lessor shall realize the guarantee only after
giving the Lessee advance warning of at least 10 days in writing.
13. ARREARS IN PAYMENTS
-------------------
13.1 If the Lessee is in arrears in the payment of any amount it is
required to pay to the Lessor in accordance with this agreement, the Lessee
shall pay the Lessor arrears interest on the amount in arrears, at the rate
current at Bank Leumi LeIsrael Ltd. for deviations in debitory checking
accounts; the interest shall be calculated for the period from the day on which
the Lessee was required to pay the amount in arrears and through the date on
which it actually made the payment. If the arrears in payment relate to an
amount paid by the Lessor to a third party instead of the Lessee, and which the
Lessee was required to pay to that third party, the interest shall be calculated
for the period from day on which the Lessor paid the amount in arrears to the
third party and through its repayment by the Lessee. If the Lessor paid interest
or a fine to a third party for the Lessee's arrears in payment, the interest
and/or fine shall be considered part of the capital of the Lessee's debt.
13.2 The payment of interest in accordance with para. 13.1 above shall not
derogate from the Lessor's right to any other relief determined in this
agreement and/or by law.
<PAGE>
13.3 Arrears of up to 7 days in any payment in accordance with this
agreement shall not constitute grounds for the nullification of the agreement,
but shall constitute a breach and shall entitle the Lessor to interest as
stated.
14. LIABILITY AND INDEMNIFICATION
-----------------------------
14.1 The Lessee shall bear liability for any damage, including damage to
person and/or property and/or reputation and/or prevention of profit, caused to
the Lessor and/or a third party (person or corporation) in connection with the
Lessee's negligence and/or that of any person on its behalf, and further for any
tort that shall occur - all in connection with the possession of the Premises
and/or the use made of the Premises and/or of the joint property by the Lessee
and any person on its behalf.
14.2 The Lessee undertakes to compensate and/or indemnify the Lessor for
all damages and/or expenses incurred for any damage as stated above.
14.3 The Lessee undertakes to compensate and/or indemnify the Lessor for
any damage or reasonable expense incurred thereby due to a suit filed against
it, whether civil or criminal, and due to the need to defend itself against such
suit, insofar as this suit derives from the Lessee's non-compliance with an
undertaking in accordance with this agreement or from the breach of the said
undertakings, including any demand for damages not falling within the
circumstances establishing the Lessor's liability as stated above.
15. FINAL RECKONING
---------------
15.1 Upon termination of the rental period, or on the nullification of this
agreement for any reason whatsoever, a final reckoning shall be prepared between
the Lessor and the Lessee.
15.2 For the purpose of implementing the final reckoning, the Lessee shall
furnish authorizations from any municipal and/or governmental and/or other
authority, and/or from any other body to which the Lessee undertook to make
various direct payments in this agreement, testifying that as of the date of
authorization, the Lessee has cleared all payments relating to the rental
period,
<PAGE>
including capital and/or interest and/or linkage increments and/or any other
debt for the said period.
16. FUNDAMENTAL BREACH
------------------
16.1 Breaches of the provisions of paragraphs 5,6,7,8,9,11 shall be
considered fundamental breaches of this agreement.
16.2 If the Lessee fails to pay rental fees and/or any other payment due
therefrom in accordance with this agreement beyond a period of 7 days, and/or if
the Lessee fails to vacate the apartment promptly and/or if the Lessee commits
another fundamental breach of the agreement, the Lessor shall be entitled to
nullify this agreement on the date determined, and the Lessee shall be obliged
to vacate the Premises of any person or object belonging thereto, and to return
it to the Lessor on the said date, without derogating from the Lessor's right to
any other remedy in accordance with this agreement and/or in accordance with the
provisions of any law. If the Lessee fails to vacate the Premises as stated or
after the termination of the rental, the Lessor shall be entitled to enter the
Premises, to remove the Lessee's objects and to place them in any place outside
the Premises, to change the locks on the Premises, to disconnect the supply of
electricity to the Premises, to prevent access to the Premises by the Lessee,
and to let the Premises to others as it shall see fit, and the Lessee shall not
have any claim or suit against the Lessor for these actions.
17. AMENDMENT OF THE AGREEMENT
--------------------------
Any amendment to this agreement shall have no validity unless made in
a written document and signed by the Parties to this agreement.
18. HEADINGS
--------
The headings of the paragraphs in this agreement are intended solely for
convenience, and shall not be considered for the purposes of its interpretation.
19. MISCELLANEOUS
-------------
19.1 This agreement reflects the totality of the agreements between the
Parties and replaces any agreement, contract, memorandum, understanding, or
<PAGE>
arrangement of any type, in writing and orally, signed and/or made and/or
secured between the Parties in any matter that is the subject of this agreement.
19.2 Stamp tax due on this agreement shall be paid by the Lessee.
19.3 The Parties shall take and/or shall act and/or cause to be taken all
additional steps, and to sign all documents and/or furnish additional documents
of any type as required for the application and implementation of this
agreement.
20. NOTIFICATIONS
-------------
The Parties' addresses for the purposes of this agreement are as
detailed in the preamble to this agreement. Any notification send from one Party
to the other in accordance with the above addresses shall be considered to have
reached its destination, if delivered by hand, immediately on delivery; and if
sent by registered mail - 72 hours after dispatch. Notifications to the Lessee
shall also considered to have been delivered on their placement in the Premises
or in the Lessee's mailbox in the Building.
WITNESSED BY THE PARTIES' SIGNATURES
/s/ Meir Hakharoshet Investments and Trade Ltd. /s/ Aliza Peleg
- ------------------------------------------------- -------------------
THE LESSOR THE LESSEE
<PAGE>
APPENDICES
In remuneration for implementation of the works stated in the plans, and in
addition to the rental fees detailed in the rental agreement, the Lessee shall
pay the Lessor the amount of $25,000 with the addition of VAT, in 5 payments of
$5,000 each, in postdated checks for January 1, 1998, February 1, 1998, March 1,
1998, April 1, 1998 and May 1, 1998.
/s/ Meir Hakharoshet Investments and Trade Ltd.
- --------------------- --------------------------
THE LESSOR
/s/ Aliza Peleg
- ------------------
THE LESSEE
<PAGE>
ADDENDUM
--------
TO A RENTAL AGREEMENT DATED DECEMBER 5, 1997 (HEREINAFTER "THE AGREEMENT")
Made and executed in Ra'anana, December 15 , (hereinafter "the Addendum") 1999
--
Between: MEIR HAKHAROSHET INVESTMENTS AND TRADE LTD.
Private Company 51-163938-7
Of 4 Hakharoshet St., Industrial Zone
PO Box 2050, Ra'anana
(Hereinafter "THE LESSOR")
And: TOPTIER ISRAEL LTD.
Private Company 51-174364-3
Of 4 Hakharoshet St., Industrial Zone
Ra'anana
(Hereinafter "THE LESSEE")
WHEREAS The Lessee rents from the Lessor areas in accordance with the agreement
made between the Lessee and the Lessor, and in accordance with an additional
agreement between them dated July 1, 1998.
AND WHEREAS The Lessor is the sole owner, and registered as the perpetual
lessor, of plot 31/1 in block 8981, at 4 Hakharoshet St., Ra'anana Industrial
Zone, and of the building constructed thereon and known as building No. 4 on
Hakharoshet St. in Ra'anana (hereinafter "THE BUILDING.")
AND WHEREAS The Lessor is establishing/has established a gallery floor with an
area of approximately 100 sq.m. between the entrance floor and the first floor
in the Building, as detailed in the specifications attached as APPENDIX A
(hereinafter "THE GALLERY.")
AND WHEREAS The Lessor is in possession of all the authorizations necessary in
accordance with the law for establishment of the Gallery;
<PAGE>
AND WHEREAS The Lessor wishes to let the Gallery to the Lessee by way of
unprotected tenancy, and the Lessee wishes to rent the Gallery from the Lessor
by way of unprotected tenancy, all as detailed below;
ACCORDINGLY, THE PARTIES HAVE DECLARED, CONDITIONED, AND AGREED AS
------------------------------------------------------------------
FOLLOWS:
- -------
1. PREAMBLE AND APPENDICES
-----------------------
1.1 The Preamble to the Addendum constitutes an integral part thereof and
is considered part of its conditions.
1.2 The Appendices to the Addendum attached thereto constitute an integral
part of the agreement and of its conditions.
2. RENTAL
------
The Lessor hereby lets the Gallery to the Lessee, and the Lessee
hereby rents the Gallery, all in accordance with the provisions of this
Addendum.
3. RENTAL PERIOD OF THE GALLERY
----------------------------
3.1 Commencing on October 10, 1999, and through the date of completion of
the actions required by law for the purpose of the commencement of use of the
first floor in the Building, or February 1, 2000, whichever is the later
(hereinafter "THE FIRST PART OF THE RENTAL PERIOD,") the Lessee shall rent the
Gallery on the shell level.
During this period, the Lessee shall pay the Lessor the amount of US
$750 per month for the rental and maintenance of the Gallery, including
management of the maintenance of the Gallery.
3.2 Commencing from the end of the First Part of the Rental Period and
through March 14, 2003 (hereinafter "THE SECOND PART OF THE RENTAL PERIOD,") the
Lessee shall rent the Gallery from the Lessor, and the Lessor shall lease the
Gallery to the Lessee.
2
<PAGE>
In the Second Part of the Rental Period, the Lessee shall pay the
Lessor the amount of US $1,500 per month for the rental and maintenance of the
Gallery, including management of maintenance of the Gallery.
3.3 The payments detailed in paras. 3.1 and 3.2 above shall be paid in
advance, once every three months, together with the payment of rental fees in
accordance with the Agreement, with the exception of the first payment in
accordance with the Addendum, which shall be paid on October 31, 1999.
4. CONFORMITY WITH THE AGREEMENT
-----------------------------
4.1 With the exception of the matters detailed in this Addendum, and with
the exception of the content of paras. 5.1, 5.3 A-D, and 7.4 of the Agreement,
the provisions of the Agreement shall also apply, MUTATIS MUTANDIS, to this
Addendum.
4.2 In the case of a contradiction between the provisions of the Addendum
and the provisions of the Agreement, the provisions of the Addendum shall
prevail and apply.
WITNESSED BY THE PARTIES' SIGNATURES
/s/ Meir Hakharoshet Investments and Trade Ltd. /s/ Aliza Peleg
- ------------------------------------------------ -------------------
3
<PAGE>
PARKING GARAGE AGREEMENT
------------------------
Made and executed in Ra'anana, December 15, 1999
--
Between: Meir Hakharoshet Investments and Trade Ltd.
Private Company 51-163938-7
Of 4 Hakharoshet St., Industrial Zone
PO Box 2050
Ra'anana
(Hereinafter "THE LESSOR")
FIRST PARTY
-----------
And: Toptier Israel Ltd.
Private Company 51-174364-3
Of 4 Hakharoshet St., Industrial Zone
PO Box 2658, Ra'anana
(Hereinafter "THE LESSEE")
SECOND PARTY
------------
WHEREAS The Lessor is the sole owner of the parking garage on two underground
floors at 4 Hakharoshet St. in Ra'anana Industrial Zone (hereinafter "THE
PARKING GARAGE"), the owner of the right to let parking places situated in the
Parking Garage, and the holder of all the permits required by law for the
purpose of the association in this agreement;
AND WHEREAS The Lessee is interested in parking services for its vehicle and has
asked the owners to supply these;
AND WHEREAS The owner has agreed to provide parking services for the owner of
the vehicle according to the conditions of this agreement, and there is no
impediment to its association in this agreement.
ACCORDINGLY, THE PARTIES HAVE DECLARED, CONDITIONED, AND AGREED AS
FOLLOWS:
1. DEFINITIONS:
<PAGE>
The terms detailed below shall have the meaning stated alongside: "THE
VEHICLE" The car and/or cars the details of which shall be delivered in a
separate list at the end of this agreement, and constituting an integral part of
this agreement (hereinafter "THE LIST"). The Lessee has the right to change this
list at its discretion.
2. PREAMBLE:
The entire content of the Preamble to this agreement was agreed by the
Parties and constitutes an integral part of the body and essence of the
agreement.
3. OWNER'S DECLARATIONS:
The owner hereby declares as follows:
A. It is the sole owner of the Parking Garage.
B. The zoning of the underground floors at 4 Hakharoshet St. in the
Industrial Zone in Ra'anana is to serve as a Parking Garage as stated in this
agreement.
C. The owner is in possession of all the permits required by law for its
association in this agreement, with the exception of a "Form 4," which it is due
to receive within two months from the date of signing the contract.
4. THE PURPOSE OF THE AGREEMENT:
The purpose of the agreement is to make available to the Lessee, as of the date
of signing this agreement, simultaneously and at any time during the period of
this agreement, of 60 labeled and fixed parking places in the Parking Garage, in
which it may park its Vehicles as detailed in the list, between the hours of
7:00 AM and 7:00 PM, during which hours the Parking Garage is open, in return
for the payment detailed below. It is hereby agreed that the list may include
more than 60 Vehicles. For the purpose of entering the Parking Garage, the owner
will provide the Lessee with magnetic cards for all the Vehicles appearing in
the list, in return for payment of the cost thereof alone.
5. EXCLUSIVITY:
<PAGE>
It is hereby agreed that during the period of this agreement, the
owner shall not permit any other body to park Vehicles in the Parking Garage,
with the exception of 10 parking places let to others, and an additional parking
place intended for the owner of the property.
6. RENTAL PERIOD:
It is agreed by the Parties that the rental period shall commence on
________________and terminate on March 14, 2003 (hereinafter "THE RENTAL
PERIOD.")
The Lessee is hereby granted an option to extend the Rental Period by three
additional years commencing on March 15, 2003 and terminating on March 14, 2006.
Insofar as the Lessee wishes to exercise this option, it shall inform the Lessor
thereof in writing not later than October 14, 2002. Rental fees for the Optional
Period shall be the same as the rental fees during the Rental Period, linked in
accordance with para. 5.3(E) of the agreement, and shall not be lower than the
amount of expenses incurred by the Lessor at that time.
7. REMUNERATION:
7.1 Rental fees for each parking place shall be in the amount of thirty US
dollars ($30) with the addition of VAT in accordance with the representative
exchange rate known on the date of payment. It is hereby clarified that the
rental fees also include payment of ARNONA [municipal tax]. Parking fees shall
be paid every three (3) months on the first day of the calendar month, according
to the dates of payment in accordance with the rental agreement signed by the
Parties on December 5, 1997 [with the exception of the first payment, which
shall be made on January 1, 2000 for the period].
It is agreed by the Parties that the payment stated in this paragraph
for ARNONA is in place of the actual payment of ARNONA imposed on the Parking
Garage, and that as long as the Lessee pays the amount as stated in this
paragraph, the Lessor shall not have any claim and/or suit from the Lessee
regarding the payment of the value of ARNONA fees.
<PAGE>
It is further agreed that the Owner shall not issue a separate invoice for
payment of the remuneration stated in this paragraph, but shall include it in
the rental fees.
7.2 To prevent any doubt, it is hereby clarified that, apart from the rental
fees as stated above, no additional payment shall be imposed on the Lessee.
8. Maintenance of the Parking Garage:
The Lessor hereby undertakes to maintain the cleanliness of the Parking
Garage and its routine maintenance in a reasonable condition, including lighting
and emergency lighting, and labeling of parking places.
9. Insurance:
The Lessor undertakes to purchase at its expense and to maintain valid
during the entire rental period, and any Optional Period, the following
insurance policies: "building insurance," "third party" insurance. The Lessor
undertakes that the insurance policies it shall purchase in accordance with the
above shall include clauses regarding the nullification of the right of
indemnification vis-a-vis the Lessee. The Lessor's third party insurance policy
specifically states that a clause has been included specifically stating that
the Lessee's Vehicles shall not be considered property in its possession and/or
control.
Witnessed by the Parties' signature:
/s/ Meir Hakharoshet Investments and Trade Ltd. /s/ Aliza Peleg
- ------------------------------------------------ -------------------
Lessor Lessee
<PAGE>
EXHIBIT 10.7
TOPTIER, ISRAEL, LTD. - BAAN DEVELOPMENT B.V.
OEM LICENSE AGREEMENT
This OEM LICENSE AGREEMENT (this "Agreement") is entered into as of
March 25, 2000 (the "Effective Date") by and between Baan Development B.V., a
Dutch corporation, with a principal place of business at Baron van Nagellstraat
89, 3770 AC Barneveld, The Netherlands ("Baan"), and TopTier, Israel, Ltd., an
Israel corporation, whose registered office and place of business are at #4
Hacharoshet Street, Ra'anana, Israel ("TopTier").
RECITALS
WHEREAS, Baan designs, develops and markets a wide range of proprietary
enterprise and internet-enabled software applications; and
WHEREAS, TopTier designs, develops and markets proprietary software and
software technology and is willing to license to Baan as OEM certain software
technology for embedding within Baan Software products only and for distribution
through Baan Software products;
WHEREAS, the Parties desire to set forth the terms and conditions under
which the foregoing shall take place; and
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties mutually agree as follows:
1. DEFINITIONS
As used throughout this Agreement, the following terms shall have the
meanings set forth below unless otherwise indicated:
1.1. "Agreement" means the terms and conditions contained herein, in
---------
all attached Exhibits, Addenda and any other documents made a part of this
Agreement or incorporated by reference, including any written amendments hereto
signed by the Parties.
1.2. "Affiliate" means any and all of the Baan entities listed in
---------
Exhibit A, which may be updated by Baan from time to time.
1.3. "Baan Software" means any enterprise software application of
-------------
Baan, a Baan Affiliate or a third Party that is marketed under the Baan brand
and all Intellectual Property Rights embodied therein. To the extent Licensed
Software and Technology is embedded in Baan Software, such Licensed Software and
Technology shall be and remain the property of TopTier.
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>
1.4. "Bankruptcy Event" means any of the following events or
----------------
circumstances with respect to a Party: (i) such Party ceases conducting its
business in the normal course; (ii) becomes insolvent or becomes unable to meet
its obligations as they become due; (iii) makes a general assignment for the
benefit of its creditors; (iv) petitions, applies for, or suffers or permits
with or without its consent the appointment of a custodian, receiver, trustee in
bankruptcy or similar officer for all or any substantial part of its business or
assets; or (v) avails itself or becomes subject to any proceeding under the U.S.
Bankruptcy Code or any similar state, federal or foreign statute relating to
bankruptcy, insolvency, reorganization, receivership, arrangement, adjustment of
debts, dissolution or liquidation, which proceeding is not dismissed within
sixty (60) days of commencement thereof.
1.5. "Confidential Information" means information, including without
------------------------
limitation the Licensed Software and Technology, that is transmitted or
otherwise provided by or on behalf of either Party to the other Party in
connection with this Agreement and the activities hereunder, and that should
reasonably have been understood by the receiving Party because of legends or
other markings, the circumstances of disclosure or the nature of the information
itself, to be proprietary and confidential to the disclosing Party, an Affiliate
of the disclosing Party or to a third party. Confidential Information may be
disclosed in written or other tangible form (including on magnetic media) or by
oral, visual or other means.
1.6. "Deliverable" means the Licensed Software and Technology
-----------
delivered by TopTier to Baan for testing and acceptance pursuant to Section 3 of
the Agreement.
1.7. "Derivative Work" has the meaning ascribed to it under the United
---------------
States Copyright Law, Title 17 U.S.C. Sec. 101 et. seq.
1.8. "Documentation" means all or any portion of the materials, in
-------------
written or other tangible form (including on magnetic media), generally made
available by TopTier for use in connection with the Licensed Software and
Technology, including functional or technical specifications, user guides,
operator guides, installation and operation guides and any other supporting
materials.
1.9. "End User" shall mean the end user of Baan Software. If End User
--------
is a corporation or other entity, then End User means each individual within
such corporation or entity licensed pursuant to this Agreement to use, but not
to further distribute, the Licensed Software and Technology embedded in Baan
Software.
1.10. "Enhancement" means any improvement, upgrade, new version of,
-----------
enhancement to, fix, extension to, or add-on module that is a Derivative Work of
the Licensed Software and Technology identified in Exhibit B.
---------
1.11. "Intellectual Property Rights" means all rights of a Person in,
----------------------------
to, or arising out of: (i) any U.S., international or foreign patent or any
application therefor and any and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof; (ii) inventions (whether
patentable or not in any country), invention disclosures, improvements, trade
secrets, proprietary information, know-how, technology and technical data; (iii)
copyrights, copyright registrations, mask works, mask work registrations, and
applications therefor in the U.S. or any foreign country, and all other rights
corresponding thereto throughout the world; and (iv) any other proprietary
rights in technology anywhere in the world.
1.12. "Licensed Software And Technology" means the TopTier Software and
--------------------------------
Technology listed on Exhibit B, as may be supplemented by TopTier from time to
---------
time, to be distributed by Baan as software embedded within Baan Software and
marketed under the Baan name.
2
<PAGE>
1.13. "Maintenance And Support" means the maintenance and support
-----------------------
activities described in the attached Exhibit C.
---------
1.14. "Object Code" means Software in binary, executable form.
-----------
1.15. "Party" in its singular or plural form, refers to either Baan or
-----
TopTier or both, as dictated by the use.
1.16. "Person" means any legal person or entity, including any
------
individual, corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated association, limited liability corporation,
governmental entity, or other person or entity of similar nature.
1.17. "Software" means computer software and Object Code, including,
--------
but not limited to, assemblers, compilers, or other executable code including
associated data files, data (including image and sound data), design tools, user
interfaces, templates, menus, buttons and icons, together with all related
Documentation.
1.18. "Source Code" means Software in human-readable form, including
-----------
high-level language program listings, flowcharts, schematics, and logic diagrams
and associated Documentation.
1.19. "Term" shall have the meaning set forth in Section 11.1.
----
1.20. "Technology" means technology, including required know-how, show-
----------
how, techniques, design rules, algorithms, routines, Software and associated
Documentation, files, data-bases, works of authorship, processes, devices and
hardware, as necessary to enable the incorporation or embedding of the Licensed
Software and Technology in Baan Software.
2. LICENSE
2.1. License To Baan. TopTier hereby grants to Baan and its Affiliates
---------------
a perpetual, non-exclusive, limited, worldwide right and license to embed and
incorporate the Licensed Software and Technology in Baan Software products only,
and for use only with databases or other data sources defined and fully
contained within Baan Software products. Baan and its Affiliates shall have the
right to market, distribute and sub-license Baan Software products incorporating
and embedding the Licensed Software and Technology only under Baan's brand name
and only to End-Users. Baan shall license the Licensed Software and Technology
pursuant to its own Software License and Support Agreement.
2.2. Limited License. TopTier's license to Baan and its Affiliates
---------------
excludes any right of sub-license to software developers, Independent Software
Vendors ("ISV") or other OEMs or to any third parties other than End-Users. Baan
and its Affiliates have no right nor license to create standalone software
products for the purpose of distributing the Licensed Software and Technology to
End-Users or other third parties. Baan and its Affiliates have no right nor
license to further develop or cause other parties to develop the Licensed
Software and Technology in ways which will enable their use with databases or
other data sources not defined and fully contained within Baan Software.
2.3. No Transfer Of License. Baan and its Affiliates may not transfer
----------------------
nor assign their rights under this Agreement to any third party without the
prior written consent of TopTier, which consent shall
3
<PAGE>
not be unreasonably withheld. In the event Baan is acquired by or merges with
another entity, this Agreement shall remain in effect and the license granted in
this Section 2 shall be limited to those Baan Software products released and in
use immediately prior to any such merger or acquisition. To the extent the
surviving entity in such merger or acquisition wishes to extend the license
rights to products in addition to those Baan Software products released and in
use immediately prior to any such merger or acquisition, any such rights will be
separately negotiated and are not included in the license grants of Section 2.1.
2.4. Development License to Baan. Subject to the terms and conditions
---------------------------
hereof, TopTier hereby grants to Baan a perpetual, non-transferable, non-
exclusive, royalty-free limited license, without the right to sublicense, to use
internally and reproduce the Licensed Software and Technology solely for the
purpose of performing development as required for the incorporation of the
Licensed Software and Technology in Baan Software products, as permitted under
this Agreement.
2.5. License Mechanism; Reporting. TopTier shall provide Baan with a
----------------------------
master copy of the Licensed Software and Technology incorporating a key
mechanism that will enable End Users to use the Licensed Software and Technology
immediately upon authorization from TopTier. Within forty-five (45) days of the
end of each calendar quarter, TopTier shall provide Baan with a written report
detailing the number of licenses of the Licensed Software and Technology
authorized by TopTier for the immediately preceding quarter, identifying such
things as End User name and address, the number of End Users and details of the
Licensed Software and Technology licensed to the particular End Users.
3. DELIVERY AND ACCEPTANCE
3.1. Delivery to Baan: TopTier shall deliver to Baan the Licensed
----------------
Software and Technology on or before April 2, 2000.
3.2. Testing and Acceptance by Baan. Baan will promptly test and
------------------------------
evaluate the Deliverables within [*] from the date of receipt of the Licensed
Software and Technology as required in Section 3.1. If the Deliverables are
acceptable to Baan, Baan shall promptly issue to TopTier a letter of acceptance
indicating that all of the Deliverables have been delivered, tested and accepted
for purposes of this Agreement (the "Letter of Acceptance"). The Letter of
Acceptance will state that Baan accepts the Deliverables under the License
granted in this Agreement and that there are no further conditions to be met by
TopTier in order to enable Baan's full use and enjoyment of its License granted
hereunder.
3.3. Letter of Deficiency. If, after testing by Baan, the Deliverables
--------------------
are not acceptable to Baan, Baan shall notify TopTier in writing within [*] from
the date of receipt of the Licensed Software and Technology as required in
Section 3.1, such written notice to include a written list of deficiencies
categorizing improvements, Enhancements or corrections, together with
comprehensive citations of test results and documented problems and deficiencies
(the "Letter of Deficiency"). To the extent that the Letter of Deficiency
identifies improvements or corrections that are part of standard Maintenance and
Support, TopTier shall perform such improvements or corrections at no additional
charge to Baan according to the Maintenance and Support terms and conditions
described in Section 5 below. To the extent that the Letter of Deficiency
contains requests for new or additional functionality not originally specified
in Exhibit B, the planning and execution of such requests, including
---------
feasibility, fees and delivery, will be negotiated separately and under a
separate agreement between Baan and TopTier and will not be construed as part of
this Agreement. Such requests for new or additional functionality shall not be
justifiable cause for Baan to delay acceptance of the Deliverables as specified
in Section 3 nor to delay payments under this Agreement as specified in Section
4 below.
4
<PAGE>
3.4. Proof of Acceptance Upon Shipment. If Baan ships any Baan
---------------------------------
Software that has Licensed Software and Technology embedded or incorporated in
it to any End User, such shipment shall immediately and without further notice
to TopTier constitute Baan's acceptance of the Deliverables, regardless of
whether Baan has provided a Letter of Acceptance as contemplated in Section 3.2
above.
3.5. Failure to Send Letter of Acceptance or Letter of Deficiency. If
------------------------------------------------------------
Baan fails to provide TopTier with either a Letter of Acceptance or a Letter of
Deficiency in the time period required in this Section 3, such failure shall
constitute acceptance by Baan of the Deliverables as if Baan had provided a
Letter of Acceptance pursuant to Section 3.2.
4. LICENSE FEES AND PAYMENTS
4.1. License Fees: The total price for the license granted to Baan in
------------
Section 3 above is [*] (the "License Fee"). TopTier shall invoice Baan for the
License Fee, and Baan shall make payments to TopTier, according to the following
schedule, over the five (5) years following the Effective Date:
4.1.1. Initial payment of the License Fee of [*] to be
paid in four (4) equal quarterly installments during the first year of this
Agreement, the first payment being due and payable on March 15, 2000, and the
remaining three (3) quarterly payments being due and payable on June 30, 2000,
September 30, 2000 and December 31, 2000. The first quarterly payment of
[*] of the initial License Fee will be irrevocable and non-refundable,
irrespective of Baan's decision to accept or not accept the Deliverables as
provided in Section 3 above. Any subsequent payment of all or part of the
initial License Fee will be refunded by TopTier to Baan, without penalty, if
Baan, after testing the Deliverables according to Section 3.2, determines that
they are not acceptable and decides to return the Deliverables to TopTier
according to Section 3.3 above and terminate this Agreement. After the initial
payment of the License Fee is made and after the Deliverables have been
accepted, Baan shall pay the remaining balance according to the terms hereof
regardless of any decision by Baan to refrain from using its license rights or
regardless of the degree by which it utilizes the license rights during the [*]
following the Effective Date of this Agreement, except for the
circumstances described in Section 11.4.
4.1.2. [*] of the License Fee, each of [*] to be paid by Baan on
the [*], respectively, of the Effective Date of this Agreement in [*] equally
quarterly installments during [*] anniversary year, with the quarterly
installments becoming due and payable on March 31, June 30, September 30 and
December 31 of [*] such year.
4.1.3. [*] payment of [*] to be paid by Baan in four (4) equal
quarterly installments during the fourth anniversary year of the Effective Date
of this Agreement, with the quarterly installments becoming due and payable on
March 31, June 30, September 30 and December 31 of such year.
4.1.4. [*]
4.1.5. Failure by Baan to make timely payments of its License
Fees will constitute a breach of this agreement and if not cured within 30 days
after notice given by TopTier to Baan in writing,
5
<PAGE>
will be cause for termination of this Agreement, without relieving any of Baan's
financial or other obligations hereunder.
4.1.6. License Fees are separate from the fees for Maintenance
and Support described in Section 5 of this Agreement.
5. MAINTENANCE AND SUPPORT
5.1. In exchange for the Maintenance and Support Fees described in
this Section 5, TopTier shall provide Baan with Maintenance and Support for the
Licensed Software and Technology on an annual basis in order to enable Baan to
receive all future Enhancements to the Licensed Software and Technology. The
Maintenance and Support Fee will be invoiced by TopTier and paid by Baan
according to the following schedule:
5.1.1. [*]
5.1.2. For the [*] years of this Agreement, Baan will pay
TopTier [*] at the beginning of each subscription year, with payment to be made
upon invoice from TopTier no later than thirty (30) days after the anniversary
date of the Effective Date of this Agreement, and TopTier shall provide such
Maintenance and Support to Baan. For each subsequent year following the [*] of
this Agreement, to the extent Baan wishes to receive Maintenance and Support
from TopTier, Baan will pay TopTier [*] at the beginning of each subscription
year, with payment to be made upon invoice from TopTier no later than thirty
(30) days after the anniversary date of the Effective Date of this Agreement.
Nothing herein shall require or be construed to require Baan to order
Maintenance and Support from TopTier for years after the [*] of this Agreement,
and nothing herein shall require or be construed to require TopTier to deliver
the Maintenance and Support to Baan after the [*] of this Agreement unless Baan
pays for such Maintenance and Support.
5.2. The Maintenance and Support provided by TopTier to Baan shall
include the following as outlined in further detail in the attached Exhibit C:
---------
5.2.1. Enhancements to the Licensed Software and Technology, as
they are released and made available to TopTier OEM customers;
5.2.2. Technical Support by TopTier to Baan technical personnel
only (and not End Users), by means of telephone, telefax, electronic mail or
electronic data transfer, in support of the license granted herein;
5.2.3. [*]
6
<PAGE>
5.2.4. Maintenance and Support by TopTier will not include on-
site technical support, consulting, design, development or engineering services
or End User FLS.
6. PROPRIETARY RIGHTS
6.1. Licensed Software and Technology. TopTier shall own all right
--------------------------------
title and interest in and to all Licensed Software and Technology and any
Derivative Works thereof, including all Intellectual Property Rights therein and
thereto.
6.2. Baan Software. Baan shall own all right title and interest in and
-------------
to all Baan Software and any Derivative Works thereof, including all
Intellectual Property Rights therein and thereto.
6.3. Source Code Escrow.
------------------
6.3.1. Escrow Account. Within thirty (30) days of the Effective
--------------
Date, TopTier shall establish with Sourcefile, an escrow agent, a Source Code
escrow account, governed by the agreement with Sourcefile, as attached in
Exhibit D. TopTier agrees to place into such escrow account a copy of the Source
- -------
Code for the Licensed Software and Technology, as supplemented from time to time
by TopTier, along with the related Documentation (collectively, "Source
Materials"); provided, however, that TopTier shall not be obligated to make
deposits into the escrow account more frequently than twice per year. Baan shall
have the right at any time to contact the escrow agent for the purpose of
confirming that the Source Materials in the escrow account and verifying the
instructions to the escrow agent to release the Source under the circumstances
specified in Section 6.3.2 below. Baan shall bear all fees, expenses and other
charges to open and maintain such escrow account.
6.3.2. Release. TopTier's agreement with the escrow agent shall
-------
provide that a copy of the Source Materials will be delivered to Baan by the
escrow agent in the event that (i) a Bankruptcy Event occurs with respect to
TopTier that is not resolved within sixty (60) days; (ii) TopTier discontinues
or is in material breach of its support obligations for the Licensed Software
and Technology and does not provide appropriate support within thirty (30) days
after receiving a request from Baan to do so; or (iii) this Agreement is
terminated or expires for any reason.
6.3.3. License. In the event of a release of escrow to Baan,
-------
under the conditions of the Sourcefile agreement, Baan shall have a
nontransferable, nonexclusive license to use the Source Materials solely to
support and maintain the Licensed Software and Technology licensed to Baan under
this Agreement. Baan shall have no rights to use the Source Material for its own
purposes of development, nor rights to distribute, transfer, copy, sell,
sublicense, assign, display, demonstrate or convey the Source Materials or the
information in the Source Materials to any third party, nor shall Baan use the
Source Materials for any purpose other than Maintenance and Support of the
Licensed Software and Technology and TopTier shall retain all ownership rights,
title and interest in and to the Source Materials, including all Intellectual
Property Rights therein and thereto.
6.4. Trademark License. Each Party hereby authorizes the other Party
-----------------
to use its current and future trademarks, service marks and trade names
("Trademarks") in marketing programs and materials, for the purpose of promoting
the products and services of each of the Parties, provided that such use is not
7
<PAGE>
derogatory nor detrimental to either Party. Such use of the Trademarks shall be
solely in accordance with the reasonable instructions and then current
guidelines from the Party owning the Trademark in question. The Parties
understand and agree that such guidelines may, from time to time, be revised for
the purpose of protecting the standards of quality established for TopTier'
goods and services sold under the Trademarks and protecting the owner's rights
in the Trademarks.
6.5. TANGIBLE PROPERTY. Unless otherwise agreed to in writing, any
-----------------
tangible property, including but not limited to Documentation and equipment or
material of every description furnished by one Party to another hereunder, is
and shall remain the property of the furnishing Party. The Parties shall not use
such property except in performing this Agreement. All such property shall be
returned to furnishing Party upon the earlier of either the furnishing Party's
request, completion or termination of the relevant services or expiration or
termination of this Agreement.
7. REPRESENTATIONS AND WARRANTIES
7.1. REPRESENTATIONS AND WARRANTIES. The Parties make the following
------------------------------
representations and warranties to each other, as applicable:
7.1.1. ORGANIZATION REPRESENTATIONS; ENFORCEABILITY. Each Party
--------------------------------------------
is duly organized, validly existing and in good standing in the jurisdiction in
which it is incorporated. The execution and delivery of this Agreement by each
Party and the transactions contemplated hereunder have been duly and validly
authorized by all necessary action on the part of each Party. This Agreement
constitutes a valid and binding obligation of each party enforceable in
accordance with its terms.
7.1.2. NO CONFLICT. The entering into and performance of this
-----------
Agreement by the Parties does not and will not violate, conflict with or result
in a material default under any other contract, agreement, indenture, decree,
judgment, undertaking, conveyance, lien or encumbrance to which each of the
Parties or any of its employees is a party or by which it or any of its property
is or may become subject or bound. Each of the Parties will not grant any rights
under any future agreement, nor will it permit or suffer any lien, obligation or
encumbrances that will conflict with the full enjoyment by each Party of its
rights under this Agreement.
7.1.3. RIGHT TO MAKE FULL GRANT. TopTier has and shall have all
------------------------
requisite ownership, rights and licenses to perform its obligations under this
Agreement fully as contemplated hereby, and to grant to Baan the license rights
stipulated herein with respect to the Licensed Software and Technology, free and
clear of any and all agreements, liens, adverse claims, encumbrances and
interests of any Person, including, without limitation, TopTier employees,
agents, artists and contractors and such contractors' employees, agents and
artists, who have provided, are providing or shall provide services with respect
to the Deliverables.
7.1.4. NONINFRINGEMENT. Nothing contained in the Licensed
---------------
Software and the Technology to be delivered to Baan, violates or misappropriates
any Intellectual Property Right of any third party. Further, no characteristic
of the Licensed Software and Technology does or will cause manufacturing, using,
maintaining or selling Baan products or other products incorporating the
Licensed Software and Technology to infringe, violate or misappropriate any
Intellectual Property Right of any third party.
7.1.5. NO HARMFUL CODE OR VIRUSES. The Deliverables and the
--------------------------
Licensed Software and Technology as delivered by TopTier to Baan, will contain
no matter which is injurious to End Users or
8
<PAGE>
their property. The Licensed Software and Technology and the media upon which
the same are delivered to Baan are free from computer viruses, booby traps, time
bombs or other programming designed to interfere with the normal functioning of
the Licensed Software and Technology, the Baan Software into which the Licensed
Software and Technology is and/or will be incorporated, or Baan's or End User's
equipment, programs or data.
7.1.6. PROCESSING OF DATE AND DATE DEPENDENT DATA. The Licensed
------------------------------------------
Software and Technology will provide accurate processing of date and date
dependent data (including, but not limited to, calculating, comparing and
sequencing operations) for all dates, including leap years.
7.1.7. PERFORMANCE. TopTier represents and warrants to Baan that
-----------
the Licensed Software and Technology will perform in substantial accordance with
the specifications in the Documentation for such Licensed Software and
Technology.
7.1.8. TESTING AND ACCEPTANCE. Baan represents and warrants to
----------------------
TopTier that it shall thoroughly and comprehensively test the Deliverables prior
to accepting them and that it shall report to TopTier any and all claims of
defects or deficiencies in performance and shall request TopTier to evaluate
such claims and correct them if necessary.
8. CONFIDENTIAL INFORMATION
8.1. TERMS OF AGREEMENT. The terms of this Agreement are the
------------------
Confidential Information of both Parties and shall not be disclosed by either
Party in any manner (including but not limited to news releases, articles,
brochures, advertisements, speeches or other information releases) without the
prior written consent of the other Party.
8.2. LIMITATIONS ON USE AND DISCLOSURE. Each Party receiving
---------------------------------
Confidential Information (the "Recipient") agrees as to any such Confidential
Information that may be disclosed to it by the other Party hereunder (the
"Discloser"):
(a) to protect such Confidential Information from disclosure to
others, using the same degree of care used to protect its own
confidential or proprietary information of like importance, but in any
case using no less than a reasonable degree of care. Recipient may
disclose Confidential Information received hereunder to (x) its
Affiliates who agree, in advance, in writing, to be bound by this
Agreement, and (y) to its employees and subcontractors, and its
Affiliates' employees and subcontractors, who have a need to know, for
the purpose of this Agreement, and who are bound to protect the
received Confidential Information from unauthorized use and disclosure
under the terms of a written agreement. Confidential Information shall
not otherwise be disclosed to any third party without the prior written
consent of the Person owning such Confidential Information;
(b) to use such Confidential Information only for the purposes
of this Agreement;
(c) not to make copies of any such Confidential Information or
any part thereof except for the purposes of this Agreement; and
(d) to reproduce and maintain on any copies of any Confidential
Information such proprietary legends or notices as are contained in or
on the original or as the owner may otherwise reasonably request.
9
<PAGE>
8.3. EXCEPTIONS. The restrictions of this Section 8 on use and
----------
disclosure of Confidential Information shall not apply to information that (a)
was publicly known at the time of Discloser's communication thereof to
Recipient; (b) becomes publicly known through no fault of Recipient subsequent
to the time of Discloser's communication thereof to Recipient; (c) was in
Recipient's possession free of any obligation of confidence at the time of
Discloser's communication thereof to Recipient; (d) is developed by Recipient
independently of and without reference to any of Discloser's Confidential
Information or other information that Discloser disclosed in confidence to any
third party; (e) is rightfully obtained by Recipient from third parties
authorized to make such disclosure without restriction; or (f) is identified by
Discloser as no longer proprietary or confidential.
8.4. DISCLOSURE PURSUANT TO LEGAL REQUIREMENT. In the event Recipient
----------------------------------------
is required by law, regulation or court order to disclose any of Discloser's
Confidential Information, Recipient will promptly notify Discloser in writing
prior to making any such disclosure in order to facilitate Discloser seeking a
protective order or other appropriate remedy from the proper authority.
Recipient agrees to cooperate with Discloser in seeking such order or other
remedy. Recipient further agrees that if Discloser is not successful in
precluding the requesting legal body from requiring the disclosure of the
Confidential Information, it will furnish only that portion of the Confidential
Information which is legally required and will exercise all reasonable efforts
to obtain reliable assurances that confidential treatment will be accorded the
Confidential Information.
8.5. RETURN OF CONFIDENTIAL INFORMATION. All Confidential Information
----------------------------------
disclosed under this Agreement (including information in computer software or
held in electronic storage media) shall be and remain the property of Discloser.
All such information in any computer memory or data storage apparatus shall be
erased or destroyed and all such information in tangible form shall be returned
to Discloser, promptly upon the earlier of: (i) the written request of the
Discloser, (ii) termination or expiration of this Agreement, and shall not
thereafter be retained in any form by Recipient.
8.6. EQUITABLE RELIEF. The Parties acknowledge that their respective
----------------
Confidential Information are unique and valuable, and that breach by either
Party of the obligations of this Agreement regarding such Confidential
Information and intellectual property rights will result in irreparable injury
to the affected Party for which monetary damages alone would not be an adequate
remedy. Therefore, the Parties agree that in the event of a breach or threatened
breach of such provisions, the affected Party shall be entitled to specific
performance and injunctive or other equitable relief as a remedy for any such
breach or anticipated breach without the necessity of posting a bond. Any such
relief shall be in addition to and not in lieu of any appropriate relief in the
way of monetary damages.
9. LIMITATION OF LIABILITY
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INCIDENTIAL, INDIRECT, STATUTORY OR CONSEQUENTIAL DAMAGES OR ANY LOST
REVENUE, LOST PROFITS RESULTING FROM, ARISING OUT OF OR RELATED TO ITS
PERFORMANCE OR FAILURE TO PERFORM ANY OF ITS OBLIGATIONS UNDER, OR BREACH OF
THIS AGREEMENT, WHETHER OR NOT EITHER PARTY HAS BEEN ADVISED, KNEW OR SHOULD
HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING LIMITATION OF
LIABILITY SHALL NOT APPLY TO TOPTIER'S OBLIGATION TO INDEMNIFY BAAN UNDER
SECTION 10 HEREOF OR TO BREACHES BY EITHER PARTY OF SECTION 8 HEREOF.
10
<PAGE>
10. INDEMNITY
TopTier will defend at its expense and indemnify and hold harmless Baan
from and against any action, suit, or other proceeding, or settlement thereof,
to the extent that such action, suit or proceeding arises out of or results from
any claim, allegation or finding that any exploitation of the Licensed Software
and Technology by Baan hereunder infringes the Intellectual Property Rights of
any third party. TopTier shall pay those losses, damages, expenses and costs,
awarded against, or incurred by Baan, or as a result of, any such suit, action
or other proceeding, or any settlement thereof, provided that (i) Baan promptly
notifies TopTier in writing of any such claim, (ii) TopTier shall be accorded
control of the defense and of all negotiations for settlement or compromise of
such claim, and (iii) Baan cooperates with TopTier, at TopTier's expense, in the
defense and settlement of such claim, including providing to TopTier such
information and assistance as TopTier may reasonably request.
11. TERM AND TERMINATION
11.1. TERM. Unless earlier terminated in accordance with its terms,
----
this Agreement shall commence as of the Effective Date and shall remain in full
force in perpetuity unless properly terminated by one or other of the Parties
according to the provisions of this Section 11.
11.2. TERMINATION FOR BREACH. Either Party may terminate this Agreement
----------------------
if the other Party is in material breach of any term, condition or provision of
this Agreement, which breach, if capable of being cured, is not cured within
thirty (30) days after the non-breaching Party gives the breaching Party written
notice of such breach.
11.3. TERMINATION FOR BANKRUPTCY; CHANGE OF CONTROL. Each Party may
---------------------------------------------
terminate this Agreement and all rights and licenses granted hereunder effective
immediately upon notice that a Bankruptcy Event has occurred with respect to the
other Party, without thereby relieving the other Party of its financial
obligations under this Agreement. Baan may terminate this Agreement effective
immediately upon notice of a Change of Control of TopTier involving a Baan
direct competitor (by way of illustration, the following are the commonly known
names of Baan direct competitors: [*]). Change of Control of TopTier means (a)
the direct or indirect acquisition of either (i) the majority of the voting
stock of TopTier or (ii) all or substantially all of the assets of TopTier in a
single or series of related transactions; or (b) TopTier is merged with or into
another entity.
11.4. EFFECT OF TERMINATION. In the event all or part of this Agreement
---------------------
is terminated hereunder:
11.4.1. If Baan terminates this Agreement after issuing a Letter
of Acceptance to TopTier or if Baan breaches this Agreement leading to
termination by TopTier, none of Baan's financial obligations will be relieved or
changed and Baan shall be obligated to make full payment as specified in Section
4, except in the case of a termination for a Change of Control of TopTier (see
11.4.2 below). Following such instances of termination by Baan or by a breach of
the Agreement by Baan, Baan's license under this agreement shall be cancelled
immediately and Baan shall refrain from further use of the Licensed Software and
Technology, except as necessary to support any published Baan Software to End-
Users, and Baan shall, within ninety (90) days of the Termination, remove all
Licensed Software and
11
<PAGE>
Technology which had previously been incorporated or embedded in Baan Software
from Baan Software and shall refrain from any marketing, sale or distribution of
Baan Software containing the Licensed Software and Technology.
11.4.2. If Baan terminates this Agreement because of a Change of
Control of TopTier as described in Section 11.3 above, Baan shall have no
obligation to make any payments called for in this Agreement that would arise
following the date of such termination; however Baan shall pay any unpaid
amounts due up to the date of such termination.
11.4.3. The following sections of this Agreement shall survive
termination by either Party: 1, 6, 7, 8, 9, 10, 11 and 12.
11.5. AVAILABLE REMEDIES. Termination of all or any portion of this
------------------
Agreement in accordance with this Section 11 shall not limit either Party from
pursuing any other remedies otherwise available to it at law or in equity,
including injunctive relief, and not otherwise precluded by this Agreement.
12. GENERAL
12.1. TOPTIER BANKRUPTCY. All rights and licenses granted to Baan under
------------------
or pursuant to this Agreement are, and shall otherwise be deemed to be, for
purposes of Section 365(n) of the United States Bankruptcy Code, licenses to
rights of "intellectual property" as defined thereunder. Notwithstanding any
provision contained herein to the contrary, if TopTier is under any proceeding
under the Bankruptcy Code and the trustee in bankruptcy of TopTier, or TopTier,
as a debtor in possession, rightfully elects to reject this Agreement , Baan
may, pursuant to 11 U.S.C. Section 365(n)(1) and (2), retain any and all of
Baan's rights hereunder, to the maximum extent permitted by law, subject to any
payments specified herein.
12.2. TAXES. All prices herein are in U.S. Dollars and are exclusive
-----
of any applicable taxes. Each Party is responsible for complying with the
collection, payment and reporting of all taxes imposed by any governmental
authority applicable to its activities in connection with the sale, lease,
delivery or license of the Licensed Software and Technology under this
Agreement. Neither Party is responsible for the taxes that may be imposed on the
other Party. Situations may arise where governmental authorities require Baan to
withhold from amounts payable to TopTier. In such cases, Baan may withhold the
amount of taxes due from payments to be made to TopTier under this Agreement and
remit the taxes withheld to the governmental authority.
12.3. COMPETING PRODUCTS. Nothing contained herein shall be construed
------------------
as precluding either Party from developing, promoting, marketing, distributing
and licensing other products that compete directly or indirectly with the
Licensed Software and Technology.
12.4. WAIVER. The failure of either Party to insist on the strict per-
------
formance of any terms, covenants and conditions of this Agreement at any time,
or in any one or more instances, or its failure to take advantage of any of its
rights hereunder, or any course of conduct or dealing, shall not be construed as
a waiver or relinquishment of any such rights or conditions at any future time
and shall in no way affect the continuance in full force and effect of all the
provisions of this Agreement.
12.5. HEADINGS. Headings used in this Agreement are for convenience of
--------
reference only and shall not be construed as altering the meaning of this
Agreement or any of its parts.
12
<PAGE>
12.6. APPLICABLE LAW. This Agreement shall be governed by and con-
--------------
strued in accordance with the laws of the state of California, without reference
to rules of conflict of law. The Parties hereby irrevocably agree that any
action commenced that relates to the terms of this Agreement shall be brought in
a court within the state of California, including a federal district court,
located in San Jose, California.
12. SURVIVAL OF LICENSES. Any licenses to the Licensed Software and
--------------------
Technology granted by Baan to End Users and any rights to the Licensed Software
and Technology that Baan may reasonably require for the purpose of providing
support to End Users shall survive the termination or expiration of this
Agreement for any reason.
12.8. SEVERABILITY. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable, the remaining terms shall not be affected.
The Agreement shall be interpreted as if the illegal, invalid or unenforceable
provision had not been included in it, and the invalid or unenforceable
provision shall be replaced by a mutually acceptable provision which, being
valid and enforceable, comes closest to the intention of the Parties underlying
the invalid or unenforceable provision.
12.9. NOTICES. All notices, requests, demands, or communications
-------
required or permitted hereunder shall be in writing, delivered personally or by
electronic mail, facsimile, overnight delivery service at the respective
addresses set forth below (or at such other addresses as shall be given in
writing by either Party to the other). All notices, requests, demands or
communications shall be deemed effective upon receipt for personal delivery, or
on the business day following the date of sending by electronic mail, facsimile
or overnight delivery service.
Baan:
Baan Development B.V.
Baron van Nagellstraat 89
3770 AC Barneveld
The Netherlands
Attn: Vice President, Chief Technology Counsel
Fax: 31 342 42 8200
TopTier: Top Tier, Israel, Ltd.
6203 San Ignacio Avenue
San Jose, CA 95119
Attn: Vice President, Operations
Fax: 408 360-1703
12.10. ASSIGNMENT. The respective rights and obligations provided in
----------
this Agreement shall bind and inure to the benefit of the Parties, their legal
representatives, successors and permitted assigns. In addition to the assignment
provisions of Section 2.3, neither Party shall assign this Agreement, including
without limitation by operation of law, in whole or in part, without the prior
written consent of the other Party, which consent shall not be unreasonably
withheld. Any assignment in violation of this Section 12.10 shall be null and
void.
12.11. RELATIONSHIP OF PARTIES. Nothing contained in this
-----------------------
Agreement shall be deemed or construed as creating a joint venture or
partnership between TopTier and Baan. Except as expressly provided herein,
neither Party is by virtue of this Agreement authorized as an agent, employee or
legal
13
<PAGE>
representative of the other, neither Party shall have power to control the
activities and operations of the other and neither Party shall have any power or
authority to bind or commit the other.
12.12. FORCE MAJEURE. Neither Party shall be liable in case of force
-------------
majeure. The Parties to this Agreement agree that force majeure shall include
(but shall not be limited to): material breakdown of equipment, labor disputes
of whatever nature or cause, and any other circumstances reasonably beyond the
control of one of the Parties.
12.13. NONSOLICITATION. During the Term and for a period of twelve(12)
---------------
months thereafter, neither Party will directly or indirectly solicit for
employment employees of the other Party; provided, however, that this Section
12.13 shall not be construed as precluding either Party from hiring any Person
that seeks employment or responds to a general advertisement.
12.14. ENTIRE AGREEMENT; EFFECT ON MOU. This Agreement constitutes the
-------------------------------
entire understanding of the Parties, and supersedes all prior or contemporaneous
written and oral agreements, representations or negotiations with respect to the
subject matter hereof. In particular, upon Baan's acceptance of the Deliverables
as provided in Section 3, this Agreement supersedes in its entirety and renders
null and void the Memorandum of Understanding (the "MOU") dated on or about
July, 1, 1998 between Baan Company N.V. and TopTier Software, Inc., each
Affiliates of the respective Parties, and that certain Development Partner
Agreement dated June 13, 1997 between Affiliates of the Parties. During the
period between the Effective Date and the date the Deliverables are accepted by
Baan, the MOU shall remain in place but exist in abeyance, unenforceable by
either Party, pending Baan's acceptance of the Deliverables pursuant to Section
3. This Agreement may not be modified or amended except in writing signed by
both Parties.
IN WITNESS WHEREOF, this Agreement is executed by the duly authorized
representatives of the Parties as of the date first set forth above.
TOPTIER, ISRAEL, LTD. BAAN DEVELOPMENT B.V.
/s/ Reuven Agassi /s/ Gordon Kushner
- ------------------------------ -------------------------------
Signature Signature
Agassi Reuven Gordon Kushner
- ------------------------------ -------------------------------
Name Name
Chairman Top Tier Israel VP, Chief Technology Counsel
- ------------------------------ -------------------------------
Title Title
14
<PAGE>
EXHIBIT A
AFFILIATES
Baan Company N.V.
Baan International B.V.
Baan Software B.V.
Baan Austria GmbH
Baan (Schweiz) AG
Baan Nederland B.V.
Baan Belgium N.V.
Baan France S.A.
Baan Nordic AB
Baan UK Ltd.
Baan Holding Central Europe GmbH
Baan South Africa (Proprietary) Limited
Baan U.S.A., Inc.
Baan Canada, Inc.
Baan Brasil Sistemas de Informatica Ltda.
Baan Argentina Ltda.
Baan Info Systems India Pvt. Ltd.
Baan Software India Pvt. Ltd.
Baan Japan Co., Ltd.
Baan (Malaysia) Sdn. Bhd.
Baan Education Asia Pacific (M) Sdn Bhd.
Baan Singapore Pte. Ltd.
Baan Asia Pacific Pte. Ltd.
Baan Korea Co. Ltd.
Baan Australia Pty. Ltd.
Baan Iberica I.S., S.A.
Baan Italia S.r.l.
Baan China Limited
Antalys, Inc.
Matrix Holding B.V.
Beologic A/S
CAPS Logistics, Inc.
CODA Plc.
Compact 3000 Ltd.
15
<PAGE>
EXHIBIT B
Licensed Software and Technology
EXHIBIT B: TopTier Technology and Licensed Software
<TABLE>
<CAPTION>
Feature Function Benefit
<S> <C> <C>
TopTier Server Enables both simple and complex correlation of data For users struggling to access
from disparate sources of structured and information through Supports only
unstructured data--either from a single TopTier incompatible and complex applications
Server, or between correlated TopTier Servers. and data access tools, Baan Data
TopTier Software provides a single
interface and patented user Sources,
as experience n that integrates,
navigates and simplifies an per the
organization's applications and
day-to-day operations
Multiplexor A specialized server component that balances loads Enables scalability of HyperRelational
between multiple TopTier servers on multiple applications.
machines. It is specifically designed to manage
multiple requests in a multiple server, single
application environment.
HRNP Server Resolves all HRNP requests, and generates HTML or
other appropriate pages as response. Multiple
instances of this server can be managed & balanced
through the Multiplexor.
Administration and Management
Services Manager TopTier Services manager is the center for servers' One interface for managing all TT
administration while running as NT services. It is servers. No need to learn several
the interface that provide all administration needs tools.
such as service installation, configuration,
activation and monitoring of the TopTier Server.
Server monitor the interface for configuring, monitoring and Lets administrator optimize
setting the properties of the server. It allows performance across multiple TopTier
configuring several servers to run on separate servers depending on load and taking
machines. The monitor can reside on a remote into account various factors such as
machine from the actual servers. number of users, speed of databases
and complexity of queries). Helps
Administrator test the load and
behavior of the system and configure
it appropriately.
Configuration and
System Analysis
Administrator A guideline that facilitates the configuration of
Guide large systems, and benchmarking information as to
performance requirements.
Server Log Administrator can set preferences and TopTier Lets administrator track server usage
server log will include every request that is and take appropriate
processed by the server including the user name, action to maximize use of system
action taken, SQL query and processing time resources and deliver better
utilized. response time to users. Also used for
testing and qualification of deployed
systems and tracking anomalies.
Security
Data Security Support for user, schema, table, and column-level Provides security for
security. HyperRelational applications while
taking full advantage of DBMS security
levels.
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Encryption (SSL) The Secure Sockets layer (SSL) protocol provides a Ensure transport of encrypted and
security "handshake" that is used to initiate the authenticated data in HyperRelational
TCP/IP connection. This handshake results in the HTML using Browser and Web Server
client and server agreeing on the level of security support for SSL.
they will use and fulfills any authentication
requirements for the connection.
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Feature Function Benefit
<S> <C> <C>
TopTier Data Navigator This base offering integrates, navigates and Unlike current integration offerings
simplifies existing extranets and intranets, and decision support Supports only
line-of-business applications and business tools, TopTier Software provides a
intelligence data sources such as relational simple way to directly Baan Data
databases. This technology enables data or access information from its source,
application to be accessed by end users via enabling users to choose Sources, as
TopTier's clients with patented Point of View the path of their navigation and
navigation featuring the signature Drag and Relate benefit from the direction per the
usage metaphor. they choose. contract
End U
Drag and Relate Drag and Relate simplifies and extends the static
Metaphore non-structured point-and-click HyperText browsing
experience with a dynamic structured data browsing
experience that supports both point & click as well
as drag and drop mavigation on a browser. This is
supported in both IE and Netscape Navigator
Toolbar For each user, the toolbar displays a tree menu of
components which represent to the user various
aspects of their portal. Components in the toolbar
are HyperRelational enabled, so links can be
dropped on them thus invoking the corresponding
Component with the related data.
The toolbar displays additional folders &
components, such as document components, web
sources and data components
Application Components that represent a business component in
Components a legacy system. These Components accept dragging
in of meta data and data that invoke this Component
with the associated data and presented with
HyperRelational links.
Office2000 The toolbar may accommodate Office 2000 documents
Integration as Components. These Components may interact with
other Components in the system using the Drag &
Relate metaphor. The documents may be pre defined
Excel templates for analysis, in Word documents
that represent letters etc.
Web Sources A predetermined list of web sources for business Componentizing web sources inserted
information, as well as the ability to extend those into the user toolbar are sensitive to
sources will be available for the user and the drag and relate actions i.e. dragging
administrator. The sources provide information a specific HyperRelational link onto
about the company, its business partners, the a web source to invoke the web source
market (financial and commercial) and any flagged with related data (e.g. tracking a
keywords. Some search/pre-caching mechanism can shipment by dragging an order of an
create a data store for the web pages of relevance item on a FEDEX Component).
and bring them to the local user. Aggregated
information will be surfaced to users via objects.
Users can be authorized to access specific
objects--hence, web sources.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Corporate Integration with the File System Folders mechanism,
Folders MS Exchange and IIS Folders allows access to
corporate documents. Integrated back end query
capabilities provide the ability to integrate the
textual documents as yet another source of
information. Users may browse for a specific
document or perform a free text search.
User based Every user's collection of components is received Every machine with Internet connection
remote toolbars remotely from a server, thus creating a roaming can provide every user with her fully
profile for the user. Access is authenticated operational personilized environment.
mechanisms described in the Security section of
this document.
Correlation The ability to relate information across multiple Allows end users to begin with any set
object models. Creating the seamless end-user of data they're interested in, then
integration through the ability to drag and drop instantly relate that data with any
objects across system boundries. other data sources. The best way to
provide integration at the front end.
Visual cues TopTier client provides visual cues to educate and simplify the Point of View Navigation.
HyperRelational A link describing "How I got to where I am" Track and save navigation paths as
Track (HRT) queries or filters for future use.
ToolTips Every HRNP has a tooltip describing what can be User can get up to speed even faster
done with this link (only IE supports tooltips). than before
Query Tools Enables developers or users to prepare a search for Provides easy interface to conduct a
(Query wizard) data records by preparing a query statement complex search for information in a
specifiying required properties and conditions. HyperRelational application. Queries
Records that meet the query criteria are listed and Records that meet the query criteria
can be saved or printed. A defined query statement are listed and can be defined,
can be saved for repeated use and also used as a changed, displayed, saved and passed
filter to pre-screen data so that only information to other users for knowledge sharing.
that meets the filter's criteria are shown.
Native SQL Support the standard ANSII 92 SQL language for No need to learn a new query language
support queries both for developers and end-user - TopTier Query tools support what
users already know and experienced at.
TopTier SQL TopTier SQL extension syntax is an additional TopTier SQL Extension syntax can
extension function to SQL that help developers and end-users simplify and shorten user queries in
leverage from the relationships defined in the an order of magnitude
TopTier Repository.
Query Components A query or a navigation track can be saved as a
query component that can seamlessly interact with
all other components.
Navigation User can drag any query Component on any other End users with no understanding of
with queries Component to get a filtered list. query syntax or SQL can use them to
navigate and filter data. The
administrator will create the queries
for the user.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C>
Queries with Query Components can hold parameters that upon A query Component with parameters
parameters calling it will ask the user to input values created by the administrator provides
to use in this query. flexible usage for end users.
Filter folder Allows authors (and users) to filter data so that Mechanism for intuitively filtering
only data that matches a certain criteria is data to focus end-users on
displayed. Pre-defined filter and query components subject-specific information.
and HR Track components can be dragged into the
sytem folder and applied globally.
Misc.
Export to file Ability to export any given screen with the entire This feature along with the new
result set of a navigation path to an Excel file. printing capabilities provide a
richer solution for utilization
of the generated data set.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Feature Function Benefit Comments
<S> <C> <C>
TopTier Development Environment Contains all the tools required for modeling, testing and Provides a complete, integrated
deploying an enerprise wide HyperRelational-based authoring environment for
information system. creating and managing
HyperRelational applications.
Provides a convenient "virtual workspace" for developers Provides an intuitive, tailored
and end-users. The workspace "follows" the user so that workspace with HyperRelational
a user can log-in onto any machine to their personal toolbars that end users will
workspace with the appropriate security. and gain access utilize to
interact with their
HyperRelational-based enterprise
information system.
Develop
Model Transporter Reads the structure of a database, its tables, columns, Makes the first step in building a
indexes, primary and foreign keys and generates a HyperRelational application
TopTier repository consisting of objects, properties and (transporting a data model into
relations. Also creates HyperRelational components for the Top Tier repository) as easy as
web browsers. "point and click". Model
Transporting only imports the
logical structure of the database,
not the data itself.
Repository Viewer The window to the TopTier Repository that allows By customizing the repository,
customization of the Meta data. developer can control the way
information appears and behaves in
a HyperRelational application
Relation Matrix Provides Relations window for viewing, modifying and Provides developer with
defining new relationships between objects in the relationship matrix in a visual
Top Tier repository. environment which makes
interacting with Top Tier
repository very easy and intuitive.
Relations reports Generates textual report containing a summary of one Provides developer with hardcopy
or all relations currently defined in the TopTier reports for evaluating design and
repository. sharing with other developers.
Auto Complete Automatically creates relationships between objects in Generates all possible relationships
the TopTier repository, particularly those that did not between objects and enables
have direct relationships in the database. Auto completion HyperRelational Navigation between
can be defined for all levels at once or one level at a objects.
time.
Weighing relations Defines the weight of relations between objects and Provides developer a mechanism to
allows control of path that will be used to optimize paths between objects in
auto-complete complex relations. the same group as well as between
groups. Proper weighting shortens
the development cycle and create
better HyperRelation applications.
Develop
Component Editor Components are the main navigational tool in a A graphical easy to use editor for
HyperRelational application. The Model Transporter defining the appearance,
wizard creates basic components which can be customized properties and methods of the
or regenerated by the developer from the Component Editor. objects the end user will interact
with
Form Editor The development environment tools create basic forms The Component Editor provides one
for each component. Using the Form Editor, developer interface for designing all parts
can customize them or create new ones in a WYSIWYG that build a Component such as
editor. forms, HTMLs, reports.
CSS support Enhanced support for CSS in HyperRelational Template It's easier to create customized
generation. Items will be generated in the HTML HyperRelational templates
templates using their exact position as specified
in the Form Editor.
</TABLE>
21
<PAGE>
<TABLE>
<S> <C> <C> <C>
Correlation Wizard Imports Objects and Components from a remote Allows developer to build a HyperRelational
TopTier Server that represents different application that provides user navigation
datasources and correlates them to the between different datasources.
local system.
Enhanced Integrate a third party Distributed Query Correlation now is faster, full featured and
Correlation Processor (such as MS DQP or ISG Navigator), more flexible.
Capabilities that will provide more robust and optimized
correlation capabilities for developers.
Display data from Imports Objects and Components from a remote Developers can create forms displaying data
multiple TopTier Server that represent different stored in disparate datasources and still have
datasources datasources. Then use fields from the remote the power of point of view navigation to other
server along with local fields to display components.
interrelated data coming from disparate data
sources on one view.
Develop
Web editing Top Tier provides the developer with capability to customize the look and behavior of the
Components on the web.
Hyper Relational A set of 8 Default HTML forms for displaying Provides for quick development of the look and
Templates data on the web. Templates are generated feel" of an HR application by generating a
(HRT) automatically during Model Transporting for starter set of templates that can be used as is
each HR component and can be regenerated at or customized for specific user needs.
anytime with the Component Editor. Generated
templates include templates for finding,
viewing, listing, adding and updating data
records as well as templates for indicating
general errors and the success or failure of
add or update operations.
FrontPage Opening an HRT from the Component editor will Finally WYZIWYG editing of HyperRelational
Editing invoke FrontPage as the default HTML editor. templates with no additional cost.
FrontPage will support HRNP tags. FrontPage
express is part of the full installation of
Internet Explorer 4.0 (which is distributed
for free).
TopTier Tags Similar to HTML, HRNL (HyperRelational Use existing WEB standards such as HTTP,
Navigation Language) is based on tags. browsers and Web server to provide a new
Embedded in the HTMLtemplates, these tags experience - Drag and Relate usage metaphor.
enable HyperRelational navigation. The
TopTier server replaces these tags with
relevant data and sends it back to the
client as normal HTML that is HyperRelational
enabled. TopTier Tags include data tags,
query tags, computational tags, extension
tags and other useful tags.
Extensions tags With TopTier extension tags developer can Ability to integrate with and extend the
display data in templates using COM objects functionality of the TopTier Server with COM,
(using Visual Basic script), ASP (Active CGI or ASP.
Server Pages) files, executables, or standard
HTML pages that reside on another server.
Online Help and Books On-line help system and documentation for Integrated, comprehensive system makes TopTier
developers and end-users. products even easier to understand and use.
Visual cues Developer can provide visual cues that educates the user and simplify the Point of View
Navigation experience.
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
HRNP Link Ability to apply special formatting to highlight various types of HRNP links with
(Metalink) different functions and to distinguish them from standard web HyperLinks.
differentiation
by font color and
Icon
Development
Packager Create the toolbars and folders that developer elects to appear in the user's browser.
Using the Packager wizard, developer package the software for distribution. The wizard
creates an installation program which can be stored on a CD and use to deploy the
HyperRelational application.
Data Base support TopTier Server supports industry standard connectivity to corporate databases.
phase ii Support for SQL 6.5 SQL 7.0 Oracle 7.x Oracle 8.0 DB2 5.x and Access
phase iii Informix 7.x, Sybase ASE 11.x, Oracle 8i
Multi-user development Several developers can work on the same project concurrently.
Feature Function
TopTier Software A Software Developer Kit (TopTier SDK) that defines how to make any third party
Developer Kit (SDK) application HyperRelational, by integrating the TopTier Server and Toolbar
Integration
Server support for The TopTier Server is the back end support for enabling Point of view navigation in
integration HyperRelational applications.
TopTier Toolbar The Toolbar can now be integrated in a third party application either as an embedded
ActiveX control or as a stand alone toolbar communicating with the application using COM.
The toolbar can accommodate Components that represent sessions or forms in a third party
application.
HyperRelational enabling The SDK exposes how to make a third party application HyperRelational and defines the APIs
third party applications required for communication with the TopTier Toolbar and Server.
<S> <C>
HRNP Link Provides developers a way to differentiate between various HyperRelational links so users
(Metalink) can quickly identify and use all types of HR links for intuitive navigation.
differentiation
by font color and
Icon
Development
Packager A simple wizard for deploying HyperRelational applications.
Data Base support Allows an HR application developer to automatically provide intranet/extranet access to a
variety of ODBC-compliant database from the major database vendors.
phase ii
phase iii
Multi-user development Speed development by facilitating cooperative and coordinated project design
Feature Benefit
TopTier Software For those customers or ISV/OEMs who wish to imbed TopTier's HyperRelational technology
Developer Kit (SDK) into their own applications, TopTier offers a comprehensive SDK. This offering includes
all client, server and development tools and documentation needed to tailor or compose
one's own TopTier Enterprise Integration Portal.
Integration
Server support for
integration
TopTier Toolbar There are 2 ways to integrate TopTier Toolbar, embed the TopTier Toolbar in the third
party application, or alternatively enable communication with it as a stand alone toolbar.
Components, forms, sessions from all third party applications can be accessed from one
TopTier toolbar
HyperRelational enabling
third party applications
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C> <C>
Sample A complete walk through of how to turn an application See how easy it is to HyperRelational
application into HyperRelational and integrate it with the TopTier enable your application.
Server including code examples.
OLE DB Provider OLE-DB is the Microsoft's standard next generation of Third-party applications that have
ODBC, implemented using COM interfaces and objects. OLE-DB Connectivity view TopTier
This feature turns the TopTier Server into an OLE-DB Server as a data source, thus
Provider. OLE-DB stands for Object Linking and leveraging the power of
Embedding for Databases. HyperRelational applications.
Turning the TopTier Server into an
OLE-DB Provider offers developers
the standard OLE-DB API as the API
to access our TopTier metadata
repository for HyperRelational
applications.
OLE DB provider Ability to send a query to the OLE DB Provider that Third party applications can access
support for includes tables from disparate databases and get the multiple data sources through one
multiple joined result from the TTServer. common OLE DB interface plus get the
datasources bonus of leveraging the power of
relationships defined in the TopTier
repository. It also provides the only
OLE DB interface to the Baan system.
</TABLE>
24
<PAGE>
EXHIBIT C
Maintenance and Support
Baan shall, pursuant to Baan's standard software license and support
agreement ("SLSA"), enter into an agreement with End Users for the provision of
Maintenance and Support for the Licensed Software and Technology. Maintenance
and Support shall consist of First Line Support, Second Line Support and Third
Line Support, defined as follows:
FIRST LINE SUPPORT ("FLS") means the provision of assistance to end-
--------------------------
users with regard to the supported products via telephone, fax,
electronic mail or otherwise, including (i) identification of the
source or cause of the support issue experienced by the end user (ii)
whenever at its reach, directly provide a solution to the support issue
received including fixed object and patch distribution, and, if
applicable, (ii) escalation of the support issue to the Second Line
Support.
SECOND LINE SUPPORT ("SLS") means the provision of assistance via
---------------------------
telephone, fax, electronic mail or otherwise with respect to the
supported products, including (i) receiving and processing support
issues relating to the supported products as identified and escalated
by the FLS, (ii) characterizing and analyzing support issues, (iii)
registry administration - and whenever possible - resolution of calls,
(iv) clarification of functions and features of the supported products,
(v) clarification of the end user documentation for the supported
products, and (vi) guidance in the operation of the supported products.
THIRD LINE SUPPORT ("TLS") means the follow up activities related to
--------------------------
support issues concerning the supported products as escalated by the
SLS and which entail but are not limited to (i) further and detailed in
depth analysis of the said support issues leading to a) well documented
and accurate description of the support issue at stake, b) replication
of the said support issue on a test system accepted by the Baan product
engineering group c) documented case resolution path, (ii) deployment
of efforts till the case is resolved either by means of a workaround or
the intervention of product engineering.
As between Baan and TopTier, Baan shall provide FPOC and FLS to End Users and
TopTier shall provide SLS and TLS to Baan only, and not to End Users; except in
the case where the support request relates to problems not solved in standard
patches or updates, in which case TopTier shall provides such SLS and TLS
directly to End Users. Baan shall provide TopTier with access to its internal
support system throughout the term of this Agreement.
Baan shall properly train its support personnel in order for it to be able to
fulfill its support obligations hereunder.
25
<PAGE>
EXHIBIT D
Escrow Agreement
SourceFlex
Software Escrow Agreement
This contract is a two-party agreement between SourceFile and the software
developer. End-users may sign on to this agreement as they license the
technology from the developer. The SourceFlex contract provides the opportunity
to serve all licensees of a particular software developer for one or more
systems.
Developer<---------------------->SourceFile
Licensee 1 - Deposit A
- Deposit B
Licensee 2 - Deposit A
Deposit C
Licensee 3 - Deposit C
26
<PAGE>
SOURCEFLEX
----------
SOFTWARE SOURCE CODE ESCROW AGREEMENT
SOURCEFILE ACCOUNT NUMBER: 7965
----
1. PARTIES.
--------
This Software Source Code Escrow Agreement, ("Agreement") effective as of
the last date next to the signatures below, is between SourceFile LLC, a
California limited liability company doing business as SourceFile
("SourceFile") located at 2201 Broadway, Suite 703, Oakland, California
94612, TopTier Software, Inc, located at 6203 San Ignacio, Suite 101, San
Jose, California 95119 ("Depositor"), and each Beneficiary described in
Paragraph 3.4 (each a "Beneficiary", collectively the "Beneficiaries").
2. RECITALS.
---------
2.1. Depositor licenses software to Beneficiaries in object code form (the
"Software") pursuant to software license agreements (each a "License
Agreement", collectively the "License Agreements"). The Software in
source code form (the "Source Code"), including all relevant
commentary, explanation, documentation, and instructions to understand,
maintain, correct, complete, duplicate and compile the Source Code, and
revisions to the Source Code is collectively hereinafter defined as the
"Source Material". The Software and Source Material are the proprietary
and confidential information of Depositor, and Depositor desires to
protect such ownership and confidentiality. A description of the
Software subject to this Agreement as of the date hereof is attached
hereto as Exhibit "A." With the addition of new Beneficiaries pursuant
------------
to paragraph 3.4, a description of the software (the "Software
-------------
Package" or "Software Packages") subject to this agreement must be
noted in Exhibit "B" for each respective new Beneficiary.
-----------
2.2. The purpose of this Agreement is to establish an escrow to protect
Depositor's ownership and confidentiality of the Software and Source
Material and to protect Beneficiary's legitimate use of the Software by
assuring the availability of the Source Material in the event certain
conditions set forth in Section 3.5 of this Agreement occur.
-----------
2.3. The parties desire that this Agreement be an agreement supplementary to
the License Agreement pursuant to the United States Bankruptcy Code (S)
365 (n).
2.4. In consideration of the mutual covenants and conditions contained in
this Agreement, the parties agree as follows.
3. SOURCE MATERIAL ESCROW PROCEDURES.
----------------------------------
3.1. Delivery of Source Material and Updates to SourceFile. Depositor shall
-----------------------------------------------------
deliver to SourceFile a sealed parcel that contains the Source Material
(the "Parcel"). Depositor
27
<PAGE>
shall also deliver to SourceFile all Source Material updates,
revisions, and/or new versions (each an "Update", collectively
"Updates") within thirty (30) days of the release of Software for such
Update, which shall be added to and become part of the Parcel and the
Source Material. Depositor shall send to SourceFile a duplicate Parcel
within three (3) days after receiving written notice from SourceFile
that the Source Material or any Update has been destroyed or damaged.
With each delivery of the Source Material and Update, Depositor agrees
to provide the information specified in Exhibit A, "Description of the
----------
Software," a copy of which is attached hereto and incorporated herein
by reference. Title and ownership of the media upon which the Source
Material is stored, exclusive of the Source Material itself, shall vest
with SourceFile upon delivery of the Parcel.
3.1.1. Delivery of Encrypted Updates to SourceFile. Depositor shall
--------------------------------------------
have the option to encrypt Updates ("Encrypted Update") and,
pursuant to acceptable instructions from SourceFile, transmit
the Encrypted Update over the Internet to SourceFile's File
Transfer Protocol site ("FTP Site").
3.1.2. SourceFile shall not be liable to Depositor or Beneficiary for
any Encrypted Update, or any part thereof, that is transmitted
over the Internet to SourceFile's FTP Site but is not received
in whole or in part, or for which no notification of receipt is
given pursuant to Section 3.2.
3.2. Acknowledgement of Receipt by SourceFile. SourceFile shall promptly
-----------------------------------------
notify Depositor and Beneficiary of receipt of the Parcel, Updates and
Encrypted Updates. Notification of receipt of the Parcel will be sent
via certified mail, return receipt requested or by private delivery
service such as Federal Express, Airborne, United Parcel Service, or
DHL Worldwide Express. Notification of receipt of each Update and
Encrypted Update will be promptly sent by E-Mail to the E-mail address
described in the Notices section of this Agreement, and posted to a
page at SourceFile's web site (http:\\www.sourcefile.com) reserved for
Depositor and Beneficiary. SourceFile shall provide Depositor and
Beneficiary with a user identification name and password as required to
access said page, and notice shall be effective upon delivery of such
user identification name and password, and verification by SourceFile
that receipt of the Update has been posted to said page. SourceFile
shall not be responsible for procuring the delivery of the Source
Material in the event of failure by the Depositor to do so.
3.3. Record Keeping, Storage, Copies and Inspection of Source Material.
-----------------------------------------------------------------
SourceFile shall have no obligation to determine the completeness,
accuracy or physical condition of the contents of the Parcel, or
whether the Parcel contains the Source Material. SourceFile shall
maintain complete written records of all materials deposited by
Depositor pursuant to this Agreement. Depositor and Beneficiary shall
be entitled at reasonable times during normal business hours and upon
reasonable notice to SourceFile to inspect the records that SourceFile
maintains pursuant to this Agreement, and to inspect the facilities of
SourceFile and the physical condition of the Source Material.
28
<PAGE>
3.4. Qualified Beneficiaries. Beneficiary shall have the right to enforce
-----------------------
the Source Material Release Procedure described in Paragraph 3.6 only
if (i) Beneficiary is a party to a License Agreement with the Depositor
that is in force and not in default by Beneficiary, and (ii) all fees
are paid to SourceFile. All other licensees of the Software shall have
no rights hereunder and SourceFile shall have no duties to such
licensees. Beneficiaries may be added upon written notice to SourceFile
and execution and delivery by such new Beneficiary of Exhibit "B". Each
------------
new Beneficiary shall be bound by the terms and conditions of this
Agreement only if such Beneficiary has sent to SourceFile a fully
executed copy of the form of acknowledgement attached hereto as Exhibit
-------
"B" in which Beneficiary accepts the terms and conditions of this
---
Agreement. A schedule of Beneficiaries effective as of the date of this
Agreement is attached hereto as Exhibit "C".
------------
3.5. Release Conditions. The following events shall be considered "Release
------------------
Conditions".
3.5.1. Depositor requests in writing that SourceFile release the Source
Material to Beneficiary;
3.5.2. Depositor is unwilling or unable to support or maintain the
Software in breach of its License Agreement with Beneficiary
after receipt of written notice of breach from Beneficiary and
after any cure period has ended;
3.5.3. [OPTIONAL] The appointment of a receiver for Depositor, or any
other proceeding involving insolvency or the protection of or
from creditors, and the same has not been discharged or
terminated without any prejudice to Beneficiary's rights or
interests under the License Agreement within thirty (30) days;
3.5.4. [OPTIONAL] Depositor has ceased its ongoing business operations,
or has ceased the sale, licensing, maintenance or other support
of the Software and no successor of Depositor has undertaken the
sale, licensing, maintenance and/or support of the Software; or
3.5.5.
3.6. Source Material Release Procedures. SourceFile shall hold the Parcel
----------------------------------
pursuant to the following terms and conditions.
3.6.1. In the event SourceFile is notified in writing of a Release
Condition (the "Release Condition Notice"), and provided that
SourceFile has been paid all fees and costs then due and owing,
then SourceFile shall promptly deliver a copy of the Release
Condition Notice to Depositor.
3.6.2. If SourceFile does not receive Contrary Instructions (defined
below) from Depositor in response to the Release Condition
Notice within thirty (30) days of
29
<PAGE>
SourceFile's delivery to Depositor of the Release Condition
Notice, then SourceFile shall deliver a copy of the Source
Material to Beneficiary. "Contrary Instructions" are defined as
Depositor's written notice to SourceFile with a copy to the
subject Beneficiary, stating that the Release Condition has not
occurred or has been cured.
3.6.3. If SourceFile receives Contrary Instructions from Depositor
within thirty (30) days of SourceFile's delivery to Depositor of
the Release Condition Notice, then SourceFile shall not deliver
a copy of the Source Material to the Beneficiary, but shall
continue to hold the Parcel until: (1) otherwise directed by the
Depositor and Beneficiary jointly in writing; (2) five (5)
business days after SourceFile has received a copy of an order
or judgment of a court of competent jurisdiction directing
SourceFile as to the disposition of the Source Material; or (3)
five (5) business days after SourceFile has received a copy of
the final decision of the arbitrator directing SourceFile as to
the disposition of the Source Material.
3.7. Limitations on Beneficiary Use of Source Material. Upon release of the
-------------------------------------------------
Source Material to Beneficiary, Beneficiary shall use the Source
Material only for the purposes authorized by the License Agreement and
for no other purpose. Beneficiary further agrees that the Source
Material is confidential information, and that Beneficiary shall not
disclose such confidential information to any person or entity.
Beneficiary shall instruct its personnel to keep the Source Material
confidential by using the same care and discretion that they use with
similar data designated by Beneficiary as confidential. Beneficiary
shall maintain the Source Material in a safe, secure location when not
in use and shall immediately destroy the Source Material in the event
Beneficiary's rights under the License Agreement terminate.
4. TERM AND TERMINATION.
---------------------
4.1. Term of Agreement. This Agreement shall have an initial term of
-----------------
three (3) years from the date hereof unless earlier terminated as
provided herein. The term shall be automatically renewed on a yearly
basis thereafter, unless Depositor, Beneficiary, or SourceFile notifies
the other parties in writing at least forty-five (45) days prior to the
end of the then current term of its intention to terminate this
Agreement.
4.2. Termination of Agreement. This Agreement shall terminate upon the
------------------------
occurrence of any of the following.
4.2.1. Upon notice after the initial term pursuant to Paragraph 4.1 or
after an increase of fees and costs pursuant to Section 5;
4.2.2. Upon release of the Source Material pursuant to Section 3;
30
<PAGE>
4.2.3. Upon termination of the License Agreement of a Beneficiary, then
this Agreement shall terminate as to that Beneficiary;
4.2.4. In the event of non-payment of fees due SourceFile; provided,
however that in such event SourceFile shall provide written
notice of non-payment to all parties to this Agreement. If the
amount past due is not received in full within thirty (30) days
of the date of said notice, then SourceFile shall have the right
to terminate this Agreement by sending written notice of
termination to all parties; provided, however that if payment is
due from a Beneficiary and not from Depositor, then this
Agreement shall terminate as to that Beneficiary only.
SourceFile shall have no obligation to take any action under
this Agreement so long as any amount due SourceFile remains
unpaid. Any party may cure past amounts due, whether or not
obligated under this Agreement.
4.3. Return of Source Material. In the event of termination of this
-------------------------
Agreement, SourceFile shall return any Source Material in its
possession to Depositor forthwith. If SourceFile is unable to locate
Depositor, after reasonable attempts to do so within 90 days from the
date of termination of this Agreement, then SourceFile will destroy the
Source Material.
4.4. Survival of Terms. In the event of termination of this Agreement, the
-----------------
rights and obligations of the parties shall terminate, other than the
obligation of Depositor and/or Beneficiary to pay SourceFile all fees
and costs then due, and the obligations of Depositor and Beneficiary
pursuant to Paragraph 3.8 (Limitations on Beneficiary Use of Source
Material, page 4), Section 9 (Confidentiality; Restriction on Access to
Source Material; Copies), Section 10 (Limitation of Liability of
SourceFile), Section 12 (Arbitration of Disputes) and Section 13.7
(Attorney's Fees).
5. COMPENSATION OF SOURCEFILE.
---------------------------
Depositor and/or Beneficiary shall pay SourceFile for its services rendered
hereunder in accordance with SourceFile's then current schedule of fees and
costs, a copy of which is attached hereto as Exhibit "D," subject to
----------
Depositor's or Beneficiary's obligation for fees and costs described in
Exhibit "B." SourceFile may increase its fees and costs annually, but in
-----------
such event Depositor and/or Beneficiary may terminate this Agreement by
giving SourceFile written notice of termination within thirty (30) days of
notice of such increase, whereupon termination shall be effective thirty
(30) days after delivery of written notice of termination.
6. REPRESENTATION AND WARRANTIES OF DEPOSITOR.
-------------------------------------------
Depositor represents and warrants the following:
6.1. The Source Material as delivered to SourceFile is capable of being used
to generate the latest version of the Software and that the Depositor
shall deliver further copies as and when necessary. The Source Material
shall contain all information in human-readable
31
<PAGE>
form and on suitable media to enable a reasonably skilled programmer or
analyst to understand, maintain and correct the Software without the
assistance of any other person.
6.2. Depositor has the right to possess the Source Material, free and clear of
any liens, security interests, or other encumbrances;
6.3. Depositor shall deliver a duplicate Parcel within 3 10 days of receipt of a
notice served upon it by SourceFile under the provisions of Clause 3.1;
6.4. Depositor owns or has licensed the Intellectual Property Rights in the
Source Code and has the right and authority to grant SourceFile and
Beneficiary the rights granted by Depositor to SourceFile and Beneficiary
in this Agreement;
6.5. The Source Material is a copy of Depositor's proprietary information
corresponding to that described in Exhibit "A", is readable from the media
upon which it is written as deposited and, unless the Source Material or
any part thereof is transmitted to SourceFile under the terms and
conditions of the Encryption Update Rider, is not encrypted.
7. TECHNICAL VERIFICATION.
-----------------------
7.1. Upon the Source Code being deposited with SourceFile, SourceFile shall
perform those tests in accordance with its Standard Technical
Verification Service from time to time and shall provide a copy of the
test report to the parties to this Agreement.
7.2. Beneficiary shall be entitled to require that SourceFile carry out a
Full Verification. Any reasonable charges and expenses incurred by
SourceFile in carrying out a Full Verification will be paid by the
Beneficiary.
7.3. Subject to the provisions of Clauses 7.1 and 7.2, SourceFile shall bear
no obligation or responsibility to any person, firm, company or entity
whatsoever to determine the existence, relevance, completeness,
accuracy, effectiveness or any other aspect of the Source Material.
8. INTELLECTUAL PROPERTY RIGHTS.
-----------------------------
The release of the Source Material to the Beneficiary will not act as an
assignment of any Intellectual Property Rights that the Depositor possesses
in the Source Code.
9. CONFIDENTIALITY; RESTRICTION ON ACCESS TO SOURCE MATERIAL; COPIES.
------------------------------------------------------------------
SourceFile acknowledges that the Parcel contains proprietary information of
Depositor and that SourceFile has an obligation to preserve and protect that
confidentiality. Except as otherwise required to carry out its duties
hereunder, SourceFile shall not permit any
32
<PAGE>
SourceFile employee, Beneficiary or any other person access to the Source
Material except as otherwise provided herein, unless consented to in
writing by Depositor. Depositor grants SourceFile the right and authorizes
SourceFile to make copies of the Source Material and deliver a copy of the
Source Material to Beneficiary as required to perform its obligations
hereunder. Except as expressly provided herein, SourceFile shall not
divulge, disclose or otherwise make available to third parties, or make any
use of whatsoever of the Parcel, or of any information provided to it by
Depositor in connection with this Agreement, without the express prior
written consent of Depositor. This obligation will continue indefinitely
notwithstanding the termination of this Agreement.
10. LIMITATION OF LIABILITY OF SOURCEFILE.
--------------------------------------
SourceFile may act in reliance only on receipt of written notice, in an
instruction or request furnished to SourceFile hereunder signed or
presented by a person apparently authorized to act on behalf of Depositor
or Beneficiary, as evidenced by inclusion of his or her name In Exhibit __,
Authorized Persons. and all employees of Depositor and Beneficiary are
conclusively deemed to have such authority. No action or claim against
SourceFile arising under this Agreement may be instituted more than one (1)
year after the event giving rise to such action or claim. SourceFile shall
not be liable for any special, incidental, or consequential damages
(including lost profits) arising out of this Agreement even if SourceFile
has been apprised of the possibility of such damages.
11. INDEMNIFICATION OF SOURCEFILE.
------------------------------
Depositor and Beneficiary shall jointly and severally indemnify, defend and
hold harmless SourceFile and its agents and employees (collectively
"SourceFile") from any and all claims, demands, liability, costs and
expenses, including attorney's fees, incurred by SourceFile directly or
indirectly arising from or relating to the Source Material and/or
SourceFile's performance of its duties under this Agreement; provided,
however that this indemnity shall not extend to SourceFile's actual fraud,
negligence, willful or reckless misconduct.
12. NOTICES.
--------
Except as otherwise provided herein for notice of Updates posted to a page
at SourceFile's web site pursuant to Paragraph 3.2, all notices, requests,
demands, or other communications under this Agreement shall be in writing.
Notice shall be sufficiently given for all purposes as follows:
12.1. Personal Delivery. When personally delivered to the recipient.
-----------------
Notice is effective on delivery.
12.2. Certified Mail. When mailed certified mail, return receipt
--------------
requested. Notice is effective on receipt, if delivery is confirmed
by a return receipt.
12.3. Overnight Delivery. When delivered by private overnight delivery
------------------
service such as Federal Express, Airborne, United Parcel Service, or
DHL Worldwide Express, charges
33
<PAGE>
pre-paid or charged to the sender's account. Notice is effective on
delivery, if delivery is confirmed by the delivery service.
TO DEPOSITOR: Top Tier Software, Inc.
Street: 6203 San Ignacio Ave., Suite 101
-----------------------------------
City, State, Zip: San Jose, CA 95119
--------------------------
Phone: 408-360-1700
-------------------------------------
Facsimile: 408-360-1703
---------------------------------
E-Mail: www.toptier.com
------------------------------------
TO SOURCEFILE:
2201 Broadway, Suite 703
Oakland, California 94612
Attn: Client Services
Phone: 510.419.3888
Facsimile: 510.419.3875
E-Mail: [email protected]
---------------------
TO BENEFICIARY: As set forth in Exhibits "B" or "C".
12.4. Any correctly addressed notice that is refused, unclaimed, or
undeliverable because of an act or omission of the party to be
notified shall be deemed effective as of the first date that said
notice was refused, unclaimed, or deemed undeliverable by the postal
authorities, messenger, or overnight delivery service.
12.5. Any party may change its address or facsimile number by giving the
other party notice of the change in any manner permitted by this
Agreement.
13. ARBITRATION OF DISPUTES.
------------------------
Any controversy or claim relating to this Agreement (whether contract, tort,
or both), or the breach of this Agreement shall be settled by arbitration
administered by the American Arbitration Association under its commercial
arbitration rules at its San Francisco, California office, and judgment on
the award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
14. MISCELLANEOUS PROVISIONS.
-------------------------
14.1. Entire Agreement; Acknowledgement. This Agreement and all agreements,
---------------------------------
exhibits, and schedules referred to in this Agreement constitute the
final, complete and exclusive statement of the terms of the Agreement
between the parties pertaining to the subject matter of this
Agreement and supersedes all prior and contemporaneous understandings
or agreements of the parties. No party has been induced to enter into
this Agreement by,
34
<PAGE>
nor is any party relying on, any representation or warranty outside
those expressly set forth in this Agreement. This Agreement has been
explained to each of the parties by their respective attorneys and the
parties acknowledge that it is executed voluntarily with full knowledge
of its significance.
14.2. Modification of Agreement. This Agreement may be supplemented, amended
-------------------------
or modified only by the mutual agreement of the parties. No supplement,
amendment, or modification of this Agreement shall be binding unless it
is in writing and signed by all parties.
14.3. Ambiguities. Each party and its counsel have participated fully in the
-----------
review and revision of this Agreement. Any rule of construction to the
effect that ambiguities are to be resolved against the drafting party
shall not apply in interpreting this Agreement.
14.4. Waiver. No waiver of a breach, failure of a condition, or any right or
------
remedy contained in or granted by the provisions of this Agreement shall
be effective unless it is in writing and signed by the party waiving the
breach, failure, right, or remedy. No waiver of any breach, failure,
right, or remedy shall be deemed a waiver of any other breach, failure,
right or remedy, whether or not similar, nor shall any waiver constitute
a continuing waiver unless the writing so specifies.
14.5. Headings. The headings in this Agreement are included for convenience
--------
only and shall neither effect the construction or interpretation of any
provision in this Agreement nor effect any of the rights or obligations
of the parties to this Agreement.
14.6. Necessary Acts, Further Assurances. The parties shall at their own cost
----------------------------------
and expense execute and deliver such further documents and instruments
and shall take such other action as may be reasonably required or
appropriate to carry out the intent and purposes of this Agreement.
14.7. Attorney's Fees. In any litigation, arbitration or other proceeding by
---------------
which one party either seeks to enforce its rights under this Agreement
(whether in contract, tort, or both) or seeks a declaration of any rights
or obligations under this Agreement, the prevailing party shall be
awarded reasonable attorney's fees, together with any costs and expenses,
to resolve the dispute and to enforce the final judgment.
14.8. Due Authorization. Each party represents and warrants that the
-----------------
execution, delivery and performance of this Agreement has been duly
authorized by all necessary corporate, partnership, or limited liability
company action.
14.9. No Third Party Rights. This Agreement is made solely for the benefit of
---------------------
the parties to this Agreement and their respective permitted successors
and assigns, and no other person or entity shall have or acquire any
right by virtue of this Agreement.
35
<PAGE>
14.10. California Law. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the State of California.
14.11. Severability. If a court of competent jurisdiction holds any provision
------------
of this Agreement to be illegible, unenforceable, or invalid in whole or
in part for any reason, such provision shall be modified or eliminated
to the minimum extent necessary and the validity and enforceability of
the remaining provisions, or portions of them, will not be affected.
14.12. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date below the signatures.
DEPOSITOR SourceFile
- --------- ----------
SourceFile LLC, A California limited
liability company
By: /s/ Shai Agassi By: /s/ Linda Romero
--------------------- ---------------------------
Name: Shai Agassi Name: Linda Romero
-------------------- -------------------------
Title: Chairman and CEO Title: Director of Operations
------------------- ------------------------
Date: 12-22-99 Date: 12-22-99
------------------- --------------------------
36
<PAGE>
EXHIBIT 10.8
TOPTIER, ISRAEL, LTD. - BAAN DEVELOPMENT B.V.
RESELLER AGREEMENT
This RESELLER AGREEMENT (this "Agreement") is entered into as of
March 25, 2000 (the "Effective Date") by and between Baan Development B.V., a
Dutch corporation, with a principal place of business at Baron van Nagellstraat
89, 3770 AC Barneveld, The Netherlands ("Baan") and TopTier, Israel, Ltd., an
Israel corporation, whose registered office and place of business are at #4
Hacharoshet Street, Ra'anana, Israel ("TopTier").
RECITALS
WHEREAS, Baan and TopTier entered into an OEM License Agreement dated
as of January 1, 2000 whereby Baan will license under its own brand name certain
TopTier software and technology (the "License Agreement"); and
WHEREAS, TopTier designs, develops and markets certain other
proprietary software and technology and is willing to grant Baan a license to
resell those TopTier Products, Additional Products and Baan Branded Products (as
defined below) to End Users;
WHEREAS, the Parties desire to set forth the terms and conditions under
which the foregoing shall take place; and
NOW THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties mutually agree as follows:
1. DEFINITIONS
As used throughout this Agreement, the following terms shall have the
meanings set forth below unless otherwise indicated:
1.1. "ADDITIONAL PRODUCTS" means proprietary software products of
-------------------
TopTier listed in EXHIBIT C-1, which may be supplemented from time to time by
-----------
TopTier.
1.2. "AGREEMENT" means the terms and conditions contained herein, in
---------
all attached Exhibits, Addenda and any other documents made a part of this
Agreement or incorporated by reference, including any written amendments hereto
signed by the Parties.
1.3. "AFFILIATE" means any and all of the Baan entities listed in
---------
Exhibit A, which may be updated by Baan from time to time.
- ---------
1.4. "BAAN BRANDED PRODUCTS" means proprietary software products of
---------------------
TopTier listed in EXHIBIT B that are marketed under the Baan brand, which may be
---------
supplemented by TopTier from time to time.
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>
1.5. "BANKRUPTCY EVENT" means any of the following events or circumstances
----------------
with respect to a Party: (i) such Party ceases conducting its business in the
normal course; (ii) becomes insolvent or becomes unable to meet its obligations
as they become due; (iii) makes a general assignment for the benefit of its
creditors; (iv) petitions, applies for, or suffers or permits with or without
its consent the appointment of a custodian, receiver, trustee in bankruptcy or
similar officer for all or any substantial part of its business or assets; or
(v) avails itself or becomes subject to any proceeding under the U.S. Bankruptcy
Code or any similar state, federal or foreign statute relating to bankruptcy,
insolvency, reorganization, receivership, arrangement, adjustment of debts,
dissolution or liquidation, which proceeding is not dismissed within sixty (60)
days of commencement thereof.
1.6. "CONFIDENTIAL INFORMATION" means information, including without
------------------------
limitation the Licensed Software and Technology, that is transmitted or
otherwise provided by or on behalf of either Party to the other Party in
connection with this Agreement and the activities hereunder, and that should
reasonably have been understood by the receiving Party because of legends or
other markings, the circumstances of disclosure or the nature of the information
itself, to be proprietary and confidential to the disclosing Party, an Affiliate
of the disclosing Party or to a third party. Confidential Information may be
disclosed in written or other tangible form (including on magnetic media) or by
oral, visual or other means.
1.7. "DERIVATIVE WORK" has the meaning ascribed to it under the United
---------------
States Copyright Law, Title 17 U.S.C. Sec. 101 et. seq.
1.8. "DOCUMENTATION" means all or any portion of the materials, in written
-------------
or other tangible form (including on magnetic media), generally made available
for use in connection with the Baan Branded Products, the Additional Products or
the TopTier Products, as the case may be, including functional or technical
specifications, user guides, operator guides, installation and operation guides
and any other supporting materials.
1.9. "END USER" shall mean the end user of the Baan Branded Products,
--------
Additional Products or the TopTier Products, as the case may be. If End User is
a corporation or other entity, then End User means each individual within such
corporation or entity licensed pursuant to this Agreement to use, but not to
further distribute, the Baan Branded Products, Additional Products or the
TopTier Products, as the case may be.
1.10. "ENHANCEMENT" means any improvement, upgrade, new version of,
-----------
enhancement to, fix, extension to, or add-on module of the Baan Branded
Products, Additional Products or the TopTier Products identified in EXHIBIT B,
---------
EXHIBIT C OR EXHIBIT C-1.
- --------- -----------
1.11. "INTELLECTUAL PROPERTY RIGHTS" means all rights of a Person in, to,
----------------------------
or arising out of: (i) any U.S., international or foreign patent or any
application therefor and any and all reissues, divisions, continuations,
renewals, extensions and continuations-in-part thereof; (ii) inventions (whether
patentable or not in any country), invention disclosures, improvements, trade
secrets, proprietary information, know-how, technology and technical data; (iii)
copyrights, copyright registrations, mask works, mask work registrations, and
applications therefor in the U.S. or any foreign country, and all other rights
corresponding thereto throughout the world; and (iv) any other proprietary
rights in technology anywhere in the world.
1.12. "MAINTENANCE AND SUPPORT" means the maintenance and support
-----------------------
activities described in the attached EXHIBIT D.
---------
1.13. "OBJECT CODE" means Software in binary, executable form.
-----------
2
<PAGE>
1.14. "PARTY" in its singular or plural form, refers to either Baan or
-----
TopTier or both, as dictated by the use.
1.15. "PERSON" means any legal person or entity, including any individual,
------
corporation, partnership, joint venture, association, joint stock company,
trust, unincorporated association, limited liability corporation, governmental
entity, or other person or entity of similar nature.
1.16. "SOFTWARE" means computer software and Object Code, including, but
--------
not limited to, assemblers, compilers, or other executable code including
associated data files, data (including image and sound data), design tools, user
interfaces, templates, menus, buttons and icons, together with all related
Documentation.
1.17. "SOURCE CODE" means Software in human-readable form, including high-
-----------
level language program listings, flowcharts, schematics, and logic diagrams and
associated Documentation.
1.18. "TERM" shall have the meaning set forth in Section 11.1.
----
1.19. "TOPTIER PRODUCTS" means the proprietary software products of
----------------
TopTier listed in EXHIBIT C, which may be supplemented by TopTier from time to
---------
time.
2. LICENSE
2.1. LICENSE TO BAAN. In consideration of the fees to be paid pursuant to
---------------
Section 3 below, TopTier hereby grants to Baan and its Affiliates a non-
exclusive, limited, worldwide right and license to market, distribute,
sublicense and otherwise resell the Baan Branded Products, the Additional
Products and the TopTier Products to End-Users during the Term of this
Agreement. Baan shall sublicense the Baan Branded Products, the Additional
Products and the TopTier Products to End Users pursuant to a third party
addendum to its own Software License and Support Agreement according to terms
and conditions to be approved by TopTier. Baan may only resell the Additional
Products and the TopTier Products to End Users in conjunction with the sale of
Baan Branded Products to such End Users or following the sale of Baan Branded
Products to such End Users.
2.2. NAMED USERS. Baan may resell the Baan Branded Products, the
-----------
Additional Products and the TopTier Products to End Users on a named user basis.
3. LICENSE FEES AND PAYMENTS
3.1. ROYALTIES. Each Party agrees to pay the other royalties
---------
("Royalties") according to the following rules, based on Net Sales by a Party of
the Baan Branded Products, the Additional Products or the TopTier Products, as
the case may be. The term "Net Sales" means the gross revenue received by a
Party from the license of the Baan Branded Products, the Additional Products or
the TopTier Products, as the case may be, less the following items: (i) import,
export, value added, excise and sales taxes, tariffs, and custom duties; (ii)
credit for returns, damaged goods, allowances, or trades; (iii) charges for
packaging, shipping and insurance; and (iv) customary rebates, cash and trade
discounts, actually taken.
3
<PAGE>
3.2. ROYALTIES FOR LICENSES OF TOPTIER PRODUCTS (JOINT SELLING). Where
----------------------------------------------------------
representatives from Baan and TopTier jointly participate in selling TopTier
Products to End Users, the Net Sales [*], and the Party receiving the proceeds
of the Net Sales from the End User shall retain its share and [*] of the Net
Sales to the other Party.
3.3. ROYALTIES FOR LICENSES OF TOPTIER PRODUCTS (BAAN SELLING). Where
---------------------------------------------------------
representatives from Baan are the sole participants in selling the TopTier
Products to End Users, the Net Sales shall be split [*] and Baan shall retain
its share and remit the remaining percentage of the Net Sales to TopTier.
3.4. ROYALTIES FOR LICENSES OF TOPTIER PRODUCTS (TOPTIER SELLING). Where
------------------------------------------------------------
representatives from TopTier are the sole participants in selling the TopTier
Products to End Users that have already purchased Baan Branded Products, the Net
Sales shall be split [*], and TopTier shall retain its share and remit the
remaining percentage of the Net Sales to Baan.
3.5. ROYALTIES FOR LICENSES OF BAAN BRANDED PRODUCTS (TOPTIER SELLING).
-----------------------------------------------------------------
Where representatives from TopTier are the sole participants in selling the Baan
Branded Products to End Users, the Net Sales shall be split [*] and TopTier
shall retain its share and remit the remaining percentage of the Net Sales to
Baan.
3.6. ROYALTIES FOR LICENSES OF BAAN BRANDED PRODUCTS (BAAN SELLING). Where
--------------------------------------------------------------
representatives from Baan are the sole participants in selling the Baan Branded
Products to End Users, the Net Sales shall be split [*], and Baan shall retain
its share and remit the remaining percentage of the Net Sales to TopTier.
3.7. ROYALITES FOR LICENSES OF BAAN BRANDED PRODUCTS (JOINT SELLING).
---------------------------------------------------------------
Where representatives from Baan and TopTier jointly participate in selling Baan
Branded Products to End Users, the Net Sales shall be split [*], and the Party
receiving the proceeds of the Net Sales from the End User shall retain its share
and remit [*] of the Net Sales to the other Party.
3.8. ROYALITES FOR LICENSES OF ADDITIONAL PRODUCTS (JOINT SELLING). Where
-------------------------------------------------------------
representatives from Baan and TopTier jointly participate in selling the
Additional Products to End Users, the Net Sales shall be split [*], and the
Party receiving the proceeds of the Net Sales from the End User shall retain its
share and remit the remaining percentage of the Net Sales to the other Party.
3.9. [*]
4
<PAGE>
3.10. ROYALTIES FOR LICENSES OF ADDITIONAL PRODUCTS (BAAN SELLING). Where
------------------------------------------------------------
representatives from Baan are the sole participants in selling the Additional
Products to an End User as permitted by Section 2.1, the Net Sales shall be
split [*] and Baan shall retain its share and remit the remaining percentage of
the Net Sales to TopTier.
3.11. REPORTS AND PAYMENT OF ROYALTIES.
--------------------------------
3.11.1. Within thirty (30) days after the end of each calendar
quarter, each Party shall report to the other (i) the names of End Users
licensing the TopTier Products, the Additional Products or the Baan Products, as
the case may be; (ii) the gross amount received for the TopTier Products, the
Additional Products or the Baan Products, as the case may be, from such End
Users and the amount of Net Sales derived therefrom during such calendar quarter
and (iii) the aggregate Royalties, including the calculation thereof, owing
thereon. Each Party shall, contemporaneously with the sending of such report,
wire to a bank and an account named by the other Party the amount of Royalties
due such Party hereunder for such quarter.
3.11.2. During the first year following the Effective Date, if the
total Royalties received by TopTier for licenses of the Baan Branded Products,
the Additional Products and the TopTier Products sold by either Party as
required under Section 3 are less than [*] per quarter, then TopTier shall
invoice Baan and Baan shall remit to TopTier the difference between [*] and the
amount of Royalties actually received by TopTier in the quarter such that
TopTier shall have received a total of [*] in Royalties at the end of the first
year following the Effective Date.
3.11.3. In respect of the payment for the first quarter of the
first year following the Effective Date as described in Section 3.8.2, Baan
shall remit to TopTier the difference between [*] and the amount of Royalties
actually received by TopTier in the first quarter, and such payment will be
nonrefundable and irrevocable.
3.12. AUDIT RIGHTS. Each Party shall make and maintain until the
------------
expiration of three (3) years after the last payment under this Agreement is
due, complete books, records and accounts regarding its distribution activities
of the relevant products in order to calculate and confirm its Royalty
obligations hereunder. Upon reasonable prior notice, each Party shall have the
right, exercisable not more than once every twelve (12) months, to appoint an
independent auditor which auditor shall be permitted to examine such books,
records and accounts during the audited Party's normal business hours to verify
reports and payments provided pursuant to this Section 3 hereof. If any such
examination discloses a shortfall in payment of Royalties, such amounts shall
immediately be paid.
4. MARKETING DEVELOPMENT FUNDS PROGRAM
4.1. PROGRAM SUMMARY. As a special incentive for Baan and in recognition
--------------
of the contribution which Baan has made and will continue to make in promoting
the recognition of TopTier Products in the marketplace, TopTier will make
certain marketing development funds available to Baan according to this Section
4 during each of the first five years following the Effective Date, as follows
(collectively, the "Marketing Development Funds"):
4.1.1. [*] during the first year following the Effective Date, up
to a maximum of [*] per calendar quarter;
5
<PAGE>
4.1.2. [*] during each of the second, third and fourth years
following the Effective Date, up to a maximum of [*] per calendar quarter; and
4.1.3. [*] during the fifth year after the Effective Date, up
to a maximum of [*] per calendar quarter.
The Marketing Development Funds will be made available only to the extent of
TopTier's share of Royalties from Joint Sales of the TopTier Products, Baan
Branded Products and from sales of the Additional Products as provided in
Sections 3.2, 3.7 and 3.8 above. Baan will only be eligible to receive Marketing
Development Funds from TopTier so long as the License Agreement remains in
effect and Baan has paid all License and Maintenance Fees then due and owing
thereunder.
4.2. COMPUTATION AND PAYMENT. The Marketing Development Funds will be
-----------------------
computed quarterly based on the Royalties reported by each Party pursuant to
Section 3.6 above, and will be paid by TopTier to Baan within forty-five (45)
days of the end of each calendar quarter.
5. MAINTENANCE AND SUPPORT
5.1. MAINTENANCE AND SUPPORT FOR TOPTIER PRODUCTS AND THE ADDITIONAL
---------------------------------------------------------------
PRODUCTS. For End Users that wish to contract for maintenance and support of the
- --------
TopTier Products or the Additional Products directly with Baan, Baan will
provide FPOC (as that term is defined in EXHIBIT D) to End Users and TopTier
---------
will provide FLS, SLS and TLS (as those terms are defined in EXHIBIT D) to End
---------
Users. For such occurrence, Baan shall charge End Users an annual fee equal to
[*] of the net license fee received by Baan for the TopTier Products and the
Additional Products (subject to certain minimum prices for the TopTier Products
and the Additional Products identified in EXHIBIT D), and Baan shall remit to
---------
TopTier [*] of any such support fees collected by Baan, along with the Royalties
to be paid pursuant to Section 3 above.
5.2. MAINTENANCE AND SUPPORT FOR BAAN BRANDED PRODUCTS. For End Users that
-------------------------------------------------
wish to contract for maintenance and support of the Baan Branded Products
directly with Baan, the Parties shall support and maintain the Baan Branded
Products according to Section 5 of the License Agreement.
6. PROPRIETARY RIGHTS
6.1. TOPTIER PRODUCTS, ADDITIONAL PRODUCTS AND BAAN BRANDED PRODUCTS.
----------------------------------------------------------------
TopTier shall own all right, title and interest in and to all TopTier Products,
Additional Products and Baan Branded Products and any Derivative Works thereof,
including all Intellectual Property Rights therein and thereto.
6.2. TRADEMARK LICENSE. Each Party hereby authorizes the other Party to
-----------------
use its current and future trademarks, service marks and trade names
("Trademarks") in marketing programs and materials, for the purpose of promoting
the products and services of each of the Parties, provided that such use is not
derogatory nor detrimental to either Party. Such use of the Trademarks shall be
solely in accordance with the reasonable instructions and then current
guidelines from the Party owning the Trademark in question. The Parties
understand and agree that such guidelines may, from time to time, be revised for
the purpose
6
<PAGE>
of protecting the standards of quality established for the goods and services
sold under the Trademarks and protecting the owner's rights in the Trademarks.
6.3. TANGIBLE PROPERTY. Unless otherwise agreed to in writing, any tangible
-----------------
property, including but not limited to Documentation and equipment or material
of every description furnished by one Party to another hereunder, is and shall
remain the property of the furnishing Party. The Parties shall not use such
property except in performing this Agreement. All such property shall be
returned to furnishing Party upon the earlier of either the furnishing Party's
request, completion or termination of the relevant services or expiration or
termination of this Agreement.
7. REPRESENTATIONS AND WARRANTIES
7.1. REPRESENTATIONS AND WARRANTIES. The Parties make the following
------------------------------
representations and warranties to each other, as applicable:
7.1.1. ORGANIZATION REPRESENTATIONS; ENFORCEABILITY. Each Party is
--------------------------------------------
duly organized, validly existing and in good standing in the jurisdiction in
which it is incorporated. The execution and delivery of this Agreement by each
Party and the transactions contemplated hereunder have been duly and validly
authorized by all necessary action on the part of each Party. This Agreement
constitutes a valid and binding obligation of each party enforceable in
accordance with its terms.
7.1.2. NO CONFLICT. The entering into and performance of this
-----------
Agreement by the Parties does not and will not violate, conflict with or result
in a material default under any other contract, agreement, indenture, decree,
judgment, undertaking, conveyance, lien or encumbrance to which each of the
Parties or any of its employees is a party or by which it or any of its property
is or may become subject or bound. Each of the Parties will not grant any rights
under any future agreement, nor will it permit or suffer any lien, obligation or
encumbrances that will conflict with the full enjoyment by each Party of its
rights under this Agreement.
7.1.3. RIGHT TO MAKE FULL GRANT. TopTier represents and warrants to
------------------------
Baan that it has and shall have all requisite ownership, rights and licenses to
perform its obligations under this Agreement fully as contemplated hereby, and
to grant to Baan the license rights stipulated herein with respect to the Baan
Branded Products, the Additional Products and the TopTier Products, free and
clear of any and all agreements, liens, adverse claims, encumbrances and
interests of any Person, including, without limitation, TopTier employees,
agents, artists and contractors and such contractors' employees, agents and
artists, who have provided, are providing or shall provide services with respect
to the Baan Branded Products, Additional Products and the TopTier Products.
7.1.4. NONINFRINGEMENT. TopTier represents and warrants to Baan that
---------------
nothing contained in the Baan Branded Products, Additional Products or the
TopTier Products violates or misappropriates any Intellectual Property Right of
any third party. Further, no characteristic of the Baan Branded Products,
Additional Products or TopTier Products does or will cause manufacturing, using,
maintaining or selling Baan products or the Baan Branded Products, Additional
Products or TopTier Products to infringe, violate or misappropriate any
Intellectual Property Right of any third party.
7.1.5. NO HARMFUL CODE OR VIRUSES. TopTier represents and warrants
--------------------------
to Baan that the TopTier Products, Additional Products and Baan Branded Products
will contain no matter which is injurious to End Users or their property. The
Baan Branded Products, Additional Products and the TopTier Products and the
media upon which the same are delivered to Baan are free from computer
7
<PAGE>
viruses, booby traps, time bombs or other programming designed to interfere with
the normal functioning of the Baan Branded Products, Additional Products and the
TopTier Products.
7.1.6. PROCESSING OF DATE AND DATE DEPENDENT DATA. TopTier represents
------------------------------------------
and warrants to Baan that the TopTier Products, Additional Products and Baan
Branded Products will provide accurate processing of date and date dependent
data (including, but not limited to, calculating, comparing and sequencing
operations) for all dates, including leap years.
7.1.7. PERFORMANCE. TopTier represents and warrants to Baan that the
-----------
Baan Branded Products, Additional Products and the TopTier Products will perform
in substantial accordance with the specifications in the Documentation for such
Baan Branded Products, Additional Products and TopTier Products.
8. CONFIDENTIAL INFORMATION
8.1. TERMS OF AGREEMENT. The terms of this Agreement are the Confidential
------------------
Information of both Parties and shall not be disclosed by either Party in any
manner (including but not limited to news releases, articles, brochures,
advertisements, speeches or other information releases) without the prior
written consent of the other Party.
8.2. LIMITATIONS ON USE AND DISCLOSURE. Each Party receiving Confidential
---------------------------------
Information (the "Recipient") agrees as to any such Confidential Information
that may be disclosed to it by the other Party hereunder (the "Discloser"):
(a) to protect such Confidential Information from disclosure to
others, using the same degree of care used to protect its own confidential
or proprietary information of like importance, but in any case using no
less than a reasonable degree of care. Recipient may disclose Confidential
Information received hereunder to (x) its Affiliates who agree, in advance,
in writing, to be bound by this Agreement, and (y) to its employees and
subcontractors, and its Affiliates' employees and subcontractors, who have
a need to know, for the purpose of this Agreement, and who are bound to
protect the received Confidential Information from unauthorized use and
disclosure under the terms of a written agreement. Confidential Information
shall not otherwise be disclosed to any third party without the prior
written consent of the Person owning such Confidential Information;
(b) to use such Confidential Information only for the purposes of
this Agreement;
(c) not to make copies of any such Confidential Information or any
part thereof except for the purposes of this Agreement; and
(d) to reproduce and maintain on any copies of any Confidential
Information such proprietary legends or notices as are contained in or on
the original or as the owner may otherwise reasonably request.
8.3. EXCEPTIONS. The restrictions of this Section 8 on use and disclosure
----------
of Confidential Information shall not apply to information that (a) was publicly
known at the time of Discloser's communication thereof to Recipient; (b) becomes
publicly known through no fault of Recipient subsequent to the time of
Discloser's communication thereof to Recipient; (c) was in Recipient's
possession free of any obligation of confidence at the time of Discloser's
communication thereof to
8
<PAGE>
Recipient; (d) is developed by Recipient independently of and without reference
to any of Discloser's Confidential Information or other information that
Discloser disclosed in confidence to any third party; (e) is rightfully obtained
by Recipient from third parties authorized to make such disclosure without
restriction; or (f) is identified by Discloser as no longer proprietary or
confidential.
8.4. DISCLOSURE PURSUANT TO LEGAL REQUIREMENT. In the event Recipient is
----------------------------------------
required by law, regulation or court order to disclose any of Discloser's
Confidential Information, Recipient will promptly notify Discloser in writing
prior to making any such disclosure in order to facilitate Discloser seeking a
protective order or other appropriate remedy from the proper authority.
Recipient agrees to cooperate with Discloser in seeking such order or other
remedy. Recipient further agrees that if Discloser is not successful in
precluding the requesting legal body from requiring the disclosure of the
Confidential Information, it will furnish only that portion of the Confidential
Information which is legally required and will exercise all reasonable efforts
to obtain reliable assurances that confidential treatment will be accorded the
Confidential Information.
8.5. RETURN OF CONFIDENTIAL INFORMATION. All Confidential Information
----------------------------------
disclosed under this Agreement (including information in computer software or
held in electronic storage media) shall be and remain the property of Discloser.
All such information in any computer memory or data storage apparatus shall be
erased or destroyed and all such information in tangible form shall be returned
to Discloser, promptly upon the earlier of: (i) the written request of the
Discloser, or (ii) termination or expiration of this Agreement, and shall not
thereafter be retained in any form by Recipient.
8.6. EQUITABLE RELIEF. The Parties acknowledge that their respective
----------------
Confidential Information are unique and valuable, and that breach by either
Party of the obligations of this Agreement regarding such Confidential
Information and intellectual property rights will result in irreparable injury
to the affected Party for which monetary damages alone would not be an adequate
remedy. Therefore, the Parties agree that in the event of a breach or threatened
breach of such provisions, the affected Party shall be entitled to specific
performance and injunctive or other equitable relief as a remedy for any such
breach or anticipated breach without the necessity of posting a bond. Any such
relief shall be in addition to and not in lieu of any appropriate relief in the
way of monetary damages.
9. LIMITATION OF LIABILITY
UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY
SPECIAL, INCIDENTIAL, INDIRECT, STATUTORY OR CONSEQUENTIAL DAMAGES OR ANY LOST
REVENUE, LOST PROFITS RESULTING FROM, ARISING OUT OF OR RELATED TO ITS
PERFORMANCE OR FAILURE TO PERFORM ANY OF ITS OBLITATIONS UNDER, OR BREACH OF
THIS AGREEMENT, WHETHER OR NOT EITHER PARTY HAS BEEN ADVISED, KNEW OR SHOULD
HAVE KNOWN OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING LIMITATION OF
LIABILITY SHALL NOT APPLY TO TOPTIER'S OBLIGATION TO INDEMNIFY BAAN UNDER
SECTION 10 HEREOF OR TO BREACHES BY EITHER PARTY OF SECTION 8 HEREOF.
10. INDEMNITY
TopTier will defend at its expense and indemnify and hold harmless Baan
from and against any action, suit, or other proceeding, or settlement thereof,
to the extent that such action, suit or proceeding
9
<PAGE>
arises out of or results from any claim, allegation or finding that any
exploitation of the TopTier Products, Baan Branded Products or the Additional
Products by Baan hereunder infringes the Intellectual Property Rights of any
third party. TopTier shall pay those losses, damages, expenses and costs,
awarded against, or incurred by Baan, or as a result of, any such suit, action
or other proceeding, or any settlement thereof, provided that (i) Baan promptly
notifies TopTier in writing of any such claim, (ii) TopTier shall be accorded
control of the defense and of all negotiations for settlement or compromise of
such claim, and (iii) Baan cooperates with TopTier, at TopTier's expense, in the
defense and settlement of such claim, including providing to TopTier such
information and assistance as TopTier may reasonably request.
11. TERM AND TERMINATION
11.1. TERM. Unless earlier terminated in accordance with its terms, this
----
Agreement shall commence as of the Effective Date and shall remain in full force
for a period of [*], unless properly terminated by one or other of
the Parties according to the provisions of this Section 11. This Agreement shall
automatically renew for additional one (1) year periods unless either Party
provides the other with at least [*] written notice of its intention to
terminate prior to expiration of the then-current Term.
11.2. TERMINATION FOR BREACH. Either Party may terminate this Agreement if
----------------------
the other Party is in material breach of any term, condition or provision of
this Agreement, which breach, if capable of being cured, is not cured within
thirty (30) days after the non-breaching Party gives the breaching Party written
notice of such breach.
11.3. TERMINATION FOR BANKRUPTCY; CHANGE OF CONTROL. Each Party may
---------------------------------------------
terminate this Agreement and all rights and licenses granted hereunder effective
immediately upon notice that a Bankruptcy Event has occurred with respect to the
other Party, without thereby relieving the other Party of its financial
obligations under this Agreement. Baan may terminate this Agreement effective
immediately upon notice of a Change of Control of TopTier involving a Baan
direct competitor (by way of illustration, the following are the commonly known
names of Baan direct competitors: [*]). Change of Control of TopTier means (a)
the direct or indirect acquisition of either (i) the majority of the voting
stock of TopTier or (ii) all or substantially all of the assets of TopTier in a
single or series of related transactions; or (b) TopTier is merged with or into
another entity.
11.4. EFFECT OF TERMINATION. IF EITHER PARTY TERMINATES THIS AGREEMENT
---------------------
OTHER THAN (I) AS PROVIDED IN SECTION 11.1; OR (II) OTHER THAN BY THE MUTUAL
CONSENT OF THE PARTIES, THEN NONE OF EITHER PARTY'S FINANCIAL OBLIGATIONS WILL
BE RELIEVED OR CHANGED AND EACH PARTY SHALL BE OBLIGATED TO MAKE FULL PAYMENT OF
ALL AMOUNTS DUE AND OWING UNDER THIS AGREEMENT, EXCEPT IN THE CASE OF A
TERMINATION BY BAAN FOR A CHANGE OF CONTROL OF TOPTIER (SEE SECTION 11.3 ABOVE).
IF BAAN TERMINATES THIS AGREEMENT BECAUSE OF A CHANGE OF CONTROL OF TOPTIER AS
DESCRIBED IN SECTION 11.3 ABOVE, BAAN SHALL HAVE NO OBLIGATION TO MAKE ANY
PAYMENTS CALLED FOR IN THIS AGREEMENT THAT WOULD ARISE FOLLOWING THE DATE OF
SUCH TERMINATION; HOWEVER, BAAN SHALL PAY ANY UNPAID AMOUNTS DUE UP TO THE DATE
OF SUCH TERMINATION.
11.5. ESCROW.
------
10
<PAGE>
11.5.1. ESCROW ACCOUNT. Within thirty (30) days of the Effective
--------------
Date, TopTier shall establish with Sourcefile, an escrow agent, a Source Code
escrow account, governed by the agreement with Sourcefile, as attached in
EXHIBIT E. TopTier agrees to place into such escrow account a copy of the Source
- ---------
Code for the TopTier Products, the Additional Products and the Baan Branded
Products, as supplemented from time to time by TopTier, along with the related
Documentation (collectively, "Source Materials"); provided, however, that
TopTier shall not be obligated to make deposits into the escrow account more
frequently than twice per year. Baan shall have the right at any time to contact
the escrow agent for the purpose of confirming that the Source Materials in the
escrow account and verifying the instructions to the escrow agent to release the
Source under the circumstances specified in Section 11.4.3 below. Baan shall
bear all fees, expenses and other charges to open and maintain such escrow
account.
11.5.2. RELEASE. TopTier's agreement with the escrow agent shall
-------
provide that a copy of the Source Materials will be delivered to Baan by the
escrow agent in any of the following events: (i) a Bankruptcy Event occurs with
respect to TopTier that is not resolved within sixty (60) days and TopTier has
refused to meet its support obligations; (ii) TopTier discontinues or is in
material breach of its support obligations for the TopTier Products, the
Additional Products or the Baan Branded Products and does not provide
appropriate support within thirty (30) days after receiving a request from Baan
to do so; or (iii) this Agreement is terminated improperly and not in accordance
with the provisions of Section 11.
11.5.3. LICENSE. In the event of a release of escrow to Baan, under
-------
the conditions of the Sourcefile agreement, Baan shall have a nontransferable,
nonexclusive license to use the Source Materials solely to support and maintain
the TopTier Products, the Additional Products and the Baan Branded Products
licensed to Baan under this Agreement. Baan shall have no rights to use the
Source Material for its own purposes of development, nor rights to distribute,
transfer, copy, sell, sublicense, assign, display, demonstrate or convey the
Source Materials or the information in the Source Materials to any third party,
nor shall Baan use the Source Materials for any purpose other than Maintenance
and Support of the TopTier Products, the Additional Products and the Baan
Branded Products and TopTier shall retain all ownership rights, title and
interest in and to the Source Materials, including all Intellectual Property
Rights therein and thereto.
11.6. SURVIVAL. The following sections of this Agreement shall survive
--------
termination by either Party: Sections 1, 6, 7, 8, 9, 10, 11 and 12.
11.7. AVAILABLE REMEDIES. Termination of all or any portion of this
------------------
Agreement in accordance with this Section shall not limit either Party from
pursuing any other remedies otherwise available to it at law or in equity,
including injunctive relief, and not otherwise precluded by this Agreement.
12. GENERAL
12.1. TAXES. All prices herein are in U.S. Dollars and are exclusive of any
-----
applicable taxes. Each Party is responsible for complying with the collection,
payment and reporting of all taxes imposed by any governmental authority
applicable to its activities in connection with the sale, lease, delivery or
license of the Deliverables under this Agreement. Neither Party is responsible
for the taxes that may be imposed on the other Party. Situations may arise where
governmental authorities require either Party to withhold from amounts payable
to the other Party. In such cases, such Party may withhold the amount of taxes
due from payments to be made to the other Party under this Agreement and remit
the taxes withheld to the governmental authority.
11
<PAGE>
12.2. COMPETING PRODUCTS. Nothing contained herein shall be construed as
------------------
precluding either Party from developing, promoting, marketing, distributing and
licensing other products that compete directly or indirectly with the other
Party's Products.
12.3. WAIVER. The failure of either Party to insist on the strict
------
performance of any terms, covenants and conditions of this Agreement at any
time, or in any one or more instances, or its failure to take advantage of any
of its rights hereunder, or any course of conduct or dealing, shall not be
construed as a waiver or relinquishment of any such rights or conditions at any
future time and shall in no way affect the continuance in full force and effect
of all the provisions of this Agreement.
12.4. HEADINGS. Headings used in this Agreement are for convenience of
--------
reference only and shall not be construed as altering the meaning of this
Agreement or any of its parts.
12.5. APPLICABLE LAW. This Agreement shall be governed by and construed in
--------------
accordance with the laws of the state of California, without reference to rules
of conflict of law. The Parties hereby irrevocably agree that any action
commenced that relates to the terms of this Agreement shall be brought in a
court within the state of California, including a federal district court,
located in San Jose, California.
12.6. SURVIVAL OF LICENSES. Any licenses to the Baan Products, the
--------------------
Additional Products or the TopTier Products granted by a Party to End Users and
any rights to the Baan Products, the Additional Products or the TopTier Products
that a Party may reasonably require for the purpose of providing support to End
Users shall survive the termination or expiration of this Agreement for any
reason.
12.7. SEVERABILITY. If any provision of this Agreement is held to be
------------
illegal, invalid or unenforceable, the remaining terms shall not be affected.
The Agreement shall be interpreted as if the illegal, invalid or unenforceable
provision had not been included in it, and the invalid or unenforceable
provision shall be replaced by a mutually acceptable provision which, being
valid and enforceable, comes closest to the intention of the Parties underlying
the invalid or unenforceable provision.
12.8. NOTICES. All notices, requests, demands, or communications required
-------
or permitted hereunder shall be in writing, delivered personally or by
electronic mail, facsimile, overnight delivery service at the respective
addresses set forth below (or at such other addresses as shall be given in
writing by either Party to the other). All notices, requests, demands or
communications shall be deemed effective upon receipt for personal delivery, or
on the business day following the date of sending by electronic mail, facsimile
or overnight delivery service.
BAAN:
Baan Development B.V.
Baron van Nagellstraat 89
3770 AC Barneveld
The Netherlands
Attn: Vice President, Chief Technology Counsel
Fax: 31 342 42 8200
TOPTIER: Top Tier, Israel, Ltd.
6203 San Ignacio Avenue
San Jose, CA 95119
Attn: Vice President, Operations
12
<PAGE>
Fax: 408 360-1703
12.9. ASSIGNMENT. The respective rights and obligations provided in this
----------
Agreement shall bind and inure to the benefit of the Parties, their legal
representatives, successors and permitted assigns. Neither Party shall assign
this Agreement, voluntary or involuntarily, including without limitation by
operation of law, in whole or in part, without the prior written consent of the
other Party, which consent shall not be unreasonably withheld. Any assignment in
violation of this Section 12.9 shall be null and void.
12.10. RELATIONSHIP OF PARTIES. Nothing contained in this Agreement shall
-----------------------
be deemed or construed as creating a joint venture or partnership between
TopTier and Baan. Except as expressly provided herein, neither Party is by
virtue of this Agreement authorized as an agent, employee or legal
representative of the other, neither Party shall have power to control the
activities and operations of the other and neither Party shall have any power or
authority to bind or commit the other.
12.11. FORCE MAJEURE. Neither Party shall be liable in case of force
-------------
majeure. The Parties to this Agreement agree that force majeure shall include
(but shall not be limited to): material breakdown of equipment, labor disputes
of whatever nature or cause, and any other circumstances reasonably beyond the
control of one of the Parties.
12.12. NONSOLICITATION. During the Term and for a period of twelve (12)
---------------
months thereafter, neither Party will directly or indirectly solicit for
employment employees of the other Party; provided, however, that this Section
12.12 shall not be construed as precluding either Party from hiring any Person
that seeks employment or responds to a general advertisement.
12.13. ENTIRE AGREEMENT. This Agreement constitutes the entire
----------------
understanding of the Parties, and supersedes all prior or contemporaneous
written and oral agreements, representations or negotiations with respect to the
subject matter hereof. This Agreement may not be modified or amended except in
writing signed by both Parties.
IN WITNESS WHEREOF, this Agreement is executed by the duly authorized
representatives of the Parties as of the date first set forth above.
TOPTIER, ISRAEL, LTD. BAAN DEVELOPMENT B.V.
/s/ Reuven Agassi /s/ Gordon Kushner
- ------------------------------ ------------------------------
Signature Signature
Agassi Reuven Gordon D. Kushner
- ------------------------------ ------------------------------
Name Name
Chairman Top Tier Israel VP, Chief Technology Counsel
- ------------------------------ ------------------------------
Title Title
13
<PAGE>
EXHIBIT A
AFFILIATES
Baan Company N.V.
Baan International B.V.
Baan Software B.V.
Baan Austria GmbH
Baan (Schweiz) AG
Baan Nederland B.V.
Baan Belgium N.V.
Baan France S.A.
Baan Nordic AB
Baan UK Ltd.
Baan Holding Central Europe GmbH
Baan South Africa (Proprietary) Limited
Baan U.S.A., Inc.
Baan Canada, Inc.
Baan Brasil Sistemas de Informatica Ltda.
Baan Argentina Ltda.
Baan Info Systems India Pvt. Ltd.
Baan Software India Pvt. Ltd.
Baan Japan Co., Ltd.
Baan (Malaysia) Sdn. Bhd.
Baan Education Asia Pacific (M) Sdn Bhd.
Baan Singapore Pte. Ltd.
Baan Asia Pacific Pte. Ltd.
Baan Korea Co. Ltd.
Baan Australia Pty. Ltd.
Baan Iberica I.S., S.A.
Baan Italia S.r.l.
Baan China Limited
Antalys, Inc.
Matrix Holding B.V.
Beologic A/S
CAPS Logistics, Inc.
CODA Plc.
Compact 3000 Ltd.
14
<PAGE>
EXHIBIT B
BAAN BRANDED PRODUCTS
1. BDN: Baan Data Navigator (provides HyperRelational navigation on Baan
products)
2. BDN-DE: Baan Data Navigator - Development Environment.
3. BON: Baan Olap Navigator (provides HyperRelational navigation and Olap
views against the BaanBis decision Manager)
15
<PAGE>
EXHIBIT C
TOPTIER PRODUCTS
1. Top Tier WebNavigator (provides HyperRelational navigation against
non-Baan datasources)
2. Top Tier Portal Pack (provides database drivers for the Top Tier Web
Navigator and Top Tier EIP)
3. Top Tier Development Environment (provides development technology for
the Top Tier Web Navigator)
16
<PAGE>
EXHIBIT C-1
ADDITIONAL PRODUCTS
1. TopTier Enterprise Information Portal (provides hosting for iViews,
personalize, document management, search, etc. and includes TopTier Reports, Top
Tier Olap and Top Tier WebNavigator)
17
<PAGE>
EXHIBIT D
MAINTENANCE AND SUPPORT
Maintenance and Support shall consist of First Point of Contact, First
Line Support, Second Line Support and Third Line Support, defined as follows:
FIRST POINT OF CONTACT ("FPOC") means responding to End User support
------------------------------
calls in the following manner: (i) the End User encounters a support
issue and reports this issue to Baan; (ii) the case is registered and
logged into Baan's support system; (iii) Baan will assess the case and
identify which Party's products are responsible for the support issue;
(iv) Baan will transfer the issue to TopTier along with any necessary
customer information; (vi) the case log will be updated with status
assigned to TopTier in the Baan support system and the End User will be
informed of the transfer by Baan.
FIRST LINE SUPPORT ("FLS") means the provision of assistance to end-
-------------------------
users with regard to the supported products via telephone, fax,
electronic mail or otherwise, including (i) identification of the
source or cause of the support issue experienced by the end user (ii)
whenever at its reach, directly provide a solution to the support issue
received including fixed object and patch distribution, and, if
applicable, (ii) escalation of the support issue to the Second Line
Support.
SECOND LINE SUPPORT ("SLS") means the provision of assistance via
--------------------------
telephone, fax, electronic mail or otherwise with respect to the
supported products, including (i) receiving and processing support
issues relating to the supported products as identified and escalated
by the FLS, (ii) characterizing and analyzing support issues, (iii)
registry administration - and whenever possible - resolution of calls,
(iv) clarification of functions and features of the supported products,
(v) clarification of the end user documentation for the supported
products, and (vi) guidance in the operation of the supported products.
THIRD LINE SUPPORT ("TLS") means the follow up activities related to
-------------------------
support issues concerning the supported products as escalated by the
SLS and which entail but are not limited to (i) further and detailed in
depth analysis of the said support issues leading to a) well documented
and accurate description of the support issue at stake, b) replication
of the said support issue on a test system accepted by the Baan product
engineering group c) documented case resolution path, (ii) deployment
of efforts till the case is resolved either by means of a workaround or
the intervention of product engineering.
As between Baan and TopTier, Baan shall provide FLS to End Users and TopTier
shall provide SLS and TLS to Baan only, and not to End Users; except in the case
where the support request relates to problems not solved in standard patches or
updates, in which case TopTier shall provides such SLS and TLS directly to End
Users. Baan shall provide TopTier with access to its internal support system
throughout the term of this Agreement.
Baan shall properly train its support personnel in order for it to be able to
fulfill its support obligations hereunder.
18
<PAGE>
EXHIBIT E
Escrow
SourceFlex
Software Escrow Agreement
This contract is a two-party agreement between SourceFile and the software
developer. End-users may sign on to this agreement as they license the
technology from the developer. The SourceFlex contract provides the opportunity
to serve all licensees of a particular software developer for one or more
systems.
Developer(----------------------)SourceFile
Licensee 1 - Deposit A
- Deposit B
Licensee 2 - Deposit A
Deposit C
Licensee 3 - Deposit C
19
<PAGE>
SOURCEFLEX
----------
SOFTWARE SOURCE CODE ESCROW AGREEMENT
SOURCEFILE ACCOUNT NUMBER: 7965
----------------
1. PARTIES.
--------
This Software Source Code Escrow Agreement, ("Agreement") effective as of the
last date next to the signatures below, is between SourceFile LLC, a
California limited liability company doing business as SourceFile
("SourceFile") located at 2201 Broadway, Suite 703, Oakland, California
94612, TopTier Software, Inc, located at 6203 San Ignacio, Suite 101, San
Jose, California 95119 ("Depositor"), and each Beneficiary described in
Paragraph 3.4 (each a "Beneficiary", collectively the "Beneficiaries").
2. RECITALS.
---------
2.1. Depositor licenses software to Beneficiaries in object code form (the
"Software") pursuant to software license agreements (each a "License
Agreement", collectively the "License Agreements"). The Software in source
code form (the "Source Code"), including all relevant commentary,
explanation, documentation, and instructions to understand, maintain,
correct, complete, duplicate and compile the Source Code, and revisions to
the Source Code is collectively hereinafter defined as the "Source
Material". The Software and Source Material are the proprietary and
confidential information of Depositor, and Depositor desires to protect
such ownership and confidentiality. A description of the Software subject
to this Agreement as of the date hereof is attached hereto as Exhibit "A."
------------
With the addition of new Beneficiaries pursuant to paragraph 3.4, a
-------------
description of the software (the "Software Package" or "Software
Packages") subject to this agreement must be noted in Exhibit "B" for each
-----------
respective new Beneficiary.
2.2. The purpose of this Agreement is to establish an escrow to protect
Depositor's ownership and confidentiality of the Software and Source
Material and to protect Beneficiary's legitimate use of the Software by
assuring the availability of the Source Material in the event certain
conditions set forth in Section 3.5 of this Agreement occur.
-----------
2.3. The parties desire that this Agreement be an agreement supplementary to
the License Agreement pursuant to the United States Bankruptcy Code (S)
365 (n).
2.4. In consideration of the mutual covenants and conditions contained in this
Agreement, the parties agree as follows.
3. SOURCE MATERIAL ESCROW PROCEDURES.
----------------------------------
3.1. Delivery of Source Material and Updates to SourceFile. Depositor shall
-----------------------------------------------------
deliver to SourceFile a sealed parcel that contains the Source Material
(the "Parcel"). Depositor
-1-
<PAGE>
shall also deliver to SourceFile all Source Material updates, revisions,
and/or new versions (each an "Update", collectively "Updates") within
thirty (30) days of the release of Software for such Update, which shall
be added to and become part of the Parcel and the Source Material.
Depositor shall send to SourceFile a duplicate Parcel within three (3)
days after receiving written notice from SourceFile that the Source
Material or any Update has been destroyed or damaged. With each delivery
of the Source Material and Update, Depositor agrees to provide the
information specified in Exhibit A, "Description of the Software," a copy
---------
of which is attached hereto and incorporated herein by reference. Title
and ownership of the media upon which the Source Material is stored,
exclusive of the Source Material itself, shall vest with SourceFile upon
delivery of the Parcel.
3.1.1. Delivery of Encrypted Updates to SourceFile. Depositor shall have
-------------------------------------------
the option to encrypt Updates ("Encrypted Update") and, pursuant
to acceptable instructions from SourceFile, transmit the Encrypted
Update over the Internet to SourceFile's File Transfer Protocol
site ("FTP Site").
3.1.2. SourceFile shall not be liable to Depositor or Beneficiary for any
Encrypted Update, or any part thereof, that is transmitted over
the Internet to SourceFile's FTP Site but is not received in whole
or in part, or for which no notification of receipt is given
pursuant to Section 3.2.
3.2. Acknowledgement of Receipt by SourceFile. SourceFile shall promptly notify
----------------------------------------
Depositor and Beneficiary of receipt of the Parcel, Updates and Encrypted
Updates. Notification of receipt of the Parcel will be sent via certified
mail, return receipt requested or by private delivery service such as
Federal Express, Airborne, United Parcel Service, or DHL Worldwide
Express. Notification of receipt of each Update and Encrypted Update will
be promptly sent by E-Mail to the E-mail address described in the Notices
section of this Agreement, and posted to a page at SourceFile's web site
(http:\\www.sourcefile.com) reserved for Depositor and Beneficiary.
SourceFile shall provide Depositor and Beneficiary with a user
identification name and password as required to access said page, and
notice shall be effective upon delivery of such user identification name
and password, and verification by SourceFile that receipt of the Update
has been posted to said page. SourceFile shall not be responsible for
procuring the delivery of the Source Material in the event of failure by
the Depositor to do so.
3.3. Record Keeping, Storage, Copies and Inspection of Source Material.
-----------------------------------------------------------------
SourceFile shall have no obligation to determine the completeness,
accuracy or physical condition of the contents of the Parcel, or whether
the Parcel contains the Source Material. SourceFile shall maintain
complete written records of all materials deposited by Depositor pursuant
to this Agreement. Depositor and Beneficiary shall be entitled at
reasonable times during normal business hours and upon reasonable notice
to SourceFile to inspect the records that SourceFile maintains pursuant to
this Agreement, and to inspect the facilities of SourceFile and the
physical condition of the Source Material.
-2-
<PAGE>
3.4. Qualified Beneficiaries. Beneficiary shall have the right to enforce the
-----------------------
Source Material Release Procedure described in Paragraph 3.6 only if (i)
Beneficiary is a party to a License Agreement with the Depositor that is
in force and not in default by Beneficiary, and (ii) all fees are paid to
SourceFile. All other licensees of the Software shall have no rights
hereunder and SourceFile shall have no duties to such licensees.
Beneficiaries may be added upon written notice to SourceFile and execution
and delivery by such new Beneficiary of Exhibit "B". Each new Beneficiary
-----------
shall be bound by the terms and conditions of this Agreement only if such
Beneficiary has sent to SourceFile a fully executed copy of the form of
acknowledgement attached hereto as Exhibit "B" in which Beneficiary
-----------
accepts the terms and conditions of this Agreement. A schedule of
Beneficiaries effective as of the date of this Agreement is attached
hereto as Exhibit "C".
-----------
3.5. Release Conditions. The following events shall be considered "Release
------------------
Conditions".
3.5.1. Depositor requests in writing that SourceFile release the Source
Material to Beneficiary;
3.5.2. Depositor is unwilling or unable to support or maintain the
Software in breach of its License Agreement with Beneficiary after
receipt of written notice of breach from Beneficiary and after any
cure period has ended;
3.5.3. [OPTIONAL] The appointment of a receiver for Depositor, or any
other proceeding involving insolvency or the protection of or from
creditors, and the same has not been discharged or terminated
without any prejudice to Beneficiary's rights or interests under
the License Agreement within thirty (30) days;
3.5.4. [OPTIONAL] Depositor has ceased its ongoing business operations,
or has ceased the sale, licensing, maintenance or other support of
the Software and no successor of Depositor has undertaken the
sale, licensing, maintenance and/or support of the Software; or
3.5.5.
3.6. Source Material Release Procedures. SourceFile shall hold the Parcel
----------------------------------
pursuant to the following terms and conditions.
3.6.1. In the event SourceFile is notified in writing of a Release
Condition (the "Release Condition Notice"), and provided that
SourceFile has been paid all fees and costs then due and owing,
then SourceFile shall promptly deliver a copy of the Release
Condition Notice to Depositor.
3.6.2. If SourceFile does not receive Contrary Instructions (defined
below) from Depositor in response to the Release Condition Notice
within thirty (30) days of
-3-
<PAGE>
SourceFile's delivery to Depositor of the Release Condition
Notice, then SourceFile shall deliver a copy of the Source
Material to Beneficiary. "Contrary Instructions" are defined as
Depositor's written notice to SourceFile with a copy to the
subject Beneficiary, stating that the Release Condition has not
occurred or has been cured.
3.6.3. If SourceFile receives Contrary Instructions from Depositor within
thirty (30) days of SourceFile's delivery to Depositor of the
Release Condition Notice, then SourceFile shall not deliver a copy
of the Source Material to the Beneficiary, but shall continue to
hold the Parcel until: (1) otherwise directed by the Depositor and
Beneficiary jointly in writing; (2) five (5) business days after
SourceFile has received a copy of an order or judgment of a court
of competent jurisdiction directing SourceFile as to the
disposition of the Source Material; or (3) five (5) business days
after SourceFile has received a copy of the final decision of the
arbitrator directing SourceFile as to the disposition of the
Source Material.
3.7. Limitations on Beneficiary Use of Source Material. Upon release of the
-------------------------------------------------
Source Material to Beneficiary, Beneficiary shall use the Source Material
only for the purposes authorized by the License Agreement and for no other
purpose. Beneficiary further agrees that the Source Material is
confidential information, and that Beneficiary shall not disclose such
confidential information to any person or entity. Beneficiary shall
instruct its personnel to keep the Source Material confidential by using
the same care and discretion that they use with similar data designated by
Beneficiary as confidential. Beneficiary shall maintain the Source
Material in a safe, secure location when not in use and shall immediately
destroy the Source Material in the event Beneficiary's rights under the
License Agreement terminate.
4. TERM AND TERMINATION.
---------------------
4.1. Term of Agreement. This Agreement shall have an initial term of three (3)
-----------------
years from the date hereof unless earlier terminated as provided herein.
The term shall be automatically renewed on a yearly basis thereafter,
unless Depositor, Beneficiary, or SourceFile notifies the other parties in
writing at least forty-five (45) days prior to the end of the then current
term of its intention to terminate this Agreement.
4.2. Termination of Agreement. This Agreement shall terminate upon the
------------------------
occurrence of any of the following.
4.2.1. Upon notice after the initial term pursuant to Paragraph 4.1 or
after an increase of fees and costs pursuant to Section 5;
4.2.2. Upon release of the Source Material pursuant to Section 3;
-4-
<PAGE>
4.2.3. Upon termination of the License Agreement of a Beneficiary, then
this Agreement shall terminate as to that Beneficiary;
4.2.4. In the event of non-payment of fees due SourceFile; provided,
however that in such event SourceFile shall provide written notice
of non-payment to all parties to this Agreement. If the amount
past due is not received in full within thirty (30) days of the
date of said notice, then SourceFile shall have the right to
terminate this Agreement by sending written notice of termination
to all parties; provided, however that if payment is due from a
Beneficiary and not from Depositor, then this Agreement shall
terminate as to that Beneficiary only. SourceFile shall have no
obligation to take any action under this Agreement so long as any
amount due SourceFile remains unpaid. Any party may cure past
amounts due, whether or not obligated under this Agreement.
4.3. Return of Source Material. In the event of termination of this Agreement,
-------------------------
SourceFile shall return any Source Material in its possession to Depositor
forthwith. If SourceFile is unable to locate Depositor, after reasonable
attempts to do so within 90 days from the date of termination of this
Agreement, then SourceFile will destroy the Source Material.
4.4. Survival of Terms. In the event of termination of this Agreement, the
-----------------
rights and obligations of the parties shall terminate, other than the
obligation of Depositor and/or Beneficiary to pay SourceFile all fees and
costs then due, and the obligations of Depositor and Beneficiary pursuant
to Paragraph 3.8 (Limitations on Beneficiary Use of Source Material, page
4), Section 9 (Confidentiality; Restriction on Access to Source
Material; Copies), Section 10 (Limitation of Liability of SourceFile),
Section 12 (Arbitration of Disputes), and Section 13.7 (Attorney's Fees).
5. COMPENSATION OF SOURCEFILE.
---------------------------
Depositor and/or Beneficiary shall pay SourceFile for its services rendered
hereunder in accordance with SourceFile's then current schedule of fees and
costs, a copy of which is attached hereto as Exhibit "D," subject to
----------
Depositor's or Beneficiary's obligation for fees and costs described in
Exhibit "B." SourceFile may increase its fees and costs annually, but in such
----------
event Depositor and/or Beneficiary may terminate this Agreement by giving
SourceFile written notice of termination within thirty (30) days of notice of
such increase, whereupon termination shall be effective thirty (30) days
after delivery of written notice of termination.
6. REPRESENTATION AND WARRANTIES OF DEPOSITOR.
-------------------------------------------
Depositor represents and warrants the following:
6.1. The Source Material as delivered to SourceFile is capable of being used to
generate the latest version of the Software and that the Depositor shall
deliver further copies as and when necessary. The Source Material shall
contain all information in human-readable
-5-
<PAGE>
form and on suitable media to enable a reasonably skilled programmer or
analyst to understand, maintain and correct the Software without the
assistance of any other person.
6.2. Depositor has the right to possess the Source Material, free and clear of
any liens, security interests, or other encumbrances;
6.3. Depositor shall deliver a duplicate Parcel within 10 days of receipt of a
notice served upon it by SourceFile under the provisions of Clause 3.1;
6.4. Depositor owns or has licensed the Intellectual Property Rights in the
Source Code and has the right and authority to grant SourceFile and
Beneficiary the rights granted by Depositor to SourceFile and Beneficiary
in this Agreement;
6.5. The Source Material is a copy of Depositor's proprietary information
corresponding to that described in Exhibit "A", is readable from the media
upon which it is written as deposited and, unless the Source Material or
any part thereof is transmitted to SourceFile under the terms and
conditions of the Encryption Update Rider, is not encrypted.
7. TECHNICAL VERIFICATION.
-----------------------
7.1. Upon the Source Code being deposited with SourceFile, SourceFile shall
perform those tests in accordance with its Standard Technical Verification
Service from time to time and shall provide a copy of the test report to
the parties to this Agreement.
7.2. Beneficiary shall be entitled to require that SourceFile carry out a Full
Verification. Any reasonable charges and expenses incurred by SourceFile
in carrying out a Full Verification will be paid by the Beneficiary.
7.3. Subject to the provisions of Clauses 7.1 and 7.2, SourceFile shall bear no
obligation or responsibility to any person, firm, company or entity
whatsoever to determine the existence, relevance, completeness, accuracy,
effectiveness or any other aspect of the Source Material.
8. INTELLECTUAL PROPERTY RIGHTS.
-----------------------------
The release of the Source Material to the Beneficiary will not act as an
assignment of any Intellectual Property Rights that the Depositor possesses
in the Source Code.
9. CONFIDENTIALITY; RESTRICTION ON ACCESS TO SOURCE MATERIAL; COPIES.
------------------------------------------------------------------
SourceFile acknowledges that the Parcel contains proprietary information of
Depositor and that SourceFile has an obligation to preserve and protect that
confidentiality. Except as otherwise required to carry out its duties
hereunder, SourceFile shall not permit any
-6-
<PAGE>
EXHIBIT 10.9
MASTER SOFTWARE LICENSE AND DISTRIBUTION AGREEMENT
FOR EMBEDDED PRODUCTS
This Software License and Distribution Agreement for Embedded Products
("Agreement") is made and entered into by and between TopTier Israel Ltd.
("Licensor") having principal offices at 4 Hacharoshet St. Ra'anana 43651 Israel
and SAP AG ("SAP"), having principal offices at Neurottstrasse 16, 69190
Walldorf, Germany.
PREAMBLE
--------
WHEREAS, SAP designs, develops, markets and sells worldwide the SAP
Software with financial human resources logistics and manufacturing
standard application programs based on client-server architecture;
WHEREAS, Licensor designs, develops, markets and sells software for
hyperrelational technology.
NOW THEREFORE, the parties agree as follows:
1. DEFINITIONS
-----------
1.1 "Applicable Entity/Entities" shall mean SAP's subsidiaries and/or
distributors or marketing partners or training partners authorized by
SAP.
1.2 "Attachments" shall mean all attachments to this Agreement.
1.3 "Effective Date" shall mean the date of execution of this Agreement.
1.4 "End User" shall mean any combination of the types of users licensed by
SAP or Applicable Entities under their standard form end-user license
agreements.
1.5 "Internal Use" shall mean use of the Software Products to create
applications for the internal business utilization by SAP or Applicable
Entities.
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>
1.6 "Not For Distribution Use" or "NDR" shall mean use of the Software
Products and Resale Products for SAP or Applicable Entities, internal
training and testing, and for demonstrations to prospects and internal
personnel of such entities.
1.7 "SAP Software" shall mean the SAP software products, as well as third
party products other than Software Products, marketed and licensed to End
Users by SAP.
1.8 "Software Products" shall mean all of Licensor's products to be embedded
in SAP Software, and/or any combinations of Licensor's products, as
listed in the respective Exhibit of Attachment A hereto, including all
------------
updates, upgrades, new versions and applicable End-User documentation.
Licensor shall have the right to modify the Software Products, subject to
the notification procedure in Section 6.1. The Software Products for
purposes of this Agreement, shall include any software products (other
than SAP Software) provided by third parties and licensed with, or as
part of, the Software Products. The Software Products shall also include
other third party software products added to the Software Products
licensed hereunder after the Effective Date of this Agreement.
1.9 "Software Products Fee" shall mean the license fee payable by SAP to
Licensor for the Software Products licensed by SAP or the Applicable
Entities to End Users hereunder as stipulated in the respective Exhibit
of Attachment A.
------------
1.10 "Support Services" shall mean the Licensor's support services as set
forth in Attachment B.
------------
1.11 "Support Services Fee" shall mean the fee payable by SAP to Licensor for
the provisions of Support Services by Licensor as stipulated in the
respective Exhibit of Attachment A.
------------
1.12 "Territory" shall mean all countries of the world.
2. SCOPE OF AGREEMENT
------------------
2.1 This Agreement, including any Attachments hereto, sets forth the terms
and conditions pursuant to which SAP licenses for Software Products from
Licensor and markets these Software Products in connection with SAP
Software.
2.2 Deviating conditions, including, without limitation, those contained in
any of Licensor's standard terms and/or standard contracts shall not
apply even if referred to by Licensor and not expressly objected to by
SAP. Silence by SAP amounts to rejection of Licensor's standard terms or
contracts.
<PAGE>
3. RIGHTS OF SAP
-------------
3.1 Licensor hereby grants to SAP and the Applicable Entities a non-exclusive
and perpetual license to use the Software Products on an NDR Use basis
and an Internal Use basis. It is agreed by the parties that Licensor
shall provide one copy of the Software Products on a no-charge basis to
such entities.
3.2 Licensor hereby grants to SAP the non-exclusive and perpetual right to
make copies of the master media copies of the Software Products and
sublicense and distribute them to End Users within the Territory as a
product embedded into SAP Software. Such sublicenses will be granted by
SAP in the same license agreement by which SAP licenses SAP Software to
End Users. SAP shall be entitled to determine the Software Products
license fees that SAP charges End Users for the Software Products
licensed by SAP to End Users independently of Licensor.
3.3 Licensor hereby further grants SAP the non-exclusive and perpetual right
to sublicense the Software Products to the Applicable Entities by
providing copies of the Software Products and authorizing the Applicable
Entities to make copies thereof and sublicense and distribute them to End
Users within the Territory as a product embedded in SAP Software.
3.4 Licensor hereby grants SAP a non-exclusive and perpetual right to use the
Licensor portal and HRNP technologies as described in Attachment C and US
patent No. 5,848,424 and PCT No. Wo 98/22908 and corresponding patents to
make developments to the portal technologies of SAP to be distributed and
licensed to End-Users worldwide. Third party software distributed in
portal technologies of SAP shall only be affected by this non-exclusive
right insofar as it is embedded in such SAP products. This right includes
the right to make developments to portal technologies of SAP to access
data sources provided by SAP Software and to access data sources provided
by non SAP Software data sources through web technologies without thereby
enabling such non SAP Software data sources to interact as hyper-
relational as SAP portal technologies itself.
3.5 The rights granted to SAP under this section can not be withdrawn or
canceled or otherwise terminated upon full payment of the USD $
10.000.000 license fee (sec. 8.3).
4. LICENSOR'S OBLIGATIONS
----------------------
4.1 Licensor agrees to ship within thirty (30) business days after the
Effective Date one (1) set of master media copies of the Software
Products to SAP. Licensor shall be responsible for all costs of export
and shipping of the master media copies of the Software Products.
4.2 Licensor shall provide to SAP master media copies, NDR Use copies and
Internal Use copies of the Software Products, including applicable user
documentation, updates and new
<PAGE>
releases on a preferred basis, but in all events not later than its first
shipment to its own customers.
4.3 Licensor shall provide Support Services to SAP as described in Attachment
B and the parties shall train a mutually agreed number of employees of
either party with support functions for 2 to 3 weeks in the respective
parties technology at no cost to either party excepting travel related
costs.
4.4 Both parties shall provide further technical training to employees of the
other with respect to the Software Products and Resale Products for the
number of employees and days as mutually agreed upon by SAP and Licensor.
Pricing and locations for such training shall be as mutually agreed upon
by the parties prior to such training taking place.
4.5 Licensor shall cooperate with SAP and use reasonable efforts to ensure
that all Software Products and Resale Products are and continue during
the entire term of this Agreement always to be materially compatible to
SAP Software including new versions or releases thereof provided that SAP
keeps informed Licensor of the changes made to the SAP Software.
4.6
(a) Licensor represents and warrants that the source code for the Software
Products, together with related documentation as it is or becomes
available (the "Deposited Material"), has been deposited in an escrow
account maintained at SourceFile Ltd. located at Broadway Suite 703,
Oakland Ca 94612 (the "Escrow Agent"), pursuant to an agreement between
the Escrow Agent and Licensor (the "Escrow Agreement") which authorizes
the Escrow Agent to release Deposited Material, if so requested, directly
to SAP upon the occurrence of events as listed in Section 4.6 (c) The
costs of such escrow to be born by SAP.
(b) Licensor shall deposit into the escrow account copies of the source code
for each new release, version, and update of the Software Products and
related documentation immediately after they have been made available to
SAP.
(c) SAP may request the Escrow Agent to release a copy of the relevant
Deposited Material to SAP upon the occurrence of any of the following
events:
(i) Licensor has been ordered under a final court decision to
release the relevant Deposited Material to SAP;
(ii) Licensor has agreed in writing to release the relevant
Deposited Material to SAP;
(iii) Filing of a petition to commence bankruptcy or composition
proceedings regarding Licensor's assets;
<PAGE>
(iv) Cancellation of the registration of Licensor in the
competent commercial register for reasons of lack of assets;
(v) Registration of a winding-up order with regard to Licensor
in the competent commercial register;
(vi) Upon 3 months of a written notice of a material failure
which has not been cured by Licensor to provide Support
Services Licensor is obligated to perform under this
agreement.
(d) Subject to the occurrence of an event listed in Section 4.6 (c) Licensor
herewith grants SAP the irrevocable and non-exclusive right to use the
released source code of Deposited Materials to the extent necessary to
ensure continued maintenance of, and support for, the relevant Software
Products. This right includes the right to copy, translate, modify or
otherwise change the released source code to the extend required by the
aforementioned objectives.
SAP agrees to maintain the released source code in strict confidence and
to not disclose it to third parties and to use it solely for the
continued maintenance of and support for the relevant Software Products
and not for the development of any own software products.
5. SAP'S OBLIGATIONS
-----------------
5.1 SAP agrees to utilize the licensed copies of the Software Products for
NDR Use and Internal Use on such terms as set forth herein including any
Attachments hereto and as may be mutually agreed upon by Licensor and
SAP.
5.2 SAP shall enter into legally enforceable, written, license agreements
with each of its customers (Applicable Entities and End Users) containing
the terms and conditions under which the Software Products are
sublicensed in compliance with this Agreement.
6. JOINT OBLIGATIONS OF LICENSOR AND SAP
-------------------------------------
6.1 Both parties realize the impact the changes to and new releases of their
respective software products may have on the other parties products. Each
party shall use its reasonable efforts to give three (3) months written
notice to the other party of any changes to their respective software
products which might impact the other party's products hereunder and
agrees otherwise to consult with the other party on such prospective
changes.
6.2 The parties shall not make public announcements, to include press
releases, or distribute marketing materials naming the other party or
using the other party's trademarks without prior written approval by the
respective party.
<PAGE>
7. DEVELOPMENT SERVICES
--------------------
7.1 Subject to agreement on payment Licensor agrees to provide Development
Services to SAP to enable SAP to embed the Software Product in the SAP
Software or extend the Software Products to meet SAP's requirements.
Licensor agrees to provide the Development Services of experienced
fulltime consultants. The parties shall determine from time to time how
many Licensor consultants are needed, the duration of the Development
Services to be provided and the fees and expenses to be paid by SAP.
7.2 SAP shall provide free of charge to Licensor all required reasonable
development support to the Licensor consultants when Development Services
are performed in SAP facilities.
7.3 SAP may terminate the Development Services with a 2 month notice to
Licensor.
7.4 Licensor is committed to develop further functionality to the Software
Products as determined by the Parties and set out in Attachment D from
time to time.
7.5 SAP shall set a reasonable acceptance procedure after consultation with
Licensor for each order of Development Services. Such orders of
Development Services and the acceptance procedure for such shall be
agreed as set forth in attachments to this Agreement as determined from
time to time.
7.6 Development work for Resale Products (sec. 9) by Licensor or by SAP shall
not be compensated by the other party.
8. PAYMENT TERMS
-------------
8.1 Software Products Fees and Support Services Fees shall be invoiced in
United States currency.
8.2 SAP shall remit the invoiced Software Products Fees and Support Services
Fees within one (1) month from receipt of the respective invoice.
8.3 SAP shall pay Licensor for the rights granted under section 3 (Rights of
SAP) the total sum of USD [*]. This license fee is payable in four
installments:
. USD [*] are due within 30 days of the execution of this Agreement.
<PAGE>
. USD [*] are due within 30 days of the acceptance of the Software
Products after the Development Services have been completed, to
include standard testing by [*] pilot customers of SAP as SAP would
request pilot customers to test SAP Software. The Software Products
are not deemed accepted in the case of delivery to partners and pilot
customers of SAP for non productive use.
. USD [*] are due [*] months from [*] are due [*].
Upon acceptance of the results of the Development Services the payments
shall not be refundable, should acceptance be withheld with cause
payments made shall be refunded within 30 days of notice by SAP.
8.4 SAP shall pay USD [*] per annum to Licensor for the maintenance of the
Software Products as modified by the Development Services to include
corrections, upgrades and 3rd level support. Licensor shall continue
maintenance during this Agreement and for two years after termination of
the Agreement. During the post-termination period Licensor shall receive
the yearly USD [*] maintenance fee. SAP may terminate the maintenance
services during this Agreement and after termination of this Agreement
with one month notice to the end of the year. Payments shall commence in
the year of acceptance. The sum shall be invoiced and paid in quarterly
installments.
9. RESELL RIGHTS OF SAP
--------------------
9.1 Licensor grants SAP the non-exclusive worldwide right to license the
Resale Products as set forth in Attachment E and as may be changed by the
parties from time to time and for the duration of this Agreement.
9.2 The Resale Products shall be branded as "TopTier ... for mySAP.com".
9.3 [*] Licensor shall receive a royalty of [*] of the license fees received
by SAP for the Resale Products from End Users and SAP shall pay yearly
[*] of the aggregate royalties received by [*] in the same year to
Licensor for the maintenance and support of the Resale Products (for
purposes of this sect. 9.5, the expression "aggregate royalties" shall
refer to all payments received by SAP from all End-Users for maintenance
and support of the Resale Products).
9.4 The parties shall agree on a yearly basis on a business plan for
licensing of these Resale Products to End-Users. Such business plan shall
be reviewed every 6 months. SAP shall give its sales force a reasonable
quota taking the customer base within the different countries into
consideration for the licensing of the Resale Products. SAP shall set
reasonable bonus payments in accordance with the respective rules of the
respective SAP
<PAGE>
subsidiaries for the licensing of these Resale Products. The business
plan shall include marketing activities by SAP. SAP shall use reasonable
efforts to execute the business plan.
9.5 Licensor shall provide 2nd and 3rd level support for the Resale
Products and provide maintenance, including upgrades and new versions
(subject, always, to payment by SAP of the amounts set out in clause
9.3). Licensor shall use reasonable efforts to continue the development
of the Resale Products to meet the requirements of the market.
9.6 SAP shall discount these Resale Products only on a pro-rata basis to
other SAP Software being licensed to the End-User or if the Resale
Products are licensed separately from SAP Software SAP shall grant
discounts only within standard practice within the respective country for
SAP Software.
9.7 SAP may grant demo and trial licenses to the Resale Products as SAP
grants such licenses to SAP Software.
9.8 Licensor may terminate the rights of SAP to the Resale Products with 3
months written notice to SAP for material breach of its obligations under
this sec. 9 if SAP does not cure such breach within the notice period.
Such termination shall not affect SAP's rights to the license on the
Software Products pursuant to clause 3.
10. TERM AND TERMINATION
--------------------
10.1 The initial term of this Agreement shall commence on the Effective Date
and shall continue in effect until [*]. Thereafter, this Agreement shall
automatically renew for one (1) year periods unless terminated for
convenience by either party upon three (3) months prior written notice
with effect to the end of the three month period or unless terminated
pursuant to sec. 10.2.
10.2 Either party may terminate this Agreement for cause. This includes,
without limitation, situations where (a) either party neglects or fails
to perform a material obligation hereunder, and such neglect or failure
continues unremedied for a period of one (1) month after written notice
is sent to the defaulting party by the other party; or (b) either party
becomes insolvent; proposes any dissolution, liquidation, composition,
financial reorganization or similar proceedings with respect to its
property or business, and such continues unremedied for a period of one
(1) month after written notice is sent by the other party; (c) either
party becomes subject to a change in its ownership that is not reasonably
acceptable to the other party and notices given by the terminating party
within one month of knowledge of change of ownership.
10.3 Termination of this Agreement shall not affect any of the individual
sublicense agreements between SAP and the End-User. Except for cases of
termination for cause by Licensor, SAP remains entitled to make copies of
the Software Products to the extent required in order to
<PAGE>
fulfill all contracts with End Users and/or Applicable Entities concluded
in the ordinary course of business prior to the date on which the
termination becomes effective.
10.4 Subject to Section 10.3, SAP, upon an event of termination, shall
immediately discontinue any copying and sublicensing of the Software
Products except to meet obligations of legally binding offers made by the
date of the effect of the termination. Additionally, the parties hereto
agree that communications to End Users and any publications/press
releases regarding such termination shall be mutually agreed upon, in
writing, prior to distribution.
10.5 Any provisions of this Agreement which, by their nature, require
performance after termination, shall survive any termination of this
Agreement. In particular, Licensor's obligation with respect to the
minimum period for the continued supply of Support Services shall not be
affected by termination.
10.6 Any payments owing or accrued as of the effective date of termination,
shall be promptly paid by the respective party to the other.
11. COPYRIGHT NOTICE
----------------
SAP shall not remove copyright notices Licensor has placed in the
Software Products and Resale Products and in the Documentation.
12. PROPRIETARY RIGHTS; CONFIDENTIALITY
-----------------------------------
12.1 Title to and ownership of the Software Products and Resale Products shall
remain with Licensor and/or with the respective manufacturer or author of
such Software Products or Resale Products. All rights to patents,
copyrights, trademarks and trade secrets in the Software Products and
Resale Products shall remain with Licensor and/or with the respective
manufacturer or author of such Software Products or Resale Products. All
intellectual property rights, confidentiality and proprietary provisions,
rights to patents, copyrights, trademarks and trade secrets in SAP
Software shall remain with SAP and/or with the respective manufacturer or
author of such SAP Software.
12.2 With respect to work results (including interim work results) arising
directly from the Development Services, title and ownership to the works
shall be decided as follows provided, always, that the provisions below
shall not affect the respective rights of the parties under clause 12.1.:
(a) if Licensor notifies before the beginning of the Development Services
requested by SAP or within thirty (30) days of such beginning not to
charge SAP for the Development
<PAGE>
Services, then Licensor shall have title and ownership to the work
subject to the license rights of SAP hereunder;
(b) if Licensor notifies before the beginning of the Development Services
requested by SAP or within thirty (30) days of such beginning to
charge SAP for Development Services, then SAP shall have title and
ownership to the work subject to Licensor having the non-exclusive
royalty free worldwide right to use, modify and distribute the work;
(c) if Licensor fails to notify SAP pursuant to clauses 12.2 (a) or (b),
then SAP shall have title and ownership to the work created subject
to Licensor having the non-exclusive royalty free worldwide right to
use, modify and distribute the work:
(d) In the event of such notification by Licensor, SAP has the right to
withdraw the work order for the respective Development Services
within 10 week days without payment obligations or ownership of
rights to use resulting from the work order or from the notification.
After this period SAP may not withdraw the work order. Should
Development Services have started before Licensor has given
notification and should SAP have withdrawn the work order, then any
work results shall be destroyed and not be used by either party;
(e) If Licensor modifies code or documentation of SAP in any way, SAP
retains title and ownership of such code or documentation, including
the modifications, and licensor shall not have any right of use,
modification or distribution with respect to such modified code or
documentation of SAP and shall transfer all rights of authorship to
SAP and insofar as such rights cannot be transferred by law, Licensor
shall not exercise such rights. SAP acknowledges and agrees that any
modification to Licensor's code will remain the property of Licensor
and that SAP shall have no right of ownership over such modified
code.
12.3 Licensor and SAP recognize that, in the course of this Agreement,
Licensor, SAP and the Applicable Entities may learn or be exposed to
confidential and/or proprietary information which is the property of the
other party. Such information will be marked or otherwise identified in
writing as confidential, or will be reasonably identifiable as
confidential. In order to provide an unrestricted basis of communication
for marketing activities hereunder, Licensor and SAP agree that they will
take all reasonable efforts to prevent such confidential information from
becoming known to anyone except those of their and the Applicable
Entities' employees, agents or consultants with a need to know in order
to properly fulfill their duties under the respective employment
agreements with either of the parties or any Applicable Entity. The
particular provisions of this Agreement shall be deemed confidential in
nature and neither party hereto shall divulge any provisions as set forth
herein to any third parties except to their respective attorneys or
accountants and except as may be required by law.
12.4 Neither party's non-disclosure obligations hereunder shall extend to any
confidential or proprietary information or any portion thereof which:
(a) the disclosing party can establish was known to it without
restriction prior to disclosure by the other party or was
independently developed by the disclosing party; or
<PAGE>
(b) is now or hereafter comes into the public domain through no fault of
the disclosing party; or
(c) is required by operation of law to be disclosed, provided, however,
that the other party is given reasonable advance notice of the
intended disclosure and reasonable opportunity to challenge such
legal requirement(s); or
(d) is disclosed to the disclosing party without restriction on
disclosure by a third party who has the lawful right to make such
disclosure.
12.5 Unless expressly agreed to in writing, and other than as specified above,
each party expressly prohibits any direct use or reference to its name,
trademarks or trade names.
12.6 The parties recognize that each has the right to develop independently
software that would compete with the products of the other party without
use of confidential information that is provided to the other under this
Agreement unless the conditions of Section 12.3 are met and without
restriction to the development rights granted to SAP under sec. 3.4 of
this Agreement.
13. THIRD PARTY RIGHTS
------------------
13.1 Licensor represents and warrants that it is the owner or licensee of the
Software Products and Resale Products, including all intellectual
property rights thereunder (for the avoidance of doubt including,
copyright, patent rights (if any), trademark and trade secret), and that
it has the right to authorize the use of the Software Products, and
Resale Products and the licensing of the Software Products and Resale
Products to End-Users by SAP and the Applicable Entities.
13.2 Licensor represents and warrants that the execution of this Agreement by
Licensor does not conflict with any provision of any other agreement,
court decision or administrative order binding upon it.
13.3 Licensor represents and warrants that the Software Products and Resale
Products do not infringe to its knowledge any copyright, United States or
European (issued by the European Patent Office) patent, trademark, trade
secret, or other intellectual property right of any third party.
13.4 Licensor shall fully indemnify, hold harmless and defend SAP and/or the
Applicable Entities against suits based on any claim that the Software
Products or Resale Products infringe any United States or European
(issued by the European Patent Office) patent, copyright, trademark,
trade secrets, or other proprietary right, provided that the entity
concerned gives Licensor prompt written notice of such suits and permits
Licensor to control the defense and
<PAGE>
settlement thereof. In the event that, as a result of any such claim of
infringement, SAP and/or the Applicable Entities are enjoined from using,
marketing, or licensing the Software Products, SAP and/or the Applicable
Entities, at their option, may request Licensor to procure at its expense
the right for SAP or the Applicable Entities to continue to use, market,
and license the Software Products or Resale Products, or replace or
modify at its expense the Software Products or Resale Products so as to
make it non-infringing, provided that the performance thereof is not
adversely affected. SAP and/or the Applicable Entities, in their sole
discretion, may in lieu of the remedies above, request a full refund of
Resale Product royalties. Irrespective of SAP's and or the Applicable
Entity's choice between the aforementioned remedies, Licensor remains
liable to fully compensate the entity concerned for any damages, costs
and reasonable expenses incurred in connection with such third party
intellectual property infringement claims. Licensor shall have no
liability to SAP or Applicable Entities to the extend that any claim is
based upon (i) any modification to the Software Products or Resale
Products not made by Licensor, (ii) use of the Software Products or
Resale Products in any unlawful, improper or inappropriate manner or for
any unlawful, improper or inappropriate purpose or (iii) use or
incorporation of the Software Products or Resale Products with any other
product.
14 WARRANTY
--------
14.1 Licensor warrants that the Software Products and Resale Products will
perform in substantial conformity with the specifications and
descriptions contained in Licensor's then current and applicable
documentation or other tangible documents, provided that SAP has not
altered the Software Products and Resale Products without the consent of
Licensor. Licensor does not warrant that the Software Products and Resale
Products will meet all needs or expectations of SAP or End Users.
14.2 The warranty period for all Software Products and Resale Products
delivered hereunder shall extend for 6 months from the time the
respective End User has received the Software Product(s) or Resale
Products from SAP. In case of any timely notice of defects by SAP, the
warranty period will be extended for the period of time running from the
dispatch of the notice of defects until their elimination, if such remedy
is elected by SAP.
14.3 With respect to any material defects of the master media copies of the
Software Products and Resale Products which SAP reports to Licensor prior
to the expiration of the warranty period, SAP, at its option, may either
(a) demand elimination of the defect at Licensor's expense and without
undue delay; or (b) require replacement delivery.
14.4 Licensor shall pay for all parts, labor, and travel expenses for
Licensor's service personnel required to fulfill its warranty obligations
under this Agreement.
<PAGE>
14.5 Licensor warrants that, irrespective of fault that the Software Products
and Resale Products accommodate now and will in the future all date-field
formats required for Year 2000 Compliance. Year 2000 Compliance means
that:
(a) the Software Products and Resale Products will accurately record,
store, process, calculate, transmit, display and present calendar
dates on or after (and, if applicable, spans of time including)
January 1, 2000;
(b) the occurrence in or use by the Software Products and Resale
Products of dates before, on or after January 1, 2000 will not
adversely affect the performance of the Software Products and
Resale Products with respect to date-dependant data, computations,
output, or other functions (including, without limitation,
calculating, comparing and sequencing).
(c) The Software Products and Resale Products will not abnormally
and/or provide invalid or incorrect results as a result of date-
dependant data and the Software Products and Resale Products can
accurately recognize, manage, accommodate and manipulate date-
dependant data, including without limitation, single and multi-
currency formulas and leap years.
This warranty is subject to the following limitations (in addition to
all other applicable limitations in this Agreement):
(a) The Software Products and Resale Products may receive data
regarding dates from databases, data-sources and applications with
which the Software Products and Resale Products are used but the
Software Products and Resale Products have not inherent date
discrimination, date validation or date calculation mechanisms
built in to validate or check dates received from other sources;
(b) While the Software Products and Resale Products enable queries
from databases or other data sources, including setting limits in
data ranges, in these instances, the date field formats used by
the Software Products and Resale Products enable Year 2000
Compliance but do not identify, validate or remedy any date
calculations or date fields of third party operating systems or
other associated applications, data sources or databases and do
not make any discrimination as to Year 2000 Compliance of third
party operating systems or applications;
(c) The Software Products and Resale Products operate with the
information they receive and as such, if incorrect date
information is provided by SAP, the End User, the operating system
or from any other external product or other sources, this
information will be used by the Software Products and Resale
Products as received and the data navigated, queried, reported or
derived from the Software Products and Resale Products is only as
date-valid as the information in or used by the underlying
applications or systems;
(d) The Software Products and Resale Products shall not work in
circumstances where the underlying applications or systems stop
functioning improperly because of their own Year 2000 Compliance
problems.
<PAGE>
14.6 In addition to the aforementioned warranty obligations Licensor must
indemnify and hold harmless SAP from all claims raised by End Users and/or
the Applicable Entities against SAP for rescission of contract, reduction
of license fees or damage compensation based on a breach of the warranty
given in this Agreement. This shall not apply to the extent that such
defects did not exist at the time of receipt of the Software Products or
Resale Products by the End User or the Applicable Entities or in
situations where the claims are based on the lack of expressly warranted
feature unless the subject of such warranty corresponds to a similar
warranty given by Licensor.
14.7 Except for the warranties expressly set forth in this Agreement, Licensor
to the fullest extent possible by law makes not warranties express,
implied or statutory with respect to the Software Products and Resale
Products, and Licensor disclaims to the fullest extend permissible by law
any implied warranties of merchantability, quality or fitness for a
particular purpose.
14.8 Liability
---------
(a) Except for the warranties expressly set forth in this Agreement,
Licensor to the fullest extent possible by law makes no warranties
express, implied or statutory with respect to the Software Products
or Resale Products, and Licensor disclaims to the fullest extent
permissible by law any implied warranties of merchantability, quality
or fitness for a particular purpose.
(b) Except for a breach of clause 12 and 13 and to the fullest extent
permissible by law, in no event shall either party be liable to the
other for any damages resulting from loss of data, loss of profits,
loss of contracts or for any special, indirect, incidental, punitive
or exemplary damages in any way arising out of or in connection with
the use or performance of the Software Products or otherwise relating
to this Agreement, however caused, even if such party has been made
aware of the possibility of such damages.
(c) Licensor's entire liability to SAP and End-Users, regardless of the
form of any claim or action or theory of liability, excluding intent
or gross negligence, shall be limited to the aggregate sum of
payments made by SAP to Licensor under this Agreement ("the Aggregate
Amount"). Licensor shall maintain throughout this Agreement insurance
coverage for an amount to be determined by SAP and notified in
writing by SAP to Licensor, subject to SAP paying at all times the
costs of such coverage above the Aggregate Amount.
15. MARKETING
---------
<PAGE>
15.1 SAP shall appoint Licensor as a "Development Partner" with the right to
use the respective logo and title in presentations and advertising.
Licensor shall receive the benefits of the respective partner program as
are changed by SAP from time to time. Licensor shall pay the standard fees
for partner offerings of SAP as are changed from time to time by SAP.
15.2 The parties shall issue point press releases from time to time to publish
the role of Licensor as a Development Partner and SAP's role as reseller
of the Software Products.
16 AUDIT
-----
SAP shall maintain, at its address throughout the term of this Agreement
and for a period of three (3) years following the expiration or
termination of this Agreement, such books and records as may be necessary
to permit Licensor to audit the statements submitted by SAP and verify the
payments made by SAP. Upon reasonable notice, but no more frequently than
twice in any calendar year, Licensor shall have the right to have its
internal controlling or financial oversight personnel or its certified
public accountants examine such books and records for the purpose of
verifying the accuracy of the payments made by SAP. Licensor will bear the
costs of such review, unless it is established that SAP has underpaid by
more than 5% to Licensor, in which case SAP shall bear the costs of the
audit.
17 GENERAL
-------
17.1 Notices All notices shall be in writing and delivered personally, by mail
-------
or via facsimile. All notices shall be addressed to the addresses
appearing in the introductory section of this Agreement and shall be
deemed delivered upon receipt. Each party may change its address by
written notice in accordance with this section.
17.2 Modification This Agreement may only be modified in writing by SAP and
------------
Licensor. This also applies to any waiver of this written form
requirement.
17.3 Nonwaiver of Rights The failure of either party to this Agreement to
-------------------
object to any conduct of the other party that is in violation of the terms
of this Agreement shall not be construed as a waiver thereof, or as waiver
of any future breach or subsequent wrongful conduct.
17.4 Entire Agreement This Agreement, including all Software Products Purchase
----------------
Orders and other attachments, shall represent the entire understanding
between the parties hereto relating to the marketing of Software Products
Services described in the Software Products Purchase Order and supersede
any and all prior proposals or agreements, whether written or oral, that
may exist between the parties. No oral side agreements exist.
<PAGE>
17.5 Governing Law This Agreement shall be governed by and construed in
-------------
accordance with the laws of Germany without reference to the conflicts of
law principles. This Agreement shall not be governed by the United Nations
Convention of Contracts for the International Sale of Goods, the
application of which is hereby expressly excluded.
17.6 Arbitration Clause Any dispute, controversy or claim arising out of or
------------------
relating to this Agreement or to a breach thereof shall be finally
resolved by arbitration. The arbitration shall be conducted by three
(3)arbitrators, one to be appointed by Licensor, one to be appointed by
SAP and the third being nominated by the two other arbitrators so selected
or, if they cannot agree on a third arbitrator, by the then president of
the International Chamber of Commerce (ICC). The arbitration shall be
conducted in accordance with the arbitration rules of the ICC. The place
of arbitration shall be London (which shall be the exclusive forum for
resolving such dispute, controversy or claim) and the arbitration shall be
conducted in the English language. The decision of the arbitrators shall
be binding upon the parties, and the expense of the arbitration (including
the award of attorney's fees to the prevailing party) shall be paid as the
arbitrators determine. The decision of the arbitrators shall be executory,
and judgement thereon or application for enforcement may be entered by any
court of competent jurisdiction. Notwithstanding anything in this clause,
each party shall have the right to institute judicial proceedings against
the other party in order to seek specific performance, injunctive relief
or similar relief before any court or tribunal having jurisdiction.
17.7 Severability If a court finds any provision of this Agreement invalid or
------------
unenforceable, this will not affect any other provision of this Agreement.
17.7 Independent Contractors Both parties represent that they are independent
-----------------------
contractors in performing all obligations hereunder, and nothing contained
herein shall be deemed or construed to create any employer/employee
relationship or any partnership or joint venture between the parties or
their respective directors, officers, employees, or independent
contractors.
17.8 Assignments: Unless otherwise provided for in this Agreement, neither
------------
party shall transfer, assign or sublicense its rights or obligations under
this Agreement to any other third party, in whole or in part, without the
prior written consent of the other party, which consent shall not be
unreasonably withheld. Assignment in whole by either party to its
respective parent organization is permitted without written consent of the
other party, but with notice to the other party.
18. RESTRICTIONS ON EXPORT AND REEXPORT
-----------------------------------
18.1 SAP is aware of the existence of export/reexport restrictions and agrees
to observe all export control provisions prevailing in the country into
which SAP delivers technical information, software or technical data under
this Agreement.
<PAGE>
18.2 It is sole responsibility of SAP to obtain all necessary approvals or
consents from any authorities having jurisdiction over the subject matter
and/or SAP, before it exports technical information, software or technical
data obtained from Licensor.
18.3 Either party to this Agreement is entitled to refuse performance under
this Agreement to the extent such performance would be in conflict with
any applicable export control requirements.
<PAGE>
TopTier Israel Ltd. SAP AG
BY: /s/ Shai Agassi BY: /s/ Henning Kagermann
-------------------------------- -----------------------------
TYPED: Shai Agassi TYPED: Henning Kagermann
----------------------------- --------------------------
TITLE: Chairman TITLE: Co-Chairman and CEO
----------------------------- --------------------------
DATE: October 15, 1999 DATE: October 13, 1999
------------------------------ ----------------------------
BY: /S/ Reuven Agassi BY: /s/ Karl-Heinz Hess
-------------------------------- -----------------------------
TYPED: Reuven Agassi TYPED: Karl-Heinz Hess
----------------------------- -------------------------
TITLE: Co-Chairman TITLE: Member of the Executive
----------------------------- -------------------------
Board
-------------------------
DATE: October 15, 1999 DATE: October 12, 1999
------------------------------ --------------------------------
<PAGE>
EXHIBIT 10.10
TOPTIER SOFTWARE, INC.
- --------------------------------------------------------------------------------
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
October 27, 1999
- --------------------------------------------------------------------------------
<PAGE>
TOPTIER SOFTWARE, INC.
AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
This Amended and Restated Investors' Rights Agreement (the
"Agreement") is made as of October 27, 1999 by and among TopTier Software, Inc.,
a Delaware corporation (the "Company"), and the persons and entities listed on
Exhibit A hereto (the "Investors").
RECITALS
WHEREAS, the Company and the Investors are parties to the Series A
Preferred Stock Purchase Agreement, the Series B Preferred Stock Purchase
Agreement, the Series C Preferred Stock Purchase Agreement or the Series D
Preferred Stock Purchase Agreement, whereby the Company has sold or will sell,
and those Investors have acquired or will acquire, that number of shares of the
Company's Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock or Series D Preferred Stock set forth opposite each Investor's name on
EXHIBIT A hereto (the "Purchased Shares," which term shall also include any
- ---------
additional shares of Common Stock and/or Preferred Stock of the Company, or
securities convertible into or exchangeable for such shares, now owned or
hereafter acquired by the Investors).
WHEREAS, certain of the Investors hold securities of the Company and
possess certain registration rights with respect to such securities pursuant to
that certain Rights Agreement dated June 20, 1997 (the "1997 Rights Agreement")
and that certain Rights Agreement dated October 6, 1998 (the "1998 Rights
Agreement"); and
WHEREAS, the Investors who are parties to the 1997 Rights Agreement
and the 1998 Rights Agreement desire to terminate the 1997 Rights Agreement and
the 1998 Rights Agreement and to accept the rights created pursuant hereto in
lieu of such previously granted rights; and
WHEREAS, the execution of this Agreement by the Company is a condition
to the obligations of the Investors under the Series D Preferred Stock Purchase
Agreement and the Company wishes to execute this Agreement and grant to the
Investors the rights contained herein in order to fulfill such condition;
NOW THEREFORE, in consideration of the foregoing, and the mutual
consideration set forth herein, the parties agree as follows:
SECTION 1.
Restrictions on Transferability;
-------------------------------
Registration Rights
-------------------
1.1 Certain Definitions. As used in this Agreement, the following
-------------------
terms shall have the following respective meanings:
<PAGE>
"Commission" shall mean the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act.
"Conversion Shares" means the Common Stock issued or issuable upon
-----------------
conversion of the Preferred Shares as defined herein.
"Preferred Shares" shall mean, collectively, the Company's outstanding
----------------
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock.
"Common Stock" shall mean the Company's Common Stock and shares of
------------
Common Stock issued or issuable upon conversion of the Company's outstanding
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock.
"Holder" shall mean any Investor holding Registrable Securities and
------
any person holding Registrable Securities to whom the rights under this
Agreement have been transferred in accordance with Section 1.14 hereof.
"Initiating Holders" shall mean Holders in the aggregate of not less
------------------
than thirty percent (30%) of the Registrable Securities as defined for purposes
of that particular section.
The terms "register" "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses incurred by the
---------------------
Company in complying with Sections 1.5, 1.6 and 1.7 of this Agreement,
including, without limitation, all registration, qualification and filing fees,
printing expenses, escrow fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses, and the expense of any special audits
incident to or required by any such registration (but excluding the compensation
of regular employees of the Company which shall be paid in any event by the
Company).
"Registrable Securities" means (i) the Conversion Shares; and (ii) any
----------------------
Common Stock of the Company issued or issuable in respect of the Preferred
Shares or Conversion Shares or other securities issued or issuable with respect
to the Preferred Shares or Conversion Shares upon any stock split, stock
dividend, recapitalization, or similar event, or any Common Stock otherwise
issued or issuable with respect to the Conversion Shares or Preferred Shares;
provided, however, that shares of Common Stock or other securities shall only be
treated as Registrable Securities if and so long as they have not been (A) sold
to or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale.
"Restricted Securities" shall mean the securities of the Company
---------------------
required to bear the legend set forth in Section 1.3 of this Agreement.
<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the securities registered by
the Holders and all fees and disbursements of counsel for the Holders (except as
provided by Section 1.9).
1.2. Restrictions. The Preferred Shares and the Conversion Shares
------------
shall not be sold, assigned, transferred or pledged except upon the conditions
specified in this Agreement, which conditions are intended to ensure compliance
with the provisions of the Securities Act. The Investors will cause any proposed
purchaser, assignee, transferee or pledgee of the Preferred Shares or the
Conversion Shares to agree to take and hold such securities subject to the
provisions and upon the conditions specified in this Agreement.
1.3. Restrictive Legend. Each certificate representing (i) the
------------------
Preferred Shares, (ii) the Conversion Shares, and (iii) any other securities
issued in respect of the securities referenced in clauses (i) and (ii) upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by the provisions of Section 1.4 below)
be stamped or otherwise imprinted with legends in the following form (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD, TRANSFERRED OR PLEDGED IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION
OF COUNSEL (WHICH MAY BE COUNSEL FOR THE COMPANY) REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT."
"THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY."
Each Investor and Holder consents to the Company making a notation on
its records and giving instructions to any transfer agent of the Restricted
Securities in order to implement the restrictions on transfer established in
this Section 1.
1.4. Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities, by acceptance thereof, agrees to comply in
all respects with the provisions of this Section 1. Prior to any proposed sale,
assignment, transfer or pledge of any Restricted
<PAGE>
Securities, unless there is in effect a registration statement under
the Securities Act covering the proposed transfer, the holder thereof shall give
written notice to the Company of such holder's intention to effect such
transfer, sale, assignment or pledge. Each such notice shall describe the manner
and circumstances of the proposed transfer, sale, assignment or pledge in
sufficient detail and, if requested by the Company, shall be accompanied at such
holder's expense by either (i) an unqualified written opinion of legal counsel
who shall, and whose legal opinion shall be, reasonably satisfactory to the
Company, addressed to the Company, to the effect that the proposed transfer of
the Restricted Securities may be effected without registration under the
Securities Act, or (ii) a "no action" letter from the Commission to the effect
that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
delivered by the holder to the Company. The Company will not require such a
legal opinion or "no action" letter (a) in any transaction in compliance with
Rule 144, (b) in any transaction in which an investor which is a corporation
distributes Restricted Securities after six (6) months after the purchase
thereof solely to its majority-owned subsidiaries or affiliates for no
consideration, or (c) in any transaction in which an investor which is a
partnership distributes Restricted Securities after six (6) months after the
purchase thereof solely to partners thereof for no consideration, provided that
each transferee agrees in writing to be subject to the terms of this Section
1.4. Each certificate evidencing the Restricted Securities transferred as above
provided shall bear, except if such transfer is made pursuant to Rule 144, the
appropriate restrictive legend set forth in Section 1.3 above, except that such
certificate shall not bear such restrictive legend if, in the opinion of counsel
for such holder and the Company, such legend is not required in order to
establish compliance with any provisions of the Securities Act.
1.5. Requested Registration.
----------------------
(a) Request for Registration. In case the Company shall
------------------------
receive from Initiating Holders a written request that the Company effect any
qualification, compliance or registration the reasonably anticipated aggregate
price to the public of which net of underwriting discounts and commissions,
would exceed $10,000,000:
(i) within ten (10) days of the receipt thereof,
give written notice of the proposed registration, qualification or
compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts
to effect such registration, qualification or compliance (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other
state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all
or such portion of the Registrable Securities of any Holder or Holders
joining in such request as are specified in a written request received by
the Company within twenty (20) days after receipt of such written notice
from the Company; provided, however, that the
<PAGE>
Company shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 1.5:
(1) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(2) Prior to the earlier of (i) six (6) months
following the Company's initial public offering or (ii) August 1, 2003;
(3) During the three (3) month period ending on the
date three (3) months immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan);
(4) After the Company has effected one (1) such
registration pursuant to this subparagraph 1.5(a), such registration has been
declared or ordered effective and the securities offered pursuant to such
registration have been sold; or
(5) If the Company shall furnish to such Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its shareholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 1.5 shall be deferred for a single period
not to exceed ninety (90) days from the date of receipt of written request from
the Initiating Holders; provided however, that the Company may not utilize this
right more than once in any twelve (12) month period.
Subject to the foregoing clauses (1) through (5), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Initiating Holders.
(b) Underwriting. In the event that a registration pursuant to
------------
Section 1.5 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 1.5(a)(i). The right of any Holder to registration pursuant to Section
1.5 shall be conditioned upon such Holder's participation in the underwriting
arrangements required by this Section 1.5 and the inclusion of such Holder's
Registrable Securities in the underwriting, to the extent requested, to the
extent provided in this Agreement.
The Company shall (together with all Holders proposing to distribute
their securities through such underwriting) enter into and perform its
obligations under an underwriting agreement in customary form with the managing
underwriter selected for such underwriting by a majority in interest of the
Initiating Holders (which managing underwriter shall be reasonably acceptable to
the Company). Notwithstanding any other provision of this Section 1.5, if the
managing underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Company shall so advise all Holders of Registrable Securities and
<PAGE>
the number of shares of Registrable Securities that may be included in the
registration and underwriting shall be allocated among all Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement, provided however, that the number of shares of Registrable Securities
to be included in such underwriting shall not be reduced unless all other
securities are first entirely excluded from the underwriting. No Registrable
Securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. To facilitate the
allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the
nearest 100 shares.
If any Holder of Registrable Securities disapproves of the terms of
the underwriting, such person may elect to withdraw therefrom by written notice
to the Company, the managing underwriter and the Initiating Holders. The
Registrable Securities and/or other securities so withdrawn shall also be
withdrawn from registration.
1.6. Company Registration
--------------------
(a) Notice of Registration. If at any time or from time to
----------------------
time, the Company shall determine to register any of its securities, either for
its own account or the account of a security holder or holders other than (i) a
registration relating solely to employee benefit plans, or (ii) a registration
relating solely to a Commission Rule 145 transaction, the Company will:
(i) promptly give to each Holder written notice
thereof, and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any
underwriting involved in such registration, all the Registrable Securities
specified in a written request or requests received within twenty (20) days
after receipt of such written notice from the Company by any Holder, to the
extent provided for in subsection (b) hereof.
(b) Underwriting. If the registration of which the Company
------------
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.6(a)(i). In such event, the right of any Holder to
registration pursuant to Section 1.6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company and the other holders distributing their securities through such
underwriting) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 1.6, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration by Holders to a minimum of 25% of
the total shares to be included in such underwriting or exclude them entirely in
the case of the Company's initial public offering in which case the Registrable
Securities of the selling Holders may be excluded if the underwriters make the
determination described above and no other shareholders' securities are included
in such registration. The Company shall so advise all Holders and the number of
shares of Registrable Securities that
<PAGE>
may be included in the registration and underwriting shall be allocated among
all Holders in proportion, as nearly as practicable, to the respective amounts
of Registrable Securities held by Such Holders at the time of filing the
registration statement. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number
of shares allocated to any Holder or other holder to the nearest 100 shares. If
any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, and the managing underwriter. The Registrable Securities and/or
other securities so withdrawn shall also be withdrawn from registration.
(c) Right to Terminate Registration. The Company shall have
-------------------------------
the right to terminate or withdraw any registration initiated by it under this
Section 1.6 prior to the effectiveness of such registration, whether or not any
Holder has elected to include securities in such registration.
1.7. Registration on Form S-3.
------------------------
(a) If Initiating Holders request that the Company file a
registration statement on Form S-3 (or any successor form to Form S-3) for a
public offering of shares of the Registrable Securities, the reasonably
anticipated aggregate price to the public of which, net of underwriting
discounts and commissions, would exceed $1,000,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for
such an offering, the Company shall use its best efforts to cause such
Registrable Securities to be registered for the offering on such form; provided,
however, that the Company shall not be required to effect more than three
registrations pursuant to this Section 1.7 in any twelve (12) month period. The
Company will (i) promptly give written notice of the proposed registration to
all other Holders, and (ii) as soon as practicable, use its best efforts to
effect such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act and any other
governmental requirements or regulations) as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Registrable Securities as are specified in such request, together with all or
such portion of the Registrable Securities of any Holder or Holders joining in
such request as are specified in a written request received by the Company
within twenty (20) days after receipt of such written notice from the Company.
The substantive provisions of Section 1.5(b) shall be applicable to each
registration initiated under this Section 1.7.
(b) Notwithstanding the foregoing, the Company shall not be
obligated to take any action pursuant to this Section 1.7: (i) in any
particular jurisdiction in which the Company would be required to execute a
general consent to service of process in effecting such registration,
qualification or compliance unless the Company is already subject to service in
such jurisdiction and except as may be required by the Securities Act, (ii)
during the three (3) month period ending on a date three (3) months following
the effective date of, a registration statement (other than with respect to a
registration statement relating to a Rule 145 transaction, an offering solely to
employees or any other registration which is not appropriate for the
registration of Registrable Securities), (iii) if the Company shall furnish to
such Holder a certificate signed by the President of the Company stating that,
in the good faith judgment of the Board of Directors, it would be seriously
detrimental to the Company or its shareholders for registration statements to be
filed in the near future, then the
<PAGE>
Company's obligation to use its best efforts to file a registration statement
shall be deferred for a single period not to exceed ninety (90) days from the
receipt of the request to file such registration by such Holder or Holders,
provided however, that the Company may not utilize this right more than once in
any twelve (12) month period, or (iv) the Company shall have already received,
within any twelve (12) month period, three (3) requests from Initiating Holders
that the Company file a registration statement on Form S-3.
1.8. Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not enter into any agreement
granting any holder or prospective holder of any securities of the Company
registration rights with respect to such securities unless the Company first
obtains the consent of the holders of at least a majority of the Registrable
Securities.
1.9. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration pursuant to Sections 1.5, 1.6 or 1.7 and the
reasonable cost of one special legal counsel to represent all of the Holders
together in any such registration shall be borne by the Company, provided that
the Company shall not be required to pay the Registration Expenses of any
registration proceeding begun pursuant to Section 1.5, the request of which has
been subsequently withdrawn by the Initiating Holders. In such case, the Holders
of Registrable Securities to have been registered shall bear all such
Registration Expenses pro rata on the basis of the number of shares to have been
registered unless the Holders of a majority of the Registrable Securities agree
to forfeit their right to one demand registration pursuant to Section 1.5.
Notwithstanding the foregoing, however, if at the time of the withdrawal, the
Holders have learned of a material adverse change in the condition, business or
prospects of the Company from that known to the Holders at the time of their
request, of which the Company had knowledge at the time of the request, then the
Holders shall not be required to pay any of said Registration Expenses or to
forfeit the right to one demand registration.
1.10. Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Section 1,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) Prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least one hundred
twenty (120) days; provided however, that such 120-day period shall be extended
for a period of time equal to the period of time the Holder refrains from
selling any securities included in such registration at the request of the
underwriter of such offering.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be reasonably necessary to comply with
the provisions of the Act with respect to the disposition of the securities
covered by such registration statement;
(c) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing
<PAGE>
underwriter of such offering. Each Holder participating in such underwriting
shall also enter into and perform its obligations under such agreement;
(d) Use its best efforts to cause all such Registrable
Securities registered pursuant to hereunder to be listed on each securities
exchange on which similar securities issued by the Company are then listed;
(e) Provide a transfer agent and registrar for all
Registrable Securities registered hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration; and
(f) Furnish to the Holders participating in such
registration and to the underwriters of the securities being registered such
reasonable number of copies of the registration statement, preliminary
prospectus, final prospectus and such other documents as such underwriters may
reasonably request in order to facilitate the public offering of such
securities.
1.11. Indemnification.
---------------
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, each of its officers and directors and
partners, and each person controlling such Holder within the meaning of Section
15 of the Securities Act, with respect to which registration, qualification or
compliance has been effected pursuant to this Section 1, and each underwriter,
if any, and each person who controls any underwriter within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
or liabilities joint or several) (or actions in respect thereof, including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any registration statement,
preliminary or final prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, or any violation or alleged violation by the Company of any rule
or regulation promulgated under the Securities Act or the Securities Exchange
Act of 1934, as amended (the "Exchange Act") applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse each such Holder, each of its officers and directors, and
each person controlling such Holder, each such underwriter and each person who
controls any such underwriter, for any legal and any other expenses reasonably
incurred in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, as incurred, provided that the Company
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by such Holder, controlling person or underwriter and stated to be
specifically for use therein or for any amounts paid in settlement of any such
claim, loss, damage and liability if such settlement is effected without the
consent of the Company, which consent shall not be unreasonably withheld.
<PAGE>
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify and hold harmless the Company, each of its directors and officers,
each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act, and each other such
Holder, each of its officers and directors and each person controlling such
Holder within the meaning of Section 15 of the Securities Act, against all
claims, losses, damages and liabilities (joint or several) (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, preliminary or final prospectus, offering circular or other document,
or any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse the Company, such Holders, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, as incurred, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to the Company by an instrument
duly executed by such Holder and stated to be specifically for use therein;
provided, however, that the liability of a Holder for indemnification under this
Section 1.11 (b) shall not exceed the gross proceeds from the offering received
by such Holder and shall not apply to amounts paid in settlement of any such
claim, loss, damage and liability if such settlement is effected without the
consent of the Holder, which consent shall not be unreasonably withheld.
(c) Each party entitled to indemnification under this
Section 1.11 (the "Indemnified Party") shall give written notice to the party
required to provide indemnification (the "Indemnifying Party") promptly after
such Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and shall permit the Indemnifying Party to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, provided however that an Indemnified Party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the Indemnifying Party, if
representation of such Indemnified Party by the counsel retained by the
Indemnifying Party would be inappropriate due to actual or potential differing
interests between such Indemnified Party and any other party represented by such
counsel in such proceeding, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 1 unless the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action. No Indemnifying Party, in the defense-of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
<PAGE>
(d) If the indemnification provided for in this Section
1.11 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any lass, liability, claim, damage, or expense
referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and the Indemnified Party on the other in connection with
the statements or omissions that resulted in such loss, liability, claim, damage
or expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party or by the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge and access to information.
(e) The obligations of the Company and Holders under this
Section 1.11 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1.
1.12. Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, the Registrable Securities held by
them and the distribution proposed by such Holder or Holders as the Company may
reasonably request in writing and as shall be required in connection with any
registration, qualification or compliance referred to in this Section 1.
1.13. Rule 144 Reporting. With a view to making available the
------------------
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration or pursuant to a registration statement on Form S-3 (or successor
form thereof), after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the reporting
requirements of the Exchange Act;
(b) File with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements);
(c) So long as an Investor owns any Restricted Securities,
to furnish to the Investor forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public) or its eligibility to register securities pursuant to
Form S-3 (at any time after the end of the fiscal year in which the first
registration statement under the Act filed by the Company becomes effective),
and of the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as an Investor may reasonably request in availing itself of
<PAGE>
any rule or regulation of the Commission allowing an Investor to sell any such
securities without registration; and
(d) Beginning after the date on which the Company would
otherwise be a registrant entitled to use Form S-3 to register the Registrable
Securities, take such additional actions as are reasonably necessary to make the
Company eligible under the Securities Act and the Exchange Act to use Form S-3
to register Registrable Securities, including the voluntary registration of its
Common Stock under Section 12 of the Exchange Act.
1.14. Transfer of Registration Rights. The rights to cause the Company
-------------------------------
to register securities granted Investors under Sections 1.5, 1.6 and 1.7 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by an
Investor (together with any affiliate); provided, that such consent shall not be
required if (a) such transfer may otherwise be effected in accordance with
applicable securities laws, (b) notice of such assignment is given to the
Company, and (c) such transferee or assignee (i) is a wholly-owned subsidiary,
or constituent partner (including limited partners) of such Investor, or (ii)
acquires from such Investor the lesser of (A) 100,000 or more shares of
Restricted Securities (as appropriately adjusted for stock splits and the like)
or (B) all of the Restricted Securities then owned by such Investor.
1.15. Standoff Agreement. Each Holder agrees in connection with the
------------------
initial registration of the Company's securities that, upon request of the
Company or the underwriters managing any underwritten initial public offering of
the Company's securities, not, to the extent requested by the Company or the
underwriters, to sell, make any short sale of, loan, grant any option for the
purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company or such underwriters, as the case may be, for such period of time (not
to exceed one hundred eighty (180) days from the effective date of such
registration) as may be requested by the Company or such managing underwriters;
provided, however, that the officers, directors and one percent (1%)
shareholders of the Company who own stock of the Company also agree to such
restrictions.
1.16. Termination Of Rights. No Holder shall be entitled to exercise
---------------------
any right provided for in this Section 1:
(a) after five (5) years following the consummation of the sale
of securities pursuant to a registration statement filed by the Company under
the Act in connection with the initial firm commitment underwritten offering of
its securities to the general public, or
(b) on or after the closing of a public offering of the Common
Stock of the Company, initiated by the Company, when all shares of the Holder's
Registrable Securities may be sold under Rule 144 during any 90-day period.
<PAGE>
SECTION 2.
Right of Participation
----------------------
2.1 Purchasers' Right of Participation.
----------------------------------
(a) Right of Participation. Subject to the terms and
----------------------
conditions contained in this Section 2.1 of even date herewith, the Company
hereby grants to each Purchaser who holds at least 500,000 shares of Registrable
Securities the right of participation to purchase its Pro Rata Portion of any
New Securities (as defined in subsection 2.1(b)) which the Company may, from
time to time, propose to sell and issue. A Purchaser's "Pro Rata Portion" for
purposes of this Section 2.1 is the ratio that (x) the sum of the number of
shares of the Company's Common Stock then held by such Purchaser and the number
of shares of the Company's Common Stock issuable upon conversion of the
Preferred Stock then held by such Purchaser, bears to (y) the sum of the total
number of shares of the Company's Common Stock then outstanding, the number of
shares of the Company's Common Stock issuable upon the exercise of any issued
and outstanding rights, options or warrants, and the number of shares of the
Company's Common Stock issuable upon conversion of any then outstanding
Preferred Stock.
(b) Definition of New Securities. Except as set forth
----------------------------
below, "New Securities" shall mean any shares of capital stock of the Company,
including Common Stock and Preferred Stock, whether authorized or not, and
rights, options or warrants to purchase said shares of Common Stock or Preferred
Stock, and securities of any type whatsoever that are, or may become,
convertible into said shares of Common Stock or Preferred Stock. Notwithstanding
the foregoing, "New Securities" does not include (i) the Preferred Shares or the
Conversion Shares, (ii) securities offered to the public generally pursuant to a
bona fide, firmly committed, underwritten public offering pursuant to an
effective registration statement under the Securities Act, (iii) securities
issued pursuant to the bona fide business acquisition of another corporation by
the Company by merger, purchase of substantially all of the assets or shares or
other reorganization whereby the Company or its shareholders own not less than a
majority of the voting power of the surviving or successor corporation, pursuant
to approval by the Board of Directors of the Company, including at least one
outside member, (iv) shares of the Company's Common Stock or related options or
warrants convertible into or exercisable for such Common Stock issued to
employees, officers and directors of, and consultants to, the Company, pursuant
to any arrangement approved by the Board of Directors of the Company, including
at least one outside member, (v) shares of the Company's Common Stock or related
options or warrants convertible into or exercisable for such Common Stock issued
to customers and vendors of the Company pursuant to any arrangement approved by
the Board of Directors of the Company, including at least one outside member;
(vi)'Shares of the Company's Common Stock or related options or warrants
convertible into or exercisable for such Common Stock issued to banks,
commercial lenders, lessors and other financial institutions in connection with
the borrowing of money or the leasing of equipment by the Company, (vii) stock
issued pursuant to any rights or agreements, including, without limitation,
convertible securities, options and warrants, provided that the Company shall
have complied with the rights of participation established by this Section 2.1
with respect to the initial sale or grant by the Company of such rights or
agreements, or (viii) stock issued in connection with any stock split, stock
dividend or recapitalization by the Company.
<PAGE>
(c) Notice of Right. In the event the Company proposes to
---------------
undertake an issuance of New Securities, it shall give each Purchaser written
notice of its intention, describing the type of New Securities, the proposed
number of New Securities to be issued and the price and terms upon which the
Company proposes to issue the same. Each Purchaser shall have twenty (20) days
from the date of receipt of any such notice to agree to purchase shares of such
New Securities (up to the amount referred to in subsection 2.1 (a)), for the
price and upon the terms specified in the notice, by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
(d) Exercise of Right. If any Purchaser exercises its right of
------------------
participation under this Agreement, the closing of the purchase of the New
Securities with respect to which such right has been exercised shall take place
ninety (90) calendar days after the Purchaser gives notice of such exercise,
which period of time may be extended in order to comply with applicable laws and
regulations. Upon exercise of such right of participation, the Company and the
Purchaser shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
(e) Regrant, Lapse and Reinstatement of Right. In the event a
-----------------------------------------
Purchaser fails to exercise the right of participation provided in this Section
2.1 within said twenty (20) day period, then in such event, the Company shall
give written notice of such event to each Purchaser exercising its rights under
Section 2.1 (a) (the "Exercising Purchasers"), and each such Exercising
Purchaser shall have the right to purchase, within five (5) days of receipt of
such notice, its Pro Rata Portion of any New Securities offered for purchase to
Purchasers other than Exercising Purchasers but not elected to be purchased
pursuant to Section 2.1 (a). The Company shall have sixty (60) days thereafter
to sell or enter into an agreement (pursuant to which the sale of New Securities
covered thereby shall be closed, if at all, within thirty (30) days from the
date of said agreement) to sell the New Securities not elected to be purchased
by such Purchaser at the price not less than and upon the terms no more
favorable to the purchasers of such securities than specified in the Company's
notice. In the event the Company has not sold the New Securities or entered into
an agreement to sell the New Securities within said sixty (60) day period (or
sold and issued New Securities in accordance with the foregoing within thirty
(30) days from the date of said agreement), the Company shall not thereafter
issue or sell any New Securities without first offering such securities to the
Purchasers in the manner provided above.
(f) Assignment. The right of the Purchasers to purchase any
----------
part of the New Securities may be assigned in whole or in part (i) to any
partner, subsidiary, affiliate, or shareholder of a Purchaser, or other persons
or organizations who acquire 100,000 or more shares of Restricted Securities (as
adjusted for stock splits and the like) and (ii) between and among any of the
Holders.
2.2. Termination of Participation Right. The rights of participation
----------------------------------
granted under Section 2.1 of this Agreement shall terminate on and be of no
further force or effect upon the earlier of (i) the consummation of the sale of
the Company's Common Stock in a firm commitment underwritten public offering
pursuant to a registration statement under the Securities Act of 1933, as
amended, at a public offering price per share not less than $14.94 and an
aggregate offering price of $20,000,000 subsequent to which the Company shall be
obligated to file annual and quarterly reports
<PAGE>
with the Commission pursuant to Section 13 or 15(d) of the Exchange Act or (ii)
upon (a) the acquisition of all or substantially all the assets of the Company,
or (b) an acquisition of the Company by another corporation or entity by
consolidation or merger in which the holders of the Company's outstanding voting
stock immediately prior to such transaction own, immediately after such
transaction, securities representing less than 50% or more of the voting power
of the corporation or other entity surviving such transaction.
SECTION 3.
MISCELLANEOUS
3.1. Successors and Assigns. Except as otherwise provided in this
----------------------
Agreement, the provisions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties to this
Agreement.
3.2. Third Parties. Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties to this Agreement, and
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
3.3. Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California in the United States of America without
giving effect to the conflicts of laws principles thereof.
3.4. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
3.5. Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be personally delivered or sent by international express
courier (e.g. DHL or Federal Express) addressed to the other party at the
address shown below or at such other address for which such party gives notice
hereunder. Notices sent by courier shall be deemed to have been given three (3)
days after deposit with any such courier.
3.6. Severabilily. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, portions of such provisions, or
such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
3.7. Amendment and Waiver. Any provision of this Agreement may
--------------------
be amended or waived with the written consent of the Company and the Holders of
at least a majority of the outstanding shares of the Registrable Securities. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each Holder of Registrable Securities and the Company. In addition, the
Company may waive performance of any obligation owing to it, as to some or all
of the Holders of Registrable Securities, or agree to accept alternatives to
such performance, without obtaining the consent of any Holder of Registrable
Securities. In the event that an underwriting
<PAGE>
agreement is entered into between the Company and any Holder, and such
underwriting agreement contains terms differing from this Agreement, as to any
such Holder the terms of such underwriting agreement shall govern.
3.8. Effect of Amendment or Waiver. The Investors and their
-----------------------------
successors and assigns acknowledge that by the operation of Section 3.7 of this
Agreement the holders of a majority of the outstanding Registrable Securities,
acting in conjunction with the Company, will have the right and power to
diminish or eliminate any or all fights or increase any or all obligations
pursuant to this Agreement.
3.9. Rights of Holders. Each holder of Registrable Securities shall
-----------------
have the absolute right to exercise or refrain from exercising any fight or
rights that such holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such fight or rights.
3.10. Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such fight, power or remedy of
such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent .specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
3.11. Prior Agreement. Effective upon the execution and delivery of
---------------
this Agreement by all parties hereto, the 1997 Rights Agreement and the 1998
Rights Agreement are hereby terminated and shall be of no further force and
effect and are hereby superseded and replaced in their entirety by this
Agreement.
3.12. Entire Agreement. This Agreement constitutes the full and
----------------
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof.
[Remainder of Page Intentionally Left Blank]
<PAGE>
The foregoing agreement is hereby executed as of the date first above written.
"COMPANY"
TOPTIER SOFTWARE, INC.
a Delaware Corporation
By: /s/ Shai Agassi
-------------------------------
Shai Agassi
Chief Executive Officer
[Signature Page to Rights Agreement]
<PAGE>
"PURCHASERS"
PRIME ASSET MANAGEMENT A.G.
By: /s/ Stephan Rind
-------------------------------------
Stephan Rind
Chief Executive Officer
By: /s/ Guido Krass
-------------------------------------
Guido Krass
By: /s/ Robert Osterrieth
-------------------------------------
Robert Osterrieth
By: /s/ Shai Agassi
-------------------------------------
Shai Agassi
By: /s/ David Blumstein
-------------------------------------
David Blumstein
SPARTA BETEILIGUNGEN AG
By: /s/ Sparta Beteil
-------------------------------------
Sparta Beteil
PRE IPO AG
By: /s/ Felix Goedhart
-------------------------------------
FERMAN AG
By: /s/ Martin Lechner
-------------------------------------
<PAGE>
[Signature Page to Rights Agreement]
QUICKSOFT, LTD.
By: /s/ Shai Agassi
-------------------------------
VANENBURG GROUP
By: /s/ Jan Baan
-------------------------------
<PAGE>
EXHIBIT 10.11
TOPTIER SOFTWARE, INC.
- --------------------------------------------------------------------------------
VOTING AGREEMENT
October 27, 1999
- --------------------------------------------------------------------------------
<PAGE>
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement"), by and among TopTier
Software, Inc. (the "Company"), and the investors listed on SCHEDULE A hereto
----------
(collectively, the "Investors") is entered into on this 27th day of October,
1999.
WHEREAS, the parties have agreed that, in connection with the purchase
by certain of the Investors of shares of the Company's Series D Preferred Stock
the parties hereto agree that the Board of Directors of the Company shall be
constituted as follows: (i) the holders of a majority of the shares of Series A
Preferred Stock, voting separately as a single class, shall be entitled to elect
two (2) directors (the "Series A Directors"), (ii) the holders of a majority of
the shares of Series B Preferred Stock and Series C Preferred Stock, voting
together as a single class, shall be entitled to elect two (2) directors (the
"Series B and C Directors"), (iii) the holders of a majority of the Shares of
Series D Preferred Stock, voting separately as a single class, shall be entitled
to elect one (1) director (the "Series D Director") and (iv) the remaining
director shall be elected by the holders of a majority of the outstanding shares
of Common Stock of the Company (the "Common Stock"), Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock,
voting together as a single class.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. AGREEMENT TO VOTE.
-----------------
(a) Each of the Investors agree to vote all of the shares of
capital stock of the Company at a regular or special meeting of shareholders (or
by written consent) now or hereafter acquired by it in accordance with the
provisions of this Agreement.
(b) Each of the holders of Common Stock, if any, agree to vote
all of the shares of capital stock of the Company at a regular or special
meeting of shareholders (or by written consent) now or hereafter acquired by him
or her in accordance with the provisions of this Agreement.
2. BOARD SIZE. Each of the holders of Common Stock and the Investors
----------
shall vote at each regular or special meeting of shareholders (and each written
consent in lieu thereof) all of its, his or her shares of Company capital stock
to ensure that the size of the Company's Board of Directors shall be set and
remain at six (6) directors.
3. ELECTION OF THE SERIES A DIRECTORS. On all matters relating to
----------------------------------
the election of the Series A Directors, each of the holders of Series A
Preferred Stock shall vote at a regular or special meeting of shareholders (or
by written consent) all of their shares of capital stock to ensure that the
Series A Directors shall be elected to the Board of Directors and the Series A
Directors shall be the persons designated by the holders of a majority in
interest of all of the shares of Series A Preferred Stock held by the Investors,
and who initially shall be Shai Agassi and David Blumstein.
<PAGE>
4. ELECTION OF SERIES B AND C DIRECTORS. On all matters relating to
------------------------------------
the election of the Series B and C Directors, each of the holders of Series B
Preferred Stock and Series C Preferred Stock shall vote at a regular or special
meeting of shareholders (or by written consent) all of their shares of capital
stock to ensure that the Series B and C Directors shall be elected to the Board
of Directors and the Series B and C Directors shall be the person designated by
the holders of a majority in interest of all of the shares of Series B Preferred
Stock and Series C Preferred Stock held by the Investors, who initially shall be
Jan Baan and Paul Baan.
5. ELECTION OF SERIES D DIRECTOR. On all matters relating to the
-----------------------------
election of the Series D Director, each of the holders of Series D Preferred
Stock shall vote at a regular or special meeting of shareholders (or by written
consent) all of their shares of Company capital stock to ensure that the Series
D Director shall be elected to the Board of Directors. The Series D Director
shall be a person designated by the holders of a majority in interest of all the
shares of Series D Preferred Stock held by the Investors, and who initially
shall be
6. REMOVAL OF THE SERIES A DIRECTOR. On all matters relating to the
--------------------------------
removal of the Series A Directors, each of the holders of Series A Preferred
Stock shall vote at a regular or special meeting of shareholders (or by written
consent) all of their shares of capital stock to ensure that any Series A
Directors selected by holders of a majority in interest of all of the shares of
Series A Preferred Stock held by the Investors for removal as the Series A
Directors shall be so removed. Any such vacancy created by such removal shall be
filled pursuant to paragraph 3 herein.
7. REMOVAL OF SERIES B AND C DIRECTORS. On all matters relating to
-----------------------------------
the removal of the Series B and C Directors, each of the holders of Series B
Preferred Stock and Series C Preferred Stock shall vote at a regular or special
meeting of shareholders (or by written consent) all of their shares of capital
stock to ensure that the Series B and C Directors selected by the holders of a
majority in interest of all of the shares of Series B Preferred Stock and Series
C Preferred Stock held by the Investor in the aggregate for removal as the
Series B and C Directors shall be so removed. Any such vacancy created by such
removal shall be filled pursuant to paragraph 4 herein.
8. REMOVAL OF SERIES D DIRECTOR. On all matters relating to the
----------------------------
removal of the Series D Director, each of the holders of Series D Preferred
Stock shall vote at a regular or special meeting of shareholders (or by written
consent) all of their shares of capital stock to ensure that the Series D
Director selected by the holders of a majority in interest of all the shares of
Series D Preferred Stock for removal as the Series D Director shall be so
removed. Any such vacancy created by such removal shall be filled pursuant to
paragraph 5 herein.
9. ELECTION AND REMOVAL OF THE REMAINING DIRECTOR. On all matters
----------------------------------------------
relating to the election of the remaining director, such remaining director
shall be elected only by the vote of holders of a majority of the outstanding
shares of Common Stock, Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock (voting together as a
single class), such remaining director shall initially be _______ . On all
matters relating to the removal of the remaining director, the remaining
director shall be removed if the Series A Directors, the Series B and C Director
and the Series D Directors
<PAGE>
unanimously approve the removal of the remaining director. Any vacancy created
by such removal shall be filled pursuant to the first sentence of this paragraph
9.
10. COVENANTS OF THE COMPANY. The Company agrees to use its best
------------------------
efforts to ensure that the rights granted hereunder are effective and that the
parties hereto enjoy the benefits thereof. Such actions include, without
limitation, the use of the Company's best efforts to cause the nomination and
election of the directors as provided above. The Company will not, by any
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all of the provisions of this Agreement
and in the taking of all such actions as may be necessary, appropriate or
reasonably requested by the holders of a majority of the outstanding voting
securities held by the parties hereto assuming conversion of all outstanding
securities, in order to protect the rights of the parties hereunder against
impairment.
11. NO LIABILITY FOR ELECTION OF RECOMMENDED DIRECTORS. Neither the
--------------------------------------------------
Company nor the Investors, nor any officer, director, shareholder, partner,
employee or agent of such party, if any, makes any representation or warranty as
to the fitness or competence of the nominee of any party hereunder to serve on
the Company's Board by virtue of such party's execution of this Agreement or by
the act of such party in voting for such nominee pursuant to this Agreement.
12. GRANT OF PROXY. Should the provisions of this Agreement be
--------------
construed to constitute the granting of proxies, such proxies shall be deemed
coupled with an interest and are irrevocable for the term of this Agreement.
13. SPECIFIC ENFORCEMENT. It is agreed and understood that monetary
--------------------
damages would not adequately compensate an injured party for the breach of this
Agreement by any party, that this Agreement shall be specifically enforceable,
and that any breach or threatened breach of this Agreement shall be the proper
subject of a temporary or permanent injunction or restraining order. Further,
each party hereto waives any claim or defense that there is an adequate remedy
at law for such breach or threatened breach.
14. SUCCESSORS IN INTEREST.
----------------------
(a) The provisions of this Agreement shall be binding upon the
successors in interest to any of securities of the Company held by any party to
this Agreement and their successors and assigns. The Company shall not permit
the transfer of any of the securities on its books or issue new certificates
representing any such securities unless and until the person(s) to whom such
shares are to be transferred shall have executed a written agreement,
substantially in the form of this Agreement, pursuant to which such person
becomes a party to this Agreement and agrees to be bound by all the provisions
hereof as if such person was a party hereunder.
(b) Each certificate representing each of the securities shall
bear a legend reading as follows:
"THE SHARES EVIDENCED HEREBY ARE SUBJECT TO
<PAGE>
THE TERMS OF A VOTING AGREEMENT (A COPY OF WHICH MAY BE OBTAINED
WITHOUT CHARGE FROM THE COMPANY), AND BY ACCEPTING ANY INTEREST IN
SUCH SHARES THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO
AGREE TO AND SHALL BECOME BOUND BY ALL THE PROVISIONS OF THE VOTING
AGREEMENT."
15. EXECUTION BY THE COMPANY. The Company, by its execution in the
------------------------
space provided below, agrees that it will cause the certificates evidencing the
shares of capital stock subject to this Agreement to bear the legend required by
Section 14 herein, and it shall supply, free of charge, a copy of this Agreement
to any holder of a certificate evidencing shares of capital stock of the Company
upon written request from such holder to the Company at its principal office.
The parties hereto do hereby agree that the failure to cause the certificates
evidencing the shares of capital stock subject to this Agreement to bear the
legend required by Section 14 herein and/or failure of the Company to supply,
free of charge, a copy of this Agreement as provided under Section 14 shall not
effect the validity or enforcement of this Agreement.
16. TERMINATION. This Agreement shall terminate upon the earlier of
-----------
(a) the date the Company consummates a sale of its Common Stock
in a firm commitment underwritten public offering pursuant to a registration
statement under the Securities Act of 1933, as amended, at a public offering
price per share not less than $14.94 and an aggregate offering price of
$20,000,000;
(b) the acquisition of the Company by another entity by means of
any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) that results in the
transfer of fifty percent (50%) or more of the outstanding voting power of the
Company or a sale of all or substantially all of the assets of the Company.
17. CAPTIONS. The captions, headings and arrangements used in this
--------
Agreement are for convenience only and do not in any way limit or amplify the
terms and provisions hereof.
18. MANNER OF VOTING. The voting of shares pursuant to this Agreement
----------------
may be effected in person, by proxy, by written consent, or in any other manner
permitted by applicable law.
19. STOCK SPLITS, STOCK DIVIDENDS, ETC. In the event of any issuance
----------------------------------
of shares of the Company's voting securities hereafter to any of the parties
hereto (including, without limitation, in connection with any stock split, stock
dividend, recapitalization, reorganization, or the like), such shares shall
become subject to this Agreement and shall be endorsed with the legend set forth
in Section 14.
20. AMENDMENTS AND WAIVERS. Any term hereof may be amended and the
----------------------
observance of any term hereof may be waived (either generally or in a particular
instance and
<PAGE>
either retroactively or prospectively) only with the written consent of (a) the
Company; (b) the Investors and their respective successors and assigns, holding
at least a majority of the shares of Series A Preferred Stock, (b) the Investors
and their respective successors and assigns, holding at least a majority of the
shares of Series B Preferred Stock, (c) the Investors and their respective
successors and assigns, holding at least a majority of the shares of Series C
Preferred Stock and (d) the Investors and their respective successors and
assigns, holding at least a majority of the shares of Series D Preferred Stock.
Any amendment or waiver so effected shall be binding upon the Company, each such
class of Investors, and all of their respective successors and assigns whether
or not such party, assignee or other shareholder entered into or approved such
amendment or waiver.
21. ENTIRE AGREEMENT. This Agreement is intended to be the sole
----------------
agreement of the parties as it relates to this subject matter.
22. ENFORCEABILITY/SEVERABILITY. The parties hereto agree that each
---------------------------
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law. If any provision of this Agreement
shall nevertheless be held to be prohibited by or invalid under applicable law,
(a) such provision shall be invalid only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement, and (b) the parties shall, to the extent
permissible by applicable law, amend this Agreement, so as to make effective and
enforceable the intent of this Agreement.
23. GOVERNING LAW. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to contracts among
California residents entered into and to be performed entirely within
California.
24. COUNTERPARTS. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
25. SUCCESSORS AND ASSIGNS. The provisions hereof shall inure to the
----------------------
benefit of, and be binding upon, the successors and assigns of the parties
hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
COMPANY:
TOPTIER SOFTWARE, INC.
By: /s/ Shai Agassi
---------------------------
Name: Shai Agassi
Its: President
[SIGNATURE PAGE TO VOTING AGREEMENT]
<PAGE>
FERMAN AG
By: /s/ Martin Lechner
---------------------------
QUICKSOFT, LTD.
By: /s/ Shai Agassi
--------------------------
VANENBURG GROUP
By: /s/ Paul Baan
---------------------------
<PAGE>
INVESTORS:
PRIME ASSET MANAGEMENT A.G.
By: /s/ Stephan Rind
--------------------------------------
Stephan Rind
Chief Executive Officer
By: /s/ Guido Krass
--------------------------------------
Guido Krass
By: /s/ Shai Agassi
--------------------------------------
Shai Agassi
By: /s/ Robert Osterrieth
--------------------------------------
Robert Osterrieth
By: /s/ David Blumstein
--------------------------------------
David Blumstein
SPARTA BETEILIGUNGEN AG
By: /s/ Sparta Beteil
--------------------------------------
Sparta Beteil
PRE IPO AG
By: /s/ Felix Goedhart (CEO)
--------------------------------------
[SIGNATURE PAGE TO VOTING AGREEMENT]
<PAGE>
EXHIBIT 10.12
TOP TIER SOFTWARE, INC.
-----------------------
1996 STOCK OPTION PLAN
----------------------
EARLY EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------------
This Agreement ("AGREEMENT") is made as of ________________ by and between
---------
Top Tier Software, Inc. a Delaware corporation (the "COMPANY"), and
-------
______________________________ ("PURCHASER"). To the extent any capitalized
---------
terms used in this Agreement are not defined, they shall have the meaning
ascribed to them in the 1996 Stock Option Plan.
1. EXERCISE OF OPTION. Subject to the terms and conditions hereof,
------------------
Purchaser hereby elects to exercise his or her option to purchase ___________
shares of the Common Stock (the "SHARES") of the Company under and pursuant to
------
the Company's 1996 Stock Option Plan (the "OPTION AGREEMENT") of those Shares
----------------
which have become vested as of the date hereof under the Vesting Schedule set
forth in the Notice of Stock Option Grant (the "VESTED SHARES") and ___________
-------------
Shares which have not yet vested under such Vesting Schedule (the "UNVESTED
--------
SHARES"). The purchase price for the Shares shall be ___ per Share for a total
- ------
purchase price of $______________. The term "SHARES" refers to the purchased
------
Shares and all securities received in replacement of the Shares or as stock
dividends or splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares under
--------------------------
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
purchase price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, (d) subject to Section 153 of the Delaware General Corporation
Law, delivery of a promissory note in the form attached as EXHIBIT C to the
---------
Option Agreement (or in any form acceptable to the Company), or (e) a
combination of the foregoing. If Purchaser delivers a promissory note as partial
or full payment of the purchase price, Purchaser will also deliver a Pledge and
Security Agreement in the form attached to EXHIBIT D to the Option Agreement (or
---------
in any form acceptable to the Company).
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below). After any Shares have
been released from such Repurchase Option, Purchaser shall not assign, encumber
or dispose of any interest in such Shares except in compliance with the
provisions below and applicable securities laws.
(a) REPURCHASE OPTION.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser's employment or consulting relationship with the Company for any
reason (including death or disability), with or without cause, the Company shall
upon the date of such termination (the "TERMINATION DATE") have an irrevocable,
----------------
exclusive option (the "REPURCHASE OPTION") for a period of 60 days from such
-----------------
date to repurchase all or any portion of the Unvested Shares held by Purchaser
as of the Termination Date which have not yet been released from the Company's
Repurchase Option at the original purchase price per Share specified in Section
I (adjusted for any stock splits, stock dividends and the like).
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser's executor and, at the Company's
option, (A) by delivery to Purchaser or Purchaser's executor with such notice of
a check in the amount of the purchase price for the Shares being purchased, or
(B) in
1
<PAGE>
the event Purchaser is indebted to the Company, by cancellation by the Company
of an amount of such indebtedness equal to the purchase price for the Shares
being repurchased, or (C) by a combination of (A) and (B) so that the combined
payment and cancellation of indebtedness equals such purchase price. Upon
delivery of such notice and payment of the purchase price in any of the ways
described above, the Company shall become the legal and beneficial owner of the
Shares being repurchased and all rights and interest therein or related thereto,
and the Company shall have the right to transfer to its own name the number of
Shares being repurchased by the Company, without further action by Purchaser.
(iii) One hundred percent (100%) of the Unvested Shares shall
initially be subject to the Repurchase Option. The Unvested Shares shall be
released from the Repurchase Option in accordance with the Vesting Schedule set
forth in the Notice of Stock Option Grant until all Shares are released from the
Repurchase Option. Fractional shares shall be rounded to the nearest whole
share.
(b) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser or
----------------------
any transferee of Purchaser (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by gift or
------
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(b) (the "RIGHT OF FIRST REFUSAL").
----------------------
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
---------------------------
deliver to the Company a written notice (the "NOTICE") stating: (i) the Holder's
------
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("PROPOSED TRANSFEREE"); (iii) the
-------------------
number of Shares to be transferred to each Proposed Transferee; and (iv) the
terms and conditions of each proposed sale or transfer. The Holder shall offer
the Shares at the same price (the "OFFERED PRICE") and upon the same terms (or
-------------
terms as similar as reasonably possible) to the Company or its assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within 30
----------------------------------
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection
(iii) below.
(iii) PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for
-------------- --------------
the Shares purchased by the Company or its assignee(s) under this Section 3(b)
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made, at
-------
the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed
--------------------------
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section 3(b), then the
Holder may sell or otherwise transfer such Shares to that Proposed Transferee at
the Offered Price or at a higher price, provided that such sale or other
transfer is consummated within 60 days after the date of the Notice and provided
further that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
--------------------------------------
contrary contained in this Section 3(b) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or
<PAGE>
on Purchaser's death by will or intestacy to Purchaser's Immediate Family (as
defined below) or a trust for the benefit of Purchaser's Immediate Family shall
be exempt from the provisions of this Section 3(b). "Immediate Family" as used
----------------
herein shall mean spouse, lineal descendant or antecedent, father, mother,
brother or sister. In such case, the transferee or other recipient shall receive
and hold the Shares so transferred subject to the provisions of this Section,
and there shall be no further transfer of such Shares except in accordance with
the terms of this Section 3.
(c) INVOLUNTARY TRANSFER.
--------------------
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER. In
-----------------------------------------------------
the event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding, in the event of death, a transfer to Immediate Family as set forth in
Section 3(b)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the Fair Market Value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any stock to
------------------------------
be transferred pursuant to Section 3(c)(i), the price per Share shall be a price
set by the Board of Directors of the Company that will reflect the current value
of the stock in terms of present earnings and future prospects of the Company.
The Company shall notify Purchaser or his or her executor of the price so
determined within 30 days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with
the valuation as determined by the Board of Directors of the Company, the
Purchaser shall be entitled to have the valuation determined by an independent
appraiser to be mutually agreed upon by the Company and the Purchaser and whose
fees shall be borne equally by the Company and the Purchaser.
(d) ASSIGNMENT. The right of the Company to purchase any part of the
----------
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations; provided, however, that an
assignee, other than a corporation that is the Parent or a 100% owned Subsidiary
of the Company, must pay the Company, upon assignment of such right, cash equal
to the difference between the original purchase price and Fair Market Value, if
the original purchase price is less than the Fair Market Value of the Shares
subject to the assignment.
(e) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including, insofar as applicable, the
Repurchase Option. Any sale or transfer of the Shares shall be void unless the
provisions of this Agreement are satisfied.
(f) TERMINATION OF RIGHTS. The Right of First Refusal and the
---------------------
Company's right to repurchase the Shares in the event of an involuntary transfer
pursuant to Section 3(c) above shall terminate upon the first sale of Common
Stock of the Company to the general public pursuant to a registration statement
filed with and declared effective by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "SECURITIES ACT").
--------------
(g) MARKET STANDOFF AGREEMENT. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of'
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the Company's initial public offering.
<PAGE>
4. ESCROW OF UNVESTED SHARES. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as ATTACHMENT A executed
------------
by Purchaser and by Purchaser's spouse (if required for transfer), in blank, to
the Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary's designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly irrevocable. Purchaser agrees that said escrow holder shall not be
liable to any party hereof (or to any other party). The escrow holder may rely
upon any letter, notice or other document executed by any signature purported to
be genuine and may resign at any time. Purchaser agrees that if the Secretary of
the Company, or the Secretary's designee, resigns as escrow holder for any or no
reason, the Board of Directors of the Company shall have the power to appoint a
successor to serve as escrow holder pursuant to the terms of this Agreement
5. Investment and Taxation Representations. In connection with the
---------------------------------------
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered
under the Securities Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted securities"
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, Purchaser must hold the Shares indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
6. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
--------------------------------------------
(a) LEGENDS. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH
SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF
COUNSEL IN A FORM SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF
1933.
<PAGE>
(ii) THE SHARES REPRESENTED-ID BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE STOCKHOLDER, A COPY OF
WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
(d) REMOVAL OF LEGEND. When all of the following events have
-----------------
occurred, the Shares then held by Purchaser will no longer be subject to the
legend referred to in Section 6(a)(ii): (i) the termination of the Right of
First Refusal; (ii) the expiration or termination of the market standoff
provisions of Section 3(g) (and of any agreement entered pursuant to Section
3(g)); and (iii) the expiration or exercise in full of the Repurchase Option.
After such time, and upon Purchaser's request, a new certificate or certificates
representing the Shares not repurchased shall be issued without the legend
referred to in Section 6(a)(ii), and delivered to Purchaser.
7. NO EMPLOYMENT. Rights Nothing in this Agreement shall affect in any
-------------
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
8. SECTION 83(B) ELECTION. Purchaser understands that Section 83(a) of
----------------------
the Internal Revenue Code of 1986, as amended (the "CODE"), taxes as ordinary
----
income for a Nonstatutory Stock Option and as alternative minimum taxable income
for an Incentive Stock Option the difference between the amount paid for the
Shares and the Fair Market Value of the Shares as of the date any restrictions
on the Shares lapse. In this context, "RESTRICTION" means the right of the
-----------
Company to buy back the Shares pursuant to the Repurchase Option set forth in
Section 3(a) of this Agreement. Purchaser understands that Purchaser may elect
to be taxed at the time the Shares are purchased, rather than when and as the
Repurchase Option expires, by filing an election under Section 83(b) (an "83(B)
-----
ELECTION") of the Code with the Internal Revenue Service within 30 days from the
- --------
date of purchase. Even if the Fair Market Value of the Shares at the time of the
execution of this Agreement equals the amount paid for the Shares, the election
must be made to avoid income and alternative minimum tax treatment under Section
83(a) in the future. Purchaser understands that failure to file such an election
in a timely manner may result in adverse tax consequences for Purchaser.
Purchaser further understands that an additional copy of such election form
should be filed with his or her federal income tax return for the calendar year
in which the date of this Agreement falls. Purchaser acknowledges that the
foregoing is only a summary of the effect of United States federal income
taxation with respect to purchase of the Shares hereunder, and does not purport
to be complete. Purchaser further acknowledges that the Company has directed
Purchaser to seek independent advice regarding the applicable provisions of the
Code, the income tax laws of any municipality, state or foreign country in which
Purchaser may reside, and the tax consequences of Purchaser's death.
Purchaser agrees that he or she will execute and deliver to the Company
with this executed Agreement a copy of the Acknowledgment and Statement of
Decision Regarding Section 83(b) Election (the "Acknowledgement") attached
---------------
hereto as Attachment B. Purchaser further agrees that he or she will execute and
------------
submit with the Acknowledgment a copy of the 83(b) Election attached hereto as
Attachment C if Purchaser has indicated in the Acknowledgment his or her
- ------------
decision to make such an election.
<PAGE>
9. MISCELLANEOUS.
-------------
(a) GOVERNING LAW. This Agreement and all acts and transactions
-------------
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid, and addressed to the party
to be notified at such party's address as set forth below or as subsequently
modified by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
COMPANY:
TOP TIER SOFTWARE, INC.
By:____________________________________
Name:__________________________________
(print)
Title:_________________________________
6203 San Ignacio Ave.
San Jose, CA 95119
PURCHASER:
EMPLOYEE
_______________________________________
(Signature)
_______________________________________
(Print Name)
Address:
I,______________________ spouse of___________________ have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting
my spouse the right to purchase the Shares as set forth in the Agreement, I
hereby agree to be bound irrevocably by the Agreement and further agree
that any community property or similar interest that I may have in the
Shares shall hereby be similarly bound by the Agreement. I hereby appoint
my spouse as my attorney in-fact with respect to any amendment or exercise
of any rights under the Agreement.
_______________________________________
Spouse of EMPLOYEE
1
<PAGE>
EXHIBIT 10.13
WORLDWIDE INTERCOMPANY MANAGEMENT SERVICES
AND TECHNICAL SUPPORT AGREEMENT
THIS WORLDWIDE INTERCOMPANY MANAGEMENT SERVICES AGREEMENT (the "Agreement") is
entered into as of the first day of August 22, 1996, by and between Top Tier
Israel (1992) Ltd., a corporation duly organized and existing under the laws of
Israel, with its principal office located at 4 Hacharashet Street, P.O. Box
2658, 3rd Floor, Ra'anana, Israel 43657 (hereinafter called "TTI"), and TopTier
Software, Inc., a corporation duly organized and existing under the laws of
Delaware, with its principal office located at 6203 San Ignatio Avenue, Suite
101 San Jose, California (hereinafter called "TopTier").
WHEREAS TTI is a software engineering company with expertise in developing
complex data navigation and acquisition software; and
WHEREAS TopTier is a distribution company with expertise in marketing,
sales, strategic planning and management, both within and without the United
States; and
WHEREAS TTI desires to focus on its core engineering competencies; and
WHEREAS TopTier desires to provide management services to TTI in
connection with TopTier's activities as a distributor of TTI software;
NOW THEREFORE, IN CONSIDERATION of the mutual covenants and agreements herein
contained, the parties hereto hereby agree as follows:
(1) TopTier shall establish and maintain throughout the period this Agreement
is effective, an office in California, which office shall be registered
and operated in accordance with the laws and administrative regulations of
California and of the U.S., and shall be comprised of such facilities and
personnel as TTI from time to time may reasonably request (hereinafter
called the "U.S. Office").
(2) Throughout the period this Agreement is effective, TopTier shall cause the
U.S. office to, and the U.S. office shall:
(a) Keep TTI advised and informed regarding all matters worldwide which
may be of reasonable interest or concern to TTI in connection with the
carrying on of its business;
(b) Perform such services as may reasonably be necessary, in the opinion
of TTI, to maintain and promote the goodwill of TTI worldwide;
(c) Investigate any new developments regarding the use worldwide of
products which from time to time are manufactured or sold or are
susceptible of being manufactured or sold by TTI;
<PAGE>
(d) Gather and provide to TTI information, including financial
information, concerning prospective customers of TTI worldwide, and
market conditions generally;
(e) Assist TTI in managing and developing the marketing and distribution
of TTI products, including but not limited to: product marketing
research and planning, marketing campaign planning and execution,
planning and execution of advertising, informational and promotional
activities, recruitment and management of marketing partners;
(f) Assist TTI in developing and implementing the strategic plan of TTI;
(g) Provide TTI with such legal, accounting, financial, human resources
and other managerial services as TTI may from time to time reasonably
request;
(h) Provide TTI with such reports concerning the above matters as may from
time to time be reasonably required by TTI;
(i) Assist TTI with technical support and maintenance services related to
maintenance services provided by TopTier. "Services" shall mean and
include: (a) providing comprehensive advice, information and other
technical support regarding the specifications, capabilities,
performance, operations, application, installation and maintenance of
the Products ("Technical Assistance"); (b) engaging in customer
liaison and marketing support activities with respect to the Products;
and (c) providing other support services reasonably requested by TTI.
"Service/Maintenance Contract/Agreement" shall mean the written
contract, purchase order or agreement pursuant to which a Customer
contracts for the service and/or maintenance of the Products over a
specified period of time.
(j) Without limiting the generality of the foregoing, act on behalf of TTI
in a liaison capacity and perform administrative and technical support
and such other reasonable services worldwide as requested by TTI from
time to time in connections with such projects, investigations and
other business matters as may be designated by TTI from time to time;
(3) TopTier shall not have any power or authority whatsoever to negotiate or
conclude sales agreements or to sell products or services on behalf of
TTI, but shall forthwith refer to TTI all inquires which TopTier may from
time to time receive regarding the purchase of any services of TTI; and
TopTier shall not have any power or authority whatsoever to negotiate,
conclude or accept any contracts or agreements of any kind whatsoever on
behalf of TTI, or in any other way legally bind or obligate TTI in any way
whatsoever. Accordingly, in the performance of the services to be
rendered hereunder, TopTier at all times shall act as a principal and an
independent contractor and not in any respect as an agent, attorney,
employee or representative of TTI; and TopTier at all times shall refrain
from declaring or representing to any third party that TopTier is in any
respect an agent, attorney, employee or representative of TTI. TopTier and
TTI also acknowledge and agree that nothing in this Agreement shall be
2
<PAGE>
construed to create a partnership, joint venture, or any other
relationship between the parties which would entitle either party to
receive a share of the other party's earnings or profits.
(4) Unless otherwise agreed to by TopTier, throughout the period this
Agreement is effective, TTI shall, and TTI shall cause the U.S. Office to,
and the U.S. Office shall, refrain from performing any services of the
kind described in Paragraph (2) hereof for any other supplier of products
or services which may from time to time be competitive with the products
or services of TopTier.
(5) In consideration for the services to be performed by TopTier pursuant to
this Agreement, TTI shall pay to TopTier, throughout the period this
Agreement is effective, in the manner provided for in Paragraph (6)
hereof, a monthly service fee calculated on the following basis:
(a) An amount equal to all costs and expenses of TopTier, including,
without limitation, overhead costs and expenses and the salaries,
wages and employee benefit payments paid in respect of the manager and
other employees of TopTier, reasonably and properly incurred by
TopTier in the performance of the services to be provided by it
hereunder (and TopTier will convert all costs and expenses incurred
and paid in local currency into U.S. dollars by using the exchange
rate prevailing at the end of each calendar month and as reported as
the New York trading rates in the Wall Street Journal); plus
(b) An amount by way of profit which shall be such amount as may from time
to time be mutually agreed upon by TopTier and TTI and which, until
otherwise so agreed upon, shall be an amount equal to five percent of
the amounts to be paid to TopTier by TopTier pursuant to Paragraph
(5)(a) hereof.
(6) (a) At the end of each calendar month throughout the period this Agreement
is effective, TopTier shall cause to be prepared, in form reasonably
satisfactory to TTI, and send to TTI a statement setting forth (i) an
itemization of the costs and expenses referred to in Paragraph (5)(a)
hereof which were actually incurred by TopTier during the calendar
month so ending, and (ii) the amount of the monthly service fee due
TopTier, calculated with respect to such calendar month as provided in
Paragraph (5) hereof.
(b) TTI shall pay to TopTier, within thirty days after receipt by TTI of
such statement, the amount of the monthly service fee payable to
TopTier with respect to the calendar month covered by such statement.
(c) All payments to be made hereunder by TTI to TopTier shall be remitted
by TTI to the headquarters office of TopTier, provided, however, that
if TopTier requests TTI to remit any of such payments or any portion
thereof directly to another office of TopTier, TTI shall comply with
such requests to the extent practicable under Israel's foreign
exchange regulations then applicable.
3
<PAGE>
(d) TopTier shall at all times cause proper records and books of account
to be kept with respect to the costs and expenses referred to in
Paragraph (5)(a) hereof, and such records and books of account shall
be available to TTI for review at such times as TTI may reasonably
request during the period this Agreement is effective. TopTier agrees
to keep all information disclosed by such review confidential and
shall disclose that information only to those employees of TopTier
who have a need to know.
(7) TopTier shall cause all necessary and proper action to be taken in order
to obtain all governmental approvals and licenses from the Israel foreign
exchange, tax and other governmental authorities which may be required in
order for TopTier to perform the services to be performed by them
hereunder and to receive the service fee from TTI provided for in
Paragraph (5) hereof.
(8) TopTier shall cause to be paid all taxes and other duties or assessments
which may be levied by any governmental authority with respect to the
services to be performed by TopTier pursuant to this Agreement and/or on
the service fees accruing and payable to TopTier pursuant to this
Agreement.
(9) This Agreement shall become effective as of the date first above written,
and shall thereafter continue to be and remain effective until terminated
as provided in Paragraph (10) hereof.
(10) This Agreement may be terminated by either of the parties hereto by
giving written notice to the other party of such termination not less
than thirty days prior to the date on which such termination is to become
effective; provided, however, that this Agreement shall be automatically
terminated in the event that either party (a) becomes subject or party to
proceedings in bankruptcy, winding-up or liquidation or to litigation
which may lead to bankruptcy, winding-up or liquidation, (b) makes an
assignment for the benefit of its creditors, or (c) contravenes any one
or more of the provisions hereof.
In addition, TTI may elect to terminate this agreement immediately, upon
written notice to TopTier if TopTier engages in activities which, in the
opinion of TTI, are detrimental to the interests of TTI.
(11) Neither this Agreement nor any of the respective rights or obligations of
the parties hereto shall be assignable in whole or in part without the
consent in writing of the other party hereto, and such consent may be
withheld wholly within the discretion of such other party.
(12) This Agreement shall be governed by and interpreted and construed in
accordance with the laws of the State of California of the United States
of America.
(13) Any controversy or claim arising out of or relating to this Agreement or
the breach thereof, shall be decided solely by arbitration in accordance
with the Commercial Rules of the American Arbitration Association then in
effect. The site of the
4
<PAGE>
arbitration shall be San Francisco, California. The initiating party
shall indicate whether one or three arbitrators shall be used.
Arbitrators shall be selected from the panels maintained by the American
Arbitration Association ("AAA") as provided by the rules of the AAA.
Judgment upon the award rendered may be entered in any court having
jurisdiction thereof.
(14) This Agreement, including any attachments, constitutes the final
expression of the understanding and agreement between the parties with
respect to the subject matter hereof, is intended as a complete and
exclusive statement of the terms of the parties' agreement, supersedes
and cancels all previous agreements and understandings, either oral or in
writing, between the parties to this Agreement, and is not subject to or
entered into on the basis of any oral or written terms or representations
other than those contained herein. Any modification or amendment of the
terms and conditions of this Agreement will only be binding upon the
parties if contained in writing and signed by or on behalf of both
parties.
IN WITNESS WHEREOF, each party hereto has executed this Agreement as of the
date first above written.
TopTier Software, Inc.
/s/ Shai Agassi
______________________
Top Tier Israel
/s/ R. Agassi
______________________
5
<PAGE>
EXHIBIT 10.14
INTERNATIONAL DISTRIBUTOR AGREEMENT
THIS INTERNATIONAL DISTRIBUTOR AGREEMENT (the "Agreement") is entered
into as of August 22, 1996 ("Effective Date") by and between Top Tier Israel
(1992) Ltd., a corporation duly organized and existing under the laws of Israel,
with its principal office located at 4 Hacharoshet Street, Ra'anana, Israel, and
TopTier Software, Inc. a corporation duly organized and existing under law of
Delaware, with its principal office located at 6203 San Ignacio Avenue, Suite
101, San Jose, California 95119 ("Distributor").
IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED HEREIN, THE PARTIES
AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "SOFTWARE" shall mean the most current version of each of Top Tier
--------
Israel's software products listed in Exhibit A attached hereto in
an object code copy or copies, together with a copy or copies of
any user manual or other documentation.
1.2 "DISTRIBUTOR CUSTOMER" shall mean any third party which acquires a
--------------------
license to (i)Use the Software for its own processing needs ("End-User")
(ii)Resell the Software to End-Users ("Reseller") (iii) incorporate the
Software within its own hardware or software systems for distribution or
resale ("OEM/ISV").
1.3 "TERRITORY" shall mean the United States and North America on an
---------
exclusive basis and the Rest of World (ROW) on a non-exclusive
basis.
1.4 All references in this Agreement to the "sale" of or "selling"
Software or Software Copies shall mean the granting of a LICENSE to use
-------
such Software of Software Copies. All references in this Agreement to the
"purchase" of Software or Software Copies shall mean the obtaining of a
LICENSE to use such Software or Software Copy.
-------
2. APPOINTMENT AND AUTHORITY OF DISTRIBUTOR
----------------------------------------
2.1 APPOINTMENT. Subject to the terms and conditions set forth herein, Top
-----------
Tier Israel hereby appoints Distributor as the exclusive distributor of the
Software in the U.S. and North American Territory, and Distributor hereby
accepts such appointment. TopTier also appoints Distributor as a non-exclusive
distributor for the Rest of the World and Distributor hereby accepts such
appointment. Distributor shall have the rights (i) to obtain Software from Top
Tier Israel and to market and distribute such Software within the Territory for
delivery to Distributor Customers in the Territory (ii) to appoint resellers and
sub-distributors to market and distribute the Software within the Territory(
iii) to negotiate and contract agreements with OEM/ISV customers. Top Tier
Israel retains full rights to appoint other distributors in that part of the
Territory defined as Rest of the World. The Distributor acknowledges and agrees
that sales made by Distributor shall only be made to Distributor Customers who
agree to be bound contractually to Distributor under terms and conditions
consistent with, and reflecting, this Agreement.
<PAGE>
2.2 TERRITORIAL RESPONSIBILITY. Distributor shall use its best efforts
---------------------------
to promote vigorously the marketing and distribution of the
Software to realize the maximum sales potential for the Software
in the Territory. Distributor shall be solely responsible for
advertising, marketing, promoting and distributing the Software in
the Territory. In consideration for its appointment, Distributor
agrees not to market and distribute within the Territory any
software products from other vendors (including Distributor's)
which, in Top Tier Israel's opinion, compete with Top Tier Israel
software products without Top Tier Israel's prior written consent.
2.3 MINIMUM GUARANTEED PAYMENTS BY DISTRIBUTOR
------------------------------------------
Distributor undertakes to provide TopTier Israel with minimum
annual guaranteed payments, as advance payments to be reconciled
against the proceeds of TopTier Israel's sales to Distributor,
according to the monthly schedule in Exhibit B., as amended from
time to time by mutual agreement of the parties. Proceeds of
TopTier Israel's sales to Distributor will be reconciled against
the advances, on a periodic basis mutually agreeable to the
parties, but no less often than once every quarter. Failure by
Distributor to provide the minimum guaranteed revenues on a
monthly basis constitutes a breach of this agreement, which will
enable TopTier Israel to terminate the agreement for cause.
2.4 PAYMENTS
--------
Distributor shall make monthly payments as specified in Exhibit B,
by wire transfer, to TopTier Israel's bank. The cost of wire
transfer will be borne by Distributor.
3. SOFTWARE DISTRIBUTION
---------------------
3.1 DISTRIBUTOR CUSTOMERS' LICENSE. Prior to providing any Distributor
-------------------------------
Customer with Software, Distributor shall insure that the license
of such Software contains appropriate terms and conditions set
forth in a Software License Agreement which has been mutually
agreed upon by the parties and which shall be executed by the
Distributor Customer.
3.2 DISTRIBUTOR COPIES. Distributor shall have the right to order a
-------------------
reasonable number of Software copies, marked not for resale, or
marked For Evaluation Only, to be used for demonstration purposes
by Distributor or for evaluation purposes by potential Distributor
Customers ("Distributor Copies") provided Distributor shall pay to
Top Tier Israel the then current charges for any such Distributor
Copies (including shipping charges) set forth in Top Tier Israel's
International Price List and provided that the right to use such
Distributor Copies will be governed by the terms of a license
agreement approved and accepted by Top Tier Israel. Distributor
shall maintain records of the Distributor Copies' recipients and
shall provide said records to TopTier Israel at quarterly
intervals.
3.3 TITLE TO SOFTWARE AND RELATED MATTERS. Title to the Software
-------------------------------------
(including the user manual, diskette and software contained
therein and all translations thereof) shall remain with Top Tier
Israel. Distributor shall not (and shall require that its
-2-
<PAGE>
Customers do not) remove, alter, cover or obfuscate any copyright
notices or other proprietary rights notices placed or embedded by
Top Tier Israel on or in any Software. Distributor shall not
provide services to others for the purpose of any such
modification, alteration, reverse engineering, disassembly or
decompilation. Distributor shall not, and shall not authorize any
third party to, modify, alter, reverse engineer, disassemble or
decompile the Software without the prior approval of Top Tier
Israel.
3.4 RECORDS AND AUDIT RIGHTS. Distributor agrees to make, and to
-------------------------
maintain until three (3) years after the last payment under this
Agreement is due and paid, complete books, records and accounts
with respect to Distributor's distribution of and payment for
Software hereunder. Such records shall include number of units
shipped by product and platform, customer information, date of
shipment, copies of purchase orders and invoices and support
contract information. Top Tier Israel shall have the right to
audit such books and records for purposes of verification of the
sales and inventory information with respect to the Software. Any
such audit shall be conducted by Top Tier Israel or its
representatives during normal business hours, and Distributor
shall cooperate fully with Top Tier Israel or its representatives
in any such audit. Any underpayment shall be payable immediately.
4. TERMS OF PURCHASE OF SOFTWARE COPIES BY DISTRIBUTOR
---------------------------------------------------
4.1 PRICES. All prices are F.O.B. Top Tier Israel facility. ("F.O.B.
------
Point"). The Price to Distributor for the Software shall be equal
to 80% of Distributor's license fee charged to its customers. The
difference between Distributor's fee to TopTier Israel and
Distributor's price to its customers shall be Distributor's sole
remuneration for distribution of the Software Copies. Top Tier
Israel has the right at any time to revise its prices charged to
Distributor.
4.2 TAXES. Amounts payable to Top Tier Israel under this Agreement are
-----
payable to Top Tier Israel generally without deduction for taxes,
(including any sales, use, excise, ad valorem, property, value
added tax, or other tax), tariff, duty or assessment levied or
imposed by any government authority (including without limitation
any country, state, city, county, province, department, or other
subdivision of the national government). Distributor shall pay all
such taxes and customs duties payable with respect to the sale and
purchase of Software Copies under this Agreement. When Top Tier
Israel has the legal obligation (independent of this Agreement) to
collect such taxes, the appropriate amount shall be added to
Distributor's invoice and paid by Distributor unless Distributor
provides Top Tier Israel with a valid tax exemption certificate
authorized by the appropriate taxing authority. Distributor shall
cooperate with Top Tier Israel and shall provide Top Tier Israel
with certificates or receipts issued by the appropriate taxing
authority. Distributor's tax records relating to any tax for which
Top Tier Israel has any legal liability in the Territory shall
also be considered "accounting records" under Section 3.4 and
subject to audit by Top Tier Israel. Amounts payable to Top Tier
Israel under this agreement are however net of
-3-
<PAGE>
income tax withheld at source, if any, that may be applicable to
the purchase of the Software Copies.
4.3 TERMS AND CONDITIONS. All orders for Software by Distributor for
---------------------
distribution to End-Users shall be initiated by Distributor's
issuance of written purchase orders sent to Top Tier Israel (via
mail, telecopier, or telefax). Any order sent by mail, telecopier
or telefax shall be deemed signed by the Distributor as if an
original signed document were delivered to Top Tier Israel
regardless whether any such document is confirmed in writing by
mail, hand delivery or other original signed document. Such orders
shall state unit quantities, until descriptions, requested
delivery dates, and shipping instructions. Top Tier Israel may
accept or reject any order in whole or part, in its discretion.
This Agreement shall govern all orders of Software by Distributor.
No terms on purchase orders, invoices or like documents by
Distributor shall serve to alter or add to the terms of this
Agreement. Shipment will be F.O.B. Top Tier Israel's distribution
facility and all freight, insurance and other shipping expenses,
as well as any special packing expenses, shall be borne by
Distributor.
4.4 PAYMENT. Top Tier Israel shall submit an invoice to Distributor
--------
either upon each shipment of Software ordered by Distributor or on
another regular basis mutually agreed to by Top Tier Israel and
the Distributor. The invoice shall cover Distributor's fees for
the Software in a given shipment plus any freight, taxes and other
applicable costs initially paid by Top Tier Israel but to be borne
by Distributor. TopTier Israel's invoices to Distributor will be
reconciled against Distributor's advance payments to TopTier
Israel on a periodic basis, but no less frequently than once every
calendar quarter, at a mutually convenient date. After the
reconciliation, any excess amounts owed to TopTier Israel by
Distributor will be paid within 30 days of the date of
reconciliation of accounts. Distributor shall pay TopTier Israel
in U.S. dollars by wire of available funds to an account
designated by Top Tier Israel or as otherwise instructed by Top
Tier Israel. Distributor shall pay all of Top Tier Israel's costs
and expenses (including reasonable attorneys' fees) to enforce and
preserve Top Tier Israel's payment rights under this Section 4.4.
4.5 SHIPPING. All Software delivered pursuant to the terms of this
---------
Agreement shall be suitably packed for shipment in Top Tier
Israel's standard shipping cartons, marked for shipment at
Distributor's address set forth above, and delivered to
Distributor or its carrier agent at the F.O.B. Point, at which
time risk of loss shall pass to Distributor. Unless otherwise
instructed in writing by Distributor, Top Tier Israel shall select
the carrier. Distributor agrees to undertake all import
formalities required to import the Software Copies into the
Territory, and to bear full expense of all custom duties, freight,
insurance, and other shipping expenses, as well as any special
packing expense.
4.6 ACCEPTANCE. Distributor shall inspect all Software promptly upon
-----------
receipt thereof and may reject any item that contains any
significant reproducible defects which render such Software unfit
for distribution to Distributor Customers, subject to return
procedures agreed upon by the parties. To reject a Software copy
Distributor
-4-
<PAGE>
shall within ten (10) days of receipt of such Software copy notify
Top Tier Israel of its rejection and of the defect which has
rendered the copy unfit for distribution. TopTier Israel will
replace the defective Software copy at its earliest opportunity
and instruct Distributor as to the required disposition of
rejected Software copy or copies, including at TopTier Israel's
discretion, authorized destruction or return for inspection.
Distributor shall maintain detailed records of rejected software
copies, including ultimate disposition upon instructions by
TopTier Israel.
5. MAINTENANCE AND SUPPORT
-----------------------
5.1 CUSTOMER SUPPORT. Distributor agrees that Distributor is
-----------------
responsible for supporting all Software it distributes, directly
or through resellers, to Distributor Customers. TopTier Israel
will provide maintenance and warranty support as detailed in
Sections 5.2 and 5.3 and assistance and customer support to the
extent requested by Distributor in exchange for 80% of all fees
charged by Distributor to its Distributor Customers for service,
warranty or maintenance agreements. TopTier Israel will receive no
other compensation from Distributor for these support services.
Distributor shall also maintain on-site staff support personnel
sufficiently knowledgeable with respect to the Software to answer
customer questions regarding the use and operation of Software
marketed by Distributor. TopTier Israel shall provide Distributor
with the support and technical assistance set forth in Sections
5.2, 5.3 and 7.1 below.
5.2 ADDITIONAL SUPPORT/MAINTENANCE. Top Tier Israel will provide to
-------------------------------
Distributor all error corrections and updates to the Software
which Top Tier Israel makes generally available to its Software
customers. Top Tier Israel will provide reasonable consultation
via telephone and facsimile to Distributor during Top Tier
Israel's normal business hours with respect to any End-User
questions that Distributor cannot adequately answer. Distributor
shall offer its customers maintenance contracts and shall provide
maintenance services, which shall include the opportunity to buy
upgrades (i.e., from version 2.0 to 3.0). Distributor shall
maintain and provide Top Tier Israel upon request, customer lists
and records identifying which customers have maintenance
contracts. Top Tier Israel shall deliver updates to the
Distributor and the Distributor agrees to deliver updates to
customers in a timely manner
5.3 TOP TIER ISRAEL UPGRADES. Top Tier Israel may, from time to time,
-------------------------
upgrade the Software, provided that nothing herein shall obligate
Top Tier Israel to produce any such upgrade. Top Tier Israel
reserves the right to require an additional charge for such
upgrade. Distributor shall be responsible for offering training in
the use and operation of such upgrades to its End-Users. Any
upgrade shall be subject to the terms of this Agreement.
6. LIMITED WARRANTY
----------------
6.1 STANDARD LIMITED WARRANTY. Top Tier Israel warrants Distributor
-------------------------
that, for a period of one year after the date of delivery to
Distributor of a Software copy, the media on
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which the Software is furnished under normal use will be free from
defects in materials and workmanship. The above warranty does not
apply to any Software copy that has been modified or altered by
any party other than Top Tier Israel or for any defects caused by
any use of the Software copy in a manner for which it was not
designed, or by the negligence of any party other than Top Tier
Israel. Top Tier Israel does not warrant that use of the Software
will be uninterrupted or error free.
TOP TIER ISRAEL'S SOLE LIABILITY WITH RESPECT TO THE ABOVE EXPRESS
WARRANTY SHALL BE FOR TOP TIER ISRAEL AT ITS OPTION, TO CORRECT
THE SOFTWARE COPY, REPLACE THE SOFTWARE COPY, OR REFUND THE AMOUNT
PAID FOR SUCH SOFTWARE COPY. DISTRIBUTOR SHALL NOT MAKE OR PASS ON
TO ANY PARTY ANY WARRANTY OR REPRESENTATION ON BEHALF OF TOP TIER
ISRAEL OTHER THAN OR INCONSISTENT WITH THE ABOVE LIMITED WARRANTY.
6.2 NO OTHER WARRANTY. EXCEPT FOR THE EXPRESS LIMITED WARRANTY SET
------------------
FORTH ABOVE, TOP TIER ISRAEL GRANTS NO OTHER WARRANTIES, EXPRESS
OR IMPLIED, BY STATUTE OR OTHERWISE, REGARDING THE SOFTWARE
COPIES, AND SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF
NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
7. ADDITIONAL OBLIGATIONS OF DISTRIBUTOR
-------------------------------------
7.1 SALES REPORTS. Distributor shall provide Top Tier Israel with a
--------------
quarterly sales report showing, at a minimum, units sold per
Software item, unit prices per item sold, total units sold and
total invoices to customers for sales of Software and maintenance
service contracts. This report will be forwarded to Top Tier
Israel as mutually agreed upon by the parties.
7.2 DEMONSTRATIONS AND STAFF TRAINING. Distributor shall provide (at
---------------------------------
Distributor expense) adequate training to its staff regarding the
use and operation of the Software and any updates thereto.
7.3 ANNUAL BUSINESS PLAN. Distributor has delivered to Top Tier Israel
---------------------
its initial business plan for the first year of this Agreement.
Sixty (60) days prior to the anniversary date of this Agreement,
Distributor shall provide to Top Tier Israel for approval a
reasonably detailed annual business plan Distributor agrees to use
best efforts to pursue its annual business plan. Substantial non-
performance of such annual business plan shall constitute a
default under this Agreement.
-6-
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7.4 MARKETING ACTIVITIES. Top Tier Israel and Distributor shall
---------------------
mutually agree on marketing plans, including positioning of
products, nature of marketing and advertising and promotional
campaigns and budgets for marketing expenditures, within six (6)
months of the Effective Date of this Agreement.
8. ADDITIONAL OBLIGATIONS OF TOP TIER ISRAEL
-----------------------------------------
8.1 MARKETING MATERIALS. Top Tier Israel shall provide Distributor
--------------------
with technical information concerning Software as required for the
creation of marketing materials and shall fully and promptly
cooperate with Distributor's request for review and editing of
such materials.
9. TERM AND TERMINATION
--------------------
9.1 TERM. This Agreement shall commence on the date of this Agreement
-----
and shall continue in force unless terminated under the provisions
of this Section 9.
9.2 TERMINATION FOR CAUSE.
----------------------
(a) If either party defaults in the performance of any
provisions of this Agreement, then the non-defaulting party
may give written notice to the defaulting party that if the
default is not cured within thirty (30) days the Agreement
will be terminated. If the non-defaulting party gives such
notice and the default is not cured during the thirty (30)
day period, then the Agreement shall terminate at the end of
that period. Notwithstanding the foregoing, in the event
that Distributor fails to make advance payments according to
the schedule in Exhibit B, pursuant to Sections 2.3, or to
promptly pay amounts due to TopTier Israel after quarterly
reconciliation of accounts, pursuant to Section 4.4, TopTier
Israel may terminate this Agreement for cause.
(b) This Agreement shall terminate, without notice, (i) upon the
institution by or against Distributor of insolvency,
receivership or bankruptcy proceedings or any other
proceedings for the settlement of Distributor's debts, (ii)
upon Distributor's making an assignment for the benefit of
creditors, (iii) or upon Distributor's dissolution.
(c) This Agreement shall terminate immediately upon written
notice to Distributor (i) in the event that any current
legislation or exchange controls under applicable law
preclude Distributor from making payments to Top Tier Israel
in United States currency for a period of sixty (60) days
provided, however, that termination under this subsection
shall not relieve Distributor of its payment obligations
under this Agreement or (ii) upon the enactment of any law,
decree or regulation by the government of the Territory
which would impair or restrict (A) the right of Top Tier
Israel to terminate this Agreement as herein provided, (B)
Top Tier Israel's right, title or interest in the
intellectual property rights in the Software, Software
Copies, documentation or other property
-7-
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covered by this Agreement or (C) Top Tier Israel's rights to
receive payment under this Agreement.
(d) This Agreement shall terminate immediately and without
notice ninety (90) days from the Effective Date if Top Tier
Israel has not received written evidence from Distributor by
such date that Distributor has secured all government
approvals, if any, in the Territory necessary to carry on
the transactions contemplated by this Agreement.
9.3 TERMINATION FOR CONVENIENCE. Either Top Tier Israel or Distributor
----------------------------
may terminate this Agreement, at any time, with or without cause,
upon ninety (90) days prior written notice.
9.4 EFFECT OF TERMINATION.
----------------------
(a) Upon termination of this Agreement for any reason
whatsoever, Top Tier Israel shall have no further obligation
to Distributor other than those set forth in this Section 9.
Top Tier Israel shall not be liable to Distributor for, and
Distributor hereby expressly waives all rights to
compensation, indemnities or damages of any kind, whether on
account of the loss by Distributor of present or prospective
profits, commissions, anticipated orders, expenditures,
investments, or commitments made in connection with this
Agreement, goodwill created, or on account of any other
reason whatsoever. Upon termination of this Agreement for
any reason, Distributor shall deliver to Top Tier Israel,
within ten (10) days, the name and address of each customer
of Distributor or customer of a reseller, and the name and
address of each customer that has a maintenance contract
with Distributor or a reseller, plus all of the records
described in Section 3.4 above.
(b) The parties have expressed that, as an essential and
fundamental condition of their agreement to enter into and
be bound by the terms and conditions and contemplated
pricing of this Agreement, all elements of this Agreement
shall be governed exclusively by the laws of the State of
California (pursuant to Section 14.2 of this Agreement). If,
notwithstanding this fundamental agreement, under any
applicable law within the Territory distributors are
entitled to any compensation upon termination for cause or
the expiration of a fixed term of their distribution
agreement, this Agreement shall be deemed a contract for a
duration of not more than two years, and shall expire upon
the expiration of such two years after the initial effective
date of this Agreement. To the extent any such compensation
is deemed earned as a matter of law, the parties shall
retroactively readjust all prices so that the prices charged
to the Distributor shall be increased by the amount
necessary to give such compensation to the Distributor as
part of the overall pricing and compensation arrangements
between the parties.
-8-
<PAGE>
9.5 RETURN OF MATERIALS. All trademarks, trade names, patents,
--------------------
copyrights, designs, drawings, formulas or other data,
photographs, samples, literature, and sales aids of every kind
shall remain the property of Top Tier Israel. Within thirty (30)
days after the termination of this Agreement, Distributor shall
prepare all such items in its possession for shipment, as Top Tier
Israel may direct, at Top Tier Israel's expense. Distributor shall
not make or retain any copies of any confidential items or
information which may have been entrusted to it. Effective upon
the termination of this Agreement, Distributor shall cease to use
all trademarks, marks, and trade names of Top Tier Israel.
9.6 TRANSITION OF SUPPORT CONTRACTS. Distributor agrees to use its
--------------------------------
best efforts to register all Top Tier Israel customers, and that
this registered customer base will be sent to Top Tier Israel at
the end of each calendar quarter. If this distribution agreement
is terminated for whatever reason, then Distributor will hand over
to Top Tier Israel or a designated representative, the then
up-to-date registered customer base. Upon payment to Top Tier
Israel or a designed representative of a mutually agreed upon
pro-rated amount of year-to-date support revenue, Distributor will
no longer have the responsibility for supporting those customers.
9.7 SURVIVAL OF CERTAIN TERMS. The provisions of Sections 3.4, 4.4,
--------------------------
4.6, 6, 9.4, 10, 11, 12, 13, and 14 shall survive the termination
of this Agreement for any reason. All other rights and obligations
of the parties shall cease upon termination of the Agreement.
10. LIMITED LIABILITY
-----------------
TOP TIER ISRAEL'S TOTAL LIABILITY UNDER ANY CAUSE OF ACTION
ARISING UNDER THIS AGREEMENT SHALL NOT EXCEED THE AMOUNTS RECEIVED
BY TOP TIER ISRAEL FROM DISTRIBUTOR UNDER THIS AGREEMENT. IN NO
EVENT SHALL EITHER PARTY HAVE ANY LIABILITY TO THE OTHER OR TO ANY
OTHER THIRD PARTY, FOR ANY LOST PROFITS OR COSTS OF PROCUREMENT OF
SUBSTITUTE GOODS OR SERVICES, OR FOR ANY OTHER INDIRECT, SPECIAL
OR CONSEQUENTIAL DAMAGES RESULTING FROM THE USE OF THE LICENSED
PRODUCTS, OR THE FAILURE OF THE LICENSED PRODUCTS TO PERFORM, OR
FOR ANY OTHER REASON OR ARISING UNDER ANY CAUSE OF ACTION;
PROVIDED, HOWEVER, THAT THIS LIMITATION SHALL NOT APPLY TO ANY
BREACH OF THE CONFIDENTIALITY OBLIGATIONS SET FORTH IN SECTION 11
OR TO DISTRIBUTOR'S EXCEEDING ITS AUTHORITY GRANTED HEREIN. IT IS
ACKNOWLEDGED BY THE PARTIES THAT NOTHING IN THIS SECTION 10 SHALL
LIMIT DISTRIBUTORS OBLIGATION TO PAY AMOUNTS ALREADY DUE AND OWING
TO TOP TIER ISRAEL.
-9-
<PAGE>
11. PROPERTY RIGHTS AND CONFIDENTIALITY
-----------------------------------
11.1 PROPERTY RIGHTS. Distributor agrees that Top Tier Israel owns all
----------------
right, title, and interest in the Software, in each Software copy
and documentation, and in all of Top Tier Israel's patents,
trademarks, trade names, inventions, copyrights, know-how, and
trade secrets relating to the design, manufacture, operation or
service of the Software. The use by Distributor of any of these
intellectual property rights is authorized only for the purposes
herein set forth, and upon termination of this Agreement for any
reason such authorization shall cease. Distributor agrees to
assign (or cause to be assigned) and hereby does assign fully to
Top Tier Israel all worldwide right, title and interest to the
aforementioned intellectual property rights, as well as all
derivatives and modifications thereof and thereto, conceived, made
or discovered by Distributor, solely or in collaboration with
others, and to execute all documentation reasonably necessary to
effect assignment of, any and all such intellectual property
rights to Top Tier Israel.
11.2 CONFIDENTIALLY. Each party hereto acknowledges that by reason of
---------------
its relationship to the other hereunder it will have access to
certain information and materials concerning the other party's
business, plans, customers, technology, and products that are
confidential and of substantial value to such party, which value
would be impaired if such information were disclosed to third
parties. Each party agrees that it will not use in any way for its
own account or the account of any third party, nor disclose to any
third party, any information received by it which is marked
confidential or which is disclosed orally and confirmed in writing
of its confidential nature within thirty (30) days after
disclosure by the other party (the "Confidential Information").
Each party shall protect the confidential nature of such
Confidential Information with at least the level of care it takes
to protect its own confidential information of similar value, but
in no event with less than reasonable care. Distributor shall not
publish any technical description of the Software other than the
description published by Top Tier Israel In the event of
termination of this Agreement, there shall be no use or disclosure
by either party of any Confidential Information of the other.
11.3 NOTIFICATION OF UNAUTHORIZED USE. Distributor shall promptly
---------------------------------
notify Top Tier Israel in writing upon its discovery of any
unauthorized use or infringement of the Software of Top Tier
Israel's patent, copyright, trademark or other intellectual
property rights with respect thereto. Top Tier Israel shall have
the sole and exclusive right to bring infringement action or
proceeding against a third party, and, in the event that Top Tier
Israel brings such an action or proceeding, Distributor shall
cooperate and provide full information and assistance to Top Tier
Israel and its counsel in connection with any such action or
proceeding.
12. TRADEMARKS AND TRADE NAMES
--------------------------
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<PAGE>
During the term of this Agreement, Distributor shall have the right to
indicate to the public that it is an authorized distributor of Top Tier
Israel Software and to advertise (within the Territory) such Software
under the trademarks, marks, and trade names that Top Tier Israel may
adopt from time to time ("Trademarks"), provided that all representations
of the Trademarks that Distributor intends to use shall first be
submitted to Top Tier Israel for approval (which shall not be
unreasonably withheld). Distributor shall not alter or remove any
Trademarks applied by Top Tier Israel to any Software or related
materials. Nothing herein shall grant to Distributor any right, title or
interest in the Trademarks. At no time during or after the term of this
Agreement shall Distributor challenge or assist others to challenge the
Trademarks or the registration thereof or attempt to register any
trademarks, marks or trade names confusingly similar to the Trademarks.
13. COMPLIANCE WITH LAWS
--------------------
13.1 FOREIGN CORRUPT PRACTICES ACT. In conformity with the United
------------------------------
States Foreign Corrupt Practices Act and with Top Tier Israel's
established corporate policies regarding foreign business
practices, Distributor and its employees and agents shall not
directly or indirectly make an offer, payment, promise to pay, or
authorize payment, or offer a gift, promise to give, or authorize
the giving of anything of value for the purpose of influencing an
act or decision of an official of any government within the
Territory or the United States Government (including a decision
not to act) or inducing such a person to use his influence to
affect any such governmental act or decision in order to assist
Top Tier Israel in obtaining, retaining or directing any such
business.
13.2 EXPORT ADMINISTRATION ACT. In conformity with the United States
--------------------------
Export Administration Act and regulations promulgated thereunder,
Distributor and its employees and agents shall not disclose,
export or re-export, directly or indirectly, any Software Copies
or technical data (or direct products thereof) provided under this
Agreement to destinations in Country Groups Q, S, W, Y and Z as
modified from time to time by the U.S. Department of Commerce, or
that are otherwise controlled under said Act and regulations.
13.3 CURRENCY CONTROL. Distributor represents and warrants that no
-----------------
currency control laws applicable in the Territory will prevent the
payment to Top Tier Israel of any sums due under this Agreement.
13.4 COMPLIANCE WITH APPLICABLE LAWS. Distributor shall comply, and
--------------------------------
shall require all of its reseller to comply, with all laws and
regulations applicable to Distributor with respect to (i) the
Software Copies, and (ii) the conduct of business generally. More
particularly, Distributor shall, without limitation:
(i) at its own expense, make, obtain, and maintain in force at all
times during the term of this Agreement, all filings,
registrations, reports, licenses, permits and authorizations
(collectively "Authorizations") in the Territory in order for
Distributor to perform its obligations under this Agreement. Top
Tier Israel shall provide
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<PAGE>
Distributor with such assistance as Distributor may reasonably
request in making or obtaining any such Authorizations. In the
event that the issuance of any Authorization is conditioned upon
an amendment of modification to this Agreement which is
unacceptable to Top Tier Israel, Top Tier Israel shall have the
right to terminate this Agreement without further obligation
whatsoever to Distributor.
(ii)Advise Top Tier Israel of any legislation, rule, regulation or
other law (including but not limited to any customs, tax, trade,
intellectual property or tariff law) which is in effect or which
may come into effect in the Territory, whether before or after the
Effective Date and which affects the importation of the Software
Copies or documentation into, or the use and the protection of the
Software Copies or documentation within the Territory, or which
has a material effect on any provision in this Agreement.
13.5 ENFORCEABILITY. Distributor represents and warrants that the
---------------
provisions of this Agreement, and the rights and obligations of
the parties hereunder, are enforceable under the laws of the
country within the Territory.
13.6 NON-COMPLIANCE AS MATERIAL DEFAULT. Non-compliance by Distributor
-----------------------------------
or its employees or agents with this Section 13 shall be deemed to
constitute a material default under this Agreement, justifying
termination for default pursuant to Section 9.2 hereof.
14. GENERAL PROVISION
-----------------
14.1 INDEPENDENT CONTRACTORS. The relationship of Distributor to Top
------------------------
Tier Israel established by this Agreement is that of contractors,
and nothing contained in this Agreement shall be construed to (i)
give either party the power to direct and control the day-to-day
activities of the other, (ii) constitute the parties as agents,
partners, joint venturers, co-owners or otherwise as participants
in a joint or common undertaking, and (iii) allow Distributor to
create or assume any obligation on behalf of Top Tier Israel for
any purpose whatsoever. All financial obligations associated with
Distributor's business are the sole responsibility of Distributor.
All sales and other agreements between Distributor and its
customers are Distributor's exclusive responsibility and shall
have no effect on Distributor's obligations under this Agreement.
Distributor shall be solely responsible for, and shall indemnify
and hold Top Tier Israel free and harmless from, and all claims,
damages or lawsuits (including attorneys' fees) arising out of the
acts of Distributor or its resellers, employees or agents.
Distributor shall require each reseller in the chain of
distribution through it to comply with provisions reflecting the
Distributor's obligations to Top Tier Israel, so that upon Top
Tier Israel request Distributor shall be able to account to Top
Tier Israel in respect to compliance by Distributor with the
obligations hereunder for all Software Copies delivered to
Distributor. Distributor shall hold harmless and indemnify Top
Tier Israel (including its shareholders, directors, officers,
agents and employees, successors and assigns) from any claims or
liability arising out of or connected to any breach by Distributor
of its obligations under this Agreement,
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<PAGE>
including, without limitation, any penalties, interest, attorneys'
fees and disbursements incurred by Top Tier Israel or any person
relying upon Distributor's obligations under this Agreement.
14.2 GOVERNING LAW. The rights and obligations of the parties under
--------------
this Agreement shall not be governed by the 1980 U.N. Convention
on Contracts for the International Sale of Goods; rather such
rights and obligations shall be governed by and construed under
the laws of the State of California, including its enactment of
the Uniform Commercial Code, without reference to conflict of laws
principles.
14.3 ARBITRATION. Any dispute or claim arising out of or in connection
------------
with this Agreement shall be finally settled by binding
arbitration in San Francisco, California under the Rules of
Arbitration of the American Arbitration Association by one
arbitrator appointed in accordance with said rules. Judgment on
the award rendered by the arbitrator may be entered in any court
having jurisdiction hereof. Notwithstanding the foregoing, the
parties may apply to any court of competent jurisdiction for
injunctive relief without breach of this arbitration provision.
14.4 ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
-----------------
and understanding of the parties relating to the subject matter
herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of
any rights under this Agreement, shall be effective unless in
writing signed by the party to be charged.
14.5 NOTICES. Any written notice required or permitted by this
--------
Agreement shall be in writing and shall be sent by mail to the
address shown at the beginning of this Agreement or at such other
address for which such party gives notice hereunder.
14.6 DOLLARS. All references to "dollars", "U.S. $" or "$" shall mean
--------
United States Dollars.
14.7 IT IS UNDERSTOOD AND AGREED THAT EACH AND EVERY PROVISION OF THIS
AGREEMENT WHICH PROVIDES FOR A LIMITATION OF LIABILITY, DISCLAIMER
OF WARRANTIES OR EXCLUSION OF DAMAGES IS INTENDED BY THE PARTIES
TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER SUCH PROVISION AND TO
BE ENFORCED AS SUCH. FURTHER, IT IS EXPRESSLY UNDERSTOOD AND
AGREED THAT IN THE EVENT ANY REMEDY HEREUNDER IS DETERMINED TO
HAVE FAILED OF ITS ESSENTIAL PURPOSE, ALL LIMITATIONS OF LIABILITY
AND EXCLUSIONS OF DAMAGES SET FORTH HEREIN SHALL REMAIN IN EFFECT.
14.8 FORCE MAJEURE. Nonperformance of either party (except for payment
--------------
obligations) shall be excused to the extent that performance is
rendered impossible by strike, fire, flood, act of God, government
acts or orders or restrictions, failure of suppliers, or any other
reason where failure to perform is beyond the control and not
caused by the negligence of the nonperforming party.
-13-
<PAGE>
14.9 NO WAIVER. The failure of either party to enforce at any time any
----------
of the provisions of the Agreement, or the failure to require at
any time performance by the other party of any of the provisions
of this Agreement, will in no way be construed to present a future
waiver of such provisions, nor in any way affect the validity of
either party to enforce each and every such provision thereafter.
14.10 NONASSIGNABILITY AND BINDING EFFECT. A mutually agreed
------------------------------------
consideration for Top Tier Israel entering into this Agreement is
the reputation, business standing, and goodwill already honored
and enjoyed by Distributor under its present ownership, and,
accordingly, Distributor agrees that its rights and obligations
under this Agreement may not be transferred or assigned directly
or indirectly without the prior written consent of Top Tier Israel
Subject to the foregoing sentence, this Agreement shall be binding
upon and inure to the benefit of the parties hereto, their
successors and assigns.
14.11 LEGAL EXPENSES. The prevailing party in any legal action,
---------------
arbitration or other dispute resolution procedure brought by one
party against the other and arising out of this Agreement shall be
entitled, in addition to any other rights and remedies it may
have, to reimbursement for its expenses, including court costs,
arbitrator's fees and reasonable attorneys' fees.
14.12 SEVERABILITY. In the event that any provision of this Agreement
-------------
becomes or it declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in
full force and effect without said provision. The parties agree to
negotiate in good faith a substitute, valid and enforceable
provision that most nearly effects the parties' intent and to be
bound by the mutually agreed substitute provision.
14.13 LANGUAGE. This Agreement is in the English Language only, which
---------
language shall be controlling in all respects, and all versions
hereof in any other language shall be for accommodation only and
shall not be binding upon the parties hereto. All correspondence,
notices, orders, claims, suits and other communication between the
parties hereto shall be written or conducted in English.
14.14 HEADINGS. The headings and captions used in this Agreement are for
---------
convenience of reference only, and shall not in any way affect the
interpretation of the provisions of this Agreement.
14.15 COUNTERPARTS. This Agreement may be executed in tow or more
-------------
counterparts, each of which shall be deemed an original and all of
which together shall constitute one instrument.
-14-
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Reuven Agassi, Top Tier Israel, Ltd. Shai Agassi, Top Tier Software, Inc.
- ------------------------------------ --------------------------------------
By: /s/ R. Agassi By: /s/ Shai Agassi
-------------------------------- -------------------------------
Title: Co-Chairman Title: Chairman and CEO
----------------------------- ----------------------------
Date: August 22, 1996 Date: August 22, 1996
------------------------------ -----------------------------
EXHIBIT A
In reference to Top Tier Israel's software products, products will be defined as
follows:
Item A
Item B
Item C
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<PAGE>
EXHIBIT 10.15
EXHIBIT C
---------
PROMISSORY NOTE
----------------
$633,332.70 San Jose, California
----------
_________________________
February 19, 2000
For value received, the undersigned promises to pay Top Tier Software,
Inc. a Delaware corporation (the "COMPANY"), at its principal office the
-------
principal sum of $633,332.70 with interest from the date hereof at a rate of
8.5 % per annum, compounded semiannually, on the unpaid balance of such
principal sum. Such principal and interest shall be due and payable five (5)
years after the date hereof.
If the undersigned's employment or consulting relationship with the
Company is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States
of America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT
INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such
sum as the Court may deem reasonable shall be added hereto as attorneys' fees.
The makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain
shares of Common Stock of the Company and is subject to the terms of a Pledge
and Security Agreement between the undersigned and the Company of even date
herewith.
EMPLOYEE /s/ Shai Agassi
----------------------------
<PAGE>
EXHIBIT 10.16
EXHIBIT C
---------
PROMISSORY NOTE
---------------
$4,789,169 San Jose, California
---------
___________________________________________
February 19, 2000
For value received, the undersigned promises to pay Top Tier Software, Inc.
a Delaware corporation (the "Company"), at its principal office the principal
-------
sum of $4,789,169.00 with interest from the date hereof at a rate of 8.5% per
annum, compounded semiannually, on the unpaid balance of such principal sum.
Such principal and interest shall be due and payable five (5) years after the
date hereof.
If the undersigned's employment or consulting relationship with the Company
is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States of
America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT INTEREST
OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such sum
as the Court may deem reasonable shall be added hereto as attorneys' fees. The
makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain shares
of Common Stock of the Company and is subject to the terms of a Pledge and
Security Agreement between the undersigned and the Company of even date
herewith.
EMPLOYEE /s/ Shai Agassi
---------------------------------------
<PAGE>
EXHIBIT 10.17
EXHIBIT C
---------
PROMISSORY NOTE
---------------
$ 332,500.00 San Jose, California
-------------------------
- ----------------------------------------
December 30, 1999
For value received, the undersigned promises to pay Top Tier Software,
Inc. a Delaware corporation (the "COMPANY"), at its principal office the
-------
principal sum of $332,500.00 with interest from the date hereof at a rate of
8.5% per annum, compounded semiannually, on the unpaid balance of such principal
sum. Such principal and interest shall be due and payable five (5) years after
the date hereof.
If the undersigned's employment or consulting relationship with the
Company is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United
States of America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME
WITHOUT INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such
sum as the Court may deem reasonable shall be added hereto as attorneys' fees.
The makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain
shares of Common Stock of the Company and is subject to the terms of a Pledge
and Security Agreement between the undersigned and the Company of even date
herewith.
EMPLOYEE /s/: David Blumstein
-----------------------------------
<PAGE>
EXHIBIT 10.18
EXHIBIT C
----------
PROMISSORY NOTE
---------------
$ 142,500.00 San Jose, California
- ----------------
________________________
January 22, 2000
For value received, the undersigned promises to pay Top Tier Software,
Inc. a Delaware corporation (the "COMPANY"), at its principal office the
-------
principal sum of $142,500.00 with interest from the date hereof at a rate of
8.5% per annum, compounded semiannually, on the unpaid balance of such principal
sum. Such principal and interest shall be due and payable five (5) years after
the date hereof.
If the undersigned's employment or consulting relationship with the
Company is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States
of America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT
INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such
sum as the Court may deem reasonable shall be added hereto as attorneys' fees.
The makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain
shares of Common Stock of the Company and is subject to the terms of a Pledge
and Security Agreement between the undersigned and the Company of even date
herewith.
EMPLOYEE /s/ Gil Perez
----------------------------
<PAGE>
EXHIBIT 10.20
EXHIBIT C
---------
PROMISSORY NOTE
---------------
$ 61,773.000 San Jose, California
- ----------------
____________________________
December 30, 1999
For value received, the undersigned promises to pay Top Tier Software,
Inc. a Delaware corporation (the "COMPANY"), at its principal office the
-------
principal sum of $61,773.00 with interest from the date hereof at a rate of 8.5%
per annum, compounded semiannually, on the unpaid balance of such principal sum.
Such principal and interest shall be due and payable five (5) years after the
date hereof.
If the undersigned's employment or consulting relationship with the
Company is terminated prior to payment in full of this Note, this Note shall be
immediately due and payable.
Principal and interest are payable in lawful money of the United States
of America. AMOUNTS DUE UNDER THIS NOTE MAY BE PREPAID AT ANY TIME WITHOUT
INTEREST OR PENALTY.
Should suit be commenced to collect any sums due under this Note, such
sum as the Court may deem reasonable shall be added hereto as attorneys' fees.
The makers and endorsers have severally waived presentment for payment, protest,
notice of protest and notice of nonpayment of this Note.
This Note, which is full recourse, is secured by a pledge of certain
shares of Common Stock of the Company and is subject to the terms of a Pledge
and Security Agreement between the undersigned and the Company of even date
herewith.
EMPLOYEE /s/ Joseph Zarb
-------------------------
<PAGE>
EXHIBIT 10.21
TOPTIER SOFTWARE, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is dated as of October 6, 1998,
---------
by and between Shai Agassi ("Employee") and TopTier Software, Inc., a Delaware
--------
corporation (the "Company").
-------
BACKGROUND
Employee was previously employed as the Chairman of the Company and was a
major shareholder of the Company. In connection with the acquisition by
Vanenburg Ventures, B.V. ("VV") of substantially all of the-outstanding equity
--
of the Company, including substantially all of Employee's equity ownership of
the Company, (the "Acquisition") the Company wishes to retain Employee as an
-----------
Employee of the Company following the Acquisition and ensure that Employee does
not engage in activities competitive with the Company for a period of time.
AGREEMENT
1. Term of Agreement. This Agreement shall commence on the date hereof
-----------------
and shall have a term of one (1) year the ("Original Term"). This Agreement may
-------------
be extended for additional one (1) year terms (each an "Additional Term") after
---------------
the expiration of the Original Term or any Additional Term if the parties hereto
mutually agree in writing to such extension.
2. Duties.
------
(a) Position. Employee shall be employed as President and Chief
--------
Technical Officer, and as such will report to the Company's Board of Directors.
(b) Obligations to the Company. Employee agrees to the best of his or
--------------------------
her ability and experience that he or she will at all times loyally and
conscientiously perform all of the duties and obligations required of and from
Employee pursuant to the terms hereof, and to the reasonable satisfaction of the
Company. During the term of Employee's employment relationship with the Company,
Employee further agrees that he will devote substantially all of his or her
business time and attention to the business of the Company, and Employee will
not directly or indirectly engage or participate in any business that is
competitive in any manner with the business of the Company. Nothing in this
Agreement will prevent Employee from accepting speaking or presentation
engagements in exchange for honoraria or from serving as a member of the board
of directors for entities not competitive in any manner with the business of the
Company, serving on boards of charitable organizations, or from owning no more
than one percent (1%) of the outstanding equity securities of a corporation
whose stock is listed on a national stock exchange. Employee will comply with
and be bound by the Company's operating policies, procedures and practices from
time to time in effect during the term of Employee's employment.
3. At-Will Employment. The Company and Employee acknowledge that
------------------
Employee's employment is and shall continue to be at-will, as defined under
applicable law, and that Employee's employment with the Company may be
terminated by either party at any time
<PAGE>
for any or no reason with thirty (30) days notice. If Employee's employment
terminates for any reason, Employee shall not be entitled to any payments,
benefits, damages, award or compensation other than as provided in this
Agreement. The rights and duties created by this Section 3 may not be modified
in any way except by a written agreement executed by the President of the
Company and approved by the Board of Directors of the Company.
4. Compensation. For the duties and services to be performed by Employee
------------
hereunder, the Company shall pay Employee, and Employee agrees to accept, the
salary, stock options, bonuses and other benefits described below in this
Section 4.
(a) Salary. Employee shall receive a monthly salary equal to his or
------
her salary prior to the date of this Agreement. Employee's monthly salary will
be payable pursuant to the Company's normal payroll practices. The base salary
shall be reviewed by the Company's Board of Directors or its Compensation
Committee following the closing of the Acquisition, and any change will be
effective as of the date determined appropriate by the Board or its Compensation
Committee.
(b) Equity Ownership. Following the date of this Agreement, the Board
----------------
of Directors will approve the purchase by Employee of shares of the Company's
Common Stock in an amount determined by the Board (the "Shares"). The Shares
------
will be subject to the Company's standard vesting provisions, provided however,
----------------
that in the event that the Company is merged or acquired in a transaction where
the Company's shareholders immediately prior to such transaction hold less than
50% of the outstanding capital stock of the surviving entity immediately after
such transaction, or all or substantially all of the Company's assets are sold,
all of the Shares will be released from such repurchase option. Otherwise,
vesting will depend on Employee's continued employment with the Company.
(c) Bonuses. Employee's entitlement to incentive bonuses from the
-------
Company is discretionary and shall be determined by the Board or its
Compensation Committee in good faith based upon the extent to which Employee's
individual performance objectives and the Company's profitability objectives and
other financial and nonfinancial objectives are achieved during the applicable
bonus period.
(d) Additional Benefits. Employee will be eligible to participate in
-------------------
the Company's employee benefit plans of general application, including without
limitation, those plans covering medical, disability and life insurance in
accordance with the rules established for individual participation in any such
plan and under applicable law. Employee will be eligible for vacation and sick
leave in accordance with the policies in effect during the term of this
Agreement and will receive such other benefits as the Company generally provides
to its other employees of comparable position and experience.
(e) Reimbursement of Expenses. Employee shall be authorized to incur
-------------------------
on behalf and for the benefit of, and shall be reimbursed by, the Company for
reasonable expenses, provided that such expenses are substantiated in accordance
with Company policies.
<PAGE>
5. Termination of Employment and Severance Benefits.
------------------------------------------------
(a) Termination of Employment. This Agreement may only be terminated
-------------------------
during its Original Term or any Additional Term as follows:
(i) By the Company for Cause (as defined in Section 6 below)
("Termination for Cause");
---------------------
(ii) By the Company for any reason other than for Cause, which
determination may be made by the Company at any time at the Company's sole
discretion, for any or no reason ("Termination Without Cause");
-------------------------
(iii) By Employee for Good Reason ("Resignation for Good
--------------------
Reason"); or
- ------
(iv) By Employee for any reason other than Good Reason (as
defined in Section 6 below) ("Voluntary Resignation").
---------------------
(b) Severance Benefits. Employee shall be entitled to receive
------------------
severance benefits upon termination of employment only as set forth in this
Section 5(b):
(i) Voluntary Resignation, Termination for Cause. If
--------------------------------------------
Employee's employment is terminated by him or her pursuant to a Voluntary
Resignation or by the Company for Cause, then Employee shall not be entitled to
receive payment of any severance benefits. Employee will receive payment(s) for
all salary and unpaid vacation accrued as of the date of Employee's termination
of employment and Employee's benefits will be continued under the Company's then
existing benefit plans and policies in accordance with such plans and policies
in effect on the date of termination and in accordance with applicable law.
(ii) Resignation for Good Reason, Termination Without Cause. If
------------------------------------------------------
Employee's employment is terminated by Employee for Good Reason or by the
Company Without Cause, Employee (or Employee's heirs or assigns if such
termination is pursuant to the death of Employee) will be entitled to receive
severance benefits as follows:
(A) Employee will be entitled to receive Employee's
regular monthly salary for the greater of (x) the remainder of the Term during
which Employee is terminated, or (y) six (6) months (the "Severance Period").
----------------
Such payments shall be made ratably over the Severance Period according to the
Company's standard payroll schedule.
(B) Employee will be entitled to receive payment on the
date of termination of any bonus payable under Section 4(c).
(C) Health insurance benefits with the same coverage
provided to Employee prior to the termination (e.g. medical, dental, optical,
mental health) and in all other respects significantly comparable to those in
place immediately prior to the termination will be provided at the Company's
cost over the Severance Period.
<PAGE>
(D) All amounts payable to Employee pursuant to those
certain Promissory Notes with aggregate principal amount of even date herewith
(the "Notes") including without limitation any interest due thereon, shall
become immediately due and payable without regard to the terms of the Notes and
such amounts will be immediately paid to Employee.
6. Definitions.
-----------
(a) For purposes of this Agreement, "Cause" for Employee's
termination will exist at any time after the happening of one or more of the
following events:
(i) Employee's willful misconduct in performance of his or her
duties hereunder, including Employee's refusal to comply in any material respect
with the legal directives of the Company's Board of Directors so long as such
directives are not inconsistent with the Employee's position and duties, which
improper performance or refusal to comply has a material adverse effect on the
Company and is not remedied within ten (10) working days after written notice
from the Board of Directors, which written notice shall state that failure to
remedy such conduct may result in Termination for Cause;
(ii) Dishonest or fraudulent conduct, a deliberate attempt to do
an injury to the Company, or conduct that materially discredits the Company or
is materially detrimental to the reputation of the Company, including conviction
of a felony; or
(iii) Employee's incurable material breach of any element of the
Company's Confidential Information and Invention Assignment Agreement.
Employee's death or temporary or permanent disability shall not
---
be Cause for termination.
(b) For purposes of this Agreement, Employee shall be deemed to have
terminated his or her employment for "Good Reason" if such termination is
-----------
related to (i) a material adverse change in Employee's position causing such
position to be of less stature or of less responsibility, (ii) a reduction of
Employee's base compensation, benefits or perquisites, (iii) a relocation of
Employee's primary site for performing services on behalf of the Company to a
facility or location more than fifty (50) miles from the Company's current San
Jose location, or (iv) the breach by the Company of a term of this Agreement.
7. Confidentiality Agreement. Employee shall sign, or has signed, a
-------------------------
Confidential Information and Invention Assignment Agreement (the
"Confidentiality Agreement") substantially in the form attached hereto as
-------------------------
Exhibit A. Employee hereby represents and warrants to the Company that he or she
- ---------
has complied with all obligations under the Confidentiality Agreement and agrees
to continue to abide by the terms of the Confidentiality Agreement and further
agrees that the provisions of the Confidentiality Agreement shall survive any
termination of this Agreement or of Employee's employment relationship with the
Company.
8. Noncompetition Covenant. Employee has been actively involved in the
-----------------------
direction of the Company's business and has thereby acquired considerable
experience, knowledge and skill. VV wish to protect its investment in the
Company, by restricting the activities of Employee that might compete with or
otherwise harm such business, and, as part of
<PAGE>
the consideration and inducement to VV for the Acquisition, Employee is willing
to agree to and abide by such restrictions as hereinafter provided.
(a) General. Employee acknowledges that Employee held a substantial
-------
number of shares of the capital stock of the Company prior to the Acquisition.
Employee further acknowledges that the value of the consideration paid by VV in
connection with the Acquisition is substantial and that preservation of the
goodwill associated with the Company is important to VV. Accordingly, VV and the
- --------
Company desire that Shareholder enter into a non-competition agreement with the
Company as set forth in this Section 8 and Employee is willing to agree to such
non-competition provisions as are set forth herein.
(b) Non-Compete. In connection with the Acquisition and the several
-----------
agreements made herein, Employee agrees that for a period of twelve (12) months
from the termination of his or her employment under this Agreement Employee will
not engage in the Restricted Business in a Restricted Territory (as such terms
are herein defined) as an employee, proprietor, officer, consultant, agent,
director or shareholder or representative of, a person, corporation, partnership
or other entity, including, without limitation, a family member. It is agreed
that activities otherwise permitted during Employee's employment with the
Company will not constitute a violation of the terms of this Section following
the termination of Employee's employment with the Company.
(c) Certain Definitions. For purposes of this Section 8:
-------------------
(i) "Restricted Business" shall mean the development or design
-------------------
of hyper-navigational data processing software.
(ii) "Restricted Territory" shall mean the counties, cities and
--------------------
states of the United States of America, including, without limitation,
California, and each political subdivision and/or nation of Canada, Mexico,
Australia, New Zealand, Taiwan, China, Asia, Europe, Central and South America,
and Africa.
(d) Solicitation. For a period of twelve (12) months following the
------------
termination of Employee's employment under this Agreement, Shareholder shall not
(i) hire, engage or participate in any effort or act to solicit the customers,
suppliers, associates or employees of the Company to cease doing business, or
their association or employment with the Company or (ii) encourage or solicit
any customer, supplier, associate or employee of the Company to breach any
contractual or employment obligation with the Company.
(e) Severability. The parties intend that the covenants contained in
------------
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state, nation, and other political subdivision of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent
<PAGE>
of the parties that the covenants set forth herein be enforced to the maximum
degree permitted by applicable law.
(f) Reformation. In the event that the provisions of this Section 8
-----------
should ever be deemed to exceed the scope, time or geographic limitations of
applicable law regarding covenants not to compete, then such provisions shall be
reformed to the maximum scope, time or geographic limitations, as the case may
be, permitted by applicable laws.
(g) Representations of Employee. Employee represents that: (i) he or
---------------------------
she is familiar with the covenants not to compete and not to solicit set forth
in this Agreement, (ii) he or she is fully aware of its obligations hereunder,
including, without limitation, the length of time, scope and geographic coverage
of these covenants, (iii) he or she finds the length of time, scope and
geographic coverage of these covenants to be reasonable, (iv) he or she is
receiving specific, bargained-for consideration for its covenants not to compete
and not to solicit, and (v) execution of this Agreement and performance of
Employee's obligations hereunder and thereunder, will not conflict with, or
result in a violation or breach of, any other agreement to which Employee is a
party or any judgment, order or decree to which Employee is subject.
(h) Breach. Employee acknowledges that in the event of a material
------
breach of any of the provisions of this Section 8 by Employee, the Company would
sustain irreparable harm, and, therefore, Employee agrees that in addition other
remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to obtain equitable relief, including specific
performance and injunctions restraining Employee from committing or continuing
any such violation of this Section 8.
9. Conflicts. Employee represents that his or her performance of all the
---------
terms of this Agreement will not breach any other agreement to which Employee is
a party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement. Employee further represents that he or she is entering into or
has entered into an employment relationship with the Company of his or her own
free will and that he or she has not been solicited as an employee in any way by
the Company.
10. Successors. Any successor to the Company (whether direct or indirect
----------
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
11. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. Employee shall not be required to mitigate
-------------------
the amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that Employee may
receive from any other source.
<PAGE>
(b) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the parties.
(c) Sole Agreement. This Agreement, including any Exhibits hereto,
--------------
constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(d) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or forty-eight (48) hours after being deposited in the U.S.
mail as certified or registered mail with postage prepaid, if such notice is
addressed to the party to be notified at such party's address as set forth below
or as subsequently modified by written notice.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(f) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(g) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(h) Arbitration. Any dispute or claim arising out of or in connection
-----------
with this Agreement will be finally settled by binding arbitration in San
Francisco, California in accordance with the rules of the American Arbitration
Association by one arbitrator appointed in accordance with said rules. The
arbitrator shall apply California law, without reference to rules of conflicts
of law or rules of statutory arbitration, to the resolution of any dispute.
Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the foregoing, the parties may
apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this paragraph,
without breach of this arbitration provision. This Section 11(h) shall not apply
to the Confidentiality Agreement.
(i) Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
-----------------
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
<PAGE>
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement the date first written above.
TOPTIER SOFTWARE, INC.
By: /s/ Davis Blumstein
-------------------------------
Title: President and CEO
-----------------------------
___________________________________
Address: 6203 San Ignacio Ave.
--------------------------
San Jose, CA 95119
--------------------------
SHAI AGASSI
/s/ Shai Agassi
-----------------------------------
Address: 16154 Loretta Lane
----------------------------
Los Gatos, CA
------------------------------------
<PAGE>
EXHIBIT 10.22
TOPTIER SOFTWARE, INC.
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of October 6, 1998,
---------
by and between DAVID BLUMSTEIN ("Employee") and TopTier Software, Inc., a
--------
Delaware corporation (the "Company").
-------
BACKGROUND
Employee was previously employed as the Chief Executive Officer of the
Company and was a major shareholder of the Company. In connection with the
acquisition by Vanenburg Ventures, B.V. ("VV") of substantially all of the-
--
outstanding equity of the Company, including substantially all of Employee's
equity ownership of the Company, (the "Acquisition") the Company wishes to
-----------
retain Employee as an Employee of the Company following the Acquisition and
ensure that Employee does not engage in activities competitive with the Company
for a period of time.
AGREEMENT
1. Term of Agreement. This Agreement shall commence on the date hereof
-----------------
and shall have a term of one (1) year the ("Original Term"). This Agreement may
-------------
be extended for additional one (1) year terms (each an "Additional Term") after
---------------
the expiration of the Original Term or any Additional Term if the parties hereto
mutually agree in writing to such extension.
2. Duties.
------
(a) Position. Employee shall be employed as CHIEF EXECUTIVE OFFICER,
--------
and as such will report to the Company's CHIEF EXECUTIVE OFFICER.
(b) Obligations to the Company. Employee agrees to the best of his or
--------------------------
her ability and experience that he or she will at all times loyally and
conscientiously perform all of the duties and obligations required of and from
Employee pursuant to the terms hereof, and to the reasonable satisfaction of the
Company. During the term of Employee's employment relationship with the Company,
Employee further agrees that he will devote substantially all of his or her
business time and attention to the business of the Company, and Employee will
not directly or indirectly engage or participate in any business that is
competitive in any manner with the business of the Company. Nothing in this
Agreement will prevent Employee from accepting speaking or presentation
engagements in exchange for honoraria or from serving as a member of the board
of directors for entities not competitive in any manner with the business of the
Company, serving on boards of charitable organizations, or from owning no more
than one percent (1%) of the outstanding equity securities of a corporation
whose stock is listed on a national stock exchange. Employee will comply with
and be bound by the Company's operating policies, procedures and practices from
time to time in effect during the term of Employee's employment.
3. At-Will Employment. The Company and Employee acknowledge that
------------------
Employee's employment is and shall continue to be at-will, as defined under
applicable law, and
<PAGE>
that Employee's employment with the Company may be terminated by either party at
any time for any or no reason with thirty (30) days notice. If Employee's
employment terminates for any reason, Employee shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided in
this Agreement. The rights and duties created by this Section 3 may not be
modified in any way except by a written agreement executed by the President of
the Company and approved by the Board of Directors of the Company.
4. Compensation. For the duties and services to be performed by Employee
------------
hereunder, the Company shall pay Employee, and Employee agrees to accept, the
salary, stock options, bonuses and other benefits described below in this
Section 4.
(a) Salary. Employee shall receive a monthly salary equal to his or
------
her salary prior to the date of this Agreement. Employee's monthly salary will
be payable pursuant to the Company's normal payroll practices. The base salary
shall be reviewed by the Company's Board of Directors or its Compensation
Committee following the closing of the Acquisition, and any change will be
effective as of the date determined appropriate by the Board or its Compensation
Committee.
(b) Equity Ownership. Following the date of this Agreement, the Board
----------------
of Directors will approve the purchase by Employee of shares of the Company's
Common Stock in an amount determined by the Board (the "Shares"). The Shares
------
will be subject to the Company's standard vesting provisions, provided however,
----------------
that in the event that the Company is merged or acquired in a transaction where
the Company's shareholders immediately prior to such transaction hold less than
50% of the outstanding capital stock of the surviving entity immediately after
such transaction, or all or substantially all of the Company's assets are sold,
all of the Shares will be released from such repurchase option. Otherwise,
vesting will depend on Employee's continued employment with the Company.
(c) Bonuses. Employee's entitlement to incentive bonuses from the
-------
Company is discretionary and shall be determined by the Board or its
Compensation Committee in good faith based upon the extent to which Employee's
individual performance objectives and the Company's profitability objectives and
other financial and nonfinancial objectives are achieved during the applicable
bonus period.
(d) Additional Benefits. Employee will be eligible to participate in
-------------------
the Company's employee benefit plans of general application, including without
limitation, those plans covering medical, disability and life insurance in
accordance with the rules established for individual participation in any such
plan and under applicable law. Employee will be eligible for vacation and sick
leave in accordance with the policies in effect during the term of this
Agreement and will receive such other benefits as the Company generally provides
to its other employees of comparable position and experience.
(e) Reimbursement of Expenses. Employee shall be authorized to incur
-------------------------
on behalf and for the benefit of, and shall be reimbursed by, the Company for
reasonable expenses, provided that such expenses are substantiated in accordance
with Company policies.
<PAGE>
5. Termination of Employment and Severance Benefits.
------------------------------------------------
(a) Termination of Employment. This Agreement may only be terminated
-------------------------
during its Original Term or any Additional Term as follows:
(i) By the Company for Cause (as defined in Section 6 below)
("Termination for Cause");
---------------------
(ii) By the Company for any reason other than for Cause,
which determination may be made by the Company at any time at the Company's sole
discretion, for any or no reason ("Termination Without Cause");
-------------------------
(iii) By Employee for Good Reason ("Resignation for Good
--------------------
Reason"); or
- ------
(iv) By Employee for any reason other than Good Reason (as
defined in Section 6 below) ("Voluntary Resignation").
---------------------
(b) Severance Benefits. Employee shall be entitled to receive
------------------
severance benefits upon termination of employment only as set forth in this
Section 5(b):
(i) Voluntary Resignation, Termination for Cause. If Employee's
--------------------------------------------
employment is terminated by him or her pursuant to a Voluntary Resignation or by
the Company for Cause, then Employee shall not be entitled to receive payment of
any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
(ii) Resignation for Good Reason, Termination Without Cause. If
------------------------------------------------------
Employee's employment is terminated by Employee for Good Reason or by the
Company Without Cause, Employee (or Employee's heirs or assigns if such
termination is pursuant to the death of Employee) will be entitled to receive
severance benefits as follows:
(A) Employee will be entitled to receive Employee's regular
monthly salary for the greater of (x) the remainder of the Term during which
Employee is terminated, or (y) six (6) months (the "Severance Period"). Such
----------------
payments shall be made ratably over the Severance Period according to the
Company's standard payroll schedule.
(B) Employee will be entitled to receive payment
on the date of termination of any bonus payable under Section 4(c).
(C) Health insurance benefits with the same coverage
provided to Employee prior to the termination (e.g. medical, dental, optical,
mental health) and in all other respects significantly comparable to those in
place immediately prior to the termination will be provided at the Company's
cost over the Severance Period.
<PAGE>
(D) All amounts payable to Employee pursuant to those
certain Promissory Notes with aggregate principal amount of even date herewith
(the "Notes") including without limitation any interest due thereon, shall
become immediately due and payable without regard to the terms of the Notes and
such amounts will be immediately paid to Employee.
6. Definitions.
-----------
(a) For purposes of this Agreement, "Cause" for Employee's
termination will exist at any time after the happening of one or more of the
following events:
(i) Employee's willful misconduct in performance of his or her
duties hereunder, including Employee's refusal to comply in any material respect
with the legal directives of the Company's Board of Directors so long as such
directives are not inconsistent with the Employee's position and duties, which
improper performance or refusal to comply has a material adverse effect on the
Company and is not remedied within ten (10) working days after written notice
from the Board of Directors, which written notice shall state that failure to
remedy such conduct may result in Termination for Cause;
(ii) Dishonest or fraudulent conduct, a deliberate attempt to do
an injury to the Company, or conduct that materially discredits the Company or
is materially detrimental to the reputation of the Company, including conviction
of a felony; or
(iii) Employee's incurable material breach of any element of the
Company's Confidential Information and Invention Assignment Agreement.
Employee's death or temporary or permanent disability shall not
---
be Cause for termination.
(b) For purposes of this Agreement, Employee shall be deemed to have
terminated his or her employment for "Good Reason" if such termination is
-----------
related to (i) a material adverse change in Employee's position causing such
position to be of less stature or of less responsibility, (ii) a reduction of
Employee's base compensation, benefits or perquisites, (iii) a relocation of
Employee's primary site for performing services on behalf of the Company to a
facility or location more than fifty (50) miles from the Company's current San
Jose location, or (iv) the breach by the Company of a term of this Agreement.
7. Confidentiality Agreement. Employee shall sign, or has signed, a
-------------------------
Confidential Information and Invention Assignment Agreement (the
"Confidentiality Agreement") substantially in the form attached hereto as
-------------------------
Exhibit A. Employee hereby represents and warrants to the Company that he or she
- ---------
has complied with all obligations under the Confidentiality Agreement and agrees
to continue to abide by the terms of the Confidentiality Agreement and further
agrees that the provisions of the Confidentiality Agreement shall survive any
termination of this Agreement or of Employee's employment relationship with the
Company.
8. Noncompetition Covenant. Employee has been actively involved in the
-----------------------
direction of the Company's business and has thereby acquired considerable
experience, knowledge and skill. VV wish to protect its investment in the
Company, by restricting the activities of Employee that might compete with or
otherwise harm such business, and, as part of
<PAGE>
the consideration and inducement to VV for the Acquisition, Employee is willing
to agree to and abide by such restrictions as hereinafter provided.
(a) General. Employee acknowledges that Employee held a substantial
-------
number of shares of the capital stock of the Company prior to the Acquisition.
Employee further acknowledges that the value of the consideration paid by VV in
connection with the Acquisition is substantial and that preservation of the
goodwill associated with the Company is important to VV. Accordingly, VV and the
- --------
Company desire that Shareholder enter into a non-competition agreement with the
Company as set forth in this Section 8 and Employee is willing to agree to such
non-competition provisions as are set forth herein.
(b) Non-Compete. In connection with the Acquisition and the several
-----------
agreements made herein, Employee agrees that for a period of twelve (12) months
from the termination of his or her employment under this Agreement Employee will
not engage in the Restricted Business in a Restricted Territory (as such terms
are herein defined) as an employee, proprietor, officer, consultant, agent,
director or shareholder or representative of, a person, corporation, partnership
or other entity, including, without limitation, a family member. It is agreed
that activities otherwise permitted during Employee's employment with the
Company will not constitute a violation of the terms of this Section following
the termination of Employee's employment with the Company.
(c) Certain Definitions. For purposes of this Section 8:
-------------------
(i) "Restricted Business" shall mean the development or design
-------------------
of hyper-navigational data processing software.
(ii) "Restricted Territory" shall mean the counties, cities and
--------------------
states of the United States of America, including, without limitation,
California, and each political subdivision and/or nation of Canada, Mexico,
Australia, New Zealand, Taiwan, China, Asia, Europe, Central and South America,
and Africa.
(d) Solicitation. For a period of twelve (12) months following the
------------
termination of Employee's employment under this Agreement, Shareholder shall not
(i) hire, engage or participate in any effort or act to solicit the customers,
suppliers, associates or employees of the Company to cease doing business, or
their association or employment with the Company or (ii) encourage or solicit
any customer, supplier, associate or employee of the Company to breach any
contractual or employment obligation with the Company.
(e) Severability. The parties intend that the covenants contained in
------------
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state, nation, and other political subdivision of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent
<PAGE>
of the parties that the covenants set forth herein be enforced to the maximum
degree permitted by applicable law.
(f) Reformation. In the event that the provisions of this Section 8
-----------
should ever be deemed to exceed the scope, time or geographic limitations of
applicable law regarding covenants not to compete, then such provisions shall be
reformed to the maximum scope, time or geographic limitations, as the case may
be, permitted by applicable laws.
(g) Representations of Employee. Employee represents that: (i) he or
---------------------------
she is familiar with the covenants not to compete and not to solicit set forth
in this Agreement, (ii) he or she is fully aware of its obligations hereunder,
including, without limitation, the length of time, scope and geographic coverage
of these covenants, (iii) he or she finds the length of time, scope and
geographic coverage of these covenants to be reasonable, (iv) he or she is
receiving specific, bargained-for consideration for its covenants not to compete
and not to solicit, and (v) execution of this Agreement and performance of
Employee's obligations hereunder and thereunder, will not conflict with, or
result in a violation or breach of, any other agreement to which Employee is a
party or any judgment, order or decree to which Employee is subject.
(h) Breach. Employee acknowledges that in the event of a material
------
breach of any of the provisions of this Section 8 by Employee, the Company would
sustain irreparable harm, and, therefore, Employee agrees that in addition other
remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to obtain equitable relief, including specific
performance and injunctions restraining Employee from committing or continuing
any such violation of this Section 8.
9. Conflicts. Employee represents that his or her performance of all the
---------
terms of this Agreement will not breach any other agreement to which Employee is
a party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement. Employee further represents that he or she is entering into or
has entered into an employment relationship with the Company of his or her own
free will and that he or she has not been solicited as an employee in any way by
the Company.
10. Successors. Any successor to the Company (whether direct or indirect
----------
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
11. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. Employee shall not be required to mitigate
-------------------
the amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that Employee may
receive from any other source.
<PAGE>
(b) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the parties.
(c) Sole Agreement. This Agreement, including any Exhibits hereto,
--------------
constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(d) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or forty-eight (48) hours after being deposited in the U.S.
mail as certified or registered mail with postage prepaid, if such notice is
addressed to the party to be notified at such party's address as set forth below
or as subsequently modified by written notice.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(f) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(g) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(h) Arbitration. Any dispute or claim arising out of or in connection
-----------
with this Agreement will be finally settled by binding arbitration in San
Francisco, California in accordance with the rules of the American Arbitration
Association by one arbitrator appointed in accordance with said rules. The
arbitrator shall apply California law, without reference to rules of conflicts
of law or rules of statutory arbitration, to the resolution of any dispute.
Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the foregoing, the parties may
apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this paragraph,
without breach of this arbitration provision. This Section 11(h) shall not apply
to the Confidentiality Agreement.
(i) Advice Of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
-----------------
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
<PAGE>
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement the date first written above.
TOPTIER SOFTWARE, INC.
By: /s/ David Blumstein
----------------------------
Title: President & CEO
-------------------------
Address: 6203 San Ignacio Ave.
-----------------------
SAN JOSE, CA 95119
-----------------------
DAVID BLUMSTEIN
/s/ David Blumstein
--------------------------------
Address: 1201 Hawkins Way
-----------------------
Pebble Beach, CA 93953
-----------------------
<PAGE>
EXHIBIT 10.23
TOPTIER SOFTWARE, INC.
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is dated as of October 6, 1998,
---------
by and between Udi Ziv ("Employee") and TopTier Software, Inc., a Delaware
--------
corporation (the "Company").
-------
BACKGROUND
Employee was previously employed as the Vice President, Research &
Development of the Company and was a major shareholder of the Company. In
connection with the acquisition by Vanenburg Ventures, B.V. ("VV") of
--
substantially all of the-outstanding equity of the Company, including
substantially all of Employee's equity ownership of the Company, (the
"Acquisition") The Company wishes to retain Employee as an Employee of the
-----------
Company following the Acquisition and ensure that Employee does not engage in
activities competitive with the Company for a period of time.
AGREEMENT
1. Term of Agreement. This Agreement shall commence on the date hereof
-----------------
and shall have a term of one (1) year the ("Original Term"). This Agreement may
-------------
be extended for additional one (1) year terms (each an "Additional Term") after
---------------
the expiration of the Original Term or any Additional Term if the parties hereto
mutually agree in writing to such extension.
2. Duties.
------
(a) Position. Employee shall be employed as Vice President, Research
--------
& Development, and as such will report to the Company's Chief Executive Officer.
(b) Obligations to the Company. Employee agrees to the best of his or
--------------------------
her ability and experience that he or she will at all times loyally and
conscientiously perform all of the duties and obligations required of and from
Employee pursuant to the terms hereof, and to the reasonable satisfaction of the
Company. During the term of Employee's employment relationship with the Company,
Employee further agrees that he will devote substantially all of his or her
business time and attention to the business of the Company, and Employee will
not directly or indirectly engage or participate in any business that is
competitive in any manner with the business of the Company. Nothing in this
Agreement will prevent Employee from accepting speaking or presentation
engagements in exchange for honoraria or from serving as a member of the board
of directors for entities not competitive in any manner with the business of the
Company, serving on boards of charitable organizations, or from owning no more
than one percent (1%) of the outstanding equity securities of a corporation
whose stock is listed on a national stock exchange. Employee will comply with
and be bound by the Company's operating policies, procedures and practices from
time to time in effect during the term of Employee's employment.
3. At-will Employment. The Company and Employee acknowledge that
------------------
Employee's employment is and shall continue to be at-will, as defined under
applicable law, and
<PAGE>
that Employee's employment with the Company may be terminated by either party at
any time for any or no reason with thirty (30) days notice. If Employee's
employment terminates for any reason, Employee shall not be entitled to any
payments, benefits, damages, award or compensation other than as provided in
this Agreement. The rights and duties created by this Section 3 may not be
modified in any way except by a written agreement executed by the President of
the Company and approved by the Board of Directors of the Company.
4. Compensation. For the duties and services to be performed by Employee
------------
hereunder, the Company shall pay Employee, and Employee agrees to accept, the
salary, stock options, bonuses and other benefits described below in this
Section 4.
(a) Salary. Employee shall receive a monthly salary equal to his or
------
her salary prior to the date of this Agreement. Employee's monthly salary will
be payable pursuant to the Company's normal payroll practices. The base salary
shall be reviewed by the Company's Board of Directors or its Compensation
Committee following the closing of the Acquisition, and any change will be
effective as of the date determined appropriate by the Board or its Compensation
Committee.
(b) Equity Ownership. Following the date of this Agreement, the Board
----------------
of Directors will approve the purchase by Employee of shares of the Company's
Common Stock in an amount determined by the Board (the "Shares"). The Shares
------
will be subject to the Company's standard vesting provisions, provided however,
----------------
that in the event that the Company is merged or acquired in a transaction where
the Company's shareholders immediately prior to such transaction hold less than
50% of the outstanding capital stock of the surviving entity immediately after
such transaction, or all or substantially all of the Company's assets are sold,
all of the Shares will be released from such repurchase option. Otherwise,
vesting will depend on Employee's continued employment with the Company.
(c) Bonuses. Employee's entitlement to incentive bonuses from the
-------
Company is discretionary and shall be determined by the Board or its
Compensation Committee in good faith based upon the extent to which Employee's
individual performance objectives and the Company's profitability objectives and
other financial and nonfinancial objectives are achieved during the applicable
bonus period.
(d) Additional Benefits. Employee will be eligible to participate in
-------------------
the Company's employee benefit plans of general application, including without
limitation, those plans covering medical, disability and life insurance in
accordance with the rules established for individual participation in any such
plan and under applicable law. Employee will be eligible for vacation and sick
leave in accordance with the policies in effect during the term of this
Agreement and will receive such other benefits as the Company generally provides
to its other employees of comparable position and experience.
(e) Reimbursement Of Expenses. Employee shall be authorized to incur
-------------------------
on behalf and for the benefit of, and shall be reimbursed by, the Company for
reasonable expenses, provided that such expenses are substantiated in accordance
with Company policies.
<PAGE>
5. Termination of Employment and Severance Benefits.
------------------------------------------------
(a) Termination of Employment. This Agreement may only be terminated
-------------------------
during its Original Term or any Additional Term as follows:
(i) By the Company for Cause (as defined in Section 6 below)
------------------------
("Termination for Cause");
(ii) By the Company for any reason other than for Cause, which
determination may be made by the Company at any time at the Company's sole
discretion, for any or no reason ("Termination Without Cause");
(iii) By Employee for Good Reason ("Resignation For Good
--------------------
Reason"); or
- ------
(iv) By Employee for any reason other than Good Reason (as
defined in Section 6 below) ("Voluntary Resignation").
(b) Severance Benefits. Employee shall be entitled to receive
------------------
severance benefits upon termination of employment only as set forth in this
Section 5(b):
(i) Voluntary Resignation, Termination for Cause. If Employee's
--------------------------------------------
employment is terminated by him or her pursuant to a Voluntary Resignation or by
the Company for Cause, then Employee shall not be entitled to receive payment of
any severance benefits. Employee will receive payment(s) for all salary and
unpaid vacation accrued as of the date of Employee's termination of employment
and Employee's benefits will be continued under the Company's then existing
benefit plans and policies in accordance with such plans and policies in effect
on the date of termination and in accordance with applicable law.
(ii) Resignation for Good Reason, Termination Without Cause. If
------------------------------------------------------
Employee's employment is terminated by Employee for Good Reason or by the
Company Without Cause, Employee (or Employee's heirs or assigns if such
termination is pursuant to the death of Employee) will be entitled to receive
severance benefits as follows:
(A) Employee will be entitled to receive Employee's regular
monthly salary for the greater of (x) the remainder of the Term during which
Employee is terminated, or (y) six (6) months (the "Severance Period"). Such
----------------
payments shall be made ratably over the Severance Period according to the
Company's standard payroll schedule.
(B) Employee will be entitled to receive payment on the
date of termination of any bonus payable under Section 4(c).
(C) Health insurance benefits with the same coverage
provided to Employee prior to the termination (e.g. medical, dental, optical,
mental health) and in all other respects significantly comparable to those in
place immediately prior to the termination will be provided at the Company's
cost over the Severance Period.
<PAGE>
(D) All amounts payable to Employee pursuant to those
certain Promissory Notes with aggregate principal amount of even date herewith
(the "Notes") including without limitation any interest due thereon, shall
become immediately due and payable without regard to the terms of the Notes and
such amounts will be immediately paid to Employee.
6. Definitions.
-----------
(a) For purposes of this Agreement, "Cause" for Employee's
termination will exist at any time after the happening of one or more of the
following events:
(i) Employee's willful misconduct in performance of his or her
duties hereunder, including Employee's refusal to comply in any material respect
with the legal directives of the Company's Board of Directors so long as such
directives are not inconsistent with the Employee's position and duties, which
improper performance or refusal to comply has a material adverse effect on the
Company and is not remedied within ten (10) working days after written notice
from the Board of Directors, which written notice shall state that failure to
remedy such conduct may result in Termination for Cause;
(ii) Dishonest or fraudulent conduct, a deliberate attempt to do
an injury to the Company, or conduct that materially discredits the Company or
is materially detrimental to the reputation of the Company, including conviction
of a felony; or
(iii) Employee's incurable material breach of any element of the
Company's Confidential Information and Invention Assignment Agreement.
Employee's death or temporary or permanent disability shall NOT
---
be Cause for termination.
(b) For purposes of this Agreement, Employee shall be deemed to have
terminated his or her employment for "Good Reason" if such termination is
-----------
related to (i) a material adverse change in Employee's position causing such
position to be of less stature or of less responsibility, (ii) a reduction of
Employee's base compensation, benefits or perquisites, (iii) a relocation of
Employee's primary site for performing services on behalf of the Company to a
facility or location more than fifty (50) miles from the Company's current San
Jose location, or (iv) the breach by the Company of a term of this Agreement.
7. Confidentiality Agreement. Employee shall sign, or has signed, a
-------------------------
Confidential Information and Invention Assignment Agreement (the
"Confidentiality Agreement") substantially in the form attached hereto as
-------------------------
Exhibit A. Employee hereby represents and warrants to the Company that he or she
- ---------
has complied with all obligations under the Confidentiality Agreement and agrees
to continue to abide by the terms of the Confidentiality Agreement and further
agrees that the provisions of the Confidentiality Agreement shall survive any
termination of this Agreement or of Employee's employment relationship with the
Company.
8. Noncompetition Covenant. Employee has been actively involved in the
-----------------------
direction of the Company's business and has thereby acquired considerable
experience, knowledge and skill. VV wish to protect its investment in the
Company, by restricting the activities of Employee that might compete with or
otherwise harm such business, and, as part of
<PAGE>
the consideration and inducement to VV for the Acquisition, Employee is willing
to agree to and abide by such restrictions as hereinafter provided.
(a) General. Employee acknowledges that Employee held a substantial
number of shares of the capital stock of the Company prior to the Acquisition.
Employee further acknowledges that the value of the consideration paid by VV in
connection with the Acquisition is substantial and that preservation of the
Goodwill associated with the Company is important to VV. Accordingly, VV and the
- --------
Company desire that Shareholder enter into a non-competition agreement with the
Company as set forth in this Section 8 and Employee is willing to agree to such
non-competition provisions as are set forth herein.
(b) Non-Compete. In connection with the Acquisition and the several
-----------
agreements made herein, Employee agrees that for a period of twelve (12) months
from the termination of his or her employment under this Agreement Employee will
not engage in the Restricted Business in a Restricted Territory (as such terms
are herein defined) as an employee, proprietor, officer, consultant, agent,
director or shareholder or representative of, a person, corporation, partnership
or other entity, including, without limitation, a family member. It is agreed
that activities otherwise permitted during Employee's employment with the
Company will not constitute a violation of the terms of this Section following
the termination of Employee's employment with the Company.
(c) Certain Definitions. For purposes of this Section 8:
-------------------
(i) "Restricted Business" shall mean the development or design
of hyper-navigational data processing software.
(ii) "Restricted Territory" shall mean the counties, cities and
--------------------
states of the United States of America, including, without limitation,
California, and each political subdivision and/or nation of Canada, Mexico,
Australia, New Zealand, Taiwan, China, Asia, Europe, Central and South America,
and Africa.
(d) Solicitation. For a period of twelve (12) months following the
------------
termination of Employee's employment under this Agreement, Shareholder shall not
(i) hire, engage or participate in any effort or act to solicit the customers,
suppliers, associates or employees of the Company to cease doing business, or
their association or employment with the Company or (ii) encourage or solicit
any customer, supplier, associate or employee of the Company to breach any
contractual or employment obligation with the Company.
(e) Severability. The parties intend that the covenants contained in
------------
the preceding paragraphs shall be construed as a series of separate covenants,
one for each county, city, state, nation, and other political subdivision of the
Restricted Territory. Except for geographic coverage, each such separate
covenant shall be deemed identical in terms to the covenant contained in the
preceding paragraphs. If, in any judicial proceeding, a court shall refuse to
enforce any of the separate covenants (or any part thereof) deemed included in
said paragraphs, then such unenforceable covenant (or such part) shall be deemed
eliminated from this Agreement for the purpose of those proceedings to the
extent necessary to permit the remaining separate covenants (or portions
thereof) to be enforced by such court. It is the intent
<PAGE>
of the parties that the covenants set forth herein be enforced to the maximum
degree permitted by applicable law.
(f) Reformation. In the event that the provisions of this Section 8
-----------
should ever be deemed to exceed the scope, time or geographic limitations of
applicable law regarding covenants not to compete, then such provisions shall be
reformed to the maximum scope, time or geographic limitations, as the case may
be, permitted by applicable laws.
(g) Representations of Employee. Employee represents that: (i) he or
---------------------------
she is familiar with the covenants not to compete and not to solicit set forth
in this Agreement, (ii) he or she is fully aware of its obligations hereunder,
including, without limitation, the length of time, scope and geographic coverage
of these covenants, (iii) he or she finds the length of time, scope and
geographic coverage of these covenants to be reasonable, (iv) he or she is
receiving specific, bargained-for consideration for its covenants not to compete
and not to solicit, and (v) execution of this Agreement and performance of
Employee's obligations hereunder and thereunder, will not conflict with, or
result in a violation or breach of, any other agreement to which Employee is a
party or any judgment, order or decree to which Employee is subject.
(h) Breach. Employee acknowledges that in the event of a material
------
breach of any of the provisions of this Section 8 by Employee, the Company would
sustain irreparable harm, and, therefore, Employee agrees that in addition other
remedies which the Company may have under this Agreement or otherwise, the
Company shall be entitled to obtain equitable relief, including specific
performance and injunctions restraining Employee from committing or continuing
any such violation of this Section 8.
9. Conflicts. Employee represents that his or her performance of all the
---------
terms of this Agreement will not breach any other agreement to which Employee is
a party. Employee has not, and will not during the term of this Agreement, enter
into any oral or written agreement in conflict with any of the provisions of
this Agreement. Employee further represents that he or she is entering into or
has entered into an employment relationship with the Company of his or her own
free will and that he or she has not been solicited as an employee in any way by
the Company.
10. Successors. Any successor to the Company (whether direct or indirect
----------
and whether by purchase, lease, merger, consolidation, liquidation or otherwise)
to all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of Employee's rights hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
11. Miscellaneous Provisions.
------------------------
(a) No Duty to Mitigate. Employee shall not be required to mitigate
-------------------
the amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that Employee may
receive from any other source.
<PAGE>
(b) Amendments and Waivers. Any term of this Agreement may be amended
----------------------
or waived only with the written consent of the parties.
(c) Sole Agreement. This Agreement, including any Exhibits hereto,
--------------
constitutes the sole agreement of the parties and supersedes all oral
negotiations and prior writings with respect to the subject matter hereof.
(d) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by a nationally-recognized delivery service (such as Federal
Express or UPS), or forty-eight (48) hours after being deposited in the U.S.
mail as certified or registered mail with postage prepaid, if such notice is
addressed to the party to be notified at such party's address as set forth below
or as subsequently modified by written notice.
(e) Choice of Law. The validity, interpretation, construction and
-------------
performance of this Agreement shall be governed by the laws of the State of
California, without giving effect to the principles of conflict of laws.
(f) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(g) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.
(h) Arbitration. Any dispute or claim arising out of or in connection
-----------
with this Agreement will be finally settled by binding arbitration in San
Francisco, California in accordance with the rules of the American Arbitration
Association by one arbitrator appointed in accordance with said rules. The
arbitrator shall apply California law, without reference to rules of conflicts
of law or rules of statutory arbitration, to the resolution of any dispute.
Judgment on the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. Notwithstanding the foregoing, the parties may
apply to any court of competent jurisdiction for preliminary or interim
equitable relief, or to compel arbitration in accordance with this paragraph,
without breach of this arbitration provision. This Section 11(h) shall not apply
to the Confidentiality Agreement.
(i) Advice of Counsel. EACH PARTY TO THIS AGREEMENT ACKNOWLEDGES
-----------------
THAT, IN EXECUTING THIS AGREEMENT, SUCH PARTY HAS HAD THE OPPORTUNITY TO SEEK
THE ADVICE OF INDEPENDENT LEGAL COUNSEL, AND HAS READ AND UNDERSTOOD ALL OF THE
TERMS AND PROVISIONS OF THIS AGREEMENT. THIS AGREEMENT SHALL NOT BE CONSTRUED
AGAINST ANY PARTY BY REASON OF THE DRAFTING OR PREPARATION HEREOF.
<PAGE>
[Signature Page Follows]
<PAGE>
The parties have executed this Agreement the date first written above.
TOPTIER SOFTWARE, INC.
By: /s/ David Blumstein
---------------------------------------
Title: President & CEO
-------------------------------------------
Address: 6203 San Ignacio Avenue
-----------------------------------
San Jose, CA 95119
---------------------------------
UDI ZIV
/s/ UDI ZIV
By: ---------------------------------------
Address: 28 Brandes St.
----------------------------------
Raanana, Israel
-------------------------------------------
<PAGE>
EXHIBIT 10.24
July 28, 1997
Joseph J. Zarb
26 - 11 Rose Lane
Park Ridge Condominiums
Danbury, CT 06811
Dear Joseph,
TopTier is pleased to offer you the position of Vice President, Partner
Accounts, reporting to me with a starting salary of $120,000 per year. You will
also be eligible to participate in the company's to be determined employee bonus
program, which will provide for a bonus of 10 - 20% of your annual salary,
provided that the company meets or exceeds its revenue objectives. In addition,
you are granted 65,000 shares of stock at a value of 31 cents per share under
TopTier's stock option plan. Your option will be subject to a four-year vesting
schedule. Under the vesting schedule, 25% of your options will vest after 12
months of employment, with the balance vesting at the rate of 2.08% per month of
employment thereafter. In the event that there is a change of control of the
company, 50% of your unvested shares will immediately vest.
TopTier offers a health insurance plan with Blue Shield including vision,
medical and dental insurance. The plan is currently run by an HMO, but it is our
intent to switch that to a PPO plan in the next three months. In addition,
TopTier will also be implementing a 401(K) tax deferred retirement plan within
the year. TopTier offers 2 weeks paid vacation per year, and up to eleven paid
holidays per year including: President's Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving (2 days), Christmas (days), and New Years Day. In
addition, depending on your start date, TopTier offers one floating holiday per
year.
- Page 1 -
<PAGE>
- Page 2 -
This letter determines the terms of your employment with the company, and may
not be modified or amended, except by a written agreement, signed by the company
and you. Your employment with TopTier is at will and may be terminated by you or
the company at any time. You will not be eligible for severance if you
voluntarily terminate or are terminated for either cause or dereliction of duty.
A corporate executive severance plan has not yet been implemented but your
severance package will be equal to the severance package chosen for Vice
President who runs major departments (ex. Sales, Marketing, Finance,
Operations). In the event that the Company and you choose relocation is
necessary the company agrees to either reimburse or provide you with all
reasonable relocation expenses, such as: Travel, Home Furnishings and should you
have been unable to find an acceptable domicile the company will pay up to 90
days living expenses.
Joseph, we feel that this position will offer you an excellent opportunity for
growth, as well as the excitement and fulfillment of working with a new and
growing company both personal and financial. We are confident that the skills
and background you bring to us will be instrumental to TopTier's success. Please
keep a copy and return the signed original of this offer letter to me by August
1, 1997, and contingent upon your acceptance, we look forward to you starting on
a mutually agreed upon start date.
Sincerely,
/s/ David Blumstein /s/ Joseph Zarb
- ------------------------------------ ------------------------------
Dave Blumstein, President and CEO Accepted by Joseph J. Zarb
<PAGE>
EXHIBIT 21.1
List of Subsidiaries
--------------------
1. Top Tier Israel, Ltd., organized under the laws of Israel.
2. Top Tier Software, Ltd., organized under the laws of the United Kingdom.
3. Quicksoft, a California corporation.
4. Learning Objects, Inc., a California corporation.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
San Jose, California
April 4, 2000
/s/ Arthur Andersen LLP
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