<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
AURUM SOFTWARE, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
---------------
<TABLE>
<C> <C> <C>
CALIFORNIA (PRIOR TO REINCORPORATION) 7372 77-0292260
DELAWARE (AFTER REINCORPORATION) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
(STATE OR OTHER JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
</TABLE>
---------------
AURUM SOFTWARE, INC.
3385 SCOTT BOULEVARD
SANTA CLARA, CA 95054
(408) 986-8100
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES AND
PRINCIPAL PLACE OF BUSINESS)
---------------
MARY E. COLEMAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AURUM SOFTWARE, INC.
3385 SCOTT BOULEVARD
SANTA CLARA, CA 95054
(408) 986-8100
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE OF PROCESS)
---------------
COPIES TO:
DOUGLAS H. COLLOM, ESQ. SCOTT T. SMITH, ESQ.
JESSICA L. ARMSTRONG, ESQ. MICHAEL J. SULLIVAN, ESQ.
ROBERT F. KORNEGAY, ESQ. DAVINA K. KAILE, ESQ.
MARK A. CLAWSON, ESQ. PILLSBURY MADISON & SUTRO LLP
WILSON SONSINI GOODRICH & ROSATI 2700 SAND HILL ROAD
PROFESSIONAL CORPORATION MENLO PARK, CA 94025
650 PAGE MILL ROAD (415) 233-4500
PALO ALTO, CA 94304
(415) 493-9300
---------------
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after
the effective date of this Registration Statement.
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
================================================================================
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.001 par value............... $33,200,000 $11,450
================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee. The estimate is made pursuant to Rule 457(o) of the
Securities Act of 1933, as amended.
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
SEPTEMBER 13, 1996
2,625,000 Shares
[LOGO]
Common Stock
--------
Of the 2,625,000 shares of Common Stock offered hereby, 2,500,000 are being
sold by Aurum Software, Inc. ("Aurum" or the "Company") and 125,000 shares are
being sold by a Selling Stockholder. See "Principal and Selling Stockholders."
The Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholder. Prior to this offering, there has been no public market
for the Common Stock of the Company. It is currently estimated that the initial
public offering price will be between $ and $ per share. See
"Underwriting" for the factors to be considered in determining the initial
public offering price. The Company has applied for quotation of its Common
Stock on the Nasdaq National Market under the symbol "AURM."
--------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.SEE "RISK
FACTORS" BEGINNING ON PAGE 5.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================
PRICE UNDERWRITING PROCEEDS TO
TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share....................... $ $ $ $
- ---------------------------------------------------------------------------------------------
Total(3)........................ $ $ $ $
=============================================================================================
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities under the Securities Act of 1933,
as amended. See "Underwriting."
(2) Before deducting expenses payable by the Company, estimated at $1 million.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 393,750 additional shares of Common Stock solely to cover over-
allotments, if any. If the option is exercised in full, the Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Stockholder will be $ , $ , $ , and $ ,
respectively. See "Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject
to the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1996.
Alex. Brown & Sons
INCORPORATED
Cowen & Company
Wessels, Arnold & Henderson
THE DATE OF THIS PROSPECTUS IS , 1996
<PAGE>
AURUM CUSTOMER ENTERPRISE
THE AURUM CUSTOMER ENTERPRISE IS AN INTEGRATED SUITE OF APPLICATIONS WHICH
HELPS AUTOMATE
THE FIELD SALES, TELEMARKETING, TELESALES AND CUSTOMER SUPPORT FUNCTIONS OF THE
BUSINESS.
FIELD SALES TELEMARKETING SUPPORT
SALESTRAK TELETRACK SUPPORTTRAK
BUSINESS INTELLIGENCE SYSTEM
(OLAP, REPORTING AND ANALYSIS)
SMART ENCYCLOPEDIA
(INTERNET/INTRANET MARKETING AND SALES INFORMATION)
CUSTOMER ENTERPRISE SERVER
.Pricing .Proposals .Quotes .Forecasts .Methodology
.Lists .Products .Campaigns .Partners .Competitors
DBSYNC WEBTRAK EVENTTRAK CTI TRAK
Patent Pending On-Line Sales Workflow Computer-
Mobile and Marketing Notification Telephone
Synchronization Lead Qualification and Escalation Integration
Internet, LAN/WAN Self-Service
Connectivity
OTHER ENTERPRISE
APPLICATIONS
AURUM
SOFTWARE
TURNS YOUR CUSTOMERS INTO GOLD
HTTP://WWW.AURUM.COM*
*INFORMATION CONTAINED IN THE COMPANY'S WEBSITE SHOULD NOT BE DEEMED TO BE PART
OF THIS PROSPECTUS.
[collage graphic/photos]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
Improved Customer Retention and Repeat Sales
Shortened Sales Cycle and Reduced Training Costs
Improved Forecasting and Visibility
Faster and More Timely Access to Information
Improved Customer Interaction
SALES AND MARKETING
INFORMATION PROCESS
[Collage graphic/photo depicting enterprise server linked to internet and
intranet clients, superimposed over depiction of globe]
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and the financial statements and notes thereto appearing elsewhere
in this Prospectus. Prospective investors should consider carefully the
information discussed under "Risk Factors."
THE COMPANY
Aurum Software, Inc. ("Aurum" or the "Company") is a leading provider of
enterprise-wide sales and marketing information software. The Company develops,
markets and supports the Aurum Customer Enterprise, an integrated suite of
applications which helps automate the field sales, telemarketing, telesales and
customer support functions of a business. The Company's products are based on
advanced client/server and Internet/Intranet technologies and provide
businesses with integrated, adaptable and mobile software solutions to meet
their competitive business goals. The Aurum Customer Enterprise is designed to
address the requirements of businesses ranging from medium-sized enterprises to
large multinational corporations and has been installed to date in deployments
consisting of as many as 3,400 users. The Company's products are designed to
enable customers to increase revenues, shorten sales cycles, increase repeat
sales, improve forecasting accuracy and visibility, decrease sales and
marketing costs, increase customer satisfaction, obtain timely market
intelligence and gain a strategic competitive advantage.
Many companies have effectively applied client/server technologies to
automate "back office" operations, including manufacturing, finance, order
entry and human resources, to streamline corporate operations and reduce
operating costs. The automation of these back office operations has not
addressed the competitive challenges of increasing revenue generation and
improving customer satisfaction through automation of the "front office" sales
and marketing functions. Companies are increasingly focusing on their front
office sales and marketing operations, often their largest operating expense
category, as the next major business function to be automated and are also
recognizing the importance of integrating them with their back office
applications. In a May 1996 research report, Aberdeen Group, Inc., an
independent market research firm, projected that the market for packaged sales
and marketing application software will grow at an average compounded rate of
50%, from $140 million in 1995 to $700 million in 1999.
The Company's objective is to become the market leader in sales and marketing
information systems. Aurum's products enable businesses to improve customer
acquisition and retention processes by integrating, automating and managing
sales and marketing operations among customers, headquarters, branch offices,
field-based employees and distribution partners. The Company's applications
permit companies to leverage the latest available technologies, including the
Internet, thereby providing immediate access to external sources of information
to generate and qualify leads and to obtain market intelligence about potential
customers and competitors. The Company's patent-pending database
synchronization technology, dbSync, provides real-time access to customer
information for all users. Aurum's object-oriented open architecture enables
integration with other enterprise applications and offers an interface that may
be adapted to company-specific sales and marketing models and changing business
requirements.
The Company markets its products through a direct sales force in North
America, and through indirect sales channels outside of North America. The
Company has developed a comprehensive methodology for rapid implementation of
its sales and marketing applications and provides an extensive array of
services to its customers including business consulting, requirements
definition, installation, consulting, training and customer support. Aurum's
system integration partners include Cambridge Technology Partners, Deloitte &
Touche LLP, IBM and KPMG Peat Marwick LLP and the Company's technology partners
include Business Objects, Centura, Informix, Microsoft, Netscape, Oracle,
Sybase, Trilogy and Xcellenet.
The Company has over 100 customers and has deployed its applications in a
diverse set of industries including financial services, chemicals, high
technology, health care, information services, manufacturing, publishing,
telecommunications and utilities. The Company's customers include A.C. Nielsen,
CUC International, Eastman Chemical, Fleet Bank, GE Capital, Hewlett Packard
Company, Hilti, Lanier Worldwide, MCI Telecommunications, Netscape, Sprint
Spectrum L.P. and Sun Microsystems.
The Company was incorporated in California in 1991 and will reincorporate in
Delaware in 1996. Unless the context otherwise requires, references in this
Prospectus to "Aurum" and the "Company" refer to Aurum Software, Inc., a
Delaware corporation, and its predecessor, Aurum Software, Inc., a California
corporation. The Company's principal executive offices are located at 3385
Scott Boulevard, Santa Clara, California 95054, and its telephone number is
(408) 986-8100.
3
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the 2,500,000 shares
Company...........................
Common Stock offered by the Selling 125,000 shares
Stockholder.......................
Common Stock to be outstanding
after this offering............... 11,108,002 shares(1)
Use of proceeds.................... For working capital and other general
corporate purposes, including repayment of
debt. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol............................ AURM
</TABLE>
SUMMARY FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
-------------------------------------- ------------------
1992 1993 1994 1995 1995 1996
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues......... $3,180 $ 4,901 $ 5,912 $10,475 $ 3,785 $10,938
Income (loss) from
operations............ (610) (4,258) (4,305) (4,358) (2,298) (569)
Net income (loss)...... (624) (4,262) (4,388) (4,452) (2,349) (607)
Pro forma net income
(loss) per share(2)... $ $
Pro forma shares used
in per share
calculation(2)........
<CAPTION>
QUARTERS ENDED
----------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Total revenues......... $1,866 $ 1,919 $ 2,922 $ 3,768 $ 4,883 $ 6,055
Income (loss) from
operations............ (881) (1,417) (872) (1,188) (650) 81
Net income (loss)...... (904) (1,445) (898) (1,205) (663) 56
Pro forma net income
(loss) per share(2)...
Pro forma shares used
in calculation(2).....
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------------------
AS
ACTUAL PRO FORMA(2) ADJUSTED(3)
-------- ------------ -----------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 2,006 $2,006 $
Working capital............................ 2,150 2,150
Total assets............................... 12,762 12,762
Borrowings under line of credit............ 1,500 1,500
Mandatorily redeemable convertible
preferred stock........................... 29,592 --
Stockholders' equity (deficit)............. (25,449) 4,143
</TABLE>
- --------
(1) Based on shares outstanding as of August 31, 1996. Excludes as of August
31, 1996 592,851 shares of Common Stock issuable upon exercise of options
outstanding under the Company's 1995 Stock Plan at a weighted average
exercise price of $3.01. See "Management--Stock Plans," "Certain
Transactions," "Description of Capital Stock" and Note 7 of Notes to
Financial Statements. Also excludes 33,455 shares available for issuance
under the 1995 Stock Plan as of August 31, 1996 and an additional 2,664,000
shares reserved after August 31, 1996 for issuance under the 1995 Stock
Plan, the 1996 Director Option Plan and the 1996 Employee Stock Purchase
Plan.
(2) Reflects the conversion of the Company's outstanding Preferred Stock into
4,958,853 shares of Common Stock upon completion of this offering. See Note
2 of Notes to Financial Statements for an explanation of shares used to
calculate pro forma net income per share and pro forma shares.
(3) Adjusted to give effect to the estimated net proceeds of this offering
based upon an assumed initial public offering price of $ per share. See
"Use of Proceeds" and "Capitalization."
----------------
Except as otherwise specified, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting." Except
as otherwise noted, all information in this Prospectus has been adjusted to
give effect to a one-for-four reverse split of the Company's Common Stock and
reincorporation of the Company in the State of Delaware to be effected prior to
the completion of this offering, and the automatic conversion of the Preferred
Stock into Common Stock and certain changes to the authorized capital stock of
the Company upon completion of this offering. See "Description of Capital
Stock" and Note 6 of Notes to Financial Statements.
4
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus. This Prospectus contains
forward-looking statements and the Company's actual results could differ
materially from those anticipated in these forward-looking statements as a
result of numerous factors, including those set forth in the following risk
factors and elsewhere in this Prospectus.
Limited Operating History. The Company was incorporated in October 1991 and
did not begin shipping its software products until January 1992. Although the
Company has experienced significant growth in revenues during the past two
years, the Company does not believe that prior growth rates are sustainable or
indicative of future operating results. The Company has incurred losses in
each year since inception and, as of June 30, 1996, had an accumulated deficit
of $25.2 million. The Company's limited operating history makes the prediction
of future operating results difficult, if not impossible. Although the Company
achieved limited profitability during the second quarter of 1996, there can be
no assurance that the Company will be able to sustain profitability on a
quarterly basis or achieve profitability on an annual basis. See "Selected
Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Potential Fluctuations in Quarterly Results; Seasonality. The Company's
quarterly operating results have varied significantly in the past and may vary
significantly in the future depending upon a number of factors, many of which
are beyond the Company's control. These factors include, among others, the
ability of the Company to develop, introduce and market new and enhanced
versions of its software on a timely basis; the demand for the Company's
software; the size, timing and contractual terms of significant orders; the
timing and significance of software product enhancements and new software
product announcements by the Company or its competitors; changes in pricing
policies by the Company or its competitors; changes in the Company's business
strategies; budgeting cycles of its potential customers; customer order
deferrals in anticipation of enhancements or new software products; changes in
the mix of software products and services sold; changes in the mix of revenue
attributable to domestic and international sales; the impact of acquisitions
of competitors; seasonal trends; the cancellations of licenses or maintenance
agreements; product life cycles; software defects and other product quality
problems; personnel changes; the ability of the Company to identify, recruit
and retain qualified sales, consulting, technical, marketing and management
personnel; investments to develop sales distribution channels; changes in the
level of operating expenses; and general domestic and international economic
and political trends. In particular, the timing of revenue recognition can be
affected by many factors, including the timing of contract execution and
delivery, and customer acceptance, if applicable. From time to time, the
Company enters into contracts with its customers which include certain post-
delivery obligations of the Company relating to the installation and
deployment of its software. In such situations, the Company may be required to
defer revenue recognition until such installation is complete. The timing
between initial customer contact and fulfillment of criteria for revenue
recognition can be lengthy and unpredictable, and revenues in any given
quarter can be adversely affected as a result of such unpredictability. In
addition, the Company's customers may decide not to honor contractual
obligations for license fees for various reasons, including changes in
business levels or business plans or implementation difficulties. While the
Company provides reserves and allowances for such instances, there can be no
assurance that such reserves and allowances will be adequate. In the event one
or more customers failed to honor such contractual obligations and the
Company's reserves and allowances proved inadequate, such failure could have a
material adverse effect on the Company's business, operating results and
financial condition. Software revenues are also difficult to forecast because
the market for client/server and sales and marketing software products is
rapidly evolving, and the Company's sales cycle, from initial contact to
purchase and implementation, varies substantially from customer to customer.
In the event of any downturn in potential customers' businesses or the economy
in general, planned purchases of the Company's products may be deferred or
canceled, which could have a material adverse effect on the Company's
business, operating results and financial condition. See "--Lengthy Sales and
Implementation Cycles."
5
<PAGE>
The Company has limited backlog. To achieve its quarterly revenue
objectives, the Company is dependent upon obtaining orders in any given
quarter for shipment in that quarter. Furthermore, the Company has often
recognized a substantial portion of its revenues in the last month or weeks of
a quarter. As a result, software revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter. Due to the foregoing
factors, quarterly revenue and operating results are not predictable with any
significant degree of accuracy. The Company's expense levels are based, in
significant part, on the Company's expectations as to future revenues and are
therefore relatively fixed in the short term. If revenue levels are below
expectations, the Company's business, operating results, including net income,
and financial condition are likely to be materially adversely affected. As a
result, the Company believes that period-to-period comparisons of its results
of operations are not necessarily meaningful and should not be relied upon as
indications of future performance. There can be no assurance that the Company
will be able to sustain profitability on a quarterly basis or achieve
profitability on an annual basis in the future. Due to all the foregoing
factors, it is likely that in some future quarter the Company's total revenues
or operating results will be below the expectations of public market analysts
and investors. In such event, or in the event that adverse conditions prevail
or are perceived to prevail generally or with respect to the Company's
business, the price of the Company's Common Stock would likely be materially
and adversely affected.
The Company's business has experienced and is expected to continue to
experience seasonality, in part due to customer buying patterns. In recent
years, the Company has generally had stronger demand for its software during
the quarters ending in June and December and weaker demand in the quarters
ending in March and September. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Lengthy Sales and Implementation Cycles. The Company's business includes
large, complex installations of its software products. The license and
implementation of the Company's software generally involves a significant
commitment of resources by its prospective customers and often requires the
Company to provide a significant level of education to prospective customers
regarding the use and benefits of the Company's software. In addition, the
implementation of the Company's software may involve substantial reengineering
efforts which may be performed by the customer or third-party system
integrators. The cost to the customer of the Company's software is typically
only a portion of the overall hardware, software, development, training and
integration costs of implementing a large-scale sales and marketing
information system. For these and other reasons, the period between initial
contact and the implementation of the Company's software is often lengthy
(ranging to date from between three and twelve months) and is subject to a
number of significant delays over which the Company has little or no control.
Because of the complexity of the Company's software products, larger
implementations can take multiple quarters. Increases in the size and
complexity of the Company's license transactions and delays in its customers'
implementation of client/server computing environments could serve to further
lengthen the implementation cycles. Delays in the sale or implementation of a
limited number of license transactions could have a material adverse effect on
the Company's business, operating results and financial condition and cause
the Company's operating results to vary significantly from quarter to quarter.
Therefore, the Company believes that its quarterly operating results are
likely to vary significantly in the future. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business--Sales
and Marketing" and "--Consulting Services, Training and Support."
Emerging Market for Sales and Marketing Information Systems; Market
Acceptance. The market for sales and marketing information systems is
relatively new and is characterized by ongoing technological developments,
frequent new product announcements and introductions, evolving industry
standards and changing customer requirements. The Company's future financial
performance will depend in large part on continued growth in the number of
organizations adopting sales and marketing software products on an enterprise-
wide basis and in the number of applications developed for use. There can be
no assurance that the sales and marketing information system market will
continue to grow. If the sales
6
<PAGE>
and marketing information system market fails to grow or grows more slowly
than the Company currently anticipates, the Company's business, operating
results and financial condition would be materially and adversely affected. In
addition, the Company believes that market acceptance of sales and marketing
software depends on the ability to provide mobile sales representatives with
access to enterprise-wide information and the willingness of sales
professionals to utilize software-based solutions such as the Company's.
Certain of the Company's larger customers have adopted the Company's software
on an incremental basis. There can be no assurance that the Company's
customers will expand usage of the Company's software on an enterprise-wide
basis or implement new software products introduced by the Company. The
failure of the Company's software to perform according to customer
expectations or otherwise to be deployed on an enterprise-wide basis would
have a material adverse effect on the ability of the Company to increase
revenues from new as well as existing customers. In addition, the failure of
the Company's software to achieve market acceptance for any reason would have
a material adverse effect on the Company's business, operating results and
financial condition. See "Business--Industry Background" and "--Strategy."
Rapid Technological Change; New Versions and New Products. The software
market in which the Company competes is characterized by rapid technological
change, frequent introductions of new products, changes in customer demands
and evolving industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable. For example, the Company's customers have
adopted a wide variety of hardware, software, database and networking
platforms, and as a result, to gain broad market acceptance, the Company must
continue to support and maintain its products on a variety of such platforms.
The Company's future success will depend on its ability to address the
increasingly sophisticated needs of its customers by supporting existing and
emerging hardware, software, database and networking platforms and by
developing and introducing enhancements to its products and new products on a
timely basis that keep pace with technological developments, evolving industry
standards and changing customer requirements. The success of the Company's
products may also depend, in part, on the Company's ability to introduce
products which are compatible with the Internet and on the broad acceptance of
the Internet and World Wide Web as a viable commercial marketplace. It is
difficult to predict with any assurance whether the Internet will prove to be
a viable commercial marketplace or whether the demand for Internet-related
products and services will increase or decrease in the future. There can be no
assurance that the Company will be successful in developing and marketing
enhancements to its products that respond to technological developments,
evolving industry standards or changing customer requirements, or that the
Company will not experience difficulties that could delay or prevent the
successful development, introduction and sale of such enhancements or that
such enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. If release dates of any
future product enhancements or new products are delayed or if these products
or enhancements fail to achieve market acceptance when released, the Company's
business, operating results and financial condition could be materially and
adversely affected. In addition, the introduction or announcement of new
product offerings or enhancements by the Company or the Company's competitors
or major hardware, systems or software vendors may cause customers to defer or
forgo purchases of the Company's products, which could have a material adverse
effect on the Company's business, operating results and financial condition.
See "Business--Products," "--Research and Development," "--Strategy" and "--
Technology."
Management of Growth; Dependence on Key Personnel. The Company's business
has grown rapidly in recent periods, with revenues increasing from $5.9
million in 1994 to $10.5 million in 1995 and $10.9 million in the first six
months of 1996. At the same time, the Company has experienced significant
growth in the number of employees, in the geographic scope of its operations
as well as its target customers, and in the scope of the operating and
financial systems required to support a growing organization. The Company's
growth has challenged and in some instances strained the Company's personnel
resources. The Company's future results of operations will depend in part on
the ability of its
7
<PAGE>
officers and other key employees to implement and expand operational, customer
support and financial control systems and to expand, train and manage its
employee base. The Company's future performance will also depend to a
significant extent on its ability to identify, attract, train and retain
highly skilled sales, consulting, technical, marketing and management
personnel. Competition for such personnel is intense, and the Company expects
that such competition will continue for the foreseeable future. The Company
has from time to time experienced difficulty in locating candidates with
appropriate qualifications. There can be no assurance that the Company will be
successful in identifying, attracting or retaining such personnel, and the
failure to identify, attract or retain such personnel could have a material
adverse effect on the Company's business, operating results or financial
condition. In order to manage future growth, if any, the Company will be
required to hire additional general and administrative personnel and to
augment or replace its existing financial and management systems. In this
regard, the Company's Chief Financial Officer joined the Company in July 1996.
There can be no assurance that the Company's existing management or any new
members of management will be able to augment or implement such systems
efficiently or on a timely basis or that they will otherwise be able to manage
any future growth or business expansion successfully. The failure to do so
could have a material adverse effect on the Company's business, operating
results or financial condition. In addition, the Company's future performance
will depend in significant part upon the continued service of its key
technical, sales and senior management personnel, none of whom is bound by an
employment agreement other than the Company's President and Chief Executive
Officer and its Chief Financial Officer, each of whose employment is
nonetheless at-will. The loss of the services of one or more of the Company's
executive officers could have a material adverse effect on the Company's
business, operating results or financial condition. See "Business--Sales and
Marketing" and "Management."
Competition. The market for the Company's client/server applications is
highly competitive, fragmented, and subject to rapid technological change and
frequent new product introductions and enhancements. The Company has a large
number of competitors which range from custom internal application development
efforts to packaged application vendors. The Company offers a suite of
applications which can be used as part of an integrated customer management
application suite or on a stand alone basis. The Company competes with
packaged application vendors that provide tactical departmental solutions in
specific market segments as well as with competitors that provide a broader
suite of integrated customer management applications. Many of these
competitors have longer operating histories, significantly greater financial,
technical, product development, marketing and other resources, greater name
recognition or a larger installed base of customers than the Company. As a
result, these competitors may be able to respond more quickly to new or
emerging technologies and to changes in customer requirements or to devote
greater resources to the development, promotion and sale of their products
than can the Company.
The Company's principal competitors in the sales force automation market
include Brock Control Systems, Inc., Metropolis Software, Inc. (recently
acquired by Clarify Inc.), SalesBook, Sales Kit Software Corporation,
SalesSoft, Saratoga Systems, Inc. and Siebel Systems, Inc. The Company also
depends for the marketing and implementation of its products upon a number of
third party systems integrators, including Cambridge Technology Partners,
Deloitte & Touche LLP, IBM and KPMG Peat Marwick LLP. Many of these firms also
have established relationships with the Company's competitors. There can be no
assurance that these third parties, many of which have significantly greater
financial resources than the Company, will not in the future compete directly
with the Company or otherwise discontinue their support of the Company's
products. The Company also faces competition from the customer support
application vendors, which are attempting to expand from their customer
support market into the sales automation area either through internal product
development or through acquisitions. These customer support competitors
include Astea International, Inc., Clarify Inc., Scopus Technology, Inc. and
The Vantive Corporation. Over time, the Company expects large enterprise
software vendors such as Oracle Corporation and SAP AG to extend their
enterprise application suites by offering sales force automation,
telemarketing and customer support, with the appropriate integration to
leading
8
<PAGE>
financial, order entry and manufacturing applications. In addition, because
the barriers to entry in the software market are relatively low, additional
competitors may emerge as the sales and marketing software market continues to
develop and expand. It is also possible that acquisitions of competitors by
large software companies or alliances among competitors could occur. The
Company expects that significant consolidation in its industry will occur over
the next few years and increased competition from new entrants or through
strategic acquisitions or alliances could result in price erosion, reduced
gross margins or loss of market share, any of which could have a material
adverse effect on the Company's business, operating results or financial
condition. See "Business--Competition."
Product Concentration. Since the beginning of 1995, the majority of the
Company's revenues have been attributable to sales of SalesTrak, which is
typically the first of the Company's software products to be deployed within a
customer's organization, with the greatest number of users and which often
serves as a foundation for other applications. The Company currently expects
SalesTrak to account for a significant portion of the Company's future
revenues. As a result, factors adversely affecting the pricing of or demand
for the SalesTrak product, such as competition or technological change, could
have a material adverse effect on the Company's business, operating results
and financial condition. A decline in sales of SalesTrak could also have a
material adverse effect on sales of other Company products that may be sold to
SalesTrak customers. The Company's future financial performance will depend,
in significant part, on the successful development, introduction and customer
acceptance of new and enhanced versions of the Company's SalesTrak product and
other software products. There can be no assurance that the Company will
continue to be successful in marketing SalesTrak or any new or enhanced
software products. See "Business--Products" and "--Competition."
Expansion of Distribution Channels. To date, the Company has sold its
products primarily through its direct sales organization and has supported its
customers with its technical and customer support staff. The Company has a
relatively small direct sales staff, and the Company's ability to achieve
revenue growth in the future will depend in large part on its success in
recruiting and training sufficient direct sales, technical and customer
support personnel and establishing and maintaining relationships with its
strategic partners. The Company's ability to achieve revenue growth in the
future will also depend on the establishment of relationships with
distributors in Europe and the Pacific Rim. The competition for qualified
international distributors is intense, and there can be no assurance that the
Company can attract and retain qualified distributors. Although the Company is
currently investing, and plans to continue to invest, significant resources to
expand its domestic direct sales force and its technical and customer support
staff, and to develop international distribution relationships with strategic
partners, the Company has at times experienced and continues to experience
difficulty in recruiting qualified personnel and in establishing necessary
third-party relationships. There can be no assurance that the Company will be
able to expand successfully its direct sales force or other distribution
channels or that any such expansion will result in an increase in revenues.
The Company believes the complexity of its products and the large-scale
deployments anticipated by its customers will require a number of highly
trained consultants and customer support personnel. There can be no assurance
that the Company will successfully expand its technical and customer support
staff to meet customer demands. Any failure by the Company to expand its
direct sales force or other distribution channels, or to expand its technical
and customer support staff, could materially and adversely affect the
Company's business, operating results and financial condition. See "--
Management of Growth; Dependence upon Key Personnel," "--International
Operations," "Business--Strategy," "--Sales and Marketing," and "--Consulting
Services, Training and Support."
International Operations. International sales have been insignificant to
date. The Company believes that its continued growth and profitability will
require expansion of its international operations. Accordingly, the Company
intends to expand its international operations and enter additional
international markets, which will require significant management attention and
financial resources and which could adversely affect the Company's operating
margins and earnings, if any. The Company's international sales are currently
denominated in U.S. dollars. An increase in the value of the U.S. dollar
relative to foreign
9
<PAGE>
currencies could make the Company's software products more expensive and,
therefore, potentially less competitive in those markets. Risks inherent in
the Company's international revenues generally include the impact of longer
payment cycles, greater difficulty in accounts receivable collection,
seasonality due to the slow-down in European business activity during the
Company's third fiscal quarter, cultural differences in the conduct of
business, tariffs and other trade barriers and other factors. There can be no
assurance that these factors will not have a material adverse effect on the
Company's business operating results or financial condition. To date, the
Company has marketed its products outside North America through distribution
arrangements with strategic partners. As of June 30, 1996, the Company had
distribution agreements in place with AurumFrance, Ensure Technologies (United
Kingdom) and IBM EMEA (Europe, Middle East and Africa). The Company has also
identified the Pacific Rim as an important international market for the
Company's products but has not yet identified suitable distribution partners.
Competition for qualified distributors is intense in many markets outside
North America, including Europe and Asia, and there can be no assurance that
the Company will be successful in attracting and retaining qualified
distributors. If the Company is unable to obtain such distributors or is
otherwise unable to penetrate strategically important international markets,
the Company's business, operating results and financial condition could be
materially and adversely affected. See "--Expansion of Distribution Channels"
and "Business--Sales and Marketing."
Reliance on Third-Party Vendors. The Company incorporates into its products
certain software and other technologies licensed to it by third-party
developers. Because the Company's products incorporate software developed and
maintained by third parties, the Company is to a certain extent dependent upon
such third parties' abilities to maintain or enhance their current products,
to develop new products on a timely and cost-effective basis and to respond to
emerging industry standards and other technological changes. In the event that
the products licensed from the third-party vendors should fail to address the
requirements of the Company's software products, the Company would be required
to find alternative software products or technologies of equal performance or
functionality. There can be no assurance that the Company would be able to
replace such functionality provided by the third-party software currently
offered in conjunction with the Company's products in the event that such
software becomes obsolete or incompatible with future versions of the
Company's products or is otherwise not adequately maintained or updated. The
absence of or any significant delay in the replacement of that functionality
could have a material adverse effect on the Company's business, operating
results and financial condition. See "Business--Software Products."
Limited Intellectual Property Protection. The Company relies primarily on a
combination of copyright and trademark laws, trade secrets, confidentiality
procedures and contractual provisions to protect its proprietary rights. The
Company seeks to protect its software, documentation and other written
materials under trade secret and copyright laws, which afford only limited
protection. The Company has submitted one patent application for its dbSync
technology. There can be no assurance that any patent covering the Company's
inventions will issue, or that any patent, if issued, will provide
sufficiently broad protection or will prove enforceable in actions against
alleged infringers. Despite precautions taken by the Company, it may be
possible for unauthorized third parties to copy aspects of its products or
future products or to obtain and use information that the Company regards as
proprietary. In particular, the Company provides its licensees with access to
its data model and other proprietary information underlying its licensed
applications. The Company makes source code available for certain of the
Company's products and occasionally enters into source code escrow agreements
with certain customers for the balance of the source code. There can be no
assurance that the Company's means of protecting its proprietary rights will
be adequate or that the Company's competitors will not independently develop
similar or superior technology or design around any patents owned by the
Company. Litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets or to
determine the validity and scope of the proprietary rights of others. Such
litigation could result in substantial costs and diversion of resources and
could have a material adverse effect on the Company's business, operating
results or financial condition.
10
<PAGE>
Policing unauthorized use of the Company's software is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States. The
Company is not aware that any of its software product offerings infringe the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim infringement by the Company with respect to
current or future products. The Company expects that software product
developers will increasingly be subject to infringement claims as the number
of products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all,
which could have a material adverse effect on the Company's business,
operating results and financial condition. The Company also relies on certain
technology which it licenses from third parties, including software which is
integrated with internally developed software and used in the Company's
products to perform key business functions. There can be no assurance that
these third party technology licenses will continue to be available to the
Company on commercially reasonable terms. The loss or the inability of the
Company to maintain any of these technology licenses could result in delays or
reductions in product shipments until equivalent technology could be
identified, licensed and integrated. Any such delays or reductions in product
shipments could materially and adversely affect the Company's business,
operating results and financial condition. See "Business--Intellectual
Property and Other Proprietary Rights."
Risk of Product Defects; Failure to Meet Performance Criteria. The Company's
software is intended for use in enterprise-wide sales and marketing
applications that may be critical to a customer's business. As a result, the
Company's customers and potential customers typically have demanding
requirements for installation and deployment. Software products as complex as
those offered by the Company frequently contain errors or failures, especially
when first introduced or when new versions are released. Although the Company
conducts extensive product testing during product development, the Company has
at times been forced to delay commercial release of software until problems
were corrected and, in some cases, has provided enhancements to correct errors
in released software. The Company could, in the future, lose revenues as a
result of software errors or defects. There can be no assurance that, despite
testing by the Company and by current and potential customers, errors will not
be found in software or releases after commencement of commercial shipments,
resulting in loss or delay of revenue or delay in market acceptance, diversion
of development resources, damage to the Company's reputation, or increased
service and warranty costs, any of which could have a material adverse effect
upon the Company's business, operating results and financial condition. In
addition, the client/server software market is subject to rapid technological
change, changing customer needs and performance criteria and evolving industry
standards that may render existing products and services obsolete. The life
cycles of the Company's software products are difficult to estimate, and the
Company expects to continue to make substantial investments in product
development and testing. There can be no assurance that the Company will have
sufficient resources to make the necessary investments. There can be no
assurance that the Company will not experience difficulties that could delay
or prevent the successful development, introduction or marketing of new or
enhanced software products. If the Company is unable, for technological or
other reasons, to develop and introduce new and enhanced software products
that satisfy customer performance criteria, the Company's business, operating
results and financial condition could be materially and adversely affected.
See "Business--Software Products" and "--Research and Development."
Product Liability. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. It is possible, however, that the
limitation of liability provisions contained in the Company's license
agreements may not be effective under the laws of certain jurisdictions.
Although the Company has not experienced any
11
<PAGE>
product liability claims to date, the sale and support of products by the
Company may entail the risk of such claims, and there can be no assurance that
the Company will not be subject to such claims in the future. A successful
product liability claim brought against the Company could have a material
adverse effect on the Company's business, operating results and financial
condition.
Effect of Certain Charter Provisions; Limitation of Liability of Directors;
Antitakeover Effects of Delaware Law. Effective upon completion of this
offering, the Company will be authorized to issue 5,000,000 shares of
undesignated Preferred Stock. The Board of Directors has the authority to
issue the Preferred Stock in one or more series and to fix the price, rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares
constituting a series or the designation of such series, without any further
vote or action by the Company's stockholders. The issuance of Preferred Stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
stockholders and may adversely affect the marketing price of, and the voting
and other rights of, the holders of Common Stock. The issuance of Preferred
Stock with voting and conversion rights may adversely affect the voting power
of the holders of Common Stock, including the loss of voting control to
others. The Company has no current plans to issue any shares of Preferred
Stock.
Certain provisions of the Company's Certificate of Incorporation and Bylaws
eliminate the right of stockholders to act by written consent without a
meeting, eliminate the right of stockholders to vote cumulatively in the
election of directors (subject to compliance with California corporate law)
and specify certain procedures for nominating directors and submitting
proposals for consideration at stockholder meetings. Such provisions are
intended to enhance the likelihood of continuity and stability in the
composition of the Board of Directors and in the policies formulated by the
Board of Directors and to discourage certain types of transactions which may
involve an actual or threatened change of control of the Company. Such
provisions are designed to reduce the vulnerability of the Company to an
unsolicited acquisition proposal and, accordingly, could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. Such provisions are also intended to discourage certain tactics that
may be used in proxy fights but could, however, have the effect of
discouraging others from making tender offers for the Company's shares and,
consequently, may also inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
These provisions may also have the effect of preventing changes in the
management of the Company.
The Company is subject to Section 203 of the Delaware General Corporation
Law (the "Antitakeover Law"), which regulates corporate acquisitions. The
Antitakeover Law prevents certain Delaware corporations, including those whose
securities are listed for trading on the Nasdaq National Market, from
engaging, under certain circumstances, in a "business combination" with any
"interested stockholder" for three years following the date that such
stockholder became an interested stockholder. For purposes of the Antitakeover
Law, a "business combination" includes, among other things, a merger or
consolidation involving the Company and the interested shareholder and the
sale of more than ten percent (10%) of the Company's assets. In general, the
Antitakeover Law defines an "interested stockholder" as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the Company
and any entity or person affiliated with or controlling or controlled by such
entity or person. A Delaware corporation may "opt out" of the Antitakeover Law
with an express provision in its original certificate of incorporation or an
express provision in its certificate of incorporation or bylaws resulting from
amendments approved by the holders of at least a majority of the Company's
outstanding voting shares. The Company has not "opted out" of the provisions
of the Antitakeover Law. See "Description of Capital Stock."
Shares Eligible for Future Sale; Registration Rights. Sales of a substantial
number of shares of Common Stock in the public market following this offering
could adversely affect the market price for the Company's Common Stock. The
number of shares of Common Stock available for sale in the public
12
<PAGE>
market is limited by restrictions under the Securities Act of 1933, as amended
(the "Securities Act"), and lockup agreements under which the holders of such
shares have agreed not to sell or otherwise dispose of any of their shares for
a period of 180 days after the date of this Prospectus without the prior
written consent of Alex. Brown & Sons Incorporated. However, Alex. Brown &
Sons Incorporated may, in its sole discretion and at any time without notice,
release all or any portion of the securities subject to lockup agreements. As
a result of these restrictions, based on shares outstanding and options
granted as of August 31, 1996, no shares other than the 2,625,000 shares
offered hereby will be eligible for sale on the date of this Prospectus, and
8,608,002 shares will be eligible for sale 180 days after the date of this
Prospectus pursuant to Rules 144, 144(k) and 701 under the Securities Act. In
addition, the Company intends to register on a registration statement on Form
S-8 a total of 6,346,604 shares of Common Stock issued or reserved for
issuance under the Company's 1993 Stock Option Plan, 1995 Stock Plan, 1996
Employee Stock Purchase Plan and 1996 Directors Option Plan, which shares will
be eligible for sale upon expiration of the lockup agreements referred to
above. Holders of approximately 3,600,113 shares of Common Stock will be
entitled to certain registration rights with respect to such shares. If such
holders, by exercising their registration rights, cause a large number of
shares to be registered and sold in the public market, the sale of such shares
could have a material adverse effect on the market price for the Company's
Common Stock. See "Shares Eligible for Future Sale."
Immediate and Substantial Dilution. The initial public offering price is
substantially higher than the book value per share of Common Stock. Investors
purchasing Common Stock in this offering will, therefore, incur immediate
dilution of $ in net tangible book value per share of Common Stock (based
upon an assumed initial public offering price of $ per share and after
deducting estimated underwriting discounts and commissions and offering
expenses) from the initial public offering price and will incur additional
dilution upon the exercise of outstanding stock options.
Control by Existing Stockholders. Upon completion of this offering, the
Company's officers, directors and affiliated entities together will
beneficially own approximately % of the outstanding shares of Common Stock
( % if the Underwriters' over-allotment option is exercised in full). In
particular, upon completion of this offering, the Company's venture capital
investors and executive officers, will own approximately % of the outstanding
shares of Common Stock ( % if the Underwriters' over-allotment option is
exercised in full). As a result, these stockholders, if acting together, would
be able to control most matters requiring stockholder approval, including the
election of directors, and the approval of mergers, consolidations and sales
of all or substantially all of the assets of the Company. This may prevent or
discourage tender offers for the Company's Common Stock unless the terms are
approved by such stockholders. See "Principal and Selling Stockholders."
No Prior Market; Possible Volatility of Stock Price. Prior to this offering
there has been no public market for the Common Stock of the Company. The
initial public offering price will be determined by negotiations between the
Company and the representatives of the Underwriters. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. There can be no assurance that an active public market will
develop or be sustained after this offering or that the market price of the
Common Stock will not decline below the initial public offering price. Future
announcements concerning the Company or its competitors, quarterly or annual
variations in results of operations, announcements of technological
innovations, the introduction of new products or changes in pricing policies
by the Company or its competitors, proprietary rights or other litigation,
changes in earnings estimates by analysts, the Company's failure to meet
analysts' estimates or other factors could cause the market price of the
Common Stock to fluctuate substantially. In addition, stock prices for many
technology companies fluctuate widely for reasons which may be unrelated to
results of operations. These fluctuations, as well as general economic, market
and political conditions such as recessions or military conflicts, may
materially and adversely affect the market price of the Company's Common
Stock.
Discretion as to Use of Proceeds. The primary purposes of this offering are
to create a public market for the Company's Common Stock, to facilitate future
access to public markets and to obtain additional working capital. As of the
date of this Prospectus, the Company has no specific plans to use
13
<PAGE>
the net proceeds from this offering other than for working capital and general
corporate purposes, including repayment of bank debt. Accordingly, the
Company's management will retain broad discretion as to the allocation of the
net proceeds from this offering. Pending any such uses, the Company plans to
invest the net proceeds in investment grade, interest-bearing securities. See
"Use of Proceeds."
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby at an assumed initial public
offering price of $ are estimated to be approximately $ ($ if the
Underwriters' over-allotment option is exercised in full), after deducting
estimated underwriting discounts and commissions and offering expenses.
The primary purposes of this offering are to create a public market for the
Common Stock, to facilitate future access to public markets and to obtain
additional working capital. The Company expects to use the net proceeds of
this offering for working capital and other general corporate purposes,
including the repayment of its outstanding bank debt, which was $1,500,000 at
June 30, 1996. A portion of the net proceeds may also be used for the
acquisition of businesses, products and technologies that are complementary to
those of the Company. The Company has no present plans, agreements or
commitments and is not currently engaged in any negotiations with respect to
any such transaction. Pending such uses, the net proceeds of this offering
will be invested in investment grade, interest-bearing securities.
The Company will not receive any proceeds from the sale of the shares of
Common Stock offered by the Selling Stockholder hereby.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its capital stock.
The Company currently expects to retain future earnings, if any, for use in
the operation and expansion of its business and does not anticipate paying any
cash dividends in the foreseeable future. The Company's bank line of credit
agreement contains a restrictive covenant which limits the Company's ability
to pay cash dividends or make stock repurchases without the prior written
consent of the lender. See Note 4 of Notes to Financial Statements.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996 after giving effect to a one-for-four reverse stock split and
reincorporation in the State of Delaware to be effected prior to the
completion of this offering, the pro forma conversion of all outstanding
shares of Preferred Stock into Common Stock and certain changes to the
authorized capital stock of the Company upon completion of this offering, and
as adjusted to reflect the receipt of net proceeds from the sale of 2,500,000
shares of Common Stock pursuant to this offering at an assumed initial public
offering price of $ per share. The capitalization information set forth in
the table below is qualified by the more detailed Financial Statements and
Notes thereto appearing elsewhere in this Prospectus and should be read in
conjunction with such Financial Statements and Notes.
<TABLE>
<CAPTION>
JUNE 30, 1996
-------------------------------
ACTUAL PRO FORMA AS ADJUSTED
--------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Borrowings under line of credit and current
portion of notes payable and capital lease
obligations(1)................................ $ 2,088 $2,088 $
========= ======= ====
Notes payable and capital lease obligations,
net of current portion(1)..................... $ 422 $ 422 $
--------- ------- ----
Mandatorily Redeemable Convertible Preferred
Stock, no par value, 24,000,000 shares
authorized; 21,905,398 shares issued and
outstanding, actual; no pro forma and as
adjusted shares............................... $ 29,592 --
--------- ------- ----
Stockholders' deficit:
Preferred Stock, $.001 par value; 5,000,000
shares authorized, no shares issued and
outstanding, pro forma and as adjusted...... --
Common Stock, $.001 par value; 10,000,000
shares authorized, 3,498,300 shares issued
and outstanding, actual; 8,457,153 shares
issued and outstanding, pro forma;
25,000,000 shares authorized, shares issued
and outstanding, as adjusted(2)............. -- 8
Additional paid-in capital................... -- 29,584
Notes receivable from stockholders........... (230) (230)
Accumulated deficit.......................... (25,219) (25,219)
--------- ------- ----
Total stockholders' equity (deficit)........ (25,449) 4,143
--------- ------- ----
Total capitalization....................... $ 4,565 $ 4,565 $
========= ======= ====
</TABLE>
- --------
(1) See Note 4 of Notes to Financial Statements.
(2) Based on shares outstanding as of August 31, 1996. Excludes as of August
31, 1996 592,851 shares of Common Stock issuable upon exercise of options
outstanding under the Company's 1995 Stock Plan at a weighted average
exercise price of $3.01. See "Management--Stock Plans," "Certain
Transactions," "Description of Capital Stock" and Note 7 of Notes to
Financial Statements. Also excludes 33,455 shares available for issuance
under the 1995 Stock Plan as of August 31, 1996 and an additional
2,664,000 shares reserved after August 31, 1996 for issuance under the
1995 Stock Plan, the 1996 Director Option Plan and the 1996 Employee Stock
Purchase Plan.
15
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of June 30, 1996 was
$4.1 million or $0.49 per share of Common Stock. Pro forma tangible book value
per share is determined by dividing the amount of total tangible assets of the
Company less total liabilities by the number of shares of Common Stock
outstanding at that date, assuming the conversion of all outstanding shares of
Preferred Stock. After giving effect to the sale of the 2,500,000 shares of
Common Stock offered by the Company hereby (at an assumed initial public
offering price of $ per share and after deducting the underwriting
discounts and commissions and estimated offering expenses), the pro forma net
tangible book value of the Company as of June 30, 1996 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 of $ per share to new investors purchasing shares at the assumed
initial public offering price. The following table illustrates the per share
dilution.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $
Pro forma net tangible book value per share at June 30, 1996...... $0.49
Increase per share attributable to new investors..................
-----
Pro forma net tangible book value per share after the offering......
---
Pro forma net tangible book value dilution per share to new
investors.......................................................... $
===
</TABLE>
The following table summarizes, on a pro forma basis as of June 30, 1996,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the existing
stockholders and by the new investors purchasing shares in this offering
(before deducting the underwriting discounts and commissions and estimated
offering expenses), based upon the assumed initial public offering price of
$ per share:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ --------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).... 8,608,002 77.5% $ -- % $
New investors............... 2,500,000 22.5 -- -- $
---------- ----- ---------- --------
Total..................... 11,108,002 100.0% $ 100.0%
========== ===== ========== ========
</TABLE>
- --------
(1) Sales by the Selling Stockholder in this offering will reduce the number
of shares of Common Stock held by existing stockholders to 8,483,002 or
approximately % ( shares, or approximately %, if the Underwriters'
over-allotment option is exercised in full) and will increase the number
of shares held by new investors to or approximately % ( shares, or
approximately %, if the Underwriters over-allotment option is exercised
in full) of the total number of shares of Common Stock outstanding after
this offering. See "Principal and Selling Stockholders."
The foregoing computations assume no exercise of stock options after August
31, 1996. As of August 31, 1996, there were outstanding options to purchase
592,851 shares of Common Stock under the Company's 1995 Stock Plan at a
weighted average exercise price of $3.01 per share and an additional 33,455
shares reserved for future option grant under the 1995 Stock Plan. After
August 31, 1996, an additional 2,664,000 shares of Common Stock were reserved
for issuance under the Company's 1995 Stock Plan, 1996 Director Option Plan
and 1996 Employee Stock Purchase Plan. To the extent that any shares are
issued upon exercise of options, warrants or rights that are presently
outstanding or granted in the future, or reserved for future issuance under
the Company's stock plans, there will be further dilution to new public
investors. See "Management--Stock Plans," "Description of Capital Stock" and
Note 7 to Notes to Financial Statements.
16
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the Financial Statements and Notes thereto and other financial
information included elsewhere in this Prospectus. The unaudited statement of
operations data set forth below for the years ended December 31, 1993, 1994
and 1995 and the balance sheet data as of December 31, 1994 and 1995 have been
derived from and are qualified by reference to the audited Financial
Statements of the Company included elsewhere in this Prospectus. The statement
of operations data for the six months ended June 30, 1995 and 1996 have been
prepared on the same basis as the annual audited financial statements and, in
the opinion of management, contain all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the operating
results for such periods. The operating results for the six months ended June
30, 1996 are not necessarily indicative of the results to be expected for any
other interim period or any future fiscal year. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
---------------------------------- ------------------
1992 1993 1994 1995 1995 1996
------ ------- ------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues:
Licenses.............. $2,169 $ 3,475 $ 3,356 $ 5,928 $ 1,820 $ 6,217
Services.............. 1,011 1,426 2,556 4,547 1,965 4,721
------ ------- ------- -------- -------- --------
Total revenues...... 3,180 4,901 5,912 10,475 3,785 10,938
------ ------- ------- -------- -------- --------
Cost of Revenues:
Licenses.............. 461 331 365 979 567 623
Services.............. 623 1,609 2,586 3,919 1,528 4,256
------ ------- ------- -------- -------- --------
Total cost of
revenues........... 1,084 1,940 2,951 4,898 2,095 4,879
------ ------- ------- -------- -------- --------
Gross profit........... 2,096 2,961 2,961 5,577 1,690 6,059
------ ------- ------- -------- -------- --------
Operating expenses:
Sales and marketing... 1,021 3,107 3,240 6,626 2,326 4,527
Research and
development.......... 763 2,251 2,246 2,286 1,204 1,387
General and
administrative....... 922 1,861 1,780 1,023 458 714
------ ------- ------- -------- -------- --------
Total operating
expenses........... 2,706 7,219 7,266 9,935 3,988 6,628
------ ------- ------- -------- -------- --------
Loss from operations... (610) (4,258) (4,305) (4,358) (2,298) (569)
Other income (expense),
net................... -- 38 5 63 27 23
Interest expense....... (14) (42) (88) (157) (78) (61)
------ ------- ------- -------- -------- --------
Net loss............... $ (624) $(4,262) $(4,388) $ (4,452) $ (2,349) $ (607)
====== ======= ======= ======== ======== ========
Pro forma net loss per
share(1).............. $ $
======== ========
Pro forma shares used
in per share
calculation(1)........
======== ========
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------- ------------------
1992 1993 1994 1995 1995 1996
------ ------- ------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit)............ $ (900) $ 3,348 $ 1,034 $ 2,205 $ (1,321) $ 2,150
Total assets.......... 1,169 6,188 5,744 9,795 3,620 12,762
Notes payable and
capital lease
obligations less
current portion...... -- 341 370 237 338 422
Mandatorily redeemable
convertible preferred
stock................ -- 8,845 11,302 17,356 11,302 29,592
Accumulated deficit... (624) (4,886) (9,274) (13,726) (11,623) (25,219)
Stockholders'
deficit.............. (452) (4,706) (9,080) (13,528) (11,425) (25,449)
</TABLE>
- --------
(1) Reflects the conversion of the Company's outstanding Preferred Stock into
4,958,853 shares of Common Stock upon completion of this offering. See
Note 2 of Notes to Financial Statements.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Financial
Statements and related notes thereto included elsewhere in this prospectus.
The following discussion contains forward-looking statements and the Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth under "Risk Factors," "Business" and elsewhere in this Prospectus.
OVERVIEW
The Company, which commenced operations in 1991, develops application
software for automating enterprise-wide sales, marketing and customer support
functions. From its inception through 1991, the Company was engaged
principally in research and development and in developing custom software
products. The Company commenced commercial shipments of its TeleTrak and
SupportTrak software products in 1992 and delivered consulting services for
implementation of its products. The SalesTrak software product began
commercial shipment in September 1994. In recent years, the Company has
focused primarily on its sales and marketing software products and, as a
result of greater market acceptance of these products, the Company's revenues
have grown rapidly, increasing from $3.2 million in 1992 to $10.5 million in
1995 and $10.9 million for the first six months of 1996. Service revenues
totaled $1.4 million, $2.6 million, $4.5 million and $4.7 million in each of
1993, 1994, 1995 and the first six months of 1996, respectively. Service
revenues include revenues from consulting services, which the Company believes
facilitate more rapid implementation and successful deployment of the
Company's software products. The Company realized operating losses from 1992
through the first quarter of 1996, and the Company achieved limited
profitability in the second quarter of 1996. The losses from 1992 through 1994
primarily reflect the Company's investment in research and development, in
particular the transition of its products from an early character-based
technology to a Windows user interface-based technology. In addition, in 1993
and 1994, the Company made a substantial investment in the development of its
SalesTrak software product and database synchronization technology. The losses
in 1995 and the first quarter of 1996 primarily reflect the Company's
continued investment in research and development of its software and an
increased investment in sales and marketing to increase revenues and expand
market share.
Revenues consist of license revenues and service revenues. License revenues
for the Company's products consist of server fees for one or more servers and
software license fees based on the number of named users. The Company also
derives license revenues from sublicensing third party software products.
License revenues are recognized upon execution of a license agreement and
delivery of software if there are no significant post-delivery vendor
obligations and collection of the receivable is deemed probable. If
significant post-delivery obligations exist or if a product is subject to
customer acceptance, revenues are deferred until no significant obligations
remain or acceptance has occurred. Revenues from services consist primarily of
consulting services, including implementation and adaptation of licensed
software and training, maintenance and support. Consulting and training
revenues are generally recognized as services are performed, except for
revenues from certain fixed price contracts or milestone deliverables, which
are recognized on a percentage-of-completion basis or upon milestone delivery.
Post-contract support revenues are recognized ratably over the term of the
support period, which is typically one year. For all periods presented, the
Company has recognized revenue in accordance with the Statement of Position
91-1 on "Software Revenue Recognition" dated December 12, 1991, issued by the
American Institute of Certified Public Accountants.
The Company's software products may be sold individually or as an integrated
suite. Since the beginning of 1995, most of the Company's revenues have come
from SalesTrak. The Company anticipates that this trend will continue for the
foreseeable future.
18
<PAGE>
The Company markets its products primarily through a direct sales force in
North America. The Company has also sold to large European and multinational
firms, resulting in international deployments of its software products. In
order to provide these large international customers with local country
support, the Company entered into agreements with distributors in the United
Kingdom in November 1995 and in France in February 1996. The Company also
entered into a reseller agreement with IBM EMEA (Europe, Middle East and
Africa) in April 1996 to distribute its products in these geographic areas.
The Company has also signed a reseller agreement with IBM in the U.S. Revenues
from these international and domestic distributors have been insignificant to
date. The Company plans to increase its international distribution in the
future.
Although the Company has experienced significant growth in revenues during
the past two years, the Company does not believe that prior growth rates are
sustainable or indicative of future operating results. In addition, the
Company expects increased competition and, as a result, intends to invest
significantly in its business. There can be no assurance that the Company will
be able to sustain profitability on a quarterly basis or achieve profitability
on an annual basis. The Company's limited operating history makes the
prediction of future results difficult, if not impossible. The Company's
future operating results will depend on many factors, including, among others,
the ability of the Company to develop, introduce and market new and enhanced
versions of its software on a timely basis; the demand for the Company's
software; the size, timing and contractual terms of significant orders; the
timing and significance of software product enhancements and new software
product announcements by the Company or its competitors; changes in pricing
policies by the Company or its competitors; changes in the Company's business
strategies; budgeting cycles of its potential customers; customer order
deferrals in anticipation of enhancements or new software products; changes in
the mix of software products and services sold; changes in the mix of revenue
attributable to domestic and international sales; the impact of acquisitions
of competitors; seasonal trends; the cancellations of licenses or maintenance
agreements; product life cycles; software defects and other product quality
problems; personnel changes; the ability of the Company to identify, recruit
and retain qualified sales, consulting, technical, marketing and management
personnel; investments to develop sales distribution channels; changes in the
level of operating expenses; and general domestic and international political
and economic trends.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995 AND 1996
Revenues
The Company's revenues are derived primarily from fees for software licenses
and to a lesser extent from services. The Company's revenues were $3.8 million
and $10.9 million for the six months ended June 30, 1995 and 1996,
respectively.
Licenses. Software license revenues were $1.8 million and $6.2 million for
the six months ended June 30, 1995 and 1996, respectively, representing 48%
and 57% of total revenues in the respective periods. The increase in dollar
amount was primarily due to increased market acceptance of the Company's
products and the expansion of its direct sales force.
Services. Service revenues are primarily comprised of fees for consulting
services, training and maintenance. Service revenues were $2.0 million and
$4.7 million for the six months ended June 30, 1995 and 1996, respectively,
representing 52% and 43% of total revenues in the respective periods. The
increase in dollar amount was due primarily to the increase in consulting,
training, maintenance and maintenance renewals associated with increased sales
of the Company's applications. As the Company implements its strategy of
encouraging third party systems integrators to provide consulting, training
and implementation services for its products, consulting and training revenues
could decline as a percentage of total revenues in the future.
19
<PAGE>
Cost of Revenues
Cost of Licenses. Cost of licenses consists primarily of license fees and
royalties paid to third party software providers and, to a lesser extent,
product media, product duplication and shipping. Cost of license fees was
$567,000 and $623,000 for the six months ended June 30, 1995 and 1996,
respectively, representing 31% and 10% of total license fees and 15% and 6% of
total revenues for each period, respectively. The increase in the dollar
amount of cost of licenses during the six months ended June 30, 1996 was due
primarily to the increased sales of the Company's products. Gross margins on
licenses improved in the first six months of 1996 due primarily to a reduction
in the sales of third party database applications as a percentage of total
sales.
Cost of Services. Cost of services consists primarily of personnel-related
costs incurred in providing consulting services, training and maintenance to
customers. Cost of services were $1.5 million and $4.3 million for the six
month periods ended June 30, 1995 and 1996, respectively, representing 78% and
90% of total service revenues and 40% and 39% of total revenues for each
period, respectively. The increase in costs as a percentage of related service
revenues in the first six months of 1996 over the same period in 1995 is
primarily the result of making a significant investment in the services
organization to handle an anticipated increase in the number of customers, to
develop a training service offering, and to develop a comprehensive consulting
methodology that will enable the Company to implement its products on a more
timely and consistent basis. During this period, the Company also made an
investment in creating a Consultant Development Program to train recent
computer science college graduates in the Company's products, which the
Company believes will help reduce its dependence on expensive outside
contractors and improve margins. The Company has also invested substantial
resources to develop, train and support its third party systems integrator
partners. The Company will continue to make investments in its services
organization on an as-needed basis to manage growth, improve customer service
and improve overall service margins.
Operating Expenses
Sales and Marketing. Sales and marketing expenses include salaries,
commissions, advertising, direct mail, seminars, public relations, trade
shows, travel and other related selling and marketing expenses. Sales and
marketing costs were $2.3 million and $4.5 million for the six months periods
ended June 30, 1995 and 1996, respectively, representing 61% and 41% of total
revenues for each period, respectively. The increase in absolute dollar amount
was attributed to expansion of the Company's direct sales force and an
increase in marketing activities. The decrease in sales and marketing expenses
as a percentage of total revenues was primarily due to the rapid growth of
revenues. The Company believes that such expenses will continue to increase in
absolute dollar amounts as the Company expands its sales and marketing staff.
Research and Development. Research and development expenses relate primarily
to engineering personnel. Costs related to research and development of
products are charged to research and development expenses as incurred.
Research and development costs were $1.2 million and $1.4 million for the six
months periods ended June 30, 1995 and 1996, respectively, representing 32%
and 13% of total revenues for each period, respectively. The increase in
dollar amount was attributed to an increase in personnel and related expenses.
The decrease in research and development expenses as a percentage of total
revenues was primarily due to the rapid growth of revenues. The Company
expects that research and development expenses will continue to increase in
absolute dollar amounts as the Company continues to commit substantial
resources to product development and engineering in future periods.
General and Administrative. General and administrative expenses include
personnel costs for administration, finance, human resources and general
management, along with legal and accounting expenses and other professional
services. General and administrative expenses were $458,000 and $714,000 for
the six months periods ended June 30, 1995 and 1996, respectively,
representing 12% and
20
<PAGE>
7% of total revenues for each period, respectively. The increase in absolute
dollar amount was attributed to expansion of the Company's general and
administrative staff and associated expenses necessary to manage and support
the Company's growth. The decrease in general and administrative expenses as a
percentage of total revenues was primarily due to the rapid growth of
revenues. The Company believes that its general and administrative expenses
will continue to increase in absolute dollars in the future as the Company
expands its staffing and experiences higher costs associated with being a
public company.
Provision for Income Taxes. The Company experienced operating losses for the
six month periods ended June 30, 1995 and 1996 and paid no income taxes.
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
Revenues
Total revenues increased 21% from $4.9 million in 1993 to $5.9 million in
1994 and increased 77% to $10.5 million in 1995.
Licenses. License revenues decreased from $3.5 million in 1993 to $3.4
million in 1994 and increased to $5.9 million in 1995, representing 71%, 57%
and 57% of total revenues in the respective periods. The decrease in license
fees between 1993 and 1994 was due to a transition from the Company's original
character-oriented product technology to a newer Windows-based technology. The
increase in license fees from 1994 to 1995 was due to increased market
acceptance of the Company's Windows-based products, the introduction of
SalesTrak and the expansion of the Company's direct sales force.
Services. Service revenues increased from $1.4 million in 1993 to $2.6
million in 1994 to $4.5 million in 1995, representing 29%, 43% and 43% of
total revenues in the respective periods. The dollar increase in service
revenues is primarily the result of an increase in demand for consulting and
systems integration services and, to a lesser extent, from an increase in
maintenance revenues from a larger, installed base.
COST OF REVENUES
Cost of Licenses. Cost of licenses were $331,000, $365,000, and $979,000, in
1993, 1994 and 1995, respectively, representing 10%, 11% and 17% of the
related license revenues for each year, respectively. The increase in the
dollar amount of the cost of licenses in each successive year reflects the
higher volume of applications sold each year. Cost of licenses increased as a
percentage of related revenues from 1994 to 1995 due to increased third party
database sales which have a lower product margin than the Company's
applications.
Cost of Services. Cost of services were $1.6 million, $2.6 million and $3.9
million in 1993, 1994 and 1995, respectively, representing 113%, 101% and 86%
of the related services revenues for each year, respectively. The increase in
the dollar amount of cost of services in each successive year reflects the
higher volumes of services and maintenance provided each year. Cost of
services decreased as a percentage of related service revenues from 1993 to
1995 due to improved operational efficiency.
OPERATING EXPENSES
Sales and Marketing. Sales and marketing expenses in 1993, 1994 and 1995
were $3.1 million, $3.2 million and $6.6 million, respectively, representing
63%, 55% and 63% of total revenues for each year, respectively. The increase
in sales and marketing expenses as a percentage of total revenues from 1994 to
1995 was principally due to a significant increase in the number of sales and
marketing personnel in 1995.
Research and Development. Research and development expenses were $2.3
million for 1993, $2.2 million for 1994 and $2.3 million for 1995 representing
46%, 38% and 22% of total revenues for each year,
21
<PAGE>
respectively. The decrease in research and development expenses as a
percentage of total revenues is a result of increasing revenues over the
relevant periods.
General and Administrative. General and administrative expenses for 1993,
1994 and 1995 were $1.9 million, $1.8 million and $1.0 million, respectively,
representing 38%, 30% and 10% of total revenues for each year, respectively.
The decrease in general and administrative expenses in absolute dollars and as
a percentage of total revenues was primarily due to improved operational
efficiencies and increased economies of scale.
Provision for Income Taxes. The Company experienced operating losses for
1993, 1994 and 1995 and paid no income taxes. As of December 31, 1995, the
Company had for federal and state purposes net operating loss carry-forwards
of approximately $8.0 million. These federal and state carryforwards expire in
the years 2007 through 2010 and 1996 through 2000, respectively. Utilization
of the net operating losses and credits may be subject to a substantial annual
limitation due to ownership change limitations provided by the Internal
Revenue Code of 1986 and similar state provisions. The annual limitation may
result in the expiration of the net operating losses and credits before
utilization. See Note 9 of Notes to Financial Statements.
SELECTED QUARTERLY OPERATING RESULTS
The following table sets forth statement of operations data for the six
quarters ended June 30, 1996, both in dollar amounts and as a percentage of
revenues. This information has been derived from the Company's unaudited
financial statements. The unaudited financial statements have been prepared on
the same basis as the audited financial statements contained elsewhere in this
Prospectus and, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of such information. Such information should be read in
conjunction with the Company's annual audited financial statements and notes
thereto appearing elsewhere in this Prospectus. The Company's quarterly
results are subject to fluctuations. The operating results for any quarter are
not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Licenses............... $ 783 $ 1,037 $1,735 $ 2,373 $2,871 $3,346
Services............... 1,083 882 1,187 1,395 2,012 2,709
------ ------- ------ ------- ------ ------
Total revenues......... 1,866 1,919 2,922 3,768 4,883 6,055
------ ------- ------ ------- ------ ------
Cost of revenues:
Licenses............... 198 369 155 257 407 216
Services............... 780 748 941 1,450 1,986 2,270
------ ------- ------ ------- ------ ------
Total cost of reve-
nues.................. 978 1,117 1,096 1,707 2,393 2,486
------ ------- ------ ------- ------ ------
Gross profit............ 888 802 1,826 2,061 2,490 3,569
------ ------- ------ ------- ------ ------
Operating expenses:
Sales and marketing.... 947 1,379 1,950 2,350 2,201 2,326
Research and develop-
ment.................. 611 593 508 574 626 761
General and administra-
tive.................. 211 247 240 325 314 400
------ ------- ------ ------- ------ ------
Total operating ex-
penses................ 1,769 2,219 2,698 3,249 3,141 3,487
------ ------- ------ ------- ------ ------
Income (loss) from oper-
ations................. (881) (1,417) (872) (1,188) (650) 81
Other income (expense),
net.................... 16 11 20 16 12 11
Interest expense........ (39) (39) (46) (33) (25) (36)
------ ------- ------ ------- ------ ------
Net income (loss)....... $ (904) $(1,445) $ (898) $(1,205) $ (663) $ 56
====== ======= ====== ======= ====== ======
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1995 1995 1995 1995 1996 1996
-------- -------- --------- -------- -------- --------
AS A PERCENTAGE OF TOTAL REVENUES
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Licenses............... 42.0% 54.0% 59.4% 63.0% 58.8% 55.3%
Services............... 58.0 46.0 40.6 37.0 41.2 44.7
----- ----- ----- ----- ----- -----
Total revenues......... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Licenses............... 10.6 19.2 5.3 6.8 8.3 3.6
Services............... 41.8 39.0 32.2 38.5 40.7 37.5
----- ----- ----- ----- ----- -----
Total cost of reve-
nues.................. 52.4 58.2 37.5 45.3 49.0 41.1
----- ----- ----- ----- ----- -----
Gross profit............ 47.6 41.8 62.5 54.7 51.0 58.9
----- ----- ----- ----- ----- -----
Operating expenses:
Sales and marketing.... 50.8 71.8 66.7 62.4 45.1 38.4
Research and develop-
ment.................. 32.7 30.9 17.4 15.2 12.8 12.6
General and administra-
tive.................. 11.3 12.9 8.2 8.6 6.4 6.6
----- ----- ----- ----- ----- -----
Total operating
expenses.............. 94.8 115.6 92.3 86.2 64.3 57.6
----- ----- ----- ----- ----- -----
Income (loss) from oper-
ations................. (47.2) 73.8 (29.8) (31.5) (13.3) 1.3
Other income (expense),
net.................... 0.9 0.5 0.7 0.4 0.2 0.2
Interest expense........ (2.1) (2.0) (1.6) (0.9) (0.5) (0.6)
----- ----- ----- ----- ----- -----
Net income (loss)....... (48.4)% (75.3)% (30.7)% (31.9)% (13.6)% 0.9%
===== ===== ===== ===== ===== =====
</TABLE>
Any decline in the demand for or market acceptance of the Company's software
products or services would have a material adverse effect on the Company's
business, financial condition and results of operations. Although the Company
has experienced significant growth in revenues in recent quarters, there can
be no assurance that the Company will sustain such growth in revenues. The
Company only became profitable in the quarter ended June 30, 1996, and there
can be no assurances that the Company will be able to sustain consistent
profitability on a quarterly basis or achieve profitability on an annual basis
in the future, if at all. The license of the Company's software generally
requires the Company to engage in a sales cycle of three to twelve months or
longer and to provide a significant level of education to prospective
customers regarding the use and benefits of the Company's software. For these
reasons, sales cycles are subject to a number of potentially significant
delays over which the Company has little or no control. Further, the Company
believes that the purchase of its software is relatively discretionary and
generally involves a substantial commitment of capital. Therefore, in the
event of any general downturn in the economy or in any potential customer's
business, these events could result in the deferral or cancellation of the
purchase of the Company's products. Accordingly, such deferrals could have a
material adverse effect on the Company's business, financial condition or
results of operations and cause the Company's operating results to vary
significantly from quarter to quarter.
The Company's business has experienced and is expected to continue to
experience seasonality, in part due to customer purchasing patterns. In recent
years, the Company has generally had stronger demand for its products during
the quarters ending in June and December and weaker demand in the quarters
ending in March and September.
Quarterly software license revenues are difficult to forecast because the
market for client/server applications is rapidly evolving, and the Company's
sales cycle, from initial trial to purchase and the provision of consulting
and support services, varies substantially from customer to customer. The
Company typically receives a substantial portion of its software license
orders in the last month or weeks of a quarter. In addition, quarterly
software license revenues are also heavily dependent on the timing of revenue
recognition, which can be affected by many factors, including the timing of
contract execution and delivery and customer acceptance, if applicable. The
Company has limited backlog in that it typically ships its software products
shortly after an order is received. Therefore, the Company has limited
visibility on software license revenues for future quarters. Despite the
uncertainties in its quarterly revenue patterns, the Company's operating
expenses are based upon anticipated revenue levels and are relatively fixed in
the short term. If revenue levels fall below expectations, the Company's
operating and net income
23
<PAGE>
results would be adversely affected. Due to the foregoing factors, quarterly
revenue and operating results are not predictable with any significant degree
of accuracy. As a result, it is likely that in some future period the
Company's results of operations could fail to meet the expectations of public
market analysts or investors. In such event, or in the event that adverse
conditions prevail generally or with respect to the Company's business, the
price of the Company's Common Stock would likely be materially and adversely
affected.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily through
equity financings in which it has raised approximately $17.5 million,
financing under its equipment lease lines and a revolving bank line of credit.
In 1993, 1994, 1995 and the six months ended June 30, 1996, approximately $3.5
million, $4.2 million, $4.1 million and $2.4 million, respectively, of cash
was used in operations. In 1995 and the six months ended June 30, 1996, the
Company experienced significant growth in accounts receivable accompanying the
Company's increased sales volume, which was partially offset by increases in
accounts payable and other current liabilities.
In 1993, 1994, 1995 and the six months ended June 30, 1996, the Company's
investing activities consisted primarily of purchases of property and
equipment. In these periods, the Company used approximately $228,000,
$427,000, $933,000 and $1.1 million, respectively, of cash to purchase
property and equipment, primarily for personal computers and for furniture and
other office equipment. The Company expects that the rate of purchases of
property and equipment will increase as the Company's employee base grows. As
of June 30, 1996, the Company's principal commitments consisted primarily of
lease lines of credit for equipment and software purchases and leases for
office facilities. See Notes 3 and 4 of Notes to Financial Statements.
At June 30, 1996, the Company had $2.0 million in cash and cash equivalents
and $2.1 million of working capital. The Company had available a revolving
bank line of credit agreement under which the Company had borrowed $1.5
million at June 30, 1996. Under the line of credit, the Company had the
ability to borrow 65% of eligible receivables or a maximum of $2 million of
which $400,000 was designated as an equipment term note. The line of credit
was renewed on July 15, 1996 increasing the ability to borrow to 75% of
eligible receivables or a maximum of $2 million. The line of credit is
collateralized by the assets of the Company and certain financial covenants
are required to be maintained. The line of credit also contains a restrictive
covenant that limits the Company's ability to pay cash dividends or make stock
repurchases in excess of $300,000 without the prior written consent of the
lender. The line of credit expires on July 15, 1997 and will automatically
increase to $4 million upon completion of this offering. On July 15, 1996 the
Company also obtained an equipment term note of $1.3 million from its bank.
The Company currently has no significant capital spending or purchase
commitments other than normal purchase agreements and commitments under
facilities, line of credit and capital leases. See Note 4 of Notes to
Financial Statements.
The Company believes that the net proceeds from the sale of Common Stock
offered hereby, together with its current cash balances and cash available
under its lines of credit, will be sufficient to meet its working capital and
capital expenditure requirements for at least the next 12 months. Although
operating activities may provide cash in certain periods, to the extent that
the Company experiences growth in the future, the Company anticipates that its
operating and investing activities may use cash. Consequently, any such growth
may require the Company to obtain additional equity or debt financing. There
can be no assurances that any necessary additional financing will be available
to the Company on commercially reasonable terms, if at all. In addition,
although there are no present understandings, commitments or agreements with
respect to any acquisition of businesses, products or technologies, the
Company, from time to time, evaluates potential acquisitions of other
businesses, products and technologies that are complementary to those of the
Company, and may in the future require additional equity or debt financings to
consummate such acquisitions.
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BUSINESS
The following Business section contains forward-looking statements and the
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors" and elsewhere in this Prospectus.
OVERVIEW
Aurum Software, Inc. is a leading provider of enterprise-wide sales and
marketing information software. The Company provides the Aurum Customer
Enterprise suite of applications which helps automate the field sales,
telemarketing, telesales and customer support functions of a business. The
Company's products are based on advanced client/server and Internet/Intranet
technologies and are designed to address the sales and marketing requirements
of businesses ranging from medium-sized enterprises to large multinational
corporations. The Aurum Customer Enterprise has been installed to date in
deployments consisting of as many as 3,400 users. The Company provides
businesses with integrated, adaptable and mobile software solutions to meet
their competitive business goals. The Company's products are designed to
enable customers to increase revenues, shorten sales cycles, increase repeat
sales, improve forecasting accuracy and visibility, decrease sales and
marketing costs, increase customer satisfaction, obtain timely market
intelligence and gain a strategic competitive advantage. The Company has
deployed its applications in a diverse set of industries including financial
services, chemicals, high technology, health care, information services,
manufacturing, publishing, telecommunications and utilities. The Company's
customers include A.C. Nielsen Company, CUC International, Eastman Chemical,
Fleet Bank, GE Capital, Hewlett Packard Company, Hilti, Lanier Worldwide, MCI
Telecommunications, Netscape Communications Corporation, Sprint Communications
and Sun Microsystems.
INDUSTRY BACKGROUND
The market dynamics of the current business environment are forcing
companies across a wide range of industries to find new ways to improve their
organizational efficiency, increase revenues and reduce costs. Many companies
have effectively applied client/server technologies to automate "back office"
operations, including manufacturing, finance, order entry and human resources,
to streamline corporate operations and reduce operating costs. The automation
of these back office operations has not, however, addressed the competitive
challenges of increasing revenue generation and improving customer
satisfaction through automation of the "front office" sales and marketing
functions. Automation solutions to these front office functions have been much
slower to develop due, in part, to the complex dynamics and highly
individualized nature of sales and marketing business processes within
organizations. Companies are, however, increasingly focusing on their front
office sales and marketing operations, often their largest operating expense
category, as the next major business function to be automated and are
recognizing the importance of integrating them with their back office
applications. In a May 1996 research report, Aberdeen Group, Inc., an
independent market research firm, projected that the market for packaged sales
and marketing application software will grow at an average annual compounded
rate of 50%, from $140 million in 1995 to $700 million in 1999.
The demands of the current market environment have resulted in fundamental
changes in the sales and marketing strategies traditionally used by
businesses. To improve the productivity of their direct sales forces,
companies must be able to implement team selling models comprising of separate
but integrated telemarketing, telesales and direct sales functions. Companies
must also be able to augment direct sales strategies with multi-tiered
distribution strategies that utilize OEMs, VARs, distributors and other
channel partners. Further, as businesses have expanded internationally, this
multi-tiered distribution strategy must be adapted to the different cultures
and business practices of geographically dispersed markets. The need to
improve sales productivity also requires companies to develop more effective
methodologies for customer lead generation and qualification, collection and
internal distribution of product and competitive information, determination of
customer requirements and market trends, improvement in visibility and
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accuracy of product and revenue forecasts, and management and training of
sales and marketing personnel. In addition, companies must be able to
effectively manage and distribute relevant customer and market information on
a real-time basis between the marketing and back office operations of the home
office and the remote field sales force to ensure that the selling and
customer retention effort is fully coordinated and to formulate intelligent
and timely marketing strategies. Sales and marketing information solutions
that address these requirements must offer a combination of automation of
business processes, information collection and sharing, decision support and
management reporting.
The need to transform front office sales and marketing operations to meet
the challenges of an increasingly competitive marketplace is converging with
the availability of a new generation of enabling technologies. Distributed
client/server computing environments have become increasingly commonplace,
built upon a foundation of relational database platforms, object-oriented
technology, wide deployment of LAN/WAN solutions and high-speed modem
technology. In addition, new generation operating systems, a more powerful and
easier to use graphical Windows interface and powerful Pentium-based laptop
computers are available to support the information and computing requirements
of a growing population of mobile sales and marketing professionals. These
technologies have been further leveraged by the capabilities of the Internet
and corporate-based Intranets, which may fundamentally change the way
businesses deliver products and services to their customers. In addition, the
ability of companies to instantly access and distribute a broad range of up-
to-date information about their customers and competitors through the Internet
and corporate-based Intranets also offers significant new automation
opportunities to the sales and marketing function.
The Company believes that sales and marketing automation efforts developed
to date have been mostly inadequate because the sales and marketing process of
a company is highly individualized and requires applications that can be
readily adapted to the dynamics of rapidly changing business environments as
well as changes in the company's business processes. In response, companies
have often attempted custom, in-house software development but have been
frustrated by the time and expense required to provide complete functionality,
the difficulty of solving the complex database synchronization problem of
linking intermittently connected mobile sales representatives with a central
customer database and the difficulty encountered in supporting and upgrading
software in response to continually changing organizational and market
requirements. As an alternative to custom software development, many companies
have selected packaged applications offered by independent software vendors.
Although these packaged products effectively manage time-related activities
and customer contacts, they have largely been implemented for individual
contact management or departmental use, creating "islands" of automation that
fail to deliver a "closed-loop" method of acquiring, developing and retaining
customers across the enterprise. In addition, these products have generally
failed to address the needs of companies seeking automated solutions that can
be tailored to the process-specific requirements of the sales and marketing
operation. Specifically, sales force automation products generally have not
permitted front office and back office operations to share and integrate up-
to-date information and have not provided the robust and scalable database
synchronization necessary to link diverse and geographically dispersed sales
organizations on a real-time basis. The Company believes that the lack of
robust database synchronization is the single most important technical
impediment to the successful automation of sales and marketing operations.
As a result, many companies are looking for packaged application software
that has the flexibility and adaptability to map to their exact business
processes, support multi-tiered distribution channels, interface with back
office applications, adapt to emerging technologies such as the Internet and
provide powerful, scalable synchronization capabilities to coordinate customer
information among thousands of mobile users on a global basis. As sales and
marketing information products are developed that provide the integrated
solutions necessary to address these challenges, the Company believes that
companies that implement these sales and marketing systems will improve their
organizational efficiency, increase revenues and reduce costs. Today, leading-
edge companies are implementing sales and marketing information systems
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to increase sales productivity and to obtain a competitive advantage. In the
future, the Company believes these sales and marketing information systems
will become a competitive necessity and companies that fail to improve their
customer acquisition and retention processes by implementing these systems
will be at a fundamental competitive disadvantage.
THE AURUM SOLUTION
The Company provides an integrated suite of client/server and Internet-based
applications designed to automate sales and marketing operations. Leveraging a
patent-pending database synchronization technology that provides real-time
access to customer information for all users, the Company's applications
enable businesses to implement improved customer acquisition and retention
processes by integrating, automating and managing sales and marketing
operations among customers, headquarters, branch offices, field-based
employees and distribution partners. Aurum's dbSync technology employs a real-
time scanning approach to provide database synchronization that is fast,
scalable, recoverable, extensible and configurable. The Company believes that
its dbSync technology is unique in the industry and has played a critical role
in winning large-scale sales force automation opportunities.
The Aurum Customer Enterprise can be implemented as an enterprise solution
for large organizations and has been installed to date in deployments
consisting of as many as 3,400 users. The Company's applications permit
companies to leverage the latest available technologies, including the
Internet, thereby providing immediate access to external sources of
information to generate and qualify leads and to obtain market intelligence
about potential customers and competitors. An object-oriented open
architecture enables integration with other enterprise applications and offers
an interface that may be configured to company-specific sales and marketing
models and that may be adapted over time to accommodate a company's changing
business requirements.
The Company believes that its software products provide the following
benefits to its customers:
Closed-Loop Sales and Marketing Process. The Company's software automates
the collection of customer and marketing information, permitting users to
evaluate the effectiveness of specific marketing programs, obtain timely and
accurate profiles of customer purchasing patterns and improve coordination
between internal sales and marketing and field sales personnel.
Faster and More Timely Access to Information. Leveraging the Company's
synchronization and Internet/Intranet technologies, the Company's software
links diverse functions and delivers critical information on a real-time basis
internally to marketing, finance and sales management personnel and externally
to remote sales teams.
Improved Customer Interaction. The Company's software provides rapid access
to information, allowing sales personnel to efficiently sort, qualify and
focus on prospective sales leads and spend more time selling to qualified
prospects.
Improved Forecasting and Visibility. The Company's software provides
marketing and finance staffs with real-time access to current and accurate
information about the sales pipeline.
Shortened Sales Cycle and Reduced Training Costs. By accumulating customer
and market information relevant to the business model of a company, the
Company's software products reduce training time for new sales representatives
and reduce the time required to source, qualify, and research prospective
customers and then close sales.
Improved Customer Retention and Repeat Sales. Access to historic customer
information permits a consistent sales interface, even where multiple sales
representatives or different departments or divisions are involved, enabling
better customer relationships and increased repeat sales.
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STRATEGY
The Company's objective is to become the market leader in sales and
marketing information systems. To achieve this objective, the Company is
pursuing the following strategies:
Maintain and Expand Technology Leadership in Sales and Marketing
Applications. The Company's strategy is to continue to develop its advanced
technology and enhance the functionality of its software. The Company's sales
and marketing software provides a comprehensive selling platform designed to
integrate with back office applications and provide real-time access to large
data stores across wide and local area networks to thousands of connected and
intermittently connected mobile users. This platform includes a suite of
applications that support the range of sales and marketing functions, object-
oriented tools that enable customization of the application suite to a
company's process-specific business model and a user-friendly, Windows-based
interface. The Company believes that the functionality of its software, its
ability to integrate with other enterprise applications, its database
synchronization technology and its ability to scale to the growth requirements
of large multinational organizations will be key factors in the Company's
ability to achieve broad market acceptance for its products.
Focus on Rapid Deployment and Enable Large-Scale Implementations. The
Company believes that the successful deployment of its software in a diverse
set of industries and in a wide variety of customer environments ranging to
thousands of users is due, in part, to its ability to rapidly adapt its
applications to map to the specific sales and marketing processes of its
customers. To date, the Company has installed its software products in
deployments consisting of as many as 3,400 users, and the Company intends to
leverage this large-scale implementation experience to penetrate large
multinational organizations. The Company believes that the strength of its
back-end server and database synchronization technology provides the product
scalability necessary to accommodate the requirements of thousands of
connected and mobile users and represents a significant competitive advantage.
The Company also believes it has gained competitive advantage because of its
ability to implement and deploy its application solutions quickly through the
use of its internal consulting services organization and through partnering
with certified systems integrators.
Leverage Strategic Business and Technology Partnerships. The Company's
strategy is to work with consulting and technology companies to increase
market acceptance of its software. The Company has established a number of
strategic business and technology partnerships with industry leaders in
consulting and implementation, including Cambridge Technology Partners,
Deloitte & Touche LLP, Ernst & Young LLP, IBM and KPMG Peat Marwick LLP.
Through these partnerships, the Company seeks to effectively leverage its
resources in marketing its software to a broad range of businesses and
industries. The Company has also established strategic technology partnerships
with database/tools companies such as Business Objects, Centura, Informix,
Microsoft, Oracle and Sybase, and other technology companies including
MediaShare, Netscape, Trilogy and XcelleNet. The Company intends to continue
to work with consulting and technology companies to address new markets and
initiatives.
Expand Global Market Presence. The Company's strategy is to extend
distribution by increasing its sales force in North America and by adding
additional distributors in Europe, the Pacific Rim and other parts of the
world. The Company believes that there are significant international market
opportunities for its products and intends to pursue these opportunities by
leveraging the resources and market presence of international distributors.
The Company intends to enhance the appeal of its software in international
markets by localizing its sales and marketing applications for implementation
in several foreign languages and in multiple foreign currencies. As market
acceptance for the Company's software increases, the Company will also
consider the use of direct sales strategies and joint ventures to enhance its
pursuit of international markets.
Leverage Internet and Intranet Technologies. The Company believes that the
Internet and corporate-based Intranets offer significant opportunities to
automate sales and marketing operations and
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has designed its products to exploit the potential of these technologies.
Through the implementation of WebTrak, its Internet integration software, the
Company's products enhance the ability of its customers to collect leads and
integrate those leads into their sales and marketing process. The Aurum Smart
Encyclopedia, an Intranet-based marketing encyclopedia system, employs
intelligent agents to browse the Internet to collect targeted competitor
information for integration into an organization's sales and marketing system
database. This information can then be immediately accessed by all users
across the enterprise. The Company believes that the informational power of
the Web will become a significant factor in the effectiveness of the Company's
software in enhancing sales productivity, and the Company intends to continue
to develop additional means by which the Company's applications can leverage
this power.
Extend Product Line into Related Customer Management Application Areas. The
Company has focused to date on establishing its presence in the market for
sales and marketing applications through the development and sale of its
integrated suite of sales and marketing software products. The Company intends
to leverage these products to achieve a more significant presence in other
customer management-related applications in the customer interaction market.
SOFTWARE PRODUCTS
Aurum Customer Enterprise is a suite of applications that addresses the
functional needs of sales, marketing and support organizations involved in the
management of customer relationships. These integrated client/server and
Internet-enabled applications manage information describing sales
opportunities, customer relationships, forecasts and quoting, sales
methodologies and sales cycles and customer support throughout global
organizations. These applications enable a complex, multi-tier team selling
model through the sharing of customer and prospect information, product
information, pricing, forecasting, competitive intelligence, sales metrics and
best selling practices. These applications can also provide better customer
support by providing current information on customer issues to all members of
the sales and support team. Aurum's software can be interfaced with customers'
other enterprise applications for financial, order entry or inventory
information vital to the sales and marketing process.
The Aurum Customer Enterprise application suite utilizes common
administrative modules and a central customer database that contains key
information about active and historical marketing campaigns, customer contacts
and relationships, account strategy, task and activity history, the account
sales team and the business accomplishments necessary to move each customer to
the next phase in the sales process. Customer support history is instantly
available and relevant financial, order history and shipment data can also be
supplied to the sales force when the sales and marketing applications are
linked to other enterprise applications.
The applications operate on a UNIX or NT based server with an Oracle,
Sybase, Informix or Microsoft SQL Server database accessed through Windows
3.1, Windows NT or Windows 95 clients. Further, mobile, detached users operate
on a laptop database and perform on-demand real-time database synchronization
to a corporate or local database server using Aurum's dbSync product through a
LAN/WAN, dial-up, RAS, XcelleNet, wireless or Internet connection. These
applications may be used individually or as part of an integrated customer
management solution.
List prices for each of Aurum's Customer Enterprise applications are based
on a license fee per server as well as license fees based on named users. The
list prices for the Aurum Customer Enterprise applications range from $15,000
to $30,000 per server and from $1,500 to $3,000 per user.
Business Applications
Aurum SalesTrak. SalesTrak is an enterprise-wide sales force automation
application designed to enable mobile and connected sales professionals to
manage leads, opportunities, customer relationships,
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contact information, account activities, calendars, literature fulfillment,
price lists, quotes and forecasts. To support team selling, SalesTrak helps
the mobile sales professional manage all of the key milestone events and
assign team responsibilities throughout a sales cycle, including key contact
information, account information, account strategy, key influencers and team
tasks. SalesTrak can support different sales methodologies and can be used by
companies to reinforce defined sales processes. SalesTrak provides companies
with increased visibility and early intelligence about changes in the
composition and quality of leads in the sales funnel at a marketing level, at
a regional level and at an individual sales representative's level. It also
provides valuable metrics on the length of the sales cycle, success ratios,
win/loss data and other key business metrics which can help improve the sales
and marketing process.
Aurum TeleTrak. TeleTrak is a comprehensive telemarketing/telesales
application designed to improve call center performance and enhance
productivity in both inbound and outbound operations. Customer inquiries enter
the process through toll-free telephone calls, the Internet, targeted
marketing campaigns or seminars and may be followed up by the pre-assigned or
next available telemarketing representative who will "work" the contact
through a series of strictly or loosely defined accomplishments to the pre-
qualified phase. Activities can include lead generation, call scripting,
activity management, follow up contact, literature fulfillment, quotes, order
generation and forecasting. Each customer contact, response or note is
recorded in the system to enable an audit trail of campaign effectiveness, as
well as individual representative productivity. A complete set of reports
assists management in running the telemarketing/telesales call center.
TeleTrak can be integrated with the latest in computer telephony technology
including automatic call directors, dialers and FAX servers for maximum call
center productivity.
Aurum SupportTrak. SupportTrak is a call management application for customer
support call centers. SupportTrak handles customer support calls through the
Web, telephone call, e-mail or fax through call resolution. It also provides
call routing or dispatch capabilities, call management, activity tracking,
calendaring, information bulletin and literature fulfillment. SupportTrak is
designed to streamline and automate the sharing of customer support
information throughout the enterprise and is tightly integrated with the
Company's SalesTrak and TeleTrak applications. Customer support activity is
stored in the central database, providing sales professionals a complete
customer support activity profile.
Aurum Management Information System. The Management Information System
includes Aurum Explorer and Aurum Reporter and provides a comprehensive new
approach to utilizing Aurum's customer information system as a data warehouse.
It combines the latest On-Line Analytical Processing (OLAP) technology with
the Aurum Customer Enterprise and enables a variety of functions from ad-hoc
reporting to on-line analytical processing and drill down analysis of the
customer data. Built on the foundation of Business Objects, an industry-
leading enterprise level query tool, the Management Information System
includes an Aurum-specific customer object repository, a set of 35 predefined
analyses and templates and end-user tools for drill down and ad hoc analysis.
Templates include forecasting, funnel management by product/team/organization,
win/loss, competitive tracking, sales team performance and more. The
Management Information System is also open and extensible to incorporate
enterprise information from external third party sources and "back office"
customer information. This application gives managers and sales
representatives throughout the customer life cycle process the ability to do
ad hoc and comprehensive analysis in an easy to use, graphical form.
Enabling Technology
Aurum dbSync. Aurum's dbSync technology employs a patent-pending real-time
scanning approach to provide database synchronization that is fast, immediate,
scalable, recoverable, extensible and configurable. The Company believes that
its dbSync technology is unique in the industry and has played a critical role
in winning large sales force automation opportunities. dbSync is designed to
facilitate the timely exchange of information among sales team members with
fast and efficient updates because only net changes and additions are
exchanged. Its advanced design offers sophisticated collision detection and
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error recovery capabilities and transport independence with support for
multiple communications links including dial-up, LAN, WAN, RAS, XcelleNet,
wireless and the Internet. dbSync is designed to support server-to-server
synchronization so that smaller regional SalesTrak servers can be placed in
foreign countries which can provide substantial savings in telecommunications
costs. dbSync also provides Electronic Software Distribution which can be used
to electronically distribute the latest release of SalesTrak or other Windows
applications to up to thousands of mobile users. The Electronic Software
Distribution feature also supports the transfer of marketing encyclopedia
files from the Company's Intranet-based marketing encyclopedia system. The use
of dbSync is illustrated below:
(DIAGRAM)
[Depiction of a mobile network computing environment comprised of an enterprised
server, regional server, networked clients and remote clients.]
EventTrak. EventTrak is an escalation and workflow engine designed to
facilitate the mapping of an individual company's business process by defining
key business rules for escalation and notification of events and issues. This
module enables a user to set up pre-defined events and business processes for
handling specific customer processes such as a type of service call, a
literature fulfillment request, or an information inquiry through
telemarketing.
Aurum CTITrak. CTITrak is a computer telephony interface that connects the
Company's applications with automatic call distributors ("ACD"), interactive
voice response ("IVR"), dialers and other telephony equipment. In connection
with an incoming customer call, CTITrak enables a company representative to
access and retrieve all data related to the calling customer from the sales
and marketing database and forward both the data and the call directly to the
call center representative.
Internet/Intranet Applications
Aurum WebTrak. WebTrak is an Internet-enabled application that provides an
interface to Aurum's sales and marketing applications from the Web. WebTrak
enables the easy publishing of Aurum database application forms on a Web
server HTML home page. These forms can be directly accessed by a prospect or
customer to indicate their interest in a specific product, to register for a
seminar or to place an order directly. Once the data is entered on the Web
server, WebTrak captures this information and transfers it to the sales and
marketing database where it can be acted upon further with the aid of
intelligent agents. An inquiry or customer request can be prequalified through
the Web and automatically entered into the
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sales and marketing process, setting off a series of activities for direct
follow up. In addition, customer profile information is captured in the Aurum
customer database, enabling a company to understand and better market to
Internet visitors. WebTrak extends the reach of automated sales and marketing
solutions to include the power of the Internet by enabling Web lead generation
and one-to-one marketing through the generation of customized marketing and
sales profiling information through the Internet.
Aurum Smart Encyclopedia. The Smart Encyclopedia provides complete product,
competitive, industry and technical information and a set of monitoring agents
that can actively alert a representative to new information that affects the
sales cycle or existing customer relationships. This system enables marketing
and sales professionals to subscribe to product, company, technical and
competitive information from other Web sites on the Internet and from their
corporate Intranet server.
The Smart Encyclopedia contains intelligent agents which actively monitor
Internet Web sites and the Intranet marketing encyclopedia content for net
changes. Mobile representatives have the ability to periodically connect to
the corporate Intranet via the dbSync process to update the information stored
on their notebook computers and to download new information. The mobile sales
representatives can then use a Web browser off-line to look at the information
that was downloaded to their laptop. This approach ensures that sales
professionals are always working with the latest customer data, product and
pricing information, competitive intelligence and multimedia selling
presentations. It also minimizes the amount of time that sales professionals
need to spend searching for competitive intelligence.
PRODUCT ARCHITECTURE
The Company's software is developed using proven technologies such as 3-Tier
client/server component architecture, modern graphical user-interface designs,
object-oriented rapid application development tools, relationship modeling
tools, commercial relational databases and Web-centric development tools. In
addition, the Company's software products employ a unique patent-pending
database synchronization technology with a proven scalable architecture.
Aurum Customer Enterprise Server. The customer management database serves as
the foundation of all the Company's applications and contains information such
as leads, companies, contacts, tasks, sales cycle phases, price books, support
information, telemarketing scripts, campaign data and other related customer
information. The common database is a normalized schema that is optimized for
scalability based on the Company's experience in implementing large-scale
deployments. Data stored in the common database is distributed to mobile users
through the Company's database synchronization technology. The common database
schema is extensible and configurable to exactly model a company's business
requirements.
Adaptable and Configurable Development Environment. The Company uses an
object-oriented rapid application development environment so the software can
be easily configured to support changing field names, field labels and changes
in the user interface and layout forms. The class library objects contain key
components and business processes which can be easily adapted to match a
company's exact sales and marketing process--including the complete
application logic and flow of the application. This approach enables customers
to quickly prototype, model and implement their specific business processes
very rapidly, and it also gives them the ability to change their processes
quickly over time as business needs change.
3-Tier Client/Server Architecture. Aurum developed a 3-Tier client/server
adaptable architecture that conceptually consists of a visual layer, business
layer and transaction layer as illustrated below. The architecture employs
Microsoft technology for ease of use and industry compatibility and Aurum
technology for high performance and remote user support. The visual layer,
which is the sales user component, provides a Windows interface and permits
the user to prioritize information views. The business layer allows managers
to easily adapt and implement management decisions and business process
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rules across the enterprise. The transaction layer serves as the repository of
customer data and access point to other enterprise databases, and is designed
to manage the connections between the client and server to optimize
performance and scalability to support large number of clients. Each layer is
designed to support rapid, easy upgrade of user defined content to newer
versions of Aurum products that preserves the user's existing investment.
[ART]
[Depiction of a three-tier enterprise server environment representing the
Aurum Adaptive Architecture.]
Database Synchronization. The Company's database synchronization provides
on-demand database synchronization, heterogeneous database synchronization,
complex data distribution model (team selling support and other application-
specific logic), customizable business objects (business rules reside in the
database), high performance extraction of net data changes, collision
handling, full extensibility and customization, support for electronic
software distribution, transport independence (works over WAN, LAN, Xcellenet,
dial-up and the Internet) and full recoverability if the communications
session fails.
Internet Technology. The Company's WebTrak product is based on a common
gateway interface. The Company intends to evolve this interface to JavaScript
and over time to provide full support for Microsoft Active X components so
that its applications or portions of its applications (applets) may be
distributed to remote users through the Internet or through a corporate
Intranet.
STRATEGIC PARTNERS
A key part of the Company's strategy is to extend its strategic partnerships
with industry leading firms to increase customer demand for the Aurum
solution, expand market penetration and provide complementary technology,
services and training. These partnerships are intended to provide complete
sales and marketing solutions for Aurum customers. The Company has established
strategic partnerships in three key areas: systems integration, technology and
sales methodology.
Systems Integration Partners. Projects which transform sales and marketing
operations are often large and complex, and include business process re-
engineering, large-scale implementations, roll out and training for up to
thousands of users. These implementations are often global in scope.
Established systems integration firms provide both domain expertise and
trained personnel to address these challenges. Having provided business
process re-engineering, total quality management and other solutions to meet
the back
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office automation needs of Fortune 500 and other organizations, many
established systems integration firms have begun to focus on and create
dedicated front office sales and marketing solutions.
Aurum's strategy includes working closely with a selected number of
industry-leading firms with a history of delivering successful sales and
marketing information system implementations. Aurum and its systems
integration partners provide a complete solution for a customer's business
process, application implementation and roll out needs. The Company believes
that these relationships have enhanced its presence in both Fortune 500 firms
and in international markets. Aurum has established strategic system
integration partnerships with Cambridge Technology Partners, Deloitte & Touche
LLP, IBM and KPMG Peat Marwick LLP.
Technology Partners. The Company's technology strategy is to focus on core
product development areas and partner with industry leading technology vendors
to provide customers with a complete solution. The Company has worked with
leading database and tool vendors such as Business Objects, Centura, Informix,
Microsoft, Oracle and Sybase. The Company has also worked with key Internet
and communications technology vendors, including Dialogic (computer
telephony), First Floor Software (intelligent agent technology), Netscape and
XcelleNet (remote communications) as well as with complementary sales
automation vendors, including MediaShare (marketing encyclopedia), Sant &
Assoc. (proposal generator) and Trilogy (sales integrator). The Company
intends to continue working with these and other technology vendors.
Sales Methodology and Training Partners. The Company believes that an
increasing number of companies are implementing sales methodologies and
training as part of their sales and marketing automation efforts. In order to
meet these customer needs and deliver a complete solution, the Company has
established a strategic relationship with The Kappa Group, Inc., an industry-
leading consulting and sales methodology firm. The Company's SalesTrak product
incorporates, as part of this partnership, The Kappa Tools, a set of
territory, opportunity management and strategic planning tools designed to
increase the effectiveness of sales and marketing professionals. Aurum and The
Kappa Group have jointly conducted marketing and trade show activities in
order to promote their mutual solution to current and prospective customers.
The Company intends to establish similar arrangements with other sales
methodology consultants.
34
<PAGE>
CUSTOMERS
As of June 30, 1996 the Company had licensed its products to over 100
customers. The following is a representative list of the Company's customers
that have purchased more than $100,000 in software and services and have
current maintenance contracts with the Company as of July 31, 1996. In 1995,
MCI Telecommunications accounted for approximately 11% of the Company's total
revenues. For the first six months of 1996, A.C. Nielsen Company accounted for
approximately 10% of the Company's total revenues.
<TABLE>
<CAPTION>
TECHNOLOGY INFORMATION/PUBLISHING/OTHER SOFTWARE
---------- ---------------------------- --------
<S> <C> <C>
Catalink Direct, Inc. A.C. Nielsen Company, Inc. Business Objects S.A.
Dialogic Corporation Adia S.A. Macromedia, Inc.
Extended Systems CUC International Inc. Mercury Interactive Corporation
Fair, Isaac and Company, Inc. Kaiser Permanente Netscape Communications Corporation
Level One Communication National Data Corporation
Maxtor Corporation Neodata Services, Inc.
Parker Compumotion Division The Atlanta Journal-Constitution
Sun Microsystems, Inc. Reed Reference Publishing
Telogy Networks, Inc.
Tencor Instruments
MANUFACTURING FINANCIAL SERVICES TELECOMMUNICATIONS
------------- ------------------ ------------------
Armstrong World Export Development Corp. BBN Corporation
Industries, Inc. Fleet Bank MCI Telecommunications
Hilti, Inc. GE Capital Corporation
Lanier Worldwide, Inc. Hewlett Packard Company
Welch Allyn (Technology Finance Division)
Wisconsin Tissue
UTILITIES CHEMICAL
--------- --------
<C>
Entergy Corporation Eastman Chemical
Houston Lighting & Power Company
Minnesota Power & Light Company
</TABLE>
Aurum applications have been selected by organizations in a wide variety of
industries for domestic and global implementation. The following are examples
of customer implementations of Aurum applications:
MCI Communications Corporation
Situation: MCI Communications Corporation ("MCI") identified a mission-
critical need to both capitalize upon new business opportunities offered by
de-regulation of the telecommunications industry and respond to the resulting
new level of competitive pressure. Specific goals included rapidly migrating
from a single line of long distance related products to a more diversified
line of information products, effectively training a 5,000 person sales force
and increasing the revenue generated by each sales representative while
reducing the overall cost of sales. After a lengthy evaluation process, MCI
chose Aurum's SalesTrak to meet its lead and opportunity management
requirements. SalesTrak was selected for its ability to scale to meet the
needs of thousands of users and provide the real-time access to product,
marketing and other enterprise data necessary to achieve identified goals.
Solution: MCI initiated a new "virtual workplace" selling paradigm designed
to increase the amount of time sales representatives spent in front of
customers and deployed a lap-top based virtual desktop solution centered on
SalesTrak. MCI sales representatives now have real-time access to new leads
and opportunities stored in a multi-gigabyte back-end database, as well as
integrated proposals, presentations and other multimedia selling tools
relating to new and existing products. Access to this wide array of corporate
data is provided on a real-time basis by Aurum's dbSync, which also implements
updates made
35
<PAGE>
by sales representatives located throughout the country as they work with
customers and prospects. Aurum's SalesTrak and dbSync facilitate immediate
access to new leads, pricing information, multimedia presentations,
competitive analysis, new product information and complex proposals.
Using SalesTrak and dbSync, MCI was able to prepare and execute an
enterprise-wide solution within six months from date of initiation.
Netscape Communications Corporation
Situation: Netscape Communications Corporation ("Netscape") was faced with a
mission critical need to manage a large number of incoming business leads from
both existing and prospective customers, qualify and develop these
opportunities for multiple tiers of distribution and seamlessly integrate
Internet inquiries into this single sales and marketing process. Netscape
completed a lengthy and comprehensive evaluation of possible solutions. Aurum
was chosen in January 1996 to provide a technology and application solution
while Cambridge Technology Partners, working in conjunction with Aurum, was
selected to complete the implementation.
Solution: Aurum SalesTrak was implemented to service Netscape's Netsales
organization with lead capture for distribution to channel partners. SalesTrak
will be implemented in the field sales organization in the fall of 1996. All
incoming opportunities (e.g., telephone, fax, reference, Internet) are managed
using SalesTrak. Each opportunity is qualified and seamlessly forwarded to the
appropriate sales organization for further development and closure.
Working in conjunction with Aurum's consulting services team, Cambridge
Technology Partners defined the appropriate project and completed the
implementation. Netscape commenced roll out in July 1996.
Global Technology Provider
Situation: A global technology provider determined the need to reengineer
its selling process to increase revenue, shorten the sales cycle and implement
team selling. Necessary requirements included increasing the authority of
field sales personnel and productivity improvement. After evaluating a wide
range of potential solutions, Aurum was chosen to provide the technology
solution.
Solution: Aurum SalesTrak was launched for the customer in Europe in June
1996. The Aurum solution enables sales representatives to more effectively
qualify business opportunities, thereby significantly shortening the closing
process and reducing sales and administrative costs. The Company has been
advised by this customer that SalesTrak will be launched worldwide during 1996
for over 250 sales professionals in Europe, North America and Latin America,
and in Asia in 1997. In this implementation, the Company's SalesTrak product
delivers:
. An opportunity management system enabling sales professionals to better
qualify leads, manage the sales process and synchronize information
among sales teams and division management.
. A deal configuration system that allows sales professionals to design
and price standard and custom financial solutions, provides deal
profitability metrics, allows for the quick generation of high-quality
proposals and legal documents at the customer site and provides a
linkage to existing order management systems.
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<PAGE>
SALES AND MARKETING
In North America, the Company markets its software primarily through its
direct sales organization. To support its sales efforts, the Company conducts
an active set of marketing programs including public relations, advertising,
direct mail, seminars, trade shows, and ongoing customer communications
including a user group council. As of June 30, 1996, the Company's sales and
marketing organization consisted of 46 full time employees.
The Company's direct sales force employs a consultative sales process,
working closely with customers to understand and define their needs to
determine how they are best addressed by both the Company's product offerings
and complementary technology and services offered by partners. Because the
implementation of sales and marketing applications is typically mission
critical, the Company's sales and marketing efforts are generally directed to
the senior management of a prospective customer.
The direct sales force works closely with strategic systems integration,
technology and sales methodology partners to identify specific customer
opportunities and requirements. These partnerships have led to the Company's
introduction into strategic accounts, increased account penetration and
reduced sales cycle length. Joint marketing activities conducted with these
partners has increased market coverage and acceptance of the Company's
products. These activities include jointly conducted seminars, trade shows and
conferences. A key part of the Company's strategy is to expand and enhance
these marketing efforts with leading systems integration partners.
The Company markets its software outside North America through key
distribution organizations. As of June 30, 1996, distributor agreements were
in place with AurumFrance, Ensure Technologies (United Kingdom) and IBM EMEA
(Europe, Middle East and Africa). In addition to marketing and selling the
Company's software, these distributors provide technical support as well as
educational and consulting services.
The Company's strategy is to continue to grow its direct sales force in
North America and to expand distribution internationally. The Company intends
to increase the size of its sales force in 1996 and 1997 and to recruit
additional distribution partners. The competition for qualified sales
personnel is intense and there is no assurance that the Company can retain its
existing sales personnel and attract, assimilate and retain qualified
personnel in the future. There is also intense competition for qualified
distributors and there is no assurance that the Company can attract and retain
qualified distributors. If the Company is unable to hire such employees and
recruit such distributors on a timely basis, the Company's business, operating
results and financial condition could be materially and adversely affected.
RESEARCH AND DEVELOPMENT
The Company has made a substantial investment in product development during
the last several years. The Company's growth and future financial performance
will depend in part upon its ability to enhance existing applications, develop
and introduce new applications that keep pace with technological advances,
meet changing customer requirements, respond to competitive products and
achieve market acceptance. As of June 30, 1996, there were 30 full time
employees on the Company's product development staff. The Company's research
and development expenditures in 1995 and for the six months ended June 30,
1996 were $2.3 million and $1.4 million, respectively, and represented 22% and
13% of revenues in these periods, respectively. The Company expects that it
will continue to commit substantial resources to product development in the
future. To date, the Company's development efforts have not resulted in any
capitalized software development costs.
The Company works closely with its customers and prospects to determine
their requirements and to design enhancements and new products to meet their
needs. The Company's current development initiatives include feature and
function enhancement of existing products, the development of new
complementary products and the development of integrated packages of its
products tailored to the
37
<PAGE>
requirements of certain market segments. The Company plans to enhance its
current product line, including new Internet/Intranet capabilities as well as
support for additional hardware and relational database platforms.
The client/server and Internet application software market is subject to
rapid technological change, changing customer needs, frequent new product
introductions and evolving industry standards that may render existing
products and services obsolete. As a result, the Company's position in its
existing markets or other markets that it may enter could be eroded rapidly by
product advancements. The life cycles of the Company's products are difficult
to estimate. The Company's product development efforts are expected to
require, from time to time, substantial investments by the Company in product
development and testing. There can be no assurance that the Company will have
sufficient resources to make the necessary investments. The Company has in the
past experienced development delays, and there can be no assurance that the
Company will not experience delays in the future. There can be no assurance
that the Company will be successful in developing and marketing enhancements
to its products that respond to technological developments, evolving industry
standards or changing customer requirements, or that the Company will not
experience difficulties that could delay or prevent the successful
development, introduction and sale of such enhancements or that such
enhancements will adequately meet the requirements of the marketplace and
achieve any significant degree of market acceptance. If release dates of any
future product enhancements or new products are delayed or if these products
or enhancements fail to achieve market acceptance when released, the Company's
business, operating results and financial condition could be materially and
adversely affected.
Software products as complex as those offered by the Company may contain
errors that may be detected at any point in the products' life cycle. The
Company has in the past discovered software errors in certain of its products
and has experienced delays in shipment of products during the period required
to correct these errors. There can be no assurance that, despite testing by
the Company and by current and potential customers, errors will not be found,
resulting in loss of, or delay in, market acceptance and sales, diversion of
development resources, injury to the Company's reputation, or increased
service and warranty costs, any of which could have a material adverse effect
on the Company's business, results of operations and financial condition.
CONSULTING SERVICES, TRAINING AND SUPPORT
The Company provides an extensive array of services to its customers,
including business consulting, requirements definition, installation,
consulting, training and customer support. The Company has developed a
comprehensive methodology for rapid implementation of its sales and marketing
applications. This methodology is used by its own consulting organization and
is also available for license by its systems integration partners. Systems
integration partners include Cambridge Technology Partners, Deloitte & Touche
LLP, IBM, KPMG Peat Marwick LLP and Technology Solutions Corporation. As of
June 30, 1996, the Company employed 50 full time employees in its consulting
services, training and customer support organization. The Company provides the
following services:
Consulting Services. The Company provides a comprehensive range of
professional services for its customers including business consulting, project
management, requirements definition, installation and implementation,
consulting, and roll out and deployment. The Company maintains a large
consulting services staff with extensive experience in the implementation and
deployment of complex client/server and Internet/Intranet applications.
Consulting services are based on a time and materials basis and are charged
separately from the software license and maintenance agreement.
The Company has an active certification program in place for training and
supporting large systems integration partners. The Company expects that over
time, the large systems integrators will perform more of the consulting
associated with the implementation of the Company's products as they complete
more engagements and increase the number of experienced consultants that have
been trained and certified on the Company's technology.
38
<PAGE>
Support. The Company's customer service organization provides post-sales
support, including information and assistance on installation, operation and
administration of the Company's products. The Company offers telephone support
during business hours and 24 hour on-call support. Initial product license
fees do not cover software maintenance. Customers are entitled to receive
software updates, maintenance releases and technical support for an annual
license fee which is a percentage of the Company's list price for the software
licenses.
Training. The Company offers comprehensive end user and technical training
programs for its customers and partners. The Company also offers customized
training courses to meet the specific needs of its customers. Fees are based
on a per class basis, per student basis or on a train the trainer basis. The
Company offers training at customer sites as well as at its offices in Santa
Clara, California. In addition, customers may choose to receive training from
selected systems integration partners.
COMPETITION
The market for the Company's client/server applications is highly
competitive, fragmented and subject to rapid technological change and frequent
new product introductions and enhancements. The Company has a large number of
competitors which range from internally developed custom application
development efforts to packaged application vendors. The Company offers a
suite of applications which can be used as part of an integrated customer
management application suite or can be used on a stand- alone basis. As such,
the Company competes with packaged application vendors that provide tactical
departmental solutions in specific market segments as well as with competitors
that provide a broader suite of integrated customer management applications.
Many of these competitors have longer operating histories, significantly
greater financial, technical, marketing and other resources, greater name
recognition and a larger installed base of customers than the Company. As a
result, these competitors may be able to respond more quickly to new or
emerging technologies and to changes in customer requirements or to devote
greater resources to the development, promotion and sale of their products
than can the Company.
The Company's principal competitors in the sales force automation market
include Brock Control Systems, Inc., Metropolis Software, Inc. (recently
acquired by Clarify Inc.), SalesBook, SalesKit Software Corporation,
SalesSoft, Saratoga Systems, Inc. and Siebel Systems, Inc. The Company also
depends for the marketing and implementation of its products upon a number of
third party systems integrators, including Cambridge Technology Partners,
Deloitte & Touche LLP, Ernst & Young LLP, IBM and KPMG Peat Marwick LLP. Many
of these firms also have established relationships with the Company's
competitors. There can be no assurance that these third parties, many of which
have significantly greater financial resources than the Company, will not in
the future compete directly with the Company or otherwise discontinue their
support of the Company's products. The Company also faces competition from the
customer support application vendors which are attempting to expand from their
customer support market into the sales automation area either through internal
product development or through acquisitions. These customer support
competitors include Astea International, Inc., Clarify Inc., Scopus
Technology, Inc. and The Vantive Corporation. Over time, the Company expects
large enterprise software vendors such as Oracle Corporation and SAP AG to
extend their enterprise application suites by offering sales force automation,
telemarketing and customer support, with the appropriate integration to
leading financial, order entry and manufacturing applications. In addition,
because the barriers to entry in the software market are relatively low,
additional competitors may emerge as the sales and marketing software market
continues to develop and expand. It is also possible that acquisitions of
competitors by large software companies or alliances among competitors could
occur. The Company expects that significant consolidation in its industry will
occur over the next few years and increased competition from new entrants or
through strategic acquisitions or alliances could result in price erosion,
reduced gross margins or loss of market share, any of which could have a
material adverse effect on the Company's business, operating results or
financial condition.
39
<PAGE>
The Company believes that it competes favorably in its marketplace based
upon its breadth and depth of application functionality, its architecture and
database synchronization technology, the scalability of its technology to
handle thousands of users on a global basis, its Internet and Intranet
capabilities, the ease of adapting its applications with its object-oriented
rapid application development tools and its ability to get large customers
into production quickly through its own consulting services organization as
well as through its partnerships with large systems integrators. Although the
Company believes that it currently competes favorably with respect to such
factors, there can be no assurance that the Company will be able to compete
successfully against current and future competitors, especially those with
greater financial, marketing, service, support, technical and other resources
than the Company, or that competitive pressures will not materially and
adversely affect the Company's business, operating results and financial
condition.
INTELLECTUAL PROPERTY AND OTHER PROPRIETARY RIGHTS
The Company relies primarily on a combination of copyright and trademark
laws, trade secrets, confidentiality procedures and contractual provisions to
protect its proprietary rights. The Company seeks to protect its software,
documentation and other written materials under trade secret and copyright
laws, which afford only limited protection. The Company has submitted one
patent application for its dbSync technology. There can be no assurance that
any patent covering the Company's inventions will issue or that any patent, if
issued will provide sufficiently broad protection or will prove enforceable in
actions against alleged infringers. Despite precautions taken by the Company,
it may be possible for unauthorized third parties to copy aspects of its
products or future products or to obtain and use information that the Company
regards as proprietary. In particular, the Company provides its licensees with
access to its data model and other proprietary information underlying its
licensed applications. The Company makes source code available for certain of
the Company's products and occasionally enters into source code escrow
agreements with certain customers for the balance of the source code. There
can be no assurance that the Company's means of protecting its proprietary
rights will be adequate or that the Company's competitors will not
independently develop similar or superior technology or design around any
patents owned by the Company. Litigation may be necessary in the future to
enforce the Company's intellectual property rights, to protect the Company's
trade secrets or to determine the validity and scope of the proprietary rights
of others. Such litigation could result in substantial costs and diversion of
resources and could have a material adverse effect on the Company's business,
operating results or financial condition.
Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem.
In addition, the laws of some foreign countries do not protect the Company's
proprietary rights to the same extent as do the laws of the United States. The
Company is not aware that any of its product offerings infringe the
proprietary rights of third parties. There can be no assurance, however, that
third parties will not claim infringement by the Company with respect to
current or future products. The Company expects that software product
developers will increasingly be subject to infringement claims as the number
of products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all,
which could have a material adverse effect on the Company's business,
operating results and financial condition.
The Company also relies on certain technology which it licenses from third
parties, including software which is integrated with internally developed
software and used in the Company's products to perform key business functions.
There can be no assurance that these third party technology licenses will
continue to be available to the Company on commercially reasonable terms. The
loss or the inability of the Company to maintain any of these technology
licenses could result in delays or reductions in product
40
<PAGE>
shipments until equivalent technology could be identified, licensed and
integrated. Any such delays or reductions in product shipments could
materially and adversely affect the Company's business, operating results and
financial condition.
EMPLOYEES
As of June 30, 1996, the Company had a total of 137 full time employees, all
of whom are based in the United States. Of the total, 46 were engaged in sales
and marketing, 50 in consulting services, training and support, 30 in
engineering and 11 in administration and finance. The Company's future
performance depends in significant part on its ability to identify, attract
and retain highly qualified technical, sales and management personnel.
Competition for such personnel is intense and there can be no assurance that
the Company will be able to identify, attract and retain such personnel in the
future. None of the Company's employees is represented by a labor union. The
Company has not experienced any work stoppages and considers its relations
with its employees to be good.
FACILITIES
The Company's principal administrative, sales, marketing, support and
research and development functions are located at its leased headquarters
facility in Santa Clara, California. The Company currently occupies 18,000
square feet of space in the Santa Clara facility and the lease extends through
March 1997, with an option to extend the lease through July 1997. The Company
anticipates that it will be necessary to obtain a larger facility upon the
termination of its headquarters lease but believes that suitable additional or
substitute facilities will be available in the future as needed on
commercially reasonable terms. The Company also leases domestic sales and
support offices in the metropolitan areas of Dallas, Chicago, Seattle and
Atlanta and in Salem, New Hampshire. The Company intends to add additional
sales offices as necessary.
41
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
The directors and executive officers and certain key employees of the
Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Mary E. Coleman...................... 42 President, Chief Executive Officer and
Director
David D. Buchanan.................... 42 Executive Vice President and Director
Susan K. Buchanan.................... 44 Executive Vice President
Timothy E. Campbell.................. 35 Vice President, Client Services
Christopher L. Dier.................. 44 Chief Financial Officer and Secretary
Charles J. Donchess.................. 43 Vice President, Marketing
Tuoc V. Luong........................ 35 Vice President, Engineering
James W. Thanos...................... 48 Vice President, Worldwide Operations
Oliver D. Curme(2)................... 42 Director
Mark J. Leslie....................... 50 Director
Robert J. Loarie(2).................. 53 Director
Robert M. Obuch(1)................... 50 Director
Jeffrey T. Webber.................... 43 Director
Charles C. Wu(1)..................... 36 Director
</TABLE>
- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Ms. Coleman has served as the Company's President and Chief Executive
Officer and as a Director since November 1994. From May 1993 to November 1994,
Ms. Coleman served as the Company's Vice President of Marketing and from
January 1994 to September 1994 as Vice President of Engineering. From March
1992 until April 1993, she served as Vice President of Marketing for Radius,
Inc., a manufacturer of peripherals for Apple Macintosh computers. From
October 1990 until March 1992, Ms. Coleman was Vice President of Marketing at
McData Corporation, a data center network switch supplier. Ms. Coleman studied
computer science at the University of Colorado.
Mr. Buchanan, a co-founder of the Company, is the chief architect of the
Company's products and the primary developer of the Company's current product
line. He has served as Executive Vice President and as a Director of the
Company since January 1993. From January 1992 until January 1993, Mr. Buchanan
served as Chairman of the Company's Board of Directors. From 1984 until
founding the Company in 1991, Mr. Buchanan served in various technical, sales
and management positions at Cincom Systems, Inc., a supplier of relational
database and Fourth Generation Language (4GL) technology. Mr. Buchanan holds a
B.A. in Math and Computer Science from Principia College and an M.B.A. and an
M.S. in Management Information Science from the University of Arizona. Mr.
Buchanan is married to Susan K. Buchanan, an Executive Vice President of the
Company.
Ms. Buchanan, a co-founder of the Company, has served as Executive Vice
President since January 1993. From January 1992 until January 1993, she served
as a director of the Company and from January 1992 until June 1992 as the
Company's Chief Financial Officer and Secretary. From October 1986 until
October 1991, she served as a district sales manager for Unify Corporation, a
supplier of application development products for client/server environments.
Prior to 1986, Ms. Buchanan served as a regional systems engineer at Data
General Corporation, a provider of servers, storage products and services for
information systems, and at the Hewlett-Packard Company, a diversified
electronics manufacturer. Ms. Buchanan holds a B.A. in speech therapy and an
M.S. in computer science from Kansas State University. Ms. Buchanan is married
to David D. Buchanan, an Executive Vice President and Director of the Company.
42
<PAGE>
Mr. Campbell has served as the Company's Vice President of Client Services
since September 1995. From January 1988 to September 1995, Mr. Campbell served
in engineering, consulting and management roles at Electronic Data Systems
Corporation, a provider of information services. Mr. Campbell holds degrees in
Electrical Engineering from Conestoga College of Applied Arts and Technology.
Mr. Dier has served as the Company's Chief Financial Officer and Secretary
since July 1996. From 1990 to July 1996, Mr. Dier served as Chief Financial
Officer of Veritas Software Corporation, a storage management software
company. From 1982 to 1989, Mr. Dier served as Vice President of Finance and
Chief Financial Officer of Tolerant Systems, Inc., a fault tolerant computer
company. From 1974 to 1982, Mr. Dier held various financial positions at Intel
Corporation, a semiconductor company. Mr. Dier holds a B.S. in Humanities and
an M.B.A. from Santa Clara University.
Mr. Donchess has served as the Company's Vice President of Marketing and
Business Development since May 1995. From September 1989 to December 1994, Mr.
Donchess served in various capacities, including Vice President of Business
Development, at Sybase, Inc., a relational database software company. Mr.
Donchess holds a B.A. in English and American Literature from Brown
University.
Mr. Luong has served as the Company's Vice President of Engineering since
January 1996. From March 1992 to January 1996, Mr. Luong served as a Vice
President of Borland International Inc., a manufacturer of systems and
applications software products, where he was responsible for development of
Borland's Delphi client/server software product line. From February 1990 to
February 1992, Mr. Luong served as Director of Advanced Technology at Pyramid
Technology Corp., a manufacturer of open systems servers. From 1983 to 1990,
Mr. Luong served in several research and development management positions at
Informix Software, Inc. and Oracle Corporation. Mr. Luong holds a B.S. in
Computer Science from the University of California at Berkeley and an M.S. in
Engineering Management from Santa Clara University.
Mr. Thanos has served as the Company's Vice President of Worldwide
Operations since January 1995. From May 1995 to December 1995, Mr. Thanos
served as Vice President of Sales for Digital Tools, Inc., a provider of
project management software. From January 1993 to April 1994, Mr. Thanos
served as Vice President of Sales for Harvest Software, Inc., a facsimile
forms company. From December 1988 to January 1993, Mr. Thanos served as Vice
President of Worldwide Operations at Metaphor Computer Systems, Inc., a
provider of decision support software. Mr. Thanos holds a B.S. in
International Studies and behavioral sciences from The Johns Hopkins
University.
Mr. Curme has served as a Director of the Company since January 1993. Mr.
Curme has been a general partner with Battery Ventures, a venture capital
investment firm, since January 1988. Mr. Curme also serves as a director and
member of the compensation committees of HNC Software Inc. and Infoseek
Corporation. Mr. Curme holds a B.S. in Biochemistry from Brown University and
an M.B.A. from the Harvard University Graduate School of Business.
Mr. Leslie has served as a Director of the Company since April 1996. Mr.
Leslie has served as President and Chief Executive Officer of Veritas Software
Corporation, a storage management software company, since February 1990. Mr.
Leslie also serves as a director of Veritas Software Corporation and as a
director and member of the compensation committee of Worldtalk Communications
Corporation and as chairman and member of the compensation committee of
Versant Object Technology Corporation. Mr. Leslie holds a B.A. in Physics and
Mathematics from New York University and attended the Program for Management
Development at the Harvard University Graduate School of Business.
Mr. Loarie has served as a Director of the Company since March 1994. Since
August 1992, Mr. Loarie has been a Principal of Morgan Stanley & Co.
Incorporated, a diversified investment firm, and a general partner of Morgan
Stanley Venture Partners, L.P., and Morgan Stanley Venture Partners II, L.P.
venture capital investment partnerships. From 1981 until August 1992, Mr.
Loarie served as a general partner of several venture capital partnerships
affiliated with Weiss, Peck & Greer, an investment management firm.
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Mr. Loarie also serves as a director of Adaptec, Inc., TelCom Semiconductor,
Inc., and of several privately held companies. Mr. Loarie holds a B.S. in
Electrical Engineering from the Illinois Institute of Technology and an M.B.A.
from the Harvard University Graduate School of Business.
Mr. Obuch has served as a Director of the Company since August 1995. Mr.
Obuch has been a Principal of BankAmerica Ventures, a venture capital
investment affiliate of BankAmerica Corporation, since August 1994. From April
1994 to August 1994, Mr. Obuch worked as an independent management consultant.
From May 1992 to April 1994, Mr. Obuch served as President and Chief Executive
Officer of Computerized Lodging Systems, Inc., a hotel reservation and
registration software company. From August 1990 to May 1992, Mr. Obuch worked
as an independent management consultant. Mr. Obuch holds a B.S. in Accounting
from Seton Hall University.
Mr. Webber has served as a Director of the Company since April 1996. Since
January 1991, Mr. Webber has served as President of R.B. Webber & Company,
Inc., a management consulting firm. Mr. Webber was a partner with the
management consulting firm Edgar, Dunn & Company from 1987 to 1991. Mr. Webber
also serves as a director of Sybase, Inc., a relational database software
company. Mr. Webber holds a B.A. in American Studies from Yale University.
Mr. Wu has served as a Director of the Company since January 1993. Mr. Wu
has been Vice President of Vertex Management, Inc., a venture capital
investment firm, since February 1991. Mr. Wu holds an S.B. in Computer Science
and Engineering from the Massachusetts Institute of Technology and an M.B.A.
from the Stanford University Graduate School of Business.
DIRECTOR COMPENSATION
The Company reimburses each member of the Company's Board of Directors for
out-of-pocket expenses incurred in connection with attending Board meetings.
No member of the Company's Board of Directors currently receives any
additional cash compensation. At the time Mr. Leslie and Mr. Webber became
members of the Board of Directors, the Company granted each of them an option
to acquire 18,750 shares of the Company's Common Stock, respectively, under
the Company's 1995 Stock Plan, subject to monthly vesting over four years. See
"Stock Plans--1995 Stock Plan." The Company's 1996 Director Option Plan (the
"Director Plan") provides that options will be granted to non-employee
directors of the Company pursuant to an automatic nondiscretionary grant
mechanism. Upon joining the Board of Directors, each new non-employee director
will automatically be granted an option to purchase 18,750 shares of Common
Stock. Each non-employee director will subsequently be granted an option to
purchase 18,750 shares of Common Stock at each annual meeting of stockholders
beginning with the 1997 Annual Meeting of Stockholders. Each such option will
be granted at the fair market value of the Common Stock on the date of grant.
Options granted to non-employee directors under the Director Plan will become
exercisable at a rate of 1/48th of the shares subject to such options on the
monthly anniversary of the date of grant. See "Stock Plans--1996 Director
Option Plan."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is responsible for determining salaries,
incentives and other forms of compensation for directors, officers and other
employees of the Company and administers various incentive compensation and
benefit plans. The Compensation Committee consists of directors Robert J.
Loarie and Oliver D. Curme. Mary E. Coleman, President, Chief Executive
Officer and director of the Company, participates in all discussions and
decisions regarding salaries and incentive compensation for all employees and
consultants of the Company, except that she is excluded from discussions
regarding her own salary and incentive compensation. No interlocking
relationship exists between any member of the Company's Compensation Committee
and any member of any other company's board of directors or compensation
committee.
44
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth in summary form information concerning the
compensation awarded to, earned by, or paid for services rendered to the
Company in all capacities during the fiscal year ended December 31, 1995 by
(i) the Company's Chief Executive Officer and (ii) the Company's next five
most highly compensated executive officers whose salary and bonus for such
fiscal year exceeded $100,000 and who served as an executive officer of the
Company during such fiscal year (the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
---------------------
ANNUAL COMPENSATION(1)
------------------------ SECURITIES UNDERLYING
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTIONS (#)
--------------------------- ----------- ----------- ---------------------
<S> <C> <C> <C>
Mary E. Coleman........... $ 174,996 $ 47,665(2) 309,468
President and Chief
Executive Officer
Prabhat K. Andleigh(3).... 123,460 9,838 61,894
Vice President,
Engineering
Susan K. Buchanan......... 96,000 219,379(4) 174,091
Executive Vice President
Charles J. Donchess(5).... 94,052 24,973(6) 92,841
Vice President, Marketing
James W. Thanos........... 130,000 98,693(7) 123,788
Vice President, Worldwide
Operations
Brigitte U. Wilson(8)..... 89,426 20,385(9) 30,948
Director of Finance and
Administration
</TABLE>
- --------
(1) Other than salary and bonus described herein, the Company did not pay the
persons named in the Summary Compensation Table any compensation in excess
of 10% of such executive officer's salary and bonus.
(2) Includes $10,625 of bonus compensation earned in 1995 but paid in 1996.
(3) Mr. Andleigh resigned from the Company effective September 1, 1995.
(4) Consists entirely of sales commissions of which $32,911 was earned in 1995
but paid in 1996.
(5) Reflects compensation for a partial year. Mr. Donchess joined the Company
effective May 22, 1995.
(6) Includes $15,859 of bonus compensation earned in 1995 but paid in 1996.
(7) Includes $22,500 of bonus compensation earned in 1995 but paid in 1996.
(8) Ms. Wilson served as the Company's Director of Finance and Administration
and Chief Financial Officer from April 1994 until July 1996. In July 1996,
Christopher L. Dier became Vice President of Finance and Chief Financial
Officer. Ms. Wilson continues to serve as the Company's Director of
Finance and Administration.
(9) Includes $4,309 of bonus compensation earned in 1995 but paid in 1996.
45
<PAGE>
STOCK OPTION GRANTS
The following table provides information relating to stock options awarded
to each of the Named Executive Officers during the fiscal year ended December
31, 1995. All such options were awarded under the Company's 1995 Stock Plan.
OPTION GRANTS IN FISCAL YEAR 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------- VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL RATES OF STOCK
SECURITIES TOTAL OPTIONS EXERCISE VESTING PRICE APPRECIATION
UNDERLYING GRANTED TO PRICE PER COMMENCE- FOR OPTIONS TERM(1)
OPTIONS EMPLOYEES IN SHARE EXPIRATION MENT ---------------------
NAME GRANTED FISCAL 1995 (2)(3) DATE(4) DATE(4) 5% 10%
---- ---------- ------------- --------- ---------- --------- ----------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Mary E. Coleman......... 45,462 3.66% $0.12 6/15/05 05/26/93 $ 3,431 $ 8,694
2,713 * $0.12 6/15/05 12/07/93 $ 205 $ 519
3,789 * $0.12 6/15/05 01/27/94 $ 286 $ 724
42,749 3.44% $0.12 6/15/05 02/22/94 $ 3,226 $ 8,176
68,750 5.63% $0.12 6/15/05 11/23/94(6) $ 5,188 $ 13,148
146,006 11.76% $0.12 6/15/05 11/23/94(6) $ 11,019 $ 27,923
Prabhat K. Andleigh(5).. 28,414 2.29% $0.12 6/15/05 08/29/94 $ 2,144 $ 5,434
33,480 2.69% $0.12 6/15/05 12/23/94(6) $ 2,527 $ 6,403
Susan K. Buchanan....... 174,091 14.01% $0.12 6/15/05 ** (6) $ 13,138 $ 33,295
Charles J. Donchess..... 92,841 7.47% $0.12 6/15/05 05/22/95(6) $ 7,006 $ 17,756
James W. Thanos......... 123,788 9.96% $0.12 6/15/05 01/16/95(6) $ 9,342 $ 23,674
Brigitte U. Wilson...... 16,740 1.35% $0.12 6/15/05 12/23/94(6) $ 1,263 $ 3,202
3,789 * $0.12 6/15/05 01/20/93 $ 286 $ 725
10,419 * $0.12 6/15/05 04/01/94 $ 786 $ 1,992
</TABLE>
- --------
* Less than 1%.
** All shares were fully vested as of the date of grant.
(1) Potential realizable value is based on the assumption that the Common
Stock of the Company appreciates at the annual rate shown (compounded
annually) from the date of grant until the expiration of the ten year
option term. These numbers are calculated based on the requirements
promulgated by the Securities and Exchange Commission and do not reflect
the Company's estimate of future stock price growth.
(2) Options were granted at an exercise price equal to the fair market value
of the Company's Common Stock, as determined by the Board of Directors, on
the date of grant.
(3) Exercise price may be paid in cash, check, promissory note, by delivery of
already-owned shares of the Company's Common Stock subject to certain
conditions, or pursuant to a cashless exercise procedure under which the
optionee provides irrevocable instructions to a brokerage firm to sell the
purchased shares and to remit to the Company, out of the sale proceeds, an
amount equal to the exercise price plus all applicable withholding taxes.
(4) All options were granted on June 15, 1995. Except as otherwise indicated,
such options were issued in an option repricing and exchange program
whereby holders of outstanding options were offered an opportunity to
exchange outstanding options for new options under the Company's 1995
Stock Plan at an exercise price of $0.12 per share. All then-outstanding
options had exercise prices in excess of $0.12 per share, which the Board
of Directors of the Company had determined to be the fair market value of
the Company's Common Stock as of June 15, 1995. New options received under
the 1995 Stock Plan contained vesting provisions identical to the options
being exchanged such that each optionee was deemed vested in the new
option as of the date of grant to the same proportionate extent such
optionee was vested in the option being exchanged. Twenty-five percent
(25%) of the shares issuable upon exercise of options granted under the
Company's 1995 Stock Plan become vested on the first anniversary of the
date of grant (or, in the case of options granted in connection with such
option repricing, the first anniversary of the vesting commencement date
indicated) and
46
<PAGE>
vest at the rate of 1/48th of such shares for each month thereafter. Options
may be exercised prior to full vesting, subject to the optionee's entering a
restricted stock purchase agreement with the Company with respect to any
unvested shares. Under such agreement, the optionee grants the Company an
option to repurchase any unvested shares at their original purchase price in
the event the optionee's employment or consulting relationship with the
Company should terminate.
(5) Mr. Andleigh resigned from the Company effective September 1, 1995. Under
the terms of his option agreements, Mr. Andleigh had three months from the
date of termination of employment to exercise his options with respect to
any vested shares. Mr. Andleigh exercised his options with respect to 5,683
vested shares on November 1, 1995. Outstanding options held by Mr. Andleigh
terminated with respect to all unvested shares on the effective date of Mr.
Andleigh's resignation.
(6) Option grant was a new grant and not part of the option exchange program
described in footnote 4.
AGGREGATE OPTION EXERCISES
IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information regarding the exercise of
stock options by the Named Executive Officers during the fiscal year ended
December 31, 1995 and stock options held as of December 31, 1995 by the Named
Executive Officers.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
ACQUIRED DECEMBER 31, 1995(#)(2) DECEMBER 31, 1995(1)(2)
ON VALUE -------------------------- -------------------------
NAME EXERCISE (#) REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mary E. Coleman(3)...... 45,462 -- -- -- --
2,713 -- -- -- --
3,789 -- -- -- --
42,749 -- -- -- --
68,750 -- -- -- --
146,006 -- -- -- --
Prabhat K. Andleigh(4).. 5,683(4) -- -- -- --
Susan K. Buchanan....... -- -- 174,091(5) -- --
Charles J. Donchess..... -- -- 92,841(6) -- --
James W. Thanos......... -- -- 123,788(7) -- --
Brigitte U. Wilson...... -- -- 30,948(8) -- --
</TABLE>
- --------
(1) Based upon an initial public offering price of $ , minus the exercise
price.
(2) Options granted under the Company's 1995 Stock Plan (as in effect prior to
the effectiveness of the registration statement covering this offering) may
be exercised immediately upon grant and prior to full vesting, subject to
the optionee's entering a restricted stock purchase agreement with the
Company with respect to any unvested shares. Under such agreement, the
optionee grants the Company an option to repurchase any unvested shares at
their original purchase price in the event the optionee's employment or
consulting relationship with the Company should terminate. The 1995 Stock
Plan will be amended in connection with this offering such that future
grants will not include an early exercise provision.
(3) As of December 31, 1995, Ms. Coleman held no outstanding options and had
acquired an aggregate of 309,469 shares upon exercise of previous option
grants, of which 199,177 shares remained subject to the Company's
repurchase option as described in footnote 2 above as of such date.
(4) Mr. Andleigh resigned from the Company effective September 1, 1995. Under
the term of his option agreements, Mr. Andleigh had three months from the
date of termination of employment to exercise vested options. Mr. Andleigh
exercised his options with respect to 5,683 vested shares on
47
<PAGE>
November 30, 1995. Outstanding options held by Mr. Andleigh terminated with
respect to all unvested shares on the date of Mr. Andleigh's resignation.
(5) Ms. Buchanan's option was fully vested at the time of grant.
(6) As of December 31, 1995, 92,841 shares remained unvested.
(7) As of December 31, 1995, 123,788 shares remained unvested.
(8) As of December 31, 1995, 19,658 shares remained unvested.
STOCK PLANS
1995 Stock Plan. The Company's 1995 Stock Plan (the "1995 Plan") was adopted
by the Board of Directors and approved by the Company's stockholders in 1995.
A total of 2,105,695 shares of Common Stock has been reserved for issuance
under the 1995 Plan as of September 1996. The 1995 Plan provides for grants of
incentive stock options to employees (including officers and employee
directors) and nonstatutory stock options to employees (including officers and
employee directors) and consultants of the Company. The purpose of the 1995
Plan is to attract and retain the best available personnel to the Company and
to encourage stock ownership by employees, officers, and consultants of the
Company so as to give them a greater personal stake in the success of the
Company. The 1995 Plan is administered by the Board of Directors or by a
committee appointed by the Board which identifies optionees and determines the
terms of options granted, including the exercise price, number of shares
subject to the option and the exercisability thereof.
The terms of options granted under the 1995 Plan generally may not exceed
ten years. The term of all incentive stock options granted to an optionee who,
at the time of grant, owns stock representing more than 10% of the voting
power of all classes of stock of the Company or a parent or subsidiary of the
Company (a "Ten Percent Stockholder"), may not exceed five years, however.
Generally, options granted under the 1995 Plan vest and become exercisable
starting one year after the date of grant, with 25% of the shares subject to
the option becoming exercisable at that time and an additional 1/48th of such
shares becoming exercisable each month thereafter. The exercise price of
incentive stock options granted under the 1995 Plan must be at least equal to
the fair market value of the shares on the date of grant. The exercise price
of nonstatutory stock options granted under the 1995 Plan is determined by the
Board of Directors. The exercise price of any incentive stock option granted
to a Ten Percent Stockholder must equal at least 110% of the fair market value
of the Common Stock on the date of grant. The consideration for exercising any
incentive stock option or any nonstatutory stock option is determined by the
Board of Directors and may consist of cash, check, promissory note, delivery
of already-owned shares of the Company's Common Stock subject to certain
conditions, delivery of a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company the
amount of sale or loan proceeds required to pay the exercise price, a
reduction in the amount of any Company liability to an optionee, or any
combination of the foregoing methods of payment or such other consideration or
method of payment to the extent permitted under applicable law. To the extent
incentive stock options granted to a participant, when aggregated with all
other incentive stock options granted to such participant, have an aggregate
fair market value in excess of $100,000 first becoming exercisable in any
calendar year, such options would be treated as nonstatutory stock options.
No option granted under the 1995 Plan may be transferred by the optionee
other than by will or the laws of descent or distribution, and each option may
be exercised, during the lifetime of the optionee, only by such optionee. An
optionee whose relationship with the Company or any related corporation ceases
for any reason (other than death or permanent and total disability) may
exercise options in the three-month period following such cessation (unless
such options terminate or expire sooner by their terms) or in such longer
period as is determined by the Board of Directors. In the event of a proposed
sale of all or substantially all of the Company's assets or merger of the
Company with or into another corporation, all outstanding options may either
be assumed or an equivalent option may be substituted by the surviving entity.
If such options are not assumed or substituted, the Board of Directors has
discretion
48
<PAGE>
either to permit each optionee to exercise options as to all of the shares
subject to the option agreement, including shares as to which such options
would not otherwise be exercisable or to cause the termination of all
exercisable options that have not been exercised prior to the completion of
such asset sale or merger.
As of June 30, 1996, 1,341,043 shares of Common Stock had been issued upon
exercise of options outstanding under the 1995 Plan, of which 627,050 shares
were fully vested. Options to purchase 541,756 shares of Common Stock at a
weighted average exercise price of $2.52 were also outstanding.
1996 Employee Stock Purchase Plan. The Company's 1996 Employee Stock Purchase
Plan (the "Purchase Plan") was adopted by the Board of Directors in September
1996. A total of 300,000 shares of Common Stock has been reserved for issuance
under the Purchase Plan. The Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code of 1986, as amended, is administered
by the Board of Directors or by a committee appointed by the Board. Employees
(including officers and employee directors of the Company but excluding 5% or
greater stockholders) are eligible to participate if they are customarily
employed for at least 20 hours per week and for more than five months in any
calendar year. The Purchase Plan permits eligible employees to purchase Common
Stock through payroll deductions, which may not exceed 15% of an employee's
compensation. The Purchase Plan will be implemented in a series of overlapping
twenty-four month offering periods. The initial offering period under the
Purchase Plan will begin on the effective date of this offering and subsequent
offering periods will begin on the first trading day on or after May 1 and
November 1 of each year. Each participant will be granted an option on the
first day of the offering period, and such option will be automatically
exercised on the last date of each purchase within the offering period. If the
fair market value of the Common Stock on any purchase date (other than the
final purchase date of the offering period) is lower than such fair market
value on the start date of that offering period, then all participants in that
offering period will be automatically withdrawn from such offering period and
re-enrolled in the immediately following offering period. The purchase price of
the Common Stock under the Purchase Plan will be equal to 85% of the lesser of
the fair market value per share of Common Stock on the start date of the
offering period or on the date on which the option is exercised. Employees may
end their participation in an offering period at any time during that period,
and participation ends automatically on termination of employment with the
Company. In the event of a proposed dissolution or liquidation of the Company,
the offering periods terminate immediately prior to the consummation of the
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the Company's assets or the merger
of the Company with or into another corporation, then the offering period in
progress will be shortened by setting a new exercise date that is before the
sale or merger and the offering period in progress shall end on the new
exercise date. Each participant shall be notified at least ten business days
prior to the new exercise date, and unless such participant ends his or her
participation, the option will be exercised automatically on the new exercise
date. The Purchase Plan will terminate in March 2006, unless sooner terminated
by the Board of Directors.
1996 Director Option Plan. The Company's 1996 Director Option Plan (the
"Director Plan") was adopted by the Board of Directors in September 1996. A
total of 150,000 shares of Common Stock has been reserved for issuance under
the Director Plan. The option grants under the Director Plan are automatic and
non-discretionary, and the exercise price of the options is 100% of the fair
market value of the Common Stock on the grant date. The Director Plan provides
for an automatic grant of options to purchase 18,750 shares of Common Stock to
each non-employee director of the Company (an "Outside Director") at the first
meeting of the Board of Directors following the annual meeting of stockholders
in each year beginning with the 1997 Annual Meeting of Stockholders, if on such
date, such Outside Director has served on the Board of Directors for at least
six months. The term of such options is ten years. Options granted to Outside
Directors under the Director Plan become exercisable at a rate of 1/48th of the
shares on the monthly anniversary of the date of grant, subject to the Outside
Director's continuous service on the Board of Directors. In the event of the
sale of all or substantially all the Company's assets or the merger
49
<PAGE>
of the Company with or into another corporation, all outstanding options may
either be assumed or an equivalent option may be substituted by the surviving
entity or, if such options are not assumed or substituted, such options shall
become exercisable as to all of the shares subject to the options, including
shares as to which they would not otherwise be exercisable. In the event that
options become exercisable in lieu of assumption or substitution, the Board of
Directors shall notify optionees that all options shall be fully exercisable
for a period of 30 days, after which such options shall terminate. The
Director Plan will terminate in 2006 unless sooner terminated by the Board of
Directors.
401(k) Plan. The Company participates in a tax-qualified employee savings
and retirement plan (the "401(k) Plan") which covers all of the Company's
full-time employees who are at least 21 years of age. Pursuant to the 401(k)
Plan, employees may elect to reduce their current compensation by up to the
lower of 20% or the statutorily prescribed annual limit and have the amount of
such reduction contributed to the 401(k) Plan. The 401(k) Plan permits
additional discretionary matching contributions by the Company on behalf of
all participants in the 401(k) Plan in such a percentage amount as may be
determined annually by the Board of Directors. To date, the Company has made
no such matching contributions. The 401(k) Plan is intended to qualify under
Section 401 of the Internal Revenue Code of 1986, as amended, so that
contributions by employees or by the Company to the 401(k) Plan, and income
earned on plan contributions, are not taxable to employees until withdrawn
from the 401(k) Plan, and so that contributions by the Company, if any, will
be deductible by the Company when made. The trustee under the 401(k) Plan, at
the direction of each participant, invests the assets of the 401(k) Plan in
any of a number of investment options.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
The Company does not currently have any employment contracts in effect with
any of the Named Executive Officers other than Mary E. Coleman, the Company's
President and Chief Executive Officer, and Christopher L. Dier, the Company's
Vice President of Finance and Chief Financial Officer.
The Company and Ms. Coleman are parties to a letter agreement dated December
22, 1994 governing her employment with the Company. The agreement sets forth
Ms. Coleman's compensation level and eligibility for salary increases,
bonuses, benefits and option grants under the 1995 Plan. Pursuant to the
agreement, Ms. Coleman is entitled to receive, in the event of the merger of
the Company into another corporation resulting in a change of control or the
sale of all or substantially all the Company's assets, an amount equal to five
percent of the total sales price paid to the Company or its shareholders as a
result of such merger or asset sale reduced by the value of any consideration
Ms. Coleman receives as a stockholder of the Company as a result of such
merger or asset sale. Ms. Coleman's right to receive such amount in the event
of a merger of the Company will terminate upon the closing of this offering.
The agreement also provides for accelerated vesting of any unvested stock
options or shares in the event of a merger or asset sale. Ms. Coleman's
employment under the letter agreement is voluntary and may be terminated by
the Company or Ms. Coleman at any time with one month's prior written notice,
provided that the Company may terminate Ms. Coleman's employment for cause on
three days' written notice.
The Company and Mr. Dier are parties to a letter agreement dated July 8,
1996 governing Mr. Dier's employment with the Company. The agreement sets
forth Mr. Dier's compensation level and eligibility for salary increases,
bonuses, benefits and option grants under the 1995 Plan. The agreement
provides for an initial grant of an option under the 1995 Plan to acquire
91,474 shares of Common Stock at an exercise price per share of $6.00 subject
to vesting over four years with the first 25% of such shares vesting on the
first anniversary of Mr. Dier's employment with the Company and the remaining
shares vesting ratably over the succeeding 36 months. In the event of a change
of control of the Company as a result of a merger or acquisition, the vesting
of initial option grant will be accelerated with respect to 24 months of
vesting if Mr. Dier is not offered a comparable position in the surviving
company. Mr. Dier's employment under the agreement may be terminated at any
time by either the Company or Mr. Dier, with or without cause.
50
<PAGE>
The Compensation Committee as Plan Administrator of the 1995 Plan will have
the authority to provide for the accelerated vesting of shares of Common Stock
subject to outstanding options held by any of the Named Executive Officers or
the shares of Common Stock subject to direct issuances held by such individual
in connection with certain changes in control of the Company. See "Stock
Plans--1995 Stock Plan."
LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS
The Company has adopted provisions in its Certificate of Incorporation that
eliminate to the fullest extent permissible under Delaware law the liability
of its directors to the Company for monetary damages. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission. The Company's Bylaws provide that the Company
shall indemnify its directors and officers to the fullest extent permitted by
Delaware law, including in circumstances in which indemnification is otherwise
discretionary under Delaware law. The Company has entered into indemnification
agreements with its officers and directors containing provisions which may
require the Company, among other things, to indemnify the officers and
directors against certain liabilities that may arise by reason of their status
or service as directors or officers (other than liabilities arising from
willful misconduct of a culpable nature), and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
There is no currently pending litigation or proceeding involving a director,
officer, employee or other agent of the Company in which indemnification would
be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.
51
<PAGE>
CERTAIN TRANSACTIONS
Between January 1993 and March 1996, the Company sold and issued 23,265,529
shares of its Preferred Stock for an aggregate consideration of $18,994,001.
The Company sold the Preferred Stock in series as follows: (i) 4,411,765
shares of Series A Preferred Stock in January 1993 at a sale price of $0.85
per share; (ii) 4,782,408 shares of Series B Preferred Stock in December 1993
at a sale price of $1.08 per share; (iii) 5,000,000 shares of Series C
Preferred Stock in December 1994 at a sale price of $0.50 per share and
warrants to acquire 1,382,280 shares of Common Stock at a per share exercise
price of $0.00004; (iv) 7,607,719 shares of Series D Preferred Stock in August
1995 at a sale price of $0.79 per share; (v) 100,000 shares of Series D
Preferred Stock in November 1995 at a sale price of $0.79 per share; and (vi)
1,363,637 shares of Series E Preferred Stock in March 1996 at a sale price of
$1.10 per share.
The following table summarizes purchases, valued in excess of $60,000, of
shares of Preferred Stock (and in connection with the warrants issued with the
Series C Preferred Stock, of shares of Common Stock issued upon exercise of
such warrants) by directors, executive offers and 5% shareholders of the
Company:
<TABLE>
<CAPTION>
SHARES
-----------------------------------------------------------
COMMON
SERIES A(1) SERIES B(2) SERIES C(3) WARRANTS(4) SERIES D(5)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Morgan Stanley Venture
Partners, L.P.(6)...... -- 3,240,741 2,413,796 716,153 1,265,823
Vertex Management,
Inc.(7)................ 1,470,588 694,444 1,200,000 319,575 1,265,823
Battery Ventures II,
L.P.(8)................ 1,764,706 555,556 1,177,790 294,448 1,265,823
Bank America
Ventures(9)............ -- -- -- -- 3,797,469
</TABLE>
- --------
(1) The Series A Preferred Stock converts into Common Stock at the rate of
0.229 share of Common Stock for each share of Series A Preferred Stock.
(2) The Series B Preferred Stock converts into Common Stock at the rate of
0.291 share of Common Stock for each share of Series B Preferred Stock.
(3) The Series C Preferred Stock converts into Common Stock at the rate of
0.125 share of Common Stock for each share of Series C Preferred Stock.
(4) The exercise price applicable to such warrants was $0.00004 per share of
Common Stock. All such warrants were exercised during 1995.
(5) The Series D Preferred Stock converts into Common Stock at the rate of
0.250 share of Common Stock for each share of Series D Preferred Stock.
(6) Includes shares purchased by Morgan Stanley Venture Capital Fund II, L.P.,
Morgan Stanley Venture Investors, L.P. and Morgan Stanley Venture Capital
Fund II, C.V., each of which is an investment partnership affiliated with
Morgan Stanley Venture Partners, L.P. Robert J. Loarie, a general partner
of Morgan Stanley Venture Partners, is a director of the Company.
(7) Includes shares held by Vertex Investments (II) Ltd. and Vertex
Investments Pte. Ltd. Charles C. Wu is a Vice President of Vertex
Management, Inc., a venture capital firm, and a director of the Company.
Vertex Investments (II) Ltd. and Vertex Investments Pte. Ltd. are
investment affiliates of Vertex Management, Inc.
(8) The general partner of Battery Ventures II, L.P., is ABF Partners, L.P.
Oliver D. Curme, a general partner of ABF Partners, is a director of the
Company.
(9) Includes shares purchased by BankAmerica Ventures and BA Venture Partners
I, an investment general partnership comprised of certain employees of
BankAmerica Ventures. Robert M. Obuch, a Principal of BankAmerica Ventures
and a general partner of BA Venture Partners I, is a director of the
Company.
The Company is a party to letter agreements with its President and Chief
Executive Officer and its Vice President of Finance and Chief Financial
Officer governing their employment with the Company. See "--Employment
Agreements and Change in Control Agreements."
In September 1995, February 1996 and July 1996, the Company loaned Mary E.
Coleman, the Company's President and Chief Executive Officer, an aggregate
amount of $368,690.97 in connection with
52
<PAGE>
the purchase of Common Stock, evidenced by three promissory notes. The
principal amounts of the three notes are $37,136.17, $31,554.80 and $300,000,
respectively, which become due and payable in September 2000, February 2001
and July 2001, respectively. Each of the notes bears interest at the rate of
8% per annum. In the event that Ms. Coleman ceases to be employed by the
Company prior to maturity of the notes, such notes shall, at the option of the
Company, become immediately due and payable.
In July 1996 and August 1996, the Company loaned to Christopher L. Dier, the
Company's Vice President of Finance and Chief Financial Officer, an aggregate
amount of $157,500 in connection with the purchase of Common Stock, evidenced
by two promissory notes. The principal sum of the notes is $120,000 and
$37,500, respectively, and the notes become due and payable in July 2000 and
August 2000, respectively. Both notes bear interest at the rate of 8% per
annum. In the event that Mr. Dier ceases to be employed by the Company prior
to maturity of the notes, such notes shall, at the option of the Company,
become immediately due and payable at the option of the Company.
In February 1996 and July 1996, the Company loaned to Brigitte U. Wilson,
the Company's Director of Finance and Administration and, at the time of such
loan, the Company's Chief Financial Officer, an aggregate amount of $79,939.18
in connection with the purchase of Common Stock, evidenced by four promissory
notes. The aggregate principal sum of the three notes issued in February 1996
is $4,939.18, and each note becomes due and payable in February 2000. The
principal sum of the fourth note is $75,000 and becomes due and payable in
July 2000. Each of the notes bears interest at the rate of 8% per annum. In
the event that Ms. Wilson ceases to be employed by the Company prior to
maturity of the notes, such notes shall, at the option of the Company, become
immediately due and payable.
53
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of August 31, 1996 and as adjusted
to reflect the sale of the shares of Common Stock offered hereby by (i) each
person or entity who is known by the Company to own beneficially 5% or more of
the Company's outstanding Common Stock; (ii) each director of the Company;
(iii) each of the Named Executive Officers; and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERING(2) NUMBER OF AFTER OFFERING(2)
----------------------- SHARES -----------------------
NAME AND ADDRESS(1) NUMBER PERCENT OFFERED NUMBER PERCENT
------------------- ------------ ---------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Morgan Stanley Venture Partners(3)............. 2,275,593 26.4% -- 2,275,593 20.5%
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
Vertex Management, Inc.(4)..................... 1,323,895 15.4% -- 1,323,895 11.9%
Three Lagoon Drive, Suite 220
Redwood City, CA 94065
Battery Ventures II, L.P....................... 1,322,884 15.4% -- 1,322,884 11.9%
200 Portland Street
Boston, MA 02114
BankAmerica Ventures(5)........................ 949,366 11.0% -- 949,366 8.5%
950 Tower Lane, Suite 700
Foster City, CA 94404
The Buchanan Family 1991 Trust................. 714,376 8.3% -- 714,376 6.4%
Prabhat K. Andleigh(6)......................... 5,683 * -- 5,683 *
David D. Buchanan(7)........................... 888,467 10.3% -- 888,467 8.0%
Susan K. Buchanan(8)........................... 888,467 10.3% 125,000 763,467 6.9%
Mary E. Coleman(9)............................. 458,047 5.3% -- 458,047 4.1%
Charles J. Donchess(10)........................ 150,001 1.7% -- 150,001 1.3%
James W. Thanos(11)............................ 154,735 1.8% -- 154,735 1.4%
Oliver D. Curme(12)............................ 1,322,884 15.4% -- 1,281,072 11.9%
Mark J. Leslie(13)............................. 29,431 * -- 29,431 *
Robert J. Loarie(14)........................... 2,275,593 26.4% -- 2,275,593 20.5%
Robert M. Obuch(15)............................ 949,366 11.0% -- 949,366 8.5%
Jeffrey T. Webber(16).......................... 20,813 * -- 20,813 *
Brigitte U. Wilson(17)......................... 51,185 * -- 51,185 *
Charles C. Wu(18).............................. 1,323,895 15.4% -- 1,323,895 11.9%
All executive officers
and directors as a
group (15 persons)(19)........................ 8,114,695 91.5% 125,000 7,989,695 70.3%
</TABLE>
- --------
* Less than 1%.
(1) Unless otherwise indicated, the address for each listed stockholder is
c/o Aurum Software, Inc., 3385 Scott Boulevard, Santa Clara, California
95054. Except as otherwise indicated, and subject to applicable community
property laws, the persons named in the table have sole voting and
investment power with respect to all shares of Common Stock held by them.
54
<PAGE>
(2) Applicable percentage ownership is based on 8,608,002 shares of Common
Stock outstanding as of August 31, 1996 and 11,108,002 shares immediately
following the completion of this offering (assuming no exercise of the
Underwriters' over-allotment option), together with applicable options
for such shareholder. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally
includes voting or investment power with respect to securities, subject
to community property laws, where applicable. Shares of Common Stock
subject to options that are presently exercisable or exercisable within
60 days of August 31, 1996 are deemed to be beneficially owned by the
person holding such options for the purpose of computing the percentage
of ownership of such person but are not treated as outstanding for the
purpose of computing any other person.
(3) Includes 1,502,379 shares of Common Stock held by Morgan Stanley Venture
Capital Fund II, L.P. ("MSVC II LP"), 432,137 shares of Common Stock held
by Morgan Stanley Venture Investors, L.P. ("MSVI") and 341,077 shares of
Common Stock held by Morgan Stanley Venture Capital Fund II, C.V. ("MSVC
II CV"). Morgan Stanley Venture Capital II, Inc. ("MSVC II") is the
managing general partner of Morgan Stanley Venture Partners II, L.P.
("MSVP II"). MSVP II is the general partner of MSVC II LP and MSVI and
the investment general partner of MSVC II CV.
(4) Includes 316,455 shares of Common Stock held by Vertex Investments (II)
Ltd. ("Vertex II") and 1,007,440 shares of Common Stock held by Vertex
Investments Pte. Ltd. ("Vertex Pte.") Vertex II and Vertex Pte. are
investment affiliates of Vertex Management, Inc., a venture capital firm.
(5) Includes 854,430 shares of Common Stock held by BankAmerica Ventures, a
venture capital investment affiliate of BankAmerica Corporation ("BA
Ventures") and 94,936 shares of Common Stock held by BA Venture Partners
I, an investment general partnership comprised of certain employees of BA
Ventures ("BA Partners").
(6) Mr. Andleigh resigned from the Company effective September 1, 1995. Under
the terms of his option agreements, Mr. Andleigh had three months from
the date of termination of employment to exercise vested options. Mr.
Andleigh exercised his options with respect to 5,683 vested shares on
November 30, 1995. Outstanding options held by Mr. Andleigh terminated
with respect to all unvested shares on the date of Mr. Andleigh's
resignation.
(7) Includes 174,091 shares of Common Stock held by Mr. Buchanan individually
and 714,376 shares of Common Stock held by The Buchanan Family 1991
Trust, for which Mr. Buchanan serves as co-trustee. Excludes 174,091
shares held by Mr. Buchanan's wife as separate property and for which Mr.
Buchanan disclaims beneficial ownership.
(8) Includes 174,091 shares of Common Stock held by Ms. Buchanan individually
and 714,376 shares of Common Stock held by The Buchanan Family 1991 Trust
for which Ms. Buchanan serves as co-trustee. Excludes 174,091 shares held
by Ms. Buchanan's husband as separate property and for which Ms. Buchanan
disclaims beneficial ownership.
(9) Includes 296,178 unvested shares of Common Stock subject to the Company's
repurchase option as of August 31, 1996 in the event of a termination of
Ms. Coleman's employment with the Company.
(10) Includes 120,988 unvested shares of Common Stock which were not vested as
of August 31, 1996. Mr. Donchess' options may be exercised in full prior
to complete vesting subject to his entering a restricted stock purchase
agreement granting the Company an option to repurchase any unvested
shares at their original purchase price in the event of a termination of
Mr. Donchess' employment with the Company.
(11) Includes 105,736 unvested shares of Common Stock subject to the Company's
repurchase option as of August 31, 1996 in the event of a termination of
Mr. Thanos' employment with the Company.
(12) Represents shares of Common Stock held by Battery Ventures II, L.P. Mr.
Curme is a director of the Company and a general partner of ABF Partners
II, L.P., the general partner of Battery Ventures II, L.P. Mr. Curme
disclaims beneficial ownership of all such shares except to the extent of
his pecuniary interest therein.
(13) Includes 3,826 shares of Common Stock held by Mr. Leslie's children.
Includes 17,188 shares of Common Stock issuable upon exercise of options
which were not vested as of August 31, 1996. Mr. Leslie's option may be
exercised in full prior to complete vesting subject to his entering a
55
<PAGE>
restricted stock purchase agreement granting the Company an option to
repurchase such shares at their original purchase price in the event of a
termination of Mr. Leslie's membership on the Company's Board of
Directors.
(14) Represents 1,502,379 shares of Common Stock held by MSVC II LP, 432,137
shares of Common Stock held by MSVI and 341,077 shares of Common Stock
held by MSVC II CV. Mr. Loarie is a director of the Company, a principal
of Morgan Stanley & Co. Incorporated, a general partner of MSVP II and a
Vice President of MSVC II. Mr. Loarie disclaims beneficial ownership of
all such shares except to the extent of his beneficial interest therein.
(15) Represents 854,430 shares of Common Stock held by BA Ventures and 94,936
shares of Common Stock held by BA Partners. Mr. Obuch is a Principal of BA
Ventures, a general partner of BA Partners, and a director of the Company.
Mr. Obuch disclaims beneficial ownership of all shares held by BA Ventures
and all shares held by BA Partners except to the extent of his
proportionate general partnership interest in BA Partners.
(16) Includes 17,188 shares of Common Stock issuable upon exercise of options
which were not vested as of August 31, 1996. Mr. Webber's option may be
exercised in full prior to complete vesting subject to his entering a
restricted stock purchase agreement granting the Company an option to
repurchase such shares at their original purchase price in the event of a
termination in Mr. Webber's status as a member of the Company's Board of
Directors.
(17) Includes 34,737 unvested shares of Common Stock subject to the Company's
repurchase option as of August 31, 1996 in the event of a termination of
Ms. Wilson's employment with the Company.
(18) Includes 316,455 shares of Common Stock held by Vertex II and 1,007,440
shares of Common Stock held by Vertex Pte. is an investment affiliate of
Vertex Management, Inc., a venture capital investment firm. Mr Wu is a
Vice President of Vertex Management, Inc. and a director of the Company.
Mr. Wu disclaims beneficial ownership of all such shares except to the
extent of his pecuniary interest therein.
(19) Includes 265,225 shares immediately issuable upon exercise of outstanding
options under the 1995 Plan. Includes 7,849,470 issued shares of Common
Stock, 471,027 of which were subject to a repurchase option in favor of
the Company as of August 31, 1996.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the completion of this offering, the Company will be authorized to
issue 25,000,000 shares of Common Stock, $0.001 par value, and 5,000,000
shares of undesignated Preferred Stock, $0.001 par value. Immediately after
the completion of this offering and assuming no exercise of the Underwriters'
over-allotment option, the Company estimates there will be an aggregate of
11,108,002 shares of Common Stock outstanding and no shares of Preferred Stock
will be issued and outstanding.
The following description of the Company's capital stock does not purport to
be complete and is subject to and qualified in its entirety by the Company's
Restated Certificate of Incorporation and Bylaws, which are included as
exhibits to the Registration Statement of which this Prospectus forms a part,
and by the provisions of applicable Delaware law.
The Restated Certificate of Incorporation and Bylaws contain certain
provisions that are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors and which may have the
effect of delaying, deferring, or preventing a future takeover or change in
control of the Company unless such takeover or change in control is approved
by the Board of Directors.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Holders of Common Stock do not have
cumulative voting rights, and, therefore, holders of a majority of the shares
voting for the election of directors can elect all of the directors. In such
event, the holders of the remaining shares will not be able to elect any
directors.
Holders of the Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the terms of any existing or future agreements
between the Company and its debtholders. The Company has never declared or
paid cash dividends on its capital stock, expects to retain future earnings,
if any, for use in the operation and expansion of its business, and does not
anticipate paying any cash dividends in the foreseeable future. In addition,
the Company's bank line of credit agreement contains a restrictive covenant
that limits the Company's ability to pay cash dividends or make stock
repurchases without the prior written consent of the lender. See "Dividend
Policy." In the event of the liquidation, dissolution or winding up of the
Company, the holders of Common Stock are entitled to share ratably in all
assets legally available for distribution after payment of all debts and other
liabilities and subject to the prior rights of any holders of Preferred Stock
then outstanding.
PREFERRED STOCK
Effective upon completion of this offering, the Company will be authorized
to issue 5,000,000 shares of undesignated Preferred Stock. The Board of
Directors has the authority to issue the Preferred Stock in one or more series
and to fix the price, rights, preferences, privileges and restrictions
thereof, including dividend rights, dividend rates, conversion rights, voting
rights, terms of redemption, redemption prices, liquidation preferences and
the number of shares constituting a series or the designation of such series,
without any further vote or action by the Company's stockholders. The issuance
of Preferred Stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
delaying, deferring or preventing a change in control of the Company without
further action by the stockholders and may adversely affect the market price
of, and the voting and other rights of, the holders of Common Stock. The
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no current plans to issue any shares
of Preferred Stock.
57
<PAGE>
ANTITAKEOVER EFFECTS OF PROVISIONS OF CERTIFICATE OF INCORPORATION AND BYLAWS
The Company's Certificate of Incorporation provides that all stockholder
actions must be effected at a duly called annual or special meeting and may
not be effected by written consent. The Certificate of Incorporation also
provides that the right of the Company's stockholders to vote cumulatively in
the election of directors will be eliminated upon completion of the offering
(except to the extent that cumulative voting may be required by the California
corporate law). At such time as cumulative voting is eliminated, stockholders
entitled to vote in the election of directors will be able to cast one vote
per share, regardless of the number of directors to be elected. The Company's
Bylaws provide that, except as otherwise required by law, special meetings of
the stockholders can only be called pursuant to a resolution adopted by a
majority of the Board of Directors, by the chief executive officer of the
Company, or by stockholders holding shares in the aggregate entitled to cast
not less than 10% of the votes at such meeting. In addition, the Company's
Bylaws establish an advance notice procedure for stockholder proposals to be
brought before an annual meeting of stockholders, including proposed
nominations of persons for election to the Board. Stockholders at an annual
meeting may only consider proposals or nominations specified in the notice of
meeting or brought before the meeting by or at the direction of the Board of
Directors or by a stockholder who was a stockholder of record on the record
date for the meeting, who is entitled to vote at the meeting and who has
delivered timely written notice in proper form to the Company's Secretary of
the stockholder's intention to bring such business before the meeting.
The foregoing provisions of the Company's Certificate of Incorporation and
Bylaws are intended to enhance the likelihood of continuity and stability in
the composition of the Board of Directors and in the policies formulated by
the Board of Directors and to discourage certain types of transactions which
may involve an actual or threatened change of control of the Company. Such
provisions are designed to reduce the vulnerability of the Company to an
unsolicited acquisition proposal and, accordingly, could discourage potential
acquisition proposals and could delay or prevent a change in control of the
Company. Such provisions are also intended to discourage certain tactics that
may be used in proxy fights but could, however, have the effect of
discouraging others from making tender offers for the Company's shares and,
consequently, may also inhibit fluctuations in the market price of the
Company's shares that could result from actual or rumored takeover attempts.
These provisions may also have the effect of preventing changes in the
management of the Company. See "Risk Factors--Effect of Certain Charter
Provisions; Limitation of Liability of Directors; Antitakeover Effects of
Delaware Law."
EFFECT OF DELAWARE ANTITAKEOVER STATUTE
The Company is subject to Section 203 of the Delaware General Corporation
Law (the "Antitakeover Law"), which regulates corporate acquisitions. The
Antitakeover Law prevents certain Delaware corporations, including those whose
securities are listed for trading on the Nasdaq National Market, from
engaging, under certain circumstances, in a "business combination" with any
"interested stockholder" for three years following the date that such
stockholder became an interested stockholder. For purposes of the Antitakeover
Law, a "business combination" includes, among other things, a merger or
consolidation involving the Company and the interested shareholder and the
sale of more than ten percent (10%) of the Company's assets. In general, the
Antitakeover Law defines an "interested stockholder" as any entity or person
beneficially owning 15% or more the outstanding voting stock of the Company
and any entity or person affiliated with or controlling or controlled by such
entity or person. A Delaware corporation may "opt out" of the Antitakeover Law
with an express provision in its original certificate of incorporation or an
express provision in its certificate of incorporation or bylaws resulting from
amendments approved by the holders of at least a majority of the Company's
outstanding voting shares. The Company has not "opted out" of the provisions
of the Antitakeover Law. See "Risk Factors--Effect of Certain Charter
Provisions; Limitation of Liability of Directors; Antitakeover Effects of
Delaware Law."
58
<PAGE>
REGISTRATION RIGHTS
After this offering, the holders of 3,600,113 shares of Common Stock will be
entitled upon expiration of lock-up agreements with the Underwriters to
certain rights with respect to the registration of such shares under the
Securities Act. Under the terms of the agreement between the Company and the
holders of such registrable securities, if the Company proposes to register
any of its securities under the Securities Act, either for its own account or
for the account of other securities holders exercising registration rights,
such holders are entitled to notice of such registration and are entitled to
include shares of such Common Stock therein. Holders of registration rights
may also require the Company to file a registration statement under the
Securities Act at the Company's expense with respect to their shares of Common
Stock, and the Company is required to use its best efforts to effect such
registration. Further, holders may require the Company to file registration
statements on Form S-3 at the Company's expense when such form becomes
available for use to the Company. All such registration rights are subject to
certain conditions and limitations, including the right of the underwriters of
an offering to limit the number of shares to be included in such registration.
TRANSFER AGENT
The Transfer Agent and Registrar for the Common Stock is The First National
Bank of Boston.
59
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering there has been no public market for the Common Stock
of the Company, and no prediction can be made regarding the effect, if any,
that market sales of shares or the availability of shares for sale will have
on the market price prevailing from time to time. As described below, only a
limited number of shares are currently available for sale, or will be
available for sale shortly after this offering, due to certain contractual and
legal restrictions on resale. Nevertheless, sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price.
Upon completion of this offering, the Company will have outstanding
11,108,002 shares of Common Stock, based on the number of shares of Preferred
Stock and Common Stock outstanding as of August 31, 1996. Of these shares, all
of the 2,625,000 shares of Common Stock sold in this offering will be freely
tradable (unless such shares are held by an "affiliate" of the Company as such
term is defined in the Securities Act) without restriction or registration
under the Securities Act. The remaining 8,608,002 shares were issued and sold
by the Company in private transactions ("Restricted Shares") and are eligible
for public sale only if registered under the Securities Act or sold in
accordance with Rule 144 or Rule 701 thereunder, which rules are summarized
below. As a result of the contractual restrictions described below and the
provisions of Rule 144 or Rule 701: (i) no shares will be available for
immediate sale in the public market on the date of this Prospectus and (ii)
8,608,002 Restricted Shares will be eligible for sale upon expiration of lock-
up agreements (as described below) 180 days after the date of this Prospectus
subject to certain limitations of Rules 144, 144(k) and 701.
The Company's executive officers, directors and certain stockholders, who
own 8,435,842 Restricted Shares, have agreed, subject to certain exceptions,
that they will not, without the prior written consent of Alex. Brown & Sons
Incorporated, offer, sell, contract to sell, grant any option to purchase, or
otherwise dispose of any shares of Common Stock or securities convertible into
or exercisable or exchangeable for Common Stock of the Company for a period of
180 days from the date of this Prospectus (the "Lockup Period"). Alex. Brown &
Sons Incorporated, in its sole discretion at any time and without notice, may
release any or all shares from the lockup agreements and permit holders of the
shares to resell all or any portion of their shares at any time prior to the
expiration of the Lockup Period.
In general, under Rule 144 as currently in effect, beginning 90 days after
the offering, a person (or persons whose shares are aggregated), who has
beneficially owned Restricted Shares for at least two years, including the
holding period of any securities that converted into Restricted Shares and
including the holding period of any prior owner except an affiliate, is
entitled to sell within any three-month period a number of shares that does
not exceed the greater of (i) 1% of the then outstanding shares of the
Company's Common Stock or (ii) the average weekly trading volume of the
Company's Common Stock in the over the counter market during the four calendar
weeks preceding the date on which notice of the sale is filed with the
Securities and Exchange Commission. Sales under Rule 144 are also subject to
certain manner of sale provisions, notice requirements and the availability of
current public information about the Company. Any person (or persons whose
shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days preceding a sale, and who owns shares
within the definition of "restricted securities" under Rule 144 that were
purchased from the Company (or any affiliate) at least three years previously,
will be entitled to sell such shares under Rule 144(k) without regard to the
volume limitations, manner of sale provisions, public information requirements
or notice requirements. The Company's transfer agent, however, may require an
opinion of counsel that a proposed sale of shares complies with Rule 144 of
the Securities Act prior to effecting a transfer of such shares. Rule 701
under the Securities Act provides that shares of Common Stock acquired on the
exercise of outstanding options may be resold by persons other than
Affiliates, beginning 90 days after the date of this Prospectus, subject only
to the manner of sale provisions of Rule 144, and by Affiliates, beginning
60
<PAGE>
90 days after the date of this Prospectus, subject to all provisions of Rule
144 except its two-year minimum holding period.
Prior to this offering, there has been no public market for the Common Stock
of the Company and no predictions can be made of the effect, if any, that the
sale or availability for sale of shares of additional Common Stock will have
on the market price of the Common Stock. Nevertheless, sales of substantial
amounts of such shares in the public market, or the perception that such sales
could occur, could adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities.
OPTIONS
As of June 30, 1996, options to purchase a total of 541,756 shares of Common
Stock pursuant to the 1995 Stock Plan (the "1995 Plan") were outstanding and
exercisable. All of the shares subject to options are subject to Lock-up
Agreements. See "--Lock-up Agreements." An additional shares of Common Stock
were available as of June 30, 1996 for future option grants or direct
issuances under the 1995 Plan. Subsequent to June 30, 1996, the Company
granted options to purchase 190,474 shares of Common Stock, and the Board of
Directors and stockholders of the Company approved an increase to 4,319,695
shares in the number of shares reserved for issuance under the 1995 Plan. In
addition, in July 1995, the Company reserved 300,000 shares for issuance under
the Company's 1996 Employee Stock Purchase Plan and 150,000 shares for
issuance under the Company's 1996 Director Option Plan. See "Management--1995
Stock Plan," "--1996 Employee Stock Purchase Plan," "--1996 Director Option
Plan" and Note 7 of Notes to Financial Statements.
The Company intends to file a registration statement on Form S-8 under the
Securities Act covering approximately 3,649,149 shares of Common Stock,
subject to outstanding stock options or issued or reserved for issuance
pursuant to the 1993 Plan and the 1995 Plan (assuming no exercise of
outstanding stock options after June 30, 1996), 300,000 shares of Common Stock
reserved for issuance under the 1996 Employee Stock Purchase Plan and 150,000
shares of Common Stock reserved for issuance under the 1996 Director Option
Plan. Such registration statement is expected to be filed simultaneously with
the effectiveness of the registration statement covering the shares of Common
Stock offered in this offering and will automatically become effective upon
filing. Accordingly, shares covered by such registration statement will
thereupon be eligible for sale in the public markets, subject to the lapse of
any repurchase rights the Company may have with respect to such shares and to
the Lock-up Agreements, if applicable.
LOCK-UP AGREEMENTS
All officers and directors and certain holders of Common Stock and options
to purchase Common Stock have agreed pursuant to certain "lock-up" agreements
that they will not 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, or otherwise dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible or
exercisable or exchangeable for Common Stock, or enter into any swap or
similar agreement that transfers, in whole or in part, the economic risk of
ownership of the Common Stock for a period of 180 days after the transfer or
date of this Prospectus without the prior written consent of Alex. Brown &
Sons Incorporated. All other holders of Common Stock and options and warrants
to purchase Common Stock have agreed pursuant to existing agreements with the
Company not to sell or otherwise transfer or dispose of any Common Stock for a
period of 180 days after the effective date of this offering.
61
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Cowen & Company and Wessels, Arnold &
Henderson, L.L.C., have severally agreed to purchase from the Company and the
Selling Stockholder the following respective numbers of shares of Common Stock
at the initial public offering price less the underwriting discounts and
commissions set forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated....................................
Cowen & Company....................................................
Wessels, Arnold & Henderson, L.L.C. ...............................
---------
Total............................................................ 2,625,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares
are purchased.
The Company has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the initial public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in
excess of $ per share. The Underwriters may allow, and such dealers may re-
allow, a concession not in excess of $ per share to certain other dealers.
After the initial public offering, the offering price and other selling terms
may be changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 393,750
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it shown in the above table bears to 2,625,000, and the Company
will be obligated, pursuant to the option, to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover over-
allotments made in connection with the sale of Common Stock offered hereby. If
purchased, the Underwriters will offer such additional shares on the same
terms as those on which the 2,625,000 shares are being offered.
The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
The Company and certain stockholders of the Company have agreed not to
offer, sell or otherwise dispose of any shares of Common Stock for a period of
180 days after the effective date of this offering without the prior written
consent of Alex. Brown & Sons Incorporated, except that the Company may issue,
and grant options to purchase, shares of Common Stock under its current stock
option and purchase plans and other currently outstanding options. In
addition, the Company may issue shares of Common Stock in connection with
corporate acquisitions. See "Shares Eligible for Future Sale."
The Representatives of the Underwriters have advised the Company that the
Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
62
<PAGE>
Prior to this offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined by negotiations among the Company and the
Representatives of the Underwriters. Among the factors to be considered in
such negotiations are prevailing market conditions, the results of operations
of the Company in recent periods, the market capitalizations and stages of
development of other companies which the Company and the Representatives of
the Underwriters believed to be comparable to the Company, estimates of the
business potential of the Company, the present state of the Company's
development and other factors deemed relevant. See "Risk Factors--No Prior
Market; Possible Volatility of Stock Price."
The Underwriters have reserved for sale, at the initial public offering
price, approximately 5% of the shares of Common Stock offered hereby for
certain employees, customers and vendors of the Company, and certain other
individuals and entities, who have expressed an interest in purchasing such
shares of Common Stock in the offering. The number of shares available for
sale to the general public will be reduced to the extent such persons purchase
such reserved shares. Any reserved shares not so purchased will be offered by
the Underwriters to the general public on the same basis as other shares
offered hereby.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo
Alto, California. Pillsbury Madison & Sutro LLP, Menlo Park, California, is
acting as counsel for the Underwriters in connection with certain legal
matters relating to the shares of Common Stock offered hereby. As of the date
of this Prospectus, a member of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, and investment partnerships of which members of such firm are
partners, beneficially own 10,384 shares of the Company's Common Stock.
EXPERTS
The balance sheets as of December 31, 1994 and 1995 and the statements of
operations, stockholders' deficit and cash flows for each of the three years
in the period ended December 31, 1995, included in this Prospectus and the
financial statement schedule for the aforementioned periods included in the
Registration Statement have been included herein in reliance on the report of
Coopers & Lybrand L.L.P., independent accountants, given on the authority of
that firm as experts in accounting and auditing.
63
<PAGE>
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form SB-2 (the "Registration
Statement") under the Securities Act and the rules regulations promulgated
thereunder with respect to the Common Stock offered hereby. This Prospectus
does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement and the exhibits and schedules filed as a part thereof.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete. In each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, and each such statement is qualified in all
respects by such reference. The Registration Statement, including exhibits and
schedules thereto, may be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549 and at the regional offices of the Commission located
at Seven World Trade Center, 13th Floor, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511.
Copies of such materials may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. The Commission maintains a World Wide Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The address of the Commission's
Web site is http://www.sec.gov.
The Company is not currently subject to the informational requirements of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). As a
result of the offering of the Company's Common Stock, the Company will become
subject to the informational requirements of the Exchange Act. The Company
intends to furnish its stockholders with annual reports containing financial
statements audited by its independent accountants and quarterly reports for
the first three quarters of each fiscal year containing unaudited financial
statements.
Aurum, Aurum SalesTrak, Aurum QualityTrak, Aurum SupportTrak and TeleTrak
are registered trademarks of the Company. Aurum EventTrak, Aurum Teletrak,
Aurum WebTrak, dbSync, Aurum Smart Encyclopedia, Aurum Management Information
System, Aurum Explorer, Aurum Reporter and Aurum CTITrak are also trademarks
of the Company. Trademarks of other companies are also referred to in this
Prospectus.
64
<PAGE>
AURUM SOFTWARE, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Coopers & Lybrand L.L.P., Independent Accountants................ F-2
Balance Sheets............................................................. F-3
Statements of Operations................................................... F-4
Statements of Stockholders' Deficit........................................ F-5
Statements of Cash Flows................................................... F-6
Notes to Financial Statements.............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Aurum Software, Inc.
We have audited the accompanying balance sheets of Aurum Software, Inc. as
of December 31, 1994 and 1995, and the related statements of operations,
stockholders' deficit and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aurum Software, Inc. as of
December 31, 1994 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995 in
conformity with generally accepted accounting principles.
San Jose, California
March 5, 1996, except for Note 12,
as to which the date is
September 12, 1996
----------------
The accompanying financial statements give effect to a reverse stock split
on a one-for-four basis of the Company's Common Stock and a one-for-one basis
of the Company's Preferred Stock which will occur upon reincorporation of the
Company in Delaware. The above opinion is in the form which will be signed by
Coopers & Lybrand L.L.P. upon completion of such reverse stock split described
in Note 12 of notes to financial statements and assuming that from September
12, 1996 to the date of such completion, no other material events have
occurred that would affect the accompanying financial statements or required
disclosure therein.
Coopers & Lybrand L.L.P.
San Jose, California
September 12, 1996
F-2
<PAGE>
AURUM SOFTWARE, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
EQUITY
DECEMBER 31, (NOTE 11)
----------------- JUNE 30, JUNE 30,
1994 1995 1996 1996
------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......... $ 2,517 $ 2,795 $ 2,006
Accounts receivable, net of
allowance for doubtful accounts
of $318, $340 and $262 at
December 31, 1994 and 1995 and
June 30, 1996 (unaudited),
respectively .................... 1,374 4,702 7,726
Prepaid expenses and other current
assets........................... 295 438 615
------- -------- --------
Total current assets............. 4,186 7,935 10,347
Property and equipment, net......... 1,151 1,559 2,178
Other assets........................ 407 301 237
------- -------- --------
Total assets.................... $ 5,744 $ 9,795 $ 12,762
======= ======== ========
LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND
STOCKHOLDERS' DEFICIT
Current liabilities:
Notes payable..................... $ 29 $ 217 $ 186
Current portion of capital lease
obligations...................... 276 304 402
Borrowings under line of credit... 600 1,500
Accounts payable.................. 499 1,191 1,640
Accrued compensation.............. 354 898 1,119
Other accrued liabilities......... 566 817 1,529
Deferred revenue.................. 828 2,303 1,821
------- -------- --------
Total current liabilities........ 3,152 5,730 8,197
Notes payable, less current
portion............................ 75 121 37
Capital lease obligations, less
current portion.................... 295 116 385
------- -------- --------
Total liabilities................ 3,522 5,967 8,619
------- -------- --------
Commitments and contingencies (Note
5).
Mandatorily redeemable convertible
preferred stock, no par value:
Authorized: 24,000,000 shares
Issued and outstanding:
14,194,173 shares in 1994,
21,901,892 shares in 1995 and
21,905,398 shares at June 30,
1996 (unaudited) (No pro forma
as preferred shares convert to
common stock)................... 11,302 17,356 29,592 $ --
------- -------- -------- --------
(Liquidation value: $17,504 in
1995 and $17,854 at June 30,
1996 (unaudited))
Stockholders' deficit:
Common stock, no par value; $0.001
pro forma:
Authorized: 10,000,000 shares;
Issued and outstanding: 831,138
shares in 1994, 2,526,159 shares
in 1995 and 3,498,300 shares at
June 30, 1996 (unaudited);
8,457,153 shares pro forma....... 195 236 8
Additional paid-in capital........ 29,584
Notes receivable from
stockholders...................... (1) (38) (230) (230)
Accumulated deficit................ (9,274) (13,726) (25,219) (25,219)
------- -------- -------- --------
Total stockholders' equity
(deficit)....................... (9,080) (13,528) (25,449) $ 4,143
------- -------- -------- ========
Total liabilities, convertible
redeemable preferred stock and
stockholders' deficit.......... $ 5,744 $ 9,795 $ 12,762
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
AURUM SOFTWARE, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Licenses..................... $ 3,475 $ 3,356 $ 5,928 $ 1,820 $ 6,217
Services..................... 1,426 2,556 4,547 1,965 4,721
------- ------- ------- -------- --------
Total revenues............. 4,901 5,912 10,475 3,785 10,938
------- ------- ------- -------- --------
Cost of revenues:
Licenses..................... 331 365 979 567 623
Services..................... 1,609 2,586 3,919 1,528 4,256
------- ------- ------- -------- --------
Total cost of revenues..... 1,940 2,951 4,898 2,095 4,879
------- ------- ------- -------- --------
Gross profit................... 2,961 2,961 5,577 1,690 6,059
------- ------- ------- -------- --------
Operating expenses:
Sales and marketing.......... 3,107 3,240 6,626 2,326 4,527
Research and development..... 2,251 2,246 2,286 1,204 1,387
General and administrative... 1,861 1,780 1,023 458 714
------- ------- ------- -------- --------
Total operating expenses... 7,219 7,266 9,935 3,988 6,628
------- ------- ------- -------- --------
Loss from operations........... (4,258) (4,305) (4,358) (2,298) (569)
Other income (expense), net.... 38 5 63 27 23
Interest expense............... (42) (88) (157) (78) (61)
------- ------- ------- -------- --------
Net loss................... $(4,262) $(4,388) $(4,452) $ (2,349) $ (607)
======= ======= ======= ======== ========
Pro forma net loss per share... $ $
======= ========
Pro forma shares used in per
share calculation.............
======= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
AURUM SOFTWARE, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE SIX MONTHS ENDED JUNE 30, 1996 (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON NOTES
STOCK RECEIVABLE
----------------- FROM ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT STOCKHOLDERS DEFICIT DEFICIT
--------- ------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Balances, December 31,
1992.................... 972,410 $233 $ (61) $ (624) $ (452)
Issuance of common
stock under stock
purchase plan.......... 2,563 2 2
Repurchase of common
stock.................. (28,054) (7) 3 (4)
Payments on notes
receivable from
stockholders........... 10 10
Net loss............... (4,262) (4,262)
--------- ---- ----- -------- ---------
Balances, December 31,
1993.................... 946,919 $228 $ (48) $ (4,886) $ (4,706)
Issuance of common
stock under stock
purchase plan.......... 2,688 4 4
Issuance of common
stock under incentive
stock option plan...... 297
Repurchase of common
stock.................. (118,766) (37) (37)
Payments and
cancellation of notes
receivable from
stockholders........... 47 47
Net loss............... (4,388) (4,388)
--------- ---- ----- -------- ---------
Balances, December 31,
1994.................... 831,138 195 (1) (9,274) (9,080)
Exercise of warrants by
preferred investors.... 1,382,280 5 5
Issuance of common
stock under incentive
stock options plan for
cash and note
receivable............. 317,954 38 (37) 1
Repurchase of common
stock.................. (5,213) (2) (2)
Net loss............... (4,452) (4,452)
--------- ---- ----- -------- ---------
Balances, December 31,
1995.................... 2,526,159 236 (38) (13,726) (13,528)
Repurchase of common
stock.................. (50,948) (118) (118)
Issuance of common
stock under incentive
stock option plan for
cash, note receivable
and services........... 1,023,089 231 (192) 39
Accretion to redemption
value of preferred
stock.................. (349) (10,886) (11,235)
Net loss............... (607) (607)
--------- ---- ----- -------- ---------
Balances, June 30, 1996
(unaudited) 3,498,300 $-- $(230) $(25,219) $ (25,449)
========= ==== ===== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
AURUM SOFTWARE, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------- ------------------
1993 1994 1995 1995 1996
------- ------- ------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss....................... $(4,262) $(4,388) $(4,452) $(2,349) $ (607)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization.................. 263 518 589 282 478
Provision for doubtful
accounts...................... 183 87 125 47
Write-off of intangibles....... 220 41
Changes in current assets and
liabilities:
Accounts receivable........... 14 (1,050) (3,453) 464 (3,024)
Prepaid expenses and other
current assets............... (224) (52) (10) 115 (112)
Other assets.................. 5 (4) (130) (7) (22)
Accounts payable.............. 3 77 692 138 449
Accrued compensation and
other liabilities............ 360 236 795 85 940
Deferred revenue.............. 121 380 1,475 (9) (482)
------- ------- ------- -------- --------
Net cash used in operating
activities.................. (3,537) (4,196) (4,149) (1,193) (2,380)
------- ------- ------- -------- --------
Cash flows from investing
activities:
Purchase of short-term
investments................... (2,889)
Sales of short-term
investments................... 2,889
Acquisition of property and
equipment..................... (228) (427) (933) (323) (1,097)
Decrease (increase) in
restricted cash............... (239) (104) (44) (11) 29
------- ------- ------- -------- --------
Net cash provided by (used
in) investing activities.... (3,356) 2,358 (977) (334) (1,068)
------- ------- ------- -------- --------
Cash flows from financing
activities:
Proceeds from borrowings under
line of credit................ 950 1,500
Repayments of borrowings under
line of credit................ (350) (600) (100)
Repayment of notes payable to
stockholders.................. (113)
Proceeds from issuance of
mandatorily redeemable
convertible preferred stock,
net of issuance costs......... 8,345 2,456 5,975 1 1,487
Proceeds from issuance of
common stock.................. 2 6 6 24
Repurchase of mandatorily
redeemable convertible
preferred and common stock.... (4) (2) (2) (604)
Proceeds from repayment of
notes receivable from
stockholders.................. 10 10
Repayments of note payables and
capital lease obligations..... (79) (224) (431) (191) (357)
Proceeds from notes payable and
sales and leasebacks of
property
and equipment................. 150 456 240 609
------- ------- ------- -------- --------
Net cash provided by (used
in) financing activities.... 8,311 2,842 5,404 (46) 2,659
------- ------- ------- -------- --------
Net increase (decrease) in
cash........................... 1,418 1,004 278 (1,573) (789)
Cash and cash equivalents at
beginning of year.............. 95 1,513 2,517 2,517 2,795
------- ------- ------- -------- --------
Cash and cash equivalents at end
of year........................ 1,513 $ 2,517 $ 2,795 $ 944 2,006
======= ======= ======= ======== ========
SUPPLEMENTAL CASH FLOW
INFORMATION:
Cash payments for:
Interest....................... $ 42 $ 88 $ 157 $ 78 $ 61
SUPPLEMENTAL DISCLOSURE OF
NONCASH TRANSACTIONS:
Issuance of stockholder note
receivable in exchange for
common stock.................. $ 37 $ 192
Cancellation of stockholder
note receivable............... $ 3 $ 37
Property and equipment acquired
under capital lease
obligations................... $ 434 $ 394 $ 58 $ 58
Property and equipment
purchased included in accounts
payable....................... $ 50 $ 15
Common stock issued in
consideration for services
performed..................... $4 $ 15
Issuance of mandatorily
redeemable convertible
preferred stock in exchange
for technology................ $ 79
Conversion of note payable to
mandatorily redeemable
convertible preferred stock... $ 500
Accretion to redemption value
of mandatorily redeemable
convertible preferred stock... $ 11,235
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
1. Business of the Company:
Aurum Software, Inc. (the "Company") is a provider of enterprise-wide
sales and marketing information software. The Company develops, markets and
supports the Aurum Customer Enterprise suite of applications which helps
automate the field sales, telemarketing, telesales and customer support
functions of a business. The Company's products are based on advanced
client/server and Internet/Intranet technologies and are designed to
address the sales and marketing requirements of businesses ranging from
medium-sized enterprises to large multinational corporations. The Company
sells its products in North America primarily through its direct sales
force and sells its products outside of North America primarily through key
distribution organizations. In addition, the Company provides an array of
services to its customers, including business consulting, requirements
definition, installation, consulting, training and customer support. The
Company is headquartered in Santa Clara, California, with sales offices
nationwide.
2. Summary of Significant Accounting Policies:
INTERIM FINANCIAL INFORMATION (UNAUDITED):
The unaudited interim financial statements and related notes for the six
months ended June 30, 1995 and 1996 have been prepared on the same basis as
the audited financial statements and, in the opinion of management, include
all adjustments, consisting of only normal recurring adjustments, necessary
for a fair presentation of the financial position and results of operations
in accordance with generally accepted accounting principles. Results for
the interim period are not necessarily indicative of results to be expected
for the full fiscal year.
USE OF ESTIMATES:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments with an original or
remaining maturity of three months or less at the time of purchase to be
cash equivalents.
REVENUE RECOGNITION:
Revenues consist of license revenues and service revenues. License
revenues are recognized upon execution of a license agreement and delivery
of software if there are no significant post-delivery vendor obligations
and if collection of the receivable is deemed probable. If significant
post-delivery obligations exist or if a product is subject to customer
acceptance, revenues are deferred until no significant obligations remain
or acceptance has occurred. Upon recognition of licence revenues, the
Company accrues for the cost of warranty and insignificant vendor
obligations. Revenues from services consist of fees from consulting
services, including implementation and customization of licensed software,
training and maintenance support. Consulting and training revenues are
generally recognized as services are performed, except for revenues from
certain fixed
F-7
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
2. Summary of Significant Accounting Policies, continued
price contracts or milestone deliverables, which are recognized on a
percentage-of-completion basis or upon milestone delivery. Maintenance
support revenues are recognized ratably over the term of the support
period, which is typically one year.
ENGINEERING AND SUPPORT:
Costs related to the conceptual formulation and design of software
products are charged to operations as incurred. Software development costs
are capitalized beginning when a product's technological feasibility has
been established and ending when a product is available for general release
to customers. The Company has not capitalized any software development
costs since such costs have not been significant.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is provided on a straight-line basis over
the estimated useful lives of the assets which is generally three years.
Amortization of equipment under capital leases is computed using the
straight-line method over the shorter of the remaining lease term or the
estimated useful life of the related asset.
COMPUTATION OF HISTORICAL NET LOSS PER SHARE AND PRO FORMA NET LOSS PER
SHARE:
Historical net loss per share is computed using the weighted average
number of common and dilutive common equivalent shares outstanding during
the period. Common equivalent shares are excluded from the computation of
net loss per share as their effect is antidilutive. For those periods prior
to the offering date, pursuant to the Securities and Exchange Commission
Staff Accounting Bulletins, common and common equivalent shares issued at
prices below the public offering price during the 12 months immediately
preceding the offering date have been included in the calculation as if
they were outstanding for all periods prior to the offering date (using the
treasury stock method and the initial public offering price). Pro forma net
loss per share assumes the common shares issuable upon conversion of the
outstanding convertible preferred stock have been outstanding during such
period. Historical net loss per share is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30,
------------------------- -----------------
1993 1994 1995 1995 1996
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Net loss...................... $(4,262) $(4,388) $(4,452) $(2,349) $ (607)
Accretion to redemption value
of mandatorily redeemable
convertible preferred stock.. -- -- -- -- (11,235)
------- ------- ------- ------- --------
Net loss applicable to common
stockholders................. $(4,262) $(4,388) $(4,452) $(2,349) $(11,842)
======= ======= ======= ======= ========
Net loss per share............ $ $ $ $ $
======= ======= ======= ======= ========
Number of shares used in per
share calculation............
======= ======= ======= ======= ========
</TABLE>
F-8
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
2. Summary of Significant Accounting Policies, continued
INCOME TAXES:
The Company accounts for income taxes under the liability method. Under
the liability method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets
and liabilities and are measured using the enacted tax rates and laws that
will be in effect when the differences are expected to reverse. The Company
is required to adjust its deferred tax liabilities in the period when tax
rates or the provisions of the income tax laws change. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
BUSINESS RISKS AND CREDIT CONCENTRATION:
A majority of the Company's revenues have been attributed to SalesTrak,
which is typically the first of the Company's software products to be
deployed with the greatest number of users and which often serves as a
foundation for other applications. Any factor adversely affecting the
pricing of or demand for the SalesTrak product could have a material
adverse affect on the Company's business, financial condition or results of
operations.
The Company incorporates into its products certain software and other
technologies licensed to it by third-party developers. In the event that
products licensed from the third-party vendors should fail to address the
requirements of the Company's software products, the Company would be
required to find alternative software products or technologies of equal
performance or functionality. The absence of or any significant delay in
the replacement of that functionality could have a material adverse affect
on the Company's business, financial condition, or results of operations.
As of December 31, 1994 and 1995 and June 30, 1996, the Company's cash
and cash equivalents are deposited with principally one financial
institution in the form of demand deposit and money market accounts.
The Company markets and sells its products to a broad geographic and
demographic base of customers and generally does not require collateral. At
December 31, 1994, two customers accounted for 15.4% and 13.1% of accounts
receivable. At December 31, 1995, two customers accounted for 16.9% and
12.5% of accounts receivable. At June 30, 1996, three customers accounted
for 16.2%, 10.6% and 10.1% of accounts receivable.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying value of certain of the Company's financial instruments
including cash and cash equivalents, accounts receivable, accounts payable
and other accrued liabilities approximates fair value due to their short
maturities. Based on borrowing rates currently available to the Company for
loans with similar terms, the carrying value of its notes payable, capital
lease obligations and borrowings under line of credit approximates fair
value.
RECENT PRONOUNCEMENTS:
During March 1995, the Financial Accounting Standards Board issued
Statement No. 121 (SFAS 121), "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be
F-9
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
2. Summary of Significant Accounting Policies, continued
Disposed Of," which requires the Company to review for impairment of long-
lived assets whenever events or changes in circumstances indicate that the
carrying amount of an asset might not be recoverable. In certain
situations, an impairment loss would be recognized. SFAS 121 will become
effective for the Company's year ending December 31, 1996. The Company has
studied the implications of SFAS 121 and, based on its initial evaluation,
does not expect it to have a material impact on the Company's financial
condition or results of operations.
During October 1995, the Financial Accounting Standards Board issued
Statement No. 123 (SFAS 123) "Accounting for Stock-Based Compensation,"
which establishes a fair value based method of accounting for stock-based
compensation plans and requires additional disclosures for those companies
who elect not to adopt the new method of accounting. The Company intends to
account for employee stock options under APB Opinion No. 25, "Accounting
for Stock Issued to Employees." SFAS 123 disclosures will be effective for
fiscal years beginning after December 15, 1995.
3. Property and Equipment:
Property and equipment, consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------- JUNE 30,
1994 1995 1996
------ ------- --------
<S> <C> <C> <C>
Computer equipment............................... $1,773 $ 2,750 $ 3,784
Furniture and fixtures........................... 184 219 282
Leasehold improvements........................... 54 32 32
------ ------- -------
2,011 3,001 4,098
Less accumulated depreciation and amortization... (860) (1,442) (1,920)
------ ------- -------
$1,151 $ 1,559 $ 2,178
====== ======= =======
</TABLE>
At December 31, 1994 and 1995 and at June 30, 1996, computer equipment in
the amount of $903,000, $1,114,000 and $1,981,000, respectively, with
$318,000, $687,000 and $1,048,000, respectively, of accumulated
depreciation were capitalized under equipment lease arrangements. These
assets are pledged as collateral under the lease arrangements.
4. Notes Payable, Capital Lease Obligations and Line of Credit:
NOTES PAYABLE:
The Company has outstanding a note payable with a financial institution
which bears interest at 10%, expires on February 15, 1998 at which time the
remaining balance is due, and is collateralized by an irrevocable letter of
credit. At December 31, 1994 and 1995 and at June 30, 1996, $104,000,
$75,000 and $59,000, respectively, was outstanding under this note.
In addition, the Company has outstanding two notes payable which bear
interest at 15% and are due on December 15, 1996 and July 16, 1997,
respectively. At December 31, 1995 and June 30, 1996, $263,000 and
$164,000, respectively, was outstanding under these notes.
F-10
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
4. Line of Credit, Capital Lease Obligations and Notes Payable, continued
The following table summarizes the scheduled maturities of notes payable
(in thousands):
<TABLE>
<S> <C>
1996............................................................... $ 251
1997............................................................... 121
1998............................................................... 6
-----
378
Less amount representing interest.................................. (40)
-----
Present value of future minimum payments........................... 338
Less current portion............................................... (217)
-----
Long term portion of notes payable................................. $ 121
=====
</TABLE>
CAPITAL LEASE OBLIGATIONS:
The Company leases equipment under capital lease agreements. Future
minimum lease payments on these capital lease obligations are as follows
(in thousands):
<TABLE>
<S> <C>
1996............................................................... $ 320
1997............................................................... 124
1998............................................................... 8
-----
Minimum lease payments............................................. 452
Less amount representing interest.................................. (32)
-----
Present value of minimum lease payments............................ 420
Less current portion............................................... (304)
-----
Long-term portion of capital leases................................ $ 116
=====
</TABLE>
During fiscal year 1995, the Company sold certain equipment at cost less
accumulated depreciation of $132,000 and leased back such equipment. No gain
or loss was recognized on the sale.
LINE OF CREDIT:
At December 31, 1995, the Company had a line of credit agreement with a
bank which provided the Company the ability to borrow 65% of eligible
receivables or a maximum of $2,000,000 of which $400,000 of the line of credit
can be designated as an equipment term note. The line of credit is
collateralized by the assets of the Company and certain financial covenants
are required to be maintained such as specified levels of working capital, net
worth, quarterly profitability and financial ratios. The line of credit
agreement also contains a restrictive covenant which limits the Company's
ability to pay cash dividends or make stock repurchases without the bank's
consent. Borrowings under the line of credit bear interest at the prime rate
plus 2.5% (11% at December 31, 1995 and 10.75% at June 30, 1996). At December
31, 1995, the Company had no borrowings under the line of credit. As of June
30, 1996, the Company had outstanding borrowings of $1,500,000 under the line
of credit. The outstanding principal matures on July 15, 1996. The line of
credit was renewed for one year on July 15, 1996.
F-11
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
5. Commitments and Contingencies:
OPERATING LEASES:
The Company leases its facilities under noncancelable operating leases
and subleases which expire in 1996, 1997 and 1998.
Future annual minimum lease payments under the lease agreements are as
follows (in thousands):
<TABLE>
<S> <C>
1996................................................................. $164
1997................................................................. 61
1998................................................................. 38
----
$263
====
</TABLE>
Rent expense for 1993, 1994 and 1995 and for the period ended June 30,
1996 amounted to $318,000, $315,.000, $237,000 and $132,000, respectively.
CONTINGENCIES:
The Company is engaged in certain legal and administrative proceedings
incidental to its normal business activities. While it is not possible to
determine the ultimate outcome of these actions at this time, management
believes that any liabilities resulting from such proceedings, or claims
which are pending or known to be threatened, will not have a material
adverse effect on the Company's financial position or results of
operations.
F-12
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
6. Mandatorily Redeemable Convertible Preferred Stock:
The mandatorily redeemable convertible preferred stock of the Company
comprises the series designated as follows:
<TABLE>
<CAPTION>
NUMBER OF COMMON
NUMBER OF SHARES SHARES LIQUIDATION
SHARES ISSUED AND RESERVED FOR VALUE
AUTHORIZED OUTSTANDING CONVERSION (IN THOUSANDS)
---------- ----------- ------------ --------------
<S> <C> <C> <C> <C>
Series A.................. 4,411,765 3,235,294 739,565 $ 2,750
Series A-1................ 1,176,471 1,176,471 172,413 1,000
Series B.................. 5,092,563 4,504,630 1,308,355 4,865
Series B-1................ 277,778 277,778 51,724 300
Series C.................. 5,000,000 5,000,000 624,997 2,500
Series D.................. 7,707,719 7,707,719 1,926,925 6,089
-- -- --
---------- --------- -------
December 31, 1995 21,901,892 4,823,979 17,504
Series A-1--repurchase.... (882,353) (882,353) (129,310) (750)
Series B-1--repurchase.... (277,778) (277,778) (51,724) (300)
Series C--repurchase...... -- (200,000) (25,000) (100)
Series E.................. 1,363,637 1,363,637 340,908 1,500
-- -- --
---------- --------- -------
June 30, 1996............ 21,905,398 4,958,853 $17,854
========== ========= =======
</TABLE>
In January 1996, the Company repurchased shares of Series A-1, Series B-
1, and Series C preferred stock held by one investor at prices of $.3459,
$.4394 and $.2950 per share, respectively.
In March 1996, the Company issued 1,363,637 shares of Series E preferred
stock at $1.10 per share.
The rights, preferences and privileges of the Series A, Series A-1,
Series B, Series C, Series D and Series E preferred stockholders are as
follows:
Redemption:
The Company shall not have the right to call or redeem at any time all or
any shares of preferred stock. At any time after August 2000 and upon the
written election of holders of shares of preferred stock constituting at
least 66 2/3% of the collective voting power of the then outstanding
preferred stock (the Redemption Date), the Company shall redeem, from
installments beginning on the Redemption Date and continuing thereafter on
the first and second anniversaries of the Redemption Date, the then
outstanding preferred stock. The Company shall effect such redemptions on
the applicable Redemption Dates by paying cash in exchange for the shares
of preferred stock to be redeemed, at a sum equal to the redemption price.
The redemption price shall be an amount per share equal to all declared and
unpaid dividends per share of preferred stock, as the case may be, being
redeemed plus the greater of $0.85 in the case of the Series A preferred
stock, $0.85 in the case of the Series A-1 preferred stock, $1.08 in the
case of the Series B preferred, $0.50 in the case of the Series C preferred
stock, $0.79 in the case of the Series D and $1.10 in the case of Series E
preferred stock or the fair market value per share of the preferred stock,
as the case may be, redeemed as of the specified Redemption Date.
F-13
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
Dividends:
The holders of Series A, Series A-1, Series B, Series C, Series D and
Series E preferred stock are entitled to noncumulative dividends of $
0.085, $0.085, $0.108, $0.05, $0.079 and $0.11, respectively, per share per
annum, when and if declared by the Board of Directors. Such a dividend will
be declared or paid prior and in preference to any declaration or payment
of any dividend on the common stock, other than a common stock dividend
payable solely in shares of common stock.
Liquidation:
A consolidation or merger of the Company with or into any other
corporation is deemed a liquidation. Holders of Series A, Series A-1,
Series B, Series C, Series D and Series E preferred stock are entitled to
receive, prior and in preference to any distribution of any of the assets
or surplus funds of the Company to common stockholders, an amount of $0.85,
$0.85, $1.08, $ 0.50, $0.79 and $1.10, respectively, per share plus an
amount equal to any declared but unpaid dividends on such shares. If the
assets and funds distributed among the holders of the Series A, Series A-1,
Series B, Series C, Series D and Series E preferred stock are insufficient
to permit the payment to the holders of the full amount as calculated
above, then the entire assets and funds of the Company legally available
for distribution shall be distributed among the holders of the Series A,
Series A-1, Series B, Series C, Series D and Series E preferred stock in
proportion to the preferential amounts to which each holder of Series A,
Series A-1, Series B, Series C, Series D and Series E preferred stock would
otherwise be entitled. After giving effect to the above distribution,
remaining assets and funds are to be distributed among the holders of
preferred and common stock pro rata based on the number of shares of common
stock held by each (assuming conversion into common stock of all such
Series A, Series A-1, Series B, Series C, Series D and Series E preferred
stock).
Conversion and Registration:
The preferred stock is convertible at the option of the holder, at any
time, into common stock as is determined by dividing $0.85, $0.85, $1.08, $
0.50, $0.79 and $1.10 by the Series A, Series A-1, Series B, Series C,
Series D and Series E conversion prices, respectively. The Board of
Directors have authorized the Series A, Series A-1, Series B, Series C,
Series D and Series E conversion prices to be $3.7184, $5.8000, $3.7184,
$4.000, $3.1600 and $4.400, respectively, per share of common stock,
subject to the filing of the amended articles of incorporation. Conversion
is automatic upon the earlier of the closing date of a public offering of
the Company's common stock for which the aggregate proceeds equal or exceed
$10,000,000 and the per share offering price is not less than $8.00, or
upon consent of two-thirds of the preferred shareholders. At December 31,
1995 and June 30, 1996, the Company has reserved 4,823,979 and 4,958,533
shares, respectively, of common stock in the event of conversion.
Voting:
Each share of preferred stock is entitled to vote on an "as converted"
basis along with common shareholders.
F-14
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
7. Stockholders' Deficit
COMMON STOCK:
At December 31, 1995 and June 30, 1996, 12,293 and 633 shares of common
stock, respectively, were subject to repurchase by the Company under the
Company's 1992 Restricted Stock Purchase Plan. In March 1996, the Board of
Directors approved an amendment to the Company's Certificate of
incorporation to increase the authorized number of shares of common stock
to 10,000,000 shares. In May 1996, the Company's Board of Directors
authorized management of the Company to file a Registration Statement with
the Securities and Exchange Commission permitting the Company to sell its
shares of common stock to the public.
STOCK OPTION PLAN:
The Board of Directors has reserved 1,208,921 and 2,030,695 shares of
common stock as of December 31, 1995 and June 30, 1996, respectively, under
its 1995 Stock Option Plan (the "1995 Plan") for issuance to employees and
directors of the Company.
STOCK PLANS
The 1995 Plan provides for grants of incentive stock options to employees
(including officers and employee directors) and nonstatutory stock options
to employees (including officers and employee directors) and consultants of
the Company. The 1995 Plan is administered by the Board of Directors or by
a committee appointed by the Board which identifies optionees and
determines the terms of options granted, including the exercise price,
number of shares subject to the option and the exercisability thereof.
The terms of options granted under the 1995 Plan generally may not exceed
ten years. The term of all incentive stock options granted to an optionee
who, at the time of grant, owns stock representing more than 10% of the
voting power of all classes of stock of the Company or a parent or
subsidiary of the Company (a "Ten Percent Stockholder"), may not exceed
five years, however. Generally, options granted under the 1995 Plan vest
and become exercisable starting one year after the date of grant, with 25%
of the shares subject to the option becoming exercisable at that time and
an additional 1/48th of such shares becoming exercisable each month
thereafter. Holders of options granted under the 1995 Plan may exercise
their options prior to complete vesting of shares, subject to such holder's
entering a restricted stock purchase agreement granting the Company an
option to repurchase, in the event of a termination of the optionee's
employment or consulting relationship, any unvested shares at a price per
share equal to the original exercise price per share for the option. The
exercise price of incentive stock options granted under the 1995 Plan must
be at least equal to the fair market value of the shares on the date of
grant. The exercise price of nonstatutory stock options granted under the
1995 Plan is determined by the Board of Directors. The exercise price of
any incentive stock option granted to a Ten Percent Stockholder must equal
at least 110% of the fair market value of the Common Stock on the date of
grant. To the extent incentive stock options granted to a participant, when
aggregated with all other incentive stock options granted to such
participant, have an aggregate fair market value in excess of $100,000
first becoming exercisable in any calendar year, such options would be
treated as nonstatutory stock options.
F-15
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
7. Shareholders' Deficit, continued
Activity under the Plan is as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
SHARES ----------------------------------
AVAILABLE NUMBER
FOR OF EXERCISE AGGREGATE
GRANT SHARES PRICE PRICE
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Shares authorized at
inception of 1995 Stock
Plan.................... 1,208,921
Options granted.......... (1,242,782) 1,242,782 $0.12-$0.32 $ 166,650
Options exercised........ (317,954) $0.12 (38,154)
Options canceled......... 97,441 (97,441) $0.12 (11,693)
---------- ---------- ----------
Balances, December 31,
1995...................... 63,580 827,387 116,803
Increase in shares
authorized.............. 821,775
Options granted.......... (759,164) 759,164 $0.32-$6.00 $1,730,130
Options exercised........ (1,023,089) $0.08-$6.00 (230,822)
Options canceled......... 21,706 (21,706) $0.08-$6.00 (7,324)
---------- ---------- ----------
Balances, June 30, 1996.... 147,897 541,756 $1,608,787
========== ========== ==========
</TABLE>
As of December 31, 1995 and June 30, 1996, 421,173 and 50,843 outstanding
options, respectively, upon exercise would not be subject to the Company's
right of repurchase. In addition, as of December 31, 1995 and June 30,
1996, 199,177 and 713,993 shares exercised under the Plan are subject to
repurchase.
The Company has the right of first refusal in the event a stockholder
decides to sell or transfer any of the Company's common stock received upon
exercise of options under the Plan. This right of first refusal terminates
upon a public offering of this Company.
8. Employee Benefit Plan:
The Company has a 401(k) Profit Sharing Plan (the Plan), which covers
substantially all employees. Each eligible employee may elect to contribute
to the Plan, through payroll deductions up to 20% of their compensation,
subject to current statutory limits. The Company, at the discretion of the
Board of Directors, may make matching contributions to the Plan, but has
not done so during the years ended December 31, 1993, 1994 or 1995 or the
six months ended June 30, 1996.
9. Income Taxes:
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets are presented below (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1994 1995
------- -------
<S> <C> <C>
Depreciation and accrued liabilities.................... $ 409 $ 323
Capitalized research and development costs.............. 500 1,718
Net operating loss carryforward......................... 2,042 3,024
Research and development credit carryforward............ 309 366
Valuation allowance..................................... (3,260) (5,431)
------- -------
Net deferred tax asset.................................. $ -- $ --
======= =======
</TABLE>
F-16
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
9. Income Taxes, continued
The Company has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
Management evaluates on a quarterly basis the recoverability of the deferred
tax assets and the level of the valuation allowance. At such time as it is
determined that it is more likely than not that deferred tax assets are
realizable the valuation allowance will be reduced.
The Company's effective tax rate differs from the statutory federal income
tax rate as shown in the following schedule:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
--------------------------
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Income tax (benefit) provision at statutory
rate........................................ (34)% (34)% (34)%
Net operating loss not benefited............. 34 34 34
------ ------ ------
Effective tax rate........................... -- % -- % -- %
====== ====== ======
</TABLE>
As of December 31 1995, the Company had approximately $8,000,000 of net
operating loss carryforwards for federal and state purposes to offset future
taxable income. These federal and state carryforwards expire in the years 2007
through 2010, and 1996 through 2000, respectively. The Company's ability to
recognize these carryforwards may be limited as a result of future changes in
ownership, as defined by tax law.
10. Major Customers:
No single customer accounted for 10% or more of the Company's revenues in
fiscal year 1993 and 1994 or the six months ended June 30, 1995. One customer
accounted for 11% of revenues for the year ended December 31, 1995 and one
customer accounted for 10% of revenues for the six months ended June 30, 1996.
11. Pro Forma Financial Statement Information:
Upon the closing of the Company's initial public offering, each outstanding
share of the Company's Series A, A-1, B, C, D and E mandatorily redeemable
convertible preferred stock will be converted automatically to common stock
based on conversion rates set forth in Note 6. The pro forma effect of the
conversion has been presented as a separate column in the Company's balance
sheet assuming the conversion had occurred as of June 30, 1996.
12. Subsequent Events:
In July 1996, the Company's Board of Directors approved, subject to
stockholder approval, the reincorporation of the Company from a California to
a Delaware corporation, which is expected to be effective before the
completion of the Company's initial public offering of its common stock. Upon
the effective date of the reincorporation, California Corporation's
outstanding common stock will be converted automatically into shares of common
stock of the Delaware Corporation on a four-for-one basis. In addition, the
California Corporation's outstanding mandatorily redeemable convertible
preferred stock will automatically convert into shares of mandatorily
redeemable convertible preferred stock of the Delaware Corporation on a one-
for-one basis. All references to number of shares and to per share information
in the financial statements have been adjusted to reflect the conversion on a
retroactive basis.
F-17
<PAGE>
AURUM SOFTWARE, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION RELATING TO THE SIX MONTHS
ENDED JUNE 30, 1995 AND 1996 IS UNAUDITED)
In July 1996, the Board of Directors authorized an increase in the number of
shares of common stock reserved for issuance under the 1995 Stock Option Plan
by 300,000 shares.
In September 1996, the Board of Directors adopted, subject to stockholder
approval, the 1996 Employee Stock Purchase Plan (the "Purchase Plan"). A total
of 300,000 shares are reserved for issuance under the Purchase Plan. No shares
have been issued under the Purchase Plan. The Purchase Plan permits eligible
employees to purchase common stock through payroll deductions, subject to
certain limitations. The price at which stock is purchased under the Purchase
Plan is equal to 85% of the fair market value of the common stock on the first
day of the applicable offering period or the last day of the applicable
offering period, whichever is lower.
In September, 1996, the Board of Directors adopted the 1996 Director Option
Plan (the "Director Plan"). A total of 150,000 shares of common stock has been
reserved for issuance under the Director Plan. The option grants under the
Director Plan are automatic and non-discretionary, and the exercise price of
the option is 100% of the fair market value of the common stock on the grant
date. The Director Plan provides for an initial grant of options to purchase
18,750 shares of common stock to each new non-employee director of the Company
(an "Outside Director") upon the effective date of this offering at a per-
share exercise price equal to the initial public offering price. In addition,
each Outside Director will automatically be granted subsequent options to
purchase 18,750 shares of common stock at the first meeting of the Board of
Directors following the annual meeting of stockholders in each year beginning
with the 1997 Annual Meeting of Stockholders, if on such date, such Outside
Director has served on the Board of Directors for at least six months. The
term of such options is ten years. The initial options granted to an Outside
Director vest at a rate of 25% on the first anniversary of the date of grant
and at a rate of 1/48th of the shares per month thereafter, and subsequent
options granted to Outside Directors become exercisable at a rate of 1/48th of
the shares subject to such additional options on the monthly anniversary of
the date of grant, subject to the Outside Director's continuous service on the
Board of Directors. The Director Plan will terminate in 2006 unless sooner
terminated by the Board of Directors.
F-18
<PAGE>
CLOSED-LOOP
SALES AND MARKETING PROCESS
FIELD SALES
MANAGEMENT
TELEMARKETING
SUPPORT
[DEPICTION OF FOUR SOFTWARE GRAPHICAL INTERFACES REPRESENTING THE SOFTWARE
FUNCTION]
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING STOCKHOLDER
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
The Company.............................................................. 3
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Financial Data.................................................. 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 25
Management............................................................... 42
Certain Transactions..................................................... 52
Principal and Selling Stockholders....................................... 54
Description of Capital Stock............................................. 57
Shares Eligible for Future Sale.......................................... 60
Underwriting............................................................. 62
Legal Matters............................................................ 63
Experts.................................................................. 63
Additional Information................................................... 64
Index to Financial Statements............................................ F-1
</TABLE>
------------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT PAR-
TICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACT-
ING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Shares
[LOGO]
Common Stock
------------
PROSPECTUS
------------
Alex. Brown & Sons
INCORPORATED
Cowen & Company
Wessels, Arnold & Henderson
October , 1996
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION FOR DIRECTORS AND OFFICERS
The Company has adopted provisions in its Certificate of Incorporation that
eliminate to the fullest extent permissible under Delaware law the liability
of its directors to the Company for monetary damages. Such limitation of
liability does not affect the availability of equitable remedies such as
injunctive relief or rescission. The Company's Bylaws provide that the Company
shall indemnify its directors and officers to the fullest extent permitted by
Delaware law, including in circumstances in which indemnification is otherwise
discretionary under Delaware law. The Company has entered into indemnification
agreements with its officers and directors containing provisions which may
require the Company, among other things, to indemnify the officers and
directors against certain liabilities that may arise by reason of their status
or service as directors or officers (other than liabilities arising from
willful misconduct of a culpable nature), and to advance their expenses
incurred as a result of any proceeding against them as to which they could be
indemnified.
There is no currently pending litigation or proceeding involving a director,
officer, employee or other agent of the Company in which indemnification would
be required or permitted. The Company is not aware of any threatened
litigation or proceeding which may result in a claim for such indemnification.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Company in connection with the sale
of the Common Shares being registered. All of the amounts shown are estimates
except for the SEC registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
SEC Registration Fee........................................... $ 11,450
NASD Filing Fee................................................ 3,821
The Nasdaq Stock Market Listing Fee............................ 45,270
Blue Sky Qualification Fees and Expenses....................... 15,000
Printing and Engraving Expenses................................ 115,000
Legal Fees and Expenses........................................ 250,000
Accounting Fees and Expenses................................... 200,000
Transfer Agent and Registrar Fees.............................. 15,000
Directors' and Officers' Insurance............................. 300,000
Miscellaneous.................................................. 44,459
----------
Total...................................................... $1,000,000
==========
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Since the Registrant's inception in October 1991, the Registrant has issued
and sold (without payment of any selling commission to any person) the
following unregistered securities.
1. From March 27, 1992 to August 31, 1996, the Registrant issued and sold
3,649,149 shares of Common Stock to employees and consultants at prices
ranging from $0.12 to $6.00 per share, upon exercise of stock options and
stock purchase rights, pursuant to the Registrant's 1992 Restricted Stock
Purchase Plan, 1993 Stock Option Plan and 1995 Stock Plan.
2. On January 13, 1993, the Registrant issued and sold 4,411,765 shares
of Series A Preferred Stock to a total of four (4) investors for an
aggregate purchase price of $3,750,000.25.
II-1
<PAGE>
3. On December 20, 1993, the Registrant issued and sold 4,782,408 shares
of Series B Preferred Stock to a total of seven (7) investors for an
aggregate purchase price of $5,165,000.64.
4. On December 23, 1994, the Registrant issued and sold 5,000,000 shares
of Series C Preferred Stock to a total of five (5) investors for an
aggregate purchase price of $2,500,000 and issued warrants to such
investors to acquire an aggregate 5,529,110 shares of Common stock at an
aggregate exercise price of $55.30.
5. On August 20, 1995, the Registrant issued and sold 7,607,719 shares of
Series D Preferred Stock to a total of eight (8) investors for an aggregate
purchase price of $6,010,097.93.
6. On November 17, 1995, the Registrant issued and sold 100,000 shares of
Series D Preferred Stock to one (1) investor in exchange for certain assets
the Company valued at an aggregate of $79,000.
7. On March 29, 1996, the Registrant issued and sold an aggregate of
1,363,637 shares of Series E Preferred Stock to two (2) investors for an
aggregate purchase price of $1,500,000.70.
8. On May 17, 1996, the Registrant issued and sold an aggregate of 6,250
shares of Common Stock to three (3) investors for an aggregate purchase
price of $37,500.
9. On August 20, 1996 to August 28, 1996, the Registrant issued and sold
an aggregate of 6,250 shares of Common Stock to six (6) investors for an
aggregate purchase price of $37,500.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section
3(b) of the Securities Act, as transactions by an issuer not involving a
public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients of securities in each such transaction represented their intention
to acquire the securities for investment only and not with a view to or for
sale in connection with any distribution thereof and appropriate legends were
affixed to the share certificates and instruments issued in such transactions.
All recipients had adequate access, through their relationship with the
Company, to information about the Registrant.
ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Form of Restated Certificate of Incorporation of the Registrant to be
filed prior to completion of the offering.
3.2 Bylaws of the Registrant.
4.1* Specimen Common Stock Certificate.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1 Form of Indemnification Agreement between the Registrant and each of its
directors and officers.
10.2 1995 Stock Plan and form of Stock Option Agreement thereunder.
10.3 1996 Director Option Plan and form of Director Stock Option Agreement
thereunder.
10.4 1996 Employee Stock Purchase Plan and forms of agreement thereunder.
10.5 Lease dated March 5, 1996 between the Registrant and Cooperage-Rose
Properties II.
10.6 Letter agreement dated December 22, 1994 between the Registrant and Mary
E. Coleman, as amended.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.7 Letter Agreement dated July 8, 1996 between the Registrant and Christopher L. Dier.
10.8+ OEM Software License Agreement, amended as of April 3, 1996, between the Registrant and
Gupta Corporation.
10.9 Line of Credit Agreement dated July 15, 1996, modifying the Business Loan Agreement dated
July 13, 1993, between the Registrant and Silicon Valley Bank.
10.10 Promissory Note dated July 15, 1996 between the Registrant and Silicon Valley Bank.
11.1 Calculation of pro forma net loss per share.
23.1 Consent of Coopers & Lybrand L.L.P., Independent Accountants.
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be supplied by amendment.
+ Confidential treatment has been requested for portions of these agreements
pursuant to a request for confidential treatment filed with the Commission.
Omitted portions have filed separately with the Commission.
(b) Financial Statement Schedules:
Report of Independent Accountants
Schedule II--Valuation and Qualifying Accounts
All other Schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
ITEM 28. UNDERTAKINGS
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
(the "Act") may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the California Corporations Law, the Articles of
Incorporation or the Bylaws of the Registrant, the Underwriting Agreement, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act, and will be governed by the final adjudication
of such issue. 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 of controlling person in connection with the securities
being registered, 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 of 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 Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance on Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe
that it meets all of the requirements for filing on Form SB-2 and authorized
this Registration Statement on Form SB-2 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Clara, State of
California, on the 13th the day of September, 1996.
Aurum Software, Inc.
/s/ Mary E. Coleman
By: _________________________________
MARY E. COLEMAN
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Mary E. Coleman and Christopher L. Dier
and each one of them, acting individually and without the other, as his or her
attorney-in-fact, each with full power of substitution, for him and her in any
and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments), and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, hereby ratifying and confirming
all that each of said attorneys-in-fact, or his substitute or substitutes may
do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES STATED.
SIGNATURE TITLE DATE
/s/ Mary E. Coleman President and Chief September 13,
- ------------------------------------- Executive Officer 1996
(MARY E. COLEMAN) (Principal
Executive Officer)
/s/ Christopher L. Dier Chief Financial September 13,
- ------------------------------------- Officer and 1996
(CHRISTOPHER L. DIER) Secretary
(Principal
Financial and
Accounting Officer)
/s/ David D. Buchanan Director September 13,
- ------------------------------------- 1996
(DAVID D. BUCHANAN)
II-4
<PAGE>
SIGNATURE TITLE DATE
/s/ Oliver D. Curme Director September 13,
- ------------------------------------- 1996
(OLIVER D. CURME)
/s/ Mark J. Leslie Director September 13,
- ------------------------------------- 1996
(MARK J. LESLIE)
/s/ Robert J. Loarie Director September 13,
- ------------------------------------- 1996
(ROBERT J. LOARIE)
/s/ Robert M. Obuch Director September 13,
- ------------------------------------- 1996
(ROBERT M. OBUCH)
/s/ Jeffrey T. Webber Director September 13,
- ------------------------------------- 1996
(JEFFREY T. WEBBER)
/s/ Charles C. Wu Director September 13,
- ------------------------------------- 1996
(CHARLES C. WU)
II-5
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
Aurum Software, Inc.
In connection with our audits of the financial statements of Aurum Software,
Inc. as of December 31, 1994 and 1995, and for each of the three years in the
period ended December 31, 1995, which financial statements are included in
this Registration Statement, we have also audited the financial statement
schedule listed in Item 27(b) herein.
In our opinion, the financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
San Jose, California
March 5, 1996
<PAGE>
SCHEDULE II
AURUM SOFTWARE, INC.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING END OF
DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD
----------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
receivable:
Year ended December 31, 1993..... $ 67 $183 $ -- $250
==== ==== ====== ====
Year ended December 31, 1994..... $250 $ 87 $ (19) $318
==== ==== ====== ====
Year ended December 31, 1995..... $318 $125 $(103) $340
==== ==== ====== ====
</TABLE>
- --------
(a)Uncollectible accounts written-off.
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
-------------------------------------
OF AURUM SOFTWARE, INC
----------------------
Aurum Software, Inc., a corporation organized and existing under the laws
of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Aurum Software, Inc. The corporation
was originally incorporated under the same name and the original Certificate of
Incorporation of the corporation was filed with the Secretary of State of the
State of Delaware on July 31, 1996.
B. This Restated Certificate of Incorporation has been duly adopted in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware by the Board of Directors of the corporation.
C. This Restated Certificate of Incorporation was approved by the sole
stockholder of the corporation pursuant to Section 216 of the General
Corporation Law of the State of Delaware.
D. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
integrates and further amends the provisions of the Certificate of Incorporation
of this corporation.
E. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
Article I.
The name of the corporation is Aurum Software, Inc. (the "Company").
Article II.
The address of the Company's registered office in the State of Delaware is
1209 Orange Street, City of Wilmington, County of New Castle, 19801. The name
of its registered agent at such address is The Corporation Trust Company.
<PAGE>
Article III.
The purpose of the Company is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
Article IV.
1. Authorized Capital. The Company is authorized to issue two classes of
------------------
stock, designated "Common Stock" and "Preferred Stock," respectively. The total
number of shares which the Company is authorized to issue is 64,000,000 shares,
$.001 par value. The number of shares of Common Stock ("Common") which the
Company is authorized to issue is 20,000,000 shares, and the number of shares of
Preferred Stock ("Preferred") which the Company is authorized to issue is
24,000,000 shares, of which 4,411,765 shares shall be designated "Series A
Preferred"; 294,118 shares shall be designated as "Series A-1 Preferred";
5,092,593 shares shall be designated "Series B Preferred"; 5,000,000 shares
shall be designated as "Series C Preferred"; 7,707,719 shares shall be
designated "Series D Preferred"; and 1,363,637 shares shall be designated
"Series E Preferred" (the Series A Preferred, Series A-1 Preferred, the Series B
Preferred, the Series C Preferred, the Series D Preferred, and the Series E
Preferred are sometimes collectively referred to herein as "Preferred").
2. Reverse Stock Split. Upon the filing of this Restated Certificate
-------------------
of Incorporation with the Secretary of State of the State of Delaware, each
currently outstanding share of Common Stock of the Company shall be consolidated
and combined into one-quarter (1/4) of a share of Common Stock. No fractional
shares of Common Stock shall be issued upon such reverse stock split; any
fractional shares that would otherwise result as to any holder shall be rounded
up to the nearest whole share. The rights, preferences, privileges and
restrictions of the Preferred have been amended hereinbelow as necessary to
reflect the occurrence of the reverse stock split contemplated by this
paragraph.
3. Authorized Capital Following Automatic Conversion Event. Upon the
-------------------------------------------------------
automatic conversion of all outstanding shares of Preferred in accordance with
the provisions of Article V, Section 3(b) of this Restated Certificate of
Incorporation (the "Automatic Conversion Event"), the Company shall immediately
thereafter be authorized to issue two classes of stock to be designated,
respectively, Common Stock and Preferred Stock. The total number of shares of
Common Stock which the Company shall have the authority to issue shall be
25,000,000, $.001 par value, and the total number of shares of Preferred Stock
the Company shall have the authority to issue shall be 5,000,000, $.001 par
value. Immediately following any Automatic Conversion Event, the Preferred
Stock may be issued from time to time in one or more series pursuant to a
resolution or resolutions providing for such issue duly adopted by the Board of
Directors (authority to do so being hereby expressly vested in the Board). The
Board of Directors is further authorized to determine or alter the rights,
preferences, privileges and restrictions granted to or imposed upon any wholly
unissued series of Preferred Stock and to fix the number of shares of any series
of Preferred Stock and the designation of any such series of Preferred Stock.
The Board of Directors, within the limits and restrictions stated in any
resolution or resolutions of the Board of Directors originally fixing the number
of shares constituting any series, may increase or decrease (but not below the
number of shares in any such series then outstanding), the number of shares of
any series subsequent to the issue of shares of that series.
-2-
<PAGE>
4. Restatement of Certificate of Incorporation. Immediately following
-------------------------------------------
any Automatic Conversion Event, the Board of Directors of the Company is
authorized, without the further consent or approval of the stockholders of the
Company to amend and restate this Restated Certificate of Incorporation to show
the authorized classes of capital stock as set forth in the preceding paragraph
and to eliminate all references in this Restated Certificate of Incorporation to
the rights, preferences, privileges and restrictions of the series of Preferred
Stock including those set forth in Article IV, section 1 above and ArticleV
below (and, in connection with any such amendment and restatement, to renumber
the remaining Articles).
Article V.
The relative rights, preferences, privileges, and restrictions granted to
or imposed on the respective classes of the shares of capital stock or the
holders thereof are as follows:
1. Dividends. The holders of the Preferred shall be entitled to receive,
---------
when and as declared by the Board of Directors, dividends out of funds legally
available therefor, prior and in preference to any declaration or payment of 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 the Company) on the Common
Stock of the Company, at the rate of $0.085, $0.085, $0.108, $0.05, $0.079, and
$0.11 respectively, per share of Series A Preferred, Series A-1 Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, and Series E
Preferred per annum. Such dividends shall not be cumulative, and no right to
such dividends shall accrue to holders of the Preferred unless declared by the
Board of Directors. No dividends or other distributions shall be made with
respect to the Common Stock, other than dividends payable solely in Common
Stock, unless at the same time an equivalent dividend with respect to each of
the Preferred has been paid or set apart for payment.
2. Liquidation Preference. In the event of any liquidation, dissolution,
----------------------
or winding up of the Company ("Liquidation"), either voluntary or involuntary,
distributions to the stockholders of the Company shall be made in the following
manner:
(a) (i) The holders of the Preferred shall be entitled to receive,
prior and in preference to any distribution of any of the assets or surplus
funds of the Company to the holders of the Common Stock by reason of their
ownership of such stock, the amount of $0.85, $0.85, $1.08, $0.50, $0.79, and
$1.10 respectively, for each share of Series A Preferred, Series A-1 Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, or Series E
Preferred then held by them, adjusted for any combinations, consolidations, or
stock distributions or dividends with respect to such shares and, in addition,
an amount equal to all declared but unpaid dividends on each of the Preferred,
as the case may be. If the assets and funds thus distributed among the holders
of the Preferred shall be insufficient to permit the payment to such holders of
the full aforesaid preferential amount, then the entire assets and funds of the
Company legally available for distribution shall be distributed among the
holders of the Preferred in the same proportion as the relative aggregate
amounts obtained by multiplying the number of shares of Series E Preferred then
held by each such holder by $1.10 per share, multiplying the number of shares of
Series D Preferred then held by each such holder by $0.79 per share, multiplying
the number
-3-
<PAGE>
of shares of Series C Preferred then held by each such holder by $0.50 per
share, multiplying the number of shares of Series B Preferred then held by each
such holder by $1.08 per share, multiplying the number of shares of Series A-1
Preferred then held by each such holder by $0.85 per share, and multiplying the
number of shares of Series A Preferred then held by each such holder by $0.85
per share.
(ii) After giving effect to the provisions of Section
2(a)(i), all of the assets of the Company shall be distributed to the holders of
Common Stock and the holders of the Preferred pro rata based on the number of
shares of Common Stock held by each (assuming conversion into Common Stock of
all outstanding Preferred).
(iii) Notwithstanding the foregoing, if the proceeds per share
(treating all outstanding Preferred on an as-converted basis) legally available
for distribution upon any liquidation, dissolution, or winding up of the Company
exceed $2.37 (subject to adjustment for stock splits, recapitalization, and the
like), then all of the assets of the Company shall be distributed pro rata to
the holders of Common Stock and the holders of Preferred pro rata based on the
number of shares of Common Stock held by each (assuming conversion into Common
Stock of all Preferred).
(b) For purposes of this Section 2, a merger or consolidation of
the Company with or into any other corporation or corporations (but excluding
any merger effected solely for the purpose of reincorporating in another state),
or the merger of any other corporation or corporations into the Company, in
which consolidation or merger the stockholders of the Company receive
distributions in cash or securities of another corporation or corporations as a
result of such consolidation or merger, a sale of all or substantially all of
the assets of the Company, or the undertaking by the Company of a transaction or
series of transactions in which more than 50% of the voting power of the Company
is disposed of, shall be treated as a Liquidation.
(c) Any securities to be delivered pursuant to Section 2(b) above
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, the value shall
be deemed to be the average of the closing prices of the securities on such
exchange over the 30-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
are applicable) over the 30-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 Company
and the holders of the Preferred which would be entitled to receive such
securities or the same type of securities and which holders of Preferred Stock
-4-
<PAGE>
represent holders of at least a majority of the collective voting power of all
then outstanding shares of such Preferred.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in
subparagraphs 2(c)(i)(A), (B), or (C) to reflect the approximate fair market
value thereof, as mutually determined by the Company and the holders of
Preferred which would be entitled to receive such securities or the same type of
securities and which represent at least 66 2/3% of the collective voting power
of all then outstanding shares of such Preferred.
(d) As authorized by Section 402.5(c) of the California
Corporations Code, the provisions of Sections 502, 503, and 506 of the
California Corporations Code shall not apply with respect to repurchase by the
Company of shares of Common Stock issued to or held by employees or consultants
of the Company or its subsidiaries upon termination of their employment or
services pursuant to agreements providing for the right of repurchase, except to
the extent such repurchases exceed $50,000 in aggregate amount paid by the
Company in any 12 consecutive months.
3. Redemption.
----------
(a) Right of Redemption. The Company shall not have the right to
-------------------
call or redeem at any time all or any shares of Preferred. At any time after the
fifth anniversary of the first issuance of the Series D Preferred and upon the
written election of holders of shares of Preferred constituting at least 66-2/3%
of the collective voting power of the then outstanding Preferred, the Company
shall redeem, from any source of funds legally available therefor, all the
outstanding shares of Preferred in three annual installments beginning on the
Redemption Date (as defined in subsection (c) below), and continuing thereafter
on the first and second anniversaries of the Redemption Date, whereupon the
remaining Preferred outstanding shall be redeemed. The Company shall effect such
redemptions on the applicable Redemption Dates by paying in cash in exchange for
the shares of Preferred to be redeemed a sum equal to the Redemption Price (as
defined in subsection (b) below). The number of shares of Preferred that the
Company shall be required under this Section 3(a) to redeem on any one
Redemption Date shall be equal to the amount determined by dividing (i) the
aggregate number of shares of Preferred outstanding immediately prior to the
Redemption Date by (ii) the number of remaining Redemption Dates (including the
Redemption Date to which such calculation applies).
(b) Redemption Price. The redemption price shall be paid in cash
----------------
and shall be an amount per share equal to all declared and unpaid dividends per
share of Preferred, as the case may be, being redeemed plus the greater of (i)
$0.85 in the case of the Series A Preferred, $0.85 in the case of the Series A-1
Preferred, $1.08 in the case of the Series B Preferred, $0.50 in the case of the
Series C Preferred, $0.79 in the case of the Series D Preferred, and $1.10 in
the case of the Series E Preferred (each as adjusted for stock splits,
recapitalization, and the like) or (ii) the fair market value per share of the
Preferred, as the case may be to be, redeemed as of the specified Redemption
Date as determined by an independent appraiser chosen by the Company and
acceptable to the collective voting power of the then outstanding Preferred.
Such amounts per share are hereinafter together referred to as the "Redemption
Price."
-5-
<PAGE>
(c) Notice of Redemption. At least 90 days before any date within
--------------------
the time fixed for redemption pursuant to this Section 3, the holders of record
of the requisite percentage of Preferred specified in Section 3(a) shall mail
written notice (hereinafter referred to as the "Redemption Request") thereof to
the Company, postage prepaid. The Redemption Request shall specify the date
within the applicable time period which the holders have specified for
redemption of the first installment of the Preferred (hereinafter referred to as
the "Redemption Date").
(d) Notice of Redemption Request. In the event that the Company
----------------------------
receives a Redemption Request within the period specified therefor, the Company
shall send written notice thereof (the "Notice of Redemption Request") by mail,
first class postage prepaid, to each holder of record (at the close of business
on the business day preceding the day on which such notice is given) of any
outstanding shares of Preferred who did not elect redemption pursuant to the
Redemption Request. The Notice of Redemption Request shall identify the
holder(s) that made such Redemption Request. The Notice of Redemption Request
shall be sent by the Company not later than fifteen (15) days after the
Company's receipt of a Redemption Request.
(e) Surrender of Certificates, etc. The Redemption Request shall
------------------------------
bind all holders of Preferred to surrender for redemption, and the Company to
redeem, the outstanding shares of Preferred on the Redemption Date which such
Redemption Request specifies. Each holder of shares of Preferred shall surrender
the certificate or certificates representing such shares of Preferred to the
Company (at the principal executive office of the Company), and thereupon the
applicable Redemption Price for such shares shall be paid in cash or check to
the order of the person whose name appears on such certificate or certificates
and each surrendered certificate shall be canceled and retired. From and after
the Redemption Date, and unless there shall have been a default in payment of
the Redemption Price, all rights to dividends on the Preferred shall cease to
exist, all rights of the holders of such shares as holders of Preferred (except
the right to receive the applicable Redemption Price, without interest, upon
surrender of their certificate or certificates) shall cease and terminate with
respect to such shares, and such shares shall not thereafter be transferred on
the books of the Company or be deemed to be outstanding for any purpose
whatsoever.
(f) Deposit of Redemption Price. On or prior to each Redemption
---------------------------
Date, the Company shall deposit the Redemption Price of all shares of Preferred
to be redeemed on such Redemption Date with a bank or trust company as a trust
fund for the benefit of the holders of shares of Preferred. Any monies deposited
by the Company pursuant to this subsection for the redemption of shares
thereafter converted into shares of Common Stock pursuant to Section 4 no later
than the day preceding the applicable Redemption Date shall be returned to the
Company forthwith upon such conversion. The balance of any monies deposited by
the Company pursuant to this subsection remaining unclaimed at the expiration of
one year following the Redemption Date shall thereafter be returned to the
Company upon its request expressed in a resolution of its Board of Directors.
(g) Available Funds. If the funds of the Company legally available
---------------
for redemption of the Preferred on any Redemption Date are insufficient to
redeem the total number of shares requested to be redeemed pursuant to this
Section 3 on such Redemption Date, those funds which are legally available will
be used to redeem the maximum number of shares of Preferred specified for
redemption
-6-
<PAGE>
ratably among the holders of such Preferred in the same proportion as the
relative aggregate amounts obtained by multiplying the number of shares of
Series E Preferred specified for redemption by $1.10 per share, multiplying the
number of shares of Series D Preferred specified for redemption by $0.79 per
share, multiplying the number of shares of Series C Preferred specified for
redemption by each such holder by $0.50 per share, multiplying the number of
shares of Series B Preferred specified for redemption by each such holder by
$1.08 per share, multiplying the number of shares of Series A Preferred
specified for redemption by each such holder by $0.85 per share, and multiplying
the number of shares of Series A-1 Preferred specified for redemption by each
such holder by $0.85 per share. The shares of Preferred not redeemed pursuant
to Section 3(a) above shall remain outstanding and shall be entitled to all the
rights and preferences provided herein. At any time thereafter, when additional
funds of the Company are legally available for the redemption of the Preferred
specified for redemption pursuant to this Section 3, such funds will immediately
be used to redeem the balance of such shares which the Company has become
obligated to redeem pursuant to this Section 3, on the same terms and conditions
as are set forth above.
4. Conversion. The holders of the Preferred shall have conversion rights
----------
as follows (the "Conversion Rights"):
(a) Right to Convert. Subject to Section 4(b) below, each share of
----------------
Series A Preferred shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share and on or prior to the fifth
day prior to such Redemption Date, if any, as may have been fixed in any
Redemption Notice, at the office of the Company or any transfer agent for the
Series A Preferred, into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing $0.85 by the Series A Conversion
Price, determined as hereinafter provided, in effect at the time of conversion
(the "Series A Conversion Rate"). The "Series A Conversion Price" shall
initially be $3.7184 per share of Common Stock. The Series A Conversion Price
and Conversion Rate shall be subject to further adjustment as hereinafter
provided.
Subject to Section 4(b) below, each share of Series A-1 Preferred shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and on or prior to the fifth day prior to such Redemption
Date, if any, as may have been fixed in any Redemption Notice, at the office of
the Company or any transfer agent for the Series A-1 Preferred, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing $0.85 by the Series A-1 Conversion Price, determined as hereinafter
provided, in effect at the time of the conversion (the "Series A-1 Conversion
Rate"). The "Series A-1 Conversion Price" shall initially be $5.80 per share of
Common Stock. The Series A-1 Conversion Price and Conversion Rate shall be
subject to further adjustment as hereinafter provided.
Subject to Section 4(b) below, each share of Series B Preferred shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and on or prior to the fifth day prior to such Redemption
Date, if any, as may have been fixed in any Redemption Notice, at the office of
the Company or any transfer agent for the Series B Preferred, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing $1.08 by the Series B Conversion Price, determined as hereinafter
provided, in effect at the time of the conversion (the "Series B Conversion
Rate"). The "Series B Conversion Price" shall initially be $3.7184 per share of
Common
-7-
<PAGE>
Stock. The Series B Conversion Price and Conversion Rate shall be subject to
further adjustment as hereinafter provided.
Subject to Section 4(b) below, each share of Series C Preferred shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and on or prior to the fifth day prior to such Redemption
Date, if any, as may have been fixed in any Redemption Notice, at the office of
the Company or any transfer agent for the Series C Preferred, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing $0.50 by the Series C Conversion Price, determined as hereinafter
provided, in effect at the time of the conversion (the "Series C Conversion
Rate"). The "Series C Conversion Price" shall initially be $4.00 per share of
Common Stock. The Series C Conversion Price and Conversion Rate shall be subject
to further adjustment as hereinafter provided.
Subject to Section 4(b) below, each share of Series D Preferred shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and on or prior to the fifth day prior to such Redemption
Date, if any, as may have been fixed in any Redemption Notice, at the office of
the Company or any transfer agent for the Series D Preferred, into such number
of fully paid and nonassessable shares of Common Stock as is determined by
dividing $0.79 by the Series D Conversion Price, determined as hereinafter
provided, in effect at the time of the conversion (the "Series D Conversion
Rate"). The "Series D Conversion Price" shall initially be $3.16 per share of
Common Stock. The Series D Conversion Price and Conversion Rate shall be subject
to further adjustment as hereinafter provided.
Subject to Section 4(b) below, each share of Series E Preferred shall be
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share and on or prior to the fifth day prior to such Redemption
Date, if any, as may have been fixed in any Redemption Notice, at the office of
the Company or any transfer agent for the Series E Preferred, unto such number
of fully paid and nonassessable shares of Common Stock as is determined by $1.10
by the Series E Conversion Price, determined as hereinafter provided, in effect
at the time of the conversion (the "Series E Conversion Rate"). The "Series E
Conversion Rate" shall initially be $4.40 per share of Common Stock. The Series
E Conversion Price and Conversion Rate shall be subject to further adjustment as
hereinafter provided.
In the event of a call for redemption of any shares of Preferred pursuant
to Section 3 hereof, the Conversion Rights shall terminate, as to the shares
designated for redemption, at the close of business on the fifth day preceding
the Redemption Date, unless default is made in the giving of the Redemption
Notice or in payment of the Redemption Price.
The "Series A Conversion Price," the "Series A-1 Conversion Price," the
"Series B Conversion Price," the "Series C Conversion Price," the "Series D
Conversion Price," and the "Series E Conversion Price" are hereinafter at times
together referred to as the "Conversion Price" and the "Series A Conversion
Rate," the "Series A-1 Conversion Rate," the "Series B Conversion Rate," the
"Series C Conversion Rate," the "Series D Conversion Rate," and the "Series E
Conversion Rate" are at times together referred to as the "Conversion Rate."
-8-
<PAGE>
(b) Automatic Conversion. Each share of Preferred shall
--------------------
automatically be converted into shares of Common Stock at the then effective
Conversion Rate of the applicable series upon either (i) the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Company to the public at a price per
share (prior to underwriting commissions and offering expenses) of not less than
$8.00 (appropriately adjusted for stock splits, recapitalization and the like
occurring at any time after the date of this Restated Certificate of
Incorporation) and an aggregate offering price to the public of not less than
$10,000,000 (the "IPO Closing Date") or (ii) the written consent of the holders
of not less than 66-2/3% of the then outstanding voting power of the shares of
Preferred, voting together as a single class. In the event of the automatic
conversion of the Preferred upon a public offering as aforesaid, the person(s)
entitled to receive the Common Stock issuable upon such conversion of Preferred
shall not be deemed to have converted such Preferred until immediately prior to
the closing of such sale of securities.
(c) Mechanics of Conversion. No fractional shares of Common Stock
-----------------------
shall be issued upon conversion of the Preferred. In lieu of any fractional
shares to which the holder would otherwise be entitled, the Company shall pay
cash equal to such fraction multiplied by the then effective Conversion Price of
the applicable series. Before any holder of Preferred shall be entitled to
convert the same into full shares of Common Stock and to receive certificates
therefor, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the Company or of any transfer agent for the
Preferred, and shall give written notice to the Company at such office that he
elects to convert the same; provided, however, that in the event of an automatic
conversion pursuant to Section 4(b), the outstanding shares of Preferred shall
be converted automatically without any further action by the holders of such
shares and whether or not the certificates representing such shares are
surrendered to the Company or its transfer agent, and provided further that the
Company shall not be obligated to issue certificates evidencing the shares of
Common Stock issuable upon such automatic conversion unless the certificates
evidencing such shares of Preferred are either delivered to the Company or its
transfer agent as provided above, or the holder notifies the Company or its
transfer agent that such certificates have been lost, stolen, or destroyed and
executes an agreement satisfactory to the Company to indemnify the Company from
any loss incurred by it in connection with such certificates. The Company
shall, as soon as practicable after such delivery, or such agreement and
indemnification in the case of a lost certificate, issue and deliver at such
office to such holder of Preferred, a certificate or certificates for the number
of shares of Common Stock to which he shall be entitled as aforesaid and a check
payable to the holder in the amount of any cash amounts payable as the result of
a conversion into fractional shares of Common Stock. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of such surrender of the shares of Preferred to be converted, or in the case of
automatic conversion on the date of closing of the offering or the effective
date of such written consent, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder or holders of such shares of Common Stock on such
date.
-9-
<PAGE>
(d) Adjustments for Diluting Issues.
-------------------------------
(i) Special Definitions. For purposes of this Section 4(d),
-------------------
the following definitions shall apply:
(A) "Options" shall mean rights, options or warrants to
-------
subscribe for, purchase, or otherwise acquire either Common Stock or Convertible
Securities.
(B) "Original Issue Date" shall mean the date on which
-------------------
the first share of Series A Preferred, Series A-1 Preferred, Series B Preferred,
Series B-1 Preferred, Series C Preferred, Series D Preferred, or Series E
Preferred was first issued, as the case may be.
(C) "Convertible Securities" shall mean shares (other
----------------------
than the Common Stock) convertible into or exchangeable for Common Stock.
(D) "Additional Shares of Common Stock" shall mean all
---------------------------------
shares of Common Stock issued (or, pursuant to Section 4(d)(iii), deemed to be
issued) by the Company after the Original Issue Date, other than shares of
Common Stock issued or issuable at any time:
(1) upon conversion of the shares of the Preferred
authorized herein or upon conversion of Convertible Securities, provided that
such Convertible Securities shall be deemed to be Additional Shares of Common
Stock;
(2) to officers, directors, and employees of, and
consultants to, the Company to be designated and approved by the Board of
Directors;
(3) as a dividend or distribution on the Preferred,
or any event for which adjustment is made pursuant to subparagraph (d)(iv)
hereof; or
(4) by way of dividend or other distribution on
shares of Common Stock excluded from the definition of Additional Shares of
Common Stock by the foregoing clauses (1), (2) or (3), or this clause (4), or on
shares of Common Stock so excluded.
(ii) Adjustment of Conversion Price Upon Issuance of
-----------------------------------------------
Additional Shares of Common Stock. In the event the Company shall issue
- ---------------------------------
Additional Shares of Common Stock without consideration or for a consideration
per share less than the respective Conversion Price (as the case may be) in
effect on the date of and immediately prior to such issue, then in such event,
the Series A Conversion Price, the Series B Conversion Price, the Series C
Conversion Price, the Series D Conversion Price, or the Series E Conversion
Price (as the case may be) shall be reduced, concurrently with such issue, to a
price determined by multiplying such Series A Conversion Price, Series B
Conversion Price, Series C Conversion Price, Series D Conversion Price, or
Series E Conversion Price by a fraction, the numerator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
(not including shares excluded from the definition of Additional Shares of
Common Stock by Section 4(d)(i)(D)(2) hereof) plus the number of shares of
Common Stock which the aggregate
-10-
<PAGE>
consideration received by the Company for the total number of Additional Shares
of Common Stock so issued would purchase at such Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price, Series D Conversion Price,
or Series E Conversion Price (as the case may be); and the denominator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such issue (not including shares excluded from the definition of Additional
Shares of Common Stock by Section 4(d)(i)(D)(2) hereof) plus the number of such
Additional Shares of Common Stock so issued; provided that, for the purposes of
this Section 4(d)(ii), all shares of Common Stock issued or issuable upon
conversion of the then outstanding Series A Preferred, Series A-1 Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, and Series E
Preferred shall be deemed to be outstanding. No adjustment in the Conversion
Price of the Series A-1 Preferred shall be made in respect of the issuance of
Additional Shares of Common Stock, regardless of the issuance price of such
shares, except for the issuance of such shares as a stock dividend, stock split,
or other transaction as provided in paragraph 4(d)(iv) hereof. No adjustment in
the Conversion Price of any series of Preferred shall be made in respect of the
issuance of the Series D Preferred so long as the Series D Preferred is issued
at an initial price of $0.79 or more, except for the issuance of such shares as
a stock dividend, stock split, or other transaction as provided in paragraph
4(d)(iv) hereof.
(iii) Determination of Consideration. For purposes of this
------------------------------
Section 4(d), the consideration received by the Company for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) Cash and Property: Such consideration shall:
-----------------
(1) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Company without any deduction for
commissions and excluding amounts paid or payable for accrued interest or
accrued dividends;
(2) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board; and
(3) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Company for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (1) and (2) above, as
determined in good faith by the Board.
(B) Options and Convertible Securities. In the case of
----------------------------------
options to purchase or rights to subscibe for Common Stock, or securities by
their terms convertible into or exchangeable for Common Stock, the following
provisions shall apply for all purposes of Section 4(d):
(1) The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to be Additional Shares of Common
issued at the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in subparagraph
4(d)(iii)(A)), if any, received by the Company upon the issuance of such options
or rights
-11-
<PAGE>
(but excluding the consideration received by the Company from the sale of the
warrants to purchase Common Stock ("Warrants") made concurrently with the
original sale of the Series C Preferred) plus the exercise price provided in
such options or rights for the Common Stock covered thereby.
(2) The aggregate maximum number of shares of
Common Stock deliverable upon conversion or in exchange for 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 be Additional Shares of Common
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 Company for any such securities and related options or rights (excluding any
cash received on account of accrued interest or accrued dividends and excluding
the consideration received for the sale of the Warrants), plus the additional
consideration, if any, to be received by the Company 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
subparagraph 4(d)(iii)(A)).
(3) In the event of any change in the number of
shares of Common Stock deliverable or in the consideration payable to this
Company 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
Series A Conversion Price, the Series B Conversion Price, the Series C
Conversion Price, the Series D Conversion Price, and the Series E Conversion
Price to the extent in any way affected by or computed using such options,
rights, or 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 Series A Conversion Price, the Series B Conversion Price, the
Series C Conversion Price, the Series D Conversion Price, and the Series E
Conversion Price to the extent in any way affected by or computed using such
options, rights, or 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 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 subparagraphs
4(d)(iii)(B)(1) and (2) shall be appropriately adjusted to reflect any change,
termination or expiration of the type described in either subparagraph
4(d)(iii)(B)(3) or (4).
(iv) Adjustments for Subdivisions or Combinations of or
--------------------------------------------------
Stock Dividends on Common Stock. In the event the outstanding shares of Common
- -------------------------------
Stock shall be subdivided (by stock split or otherwise), into a greater number
of shares of Common Stock, or the Company at any time or from time to time after
the Original Issue Date shall declare or pay any dividend on the Common Stock
payable
-12-
<PAGE>
in Common Stock, the Series A Conversion Rate, the Series A-1 Conversion Rate,
the Series B Conversion Rate, the Series C Conversion Rate, the Series D
Conversion Rate, and the Series E Conversion Rate then in effect shall,
concurrently with the effectiveness of such subdivision or stock dividend, be
proportionately increased based on the ratio of (A) the number of shares of
Common Stock outstanding immediately after such subdivision or stock dividend to
(B) the number of shares of Common Stock outstanding immediately prior to such
subdivision or stock dividend. In the event the outstanding shares of Common
Stock shall be combined or consolidated, by reclassification or otherwise, into
a lesser number of shares of Common Stock, the Series A Conversion Rate, the
Series A-1 Conversion Rate, the Series B Conversion Rate, the Series C
Conversion Rate, the Series D Conversion Rate, and the Series E Conversion Rate
then in effect shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately decreased on the same basis.
(v) Adjustments for Other Distributions. In the event the
-----------------------------------
Company at any time or from time to time makes, or fixes a record date for the
determination of holders of Common Stock entitled to receive, any distribution
payable in (A) securities of the Company or other entities (other than shares of
Common Stock and other than as otherwise adjusted in this Section 4 or as
otherwise provided in Section 1), (B) evidences of indebtedness issued by the
Company or other persons, or (C) assets (excluding cash dividends) or options or
rights not referred to in subparagraph 4(d)(iii)(B), then and in each such event
provision shall be made so that the holders of Series A Preferred, Series A-1
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, and
Series E Preferred shall receive upon conversion thereof, in addition to the
number of shares of Common Stock receivable thereupon, the amount of such
distribution which they would have received had their Preferred been converted
into Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 4 with respect to the rights of the holders of the Preferred.
(vi) Adjustments for Recapitalization, Reclassification,
--------------------------------------------------
Exchange and Substitution. If at any time or from time to time the Common Stock
- -------------------------
issuable upon conversion of the Series A Preferred, Series A-1 Preferred, Series
B Preferred, Series C Preferred, Series D Preferred, and Series E Preferred
shall be changed into the same or a different number of shares of any other
class or classes of stock, whether by recapitalization, capital reorganization,
reclassification or otherwise (other than a subdivision, combination of shares
or merger or sale of assets transaction provided for above or in Section 2(b)),
the Conversion Rate of each series of Preferred then in effect shall,
concurrently with the effectiveness of such recapitalization, reorganization or
reclassification, be proportionately adjusted such that the Preferred shall be
convertible into, in lieu of the number of shares of Common Stock which the
holders thereof would otherwise have been entitled to receive, a number of
shares of such other class or classes of stock equivalent to the number of
shares of Common Stock that would have been subject to receipt by the holders
upon conversion of the Preferred immediately before that change. In addition, to
the extent applicable in any reorganization or recapitalization, provision shall
be made so that the holders of the Preferred shall thereafter be entitled to
receive upon conversion of the Preferred 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
reorganization or recapitalization.
-13-
<PAGE>
(e) No Impairment. Except as provided in Section 5, the Company will
-------------
not, by amendment of its Articles of Incorporation or through any
reorganization, 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 Company, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Preferred.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price or Conversion Rate of any
series of Preferred pursuant to this Section 4, the Company at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and furnish to each holder of Preferred a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Company shall, upon the written
request at any time of any holder of Preferred, furnish or cause to be furnished
to such holder a like certificate setting forth (i) such adjustments and
readjustments, (ii) the respective Conversion Price and the Conversion Rate at
the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversion of the Preferred.
(g) Reservation of Stock Issuable Upon Conversion. The Company shall
---------------------------------------------
at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Preferred 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
the Preferred; and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Preferred, in addition to such other remedies as shall
be available to the holder of such Preferred, the Company will take such
corporate action as may, in the opinion of 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.
(h) Notices of Record Date. In the event that the Company shall
----------------------
propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not a
regular cash dividend and whether or not out of earnings or earned surplus;
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other
corporation, or sell, lease or convey all or substantially all its property or
business, or to liquidate, dissolve or wind up; then, in connection with each
such event, the Company shall send to the holders of the Preferred:
-14-
<PAGE>
(A) in the case of the matters referred to in (i) and
(ii) above, at least 20 days' prior written notice of the date on which a record
shall be taken for such dividend, distribution or subscription rights (and
specifying the date on which the holders of Common Stock shall be entitled
thereto and the amount and character of such dividend, distribution or right);
and
(B) in the case of the matters referred to in (iii) and
(iv) above, at least 20 days' prior written notice of the date when the same
shall take place (and specifying the date on which the holders of Common Stock
shall be entitled to exchange their Common Stock for securities or other
property deliverable upon the occurrence of such event or the record date for
the determination of such holders if such record date is earlier).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Preferred at the
address for each such holder as shown on the books of the Company.
5. Covenants. In addition to any other rights provided by law, so long
---------
as at least 500,000 shares (subject to adjustment for stock splits,
recapitalizations and the like) of the Preferred shall be outstanding, the
Company shall not, without first obtaining the affirmative vote or written
consent of the holders of not less than 66-2/3% of the then outstanding voting
power of the shares of Preferred (such Preferred voting or acting by written
consent together as a single class, except as may otherwise be required by law):
(a) amend or repeal any provision of, or add any provision to, the
Company's Articles of Incorporation or Bylaws if such action would (i) increase
or decrease the size of the Board of Directors; (ii) adversely alter or change
the preferences, rights, privileges, or powers of, or the restrictions provided
for the benefit of, any series of the Preferred; (iii) increase or decrease the
authorized number of shares of any series of Preferred; or (iv) create any
series of stock having any preference over or parity with any of the outstanding
series of the Preferred.
(b) authorize or issue any securities (including but not limited to
any Options or Convertible Securities as defined in Section 4(d) hereof, but
excluding any debt securities that do not contain any equity features) having
any preference or priority as to rights or privileges superior to or on a parity
with any such preference or priority of the series of the Preferred;
(c) merge or consolidate with any other corporation or sell, lease,
or convey all or substantially all of the assets of the Company or otherwise
effect a recapitalization or reorganization of the Company;
(d) pay or declare any dividend on any shares of Common Stock while
any shares of Preferred remain outstanding, or apply any of its assets to the
redemption, retirement, purchase or acquisition directly or indirectly, through
subsidiaries or otherwise, of any shares of Common Stock or Preferred Stock, (i)
except as expressly permitted herein; (ii) except as a result of the Company's
exercising the right of first refusal on stockholder transfers set forth in
Article I of the Amended and Restated Shareholders Agreement dated as of March
1996 (the "Shareholders Agreement"); and
-15-
<PAGE>
(iii) except from employees or consultants of the Company upon termination of
employment or association pursuant to the terms of restrictive stock purchase
agreements providing for the repurchase of such shares at cost entered into with
such employees or consultants, except to the extent such repurchases exceed
$50,000 in aggregate amount paid by the Company in any 12 consecutive months; or
(e) do any act or thing which would result in taxation of the holders
of shares of the Preferred under Section 305 of the Internal Revenue Code of
1954, as amended (or any comparable provision of the Internal Revenue Code as
hereafter from time to time amended).
6. Voting Rights.
-------------
(a) Holders of the Preferred shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, and shall
be entitled to vote, together with the holders of Common Stock, with respect to
any questions upon which holders of Common Stock have the right to vote. Except
as otherwise required by law or by Sections 5 and 6(b) hereof, the holder of
each share of Common Stock issued and outstanding shall have one vote and the
holder of each share of Preferred shall be entitled to the number of votes equal
to the number of shares of Common Stock into which such share of Preferred could
be converted at the record date for determination of the stockholders entitled
to vote on such matters, or, if no such record date is established, at the date
such vote is taken or any written consent of stockholders is solicited, such
votes to be counted together with all other shares of stock of the Company
having general voting power and not separately as a class. For purposes of this
Article V, the "voting power of the shares of Preferred" shall mean the number
of votes equal to the number of shares of Common Stock into which such share of
Preferred could be converted at the dates provided in the preceding sentence.
Fractional votes by the holders of Preferred shall not, however, be permitted
and any fractional voting rights shall (after aggregating all shares into which
shares of Preferred held by each holder could be converted) be rounded to the
nearest whole number. Holders of Common Stock and Preferred shall be entitled
to notice of any stockholders' meeting in accordance with the Bylaws of the
Company.
(b) Election of Directors by Class. So long as the holders of the
------------------------------
Series A Preferred and Series A-1 Preferred hold not less than fifty percent
(50%) of the originally issued shares of Series A Preferred and Series A-1
Preferred, the holders of the Series A Preferred and Series A-1 Preferred shall
be entitled, voting as a separate class, to elect two (2) directors of the
Company at each annual election of directors. In the event the holders of the
Series A Preferred and Series A-1 Preferred hold less than 50% of the originally
issued shares of Series A Preferred and Series A-1 Preferred, but at least 30%
of such shares, the holders of the Series A Preferred and Series A-1 Preferred
shall be entitled, voting as a separate class, to elect one (1) director of the
Company at each annual election of directors. So long as the holders of the
Series B Preferred hold not less than fifty percent (50%) of the originally
issued shares of Series B Preferred, the holders of the Series B Preferred shall
be entitled, voting as a separate class, to elect one (1) director of the
Company at each annual election of directors. So long as the holders of the
Series D Preferred hold not less than (50%) of the originally issued shares of
Series D Preferred, the holders of the Series D Preferred shall be entitled,
voting as a separate class, to elect one (1) director of the Company at each
annual election of directors. The holders of shares of Common shall be entitled
to
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<PAGE>
elect one director of the Company at each annual election of directors. In the
case of any vacancy in the office of a director elected by the holders of the
Series A Preferred and Series A-1 Preferred, the remaining director solely
elected by that class may elect a successor to hold office for the unexpired
term of the director whose place shall be vacant. In the case of any vacancy in
the office of the director elected by the holders of the Series B Preferred or
the Common Stock, the holders of the then outstanding Series B Preferred or the
Common Stock (as the case may be) shall be entitled, voting as a separate class
either by written consent or at a special meeting, to elect a successor to hold
office for the unexpired term of the director whose respective place shall be
vacant. For purposes of this Section 6(b), the Series A Preferred, Series B
Preferred and Series D Preferred shall be deemed to include any "identical"
series of Preferred Stock created pursuant to Section 7 below, in addition to
the Series A-1 Preferred. Neither the holders of the Series C Preferred nor the
holders of the Series E Preferred shall have rights, voting as a separate class,
in the election of directors.
(c) General Election of Remaining Directors. Except as provided in
---------------------------------------
Section 6(b) above, the holders of Common Stock and the Preferred shall be
entitled to vote together in accordance with the requirements of Section 6(a)
with respect to the election of any other director or directors to the Board of
Directors.
7. Special Mandatory Conversion.
----------------------------
(a) If any holder of shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred, or Series E Preferred
entitled to exercise the preemptive right (the "Preemptive Right") as set forth
in Article III of the Shareholders Agreement with respect to any equity
financing of the Company which results in the reduction of the Conversion Price
of the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, or Series E Preferred (as the case may be) (the "Equity Financing")
and (i) the Company has fully complied in all respects with its obligations
pursuant to Article III of the Shareholders Agreement in respect thereof, and
(ii) the provisions of the Preemptive Right set forth in Article III of the
Shareholders Agreement have not been waived at the request of the Company by
such holder, if such holder (a "Non-Participating Holder") does not acquire in
full his Special Proportionate Percentage (as hereinafter defined) of the
Allocated Offered Securities (as hereinafter defined) offered to the holders of
the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, or Series E Preferred (as the case may be) in such Equity Financing
(a "Mandatory Offering"), then all of such holder's shares of Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, or Series
E Preferred (as the case may be) (in the event the Equity Financing results in
the reduction of the Series A, Series B, Series C, Series D, or Series E
Conversion Price) shall automatically and without further action on the part of
such holder be converted effective subject to and concurrently with consummation
of the Mandatory Offering (the "Mandatory Offering Date") as follows: each share
of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, or Series E Preferred held by such Non-Participating Holder shall be
converted into one share of a newly created series of Preferred Stock which such
series shall be identical in all respects to the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred, or Series E Preferred (as the
case may be), except that the Conversion Price of such series shall be fixed
immediately prior to the Mandatory Offering Date and shall not be adjusted
thereafter as provided in Section 4(d)(ii) or subject to the special mandatory
conversion provisions of this Section 7. Upon such conversion, the
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<PAGE>
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, or Series E Preferred (as the case may be) so converted shall be
canceled and not subject to reissuance. As used in this Section 7, the
following terms shall have the following respective meanings:
(1) "Allocated Offered Securities" shall mean, as to a holder of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred,
or Series E Preferred (as the case may be), that portion of the gross amount of
securities offered by the Company in the Equity Financing (the "Offered
Securities") which has expressly been allocated for purchase by the holders of
the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, or Series E Preferred (as the case may be) as a group, which
allocations have been expressly approved by the Board of Directors of the
Company, it being understood that for purposes of this Section 7(a) that
Allocated Offered Securities may represent an amount of Offered Securities that
is less (but in no event greater) than the amount of Offered Securities which
the Company is otherwise required to offer to the holders of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, or Series E
Preferred (as the case may be) pursuant to Article III of the Shareholders
Agreement; and
(2) "Special Proportionate Percentage" shall mean, as to each
holder of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, or Series E Preferred (as the case may be), that percentage figure
which expresses the ratio which (x) the number of shares of Common Stock issued
or issuable upon conversion of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred, or Series E Preferred (without regard to any
shares owned by affiliates of such holder) immediately prior to such Equity
Financing bears to (y) the aggregate number of shares of Common Stock of the
Company issued or issuable upon the conversion of the Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred, or Series E Preferred. For
purposes solely of the computation required for determination of the Special
Proportionate Percentage, the holders of outstanding Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred, or Series E Preferred (as
the case may be) shall be treated as having converted all such outstanding
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred,
or Series E Preferred into shares of Common at the rate at which such securities
are convertible into Common in effect at the time of such Equity Financing.
(b) The holder of any shares of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred, or Series E Preferred
converted pursuant to Section 7(a) hereof, shall deliver to the Company during
regular business hours at the office of any transfer agent of the Company for
the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, or Series E Preferred (as the case may be), or at such other place as
may be designated by the Company, the certificate or certificates for the shares
so converted, duly endorsed or assigned in blank or to the Company. As promptly
as practicable thereafter, the Company shall issue and deliver to such holder,
at the place designated by such holder, a certificate or certificates for the
number of full shares of the new series of Preferred Stock to which such holder
is entitled. The person in whose name the certificate for such new series of
Preferred Stock is to be issued shall be deemed to have become a stockholder of
record on the Mandatory Offering Date unless the transfer books of the Company
are closed on that date, in which event he shall be deemed to have become a
stockholder of record on the next succeeding date on which the transfer books
are open.
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<PAGE>
(c) In the event that at any time the special mandatory
conversion set forth in this Section 7 shall not be effective as to all shares
of the Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, or Series E Preferred (as the case may be) then outstanding, the
Board shall take all necessary actions to designate new series of Preferred
Stock (having such distinctive designations and number of shares as the Board
may by resolution fix) on each such subsequent occasion that (i) any Equity
Financing occurs and (ii) any holder of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred, or Series E Preferred (as the case may
be) does not acquire his full Special Proportionate Percentage of the Allocated
Offered Securities then so offered to the holders of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, or Series E
Preferred (as the case may be). Each share of such Non-Participating Holder's
shares of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred or Series E Preferred (as the case may be) shall be converted into one
share of such newly-created series of Preferred Stock concurrently with the
consummation of the subject Mandatory Offering. Such new series of Preferred
Stock shall be identical in all respects, except with respect to the respective
Conversion Prices then in effect, to the new series of Preferred Stock created
pursuant to the provisions of Section 7(a).
(d) Nothing in this Section 7 shall be construed to prevent any
holder of Series A Preferred, Series B Preferred, Series C Preferred, Series D
Preferred, or Series E Preferred from acquiring or disposing of shares of Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred, or
Series E Preferred from or to another person for the purpose of enabling a
holder to acquire in full his Special Proportionate Percentage of Allocated
Securities in a Mandatory Offering.
Article VI.
The Company is to have perpetual existence.
Article VII.
Elections of directors need not be by written ballot unless a stockholder
demands election by written ballot at the meeting and before voting begins or
unless the Bylaws of the Company shall so provide.
Article VIII.
The number of directors which constitute the whole Board of Directors of
the Company shall be designated in the Bylaws of the Company.
Article IX.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Bylaws of the Company.
Article X.
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<PAGE>
1. 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 Company
shall not be personally liable to the Company or its stockholders for monetary
damages for breach of fiduciary duty as a director.
2. The Company 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
Company or any predecessor of the Company, or serves or served at any other
enterprise as a director, officer or employee at the request of the Company or
any predecessor to the Company.
3. Neither any amendment nor repeal of this Article X, nor the adoption
of any provision of the Company's Certificate of Incorporation inconsistent with
this Article X, shall eliminate or reduce the effect of this Article X, in
respect of any matter occurring, or any action or proceeding accruing or arising
or that, but for this Article X, would accrue or arise, prior to such amendment,
repeal or adoption of an inconsistent provision.
Article XI.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Company may be kept
(subject to any provision contained in the statutes) outside of the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Company.
Article XII.
Vacancies created by the resignation of one or more members of the Board of
Directors and newly created directorships, created in accordance with the Bylaws
of this Company, may be filled by the vote of a majority, although less than a
quorum, of the directors then in office, or by a sole remaining director.
Article XIII.
Advance notice of new business and stockholder nominations for the election
of directors shall be given in the manner and to the extent provided in the
Bylaws of the Company.
Article XIV.
Stockholders shall be entitled to cumulative voting rights in the election
of directors as set forth in this Article XIV and the Bylaws of the Company, but
only until cumulative voting rights are not required under Section 2115 of the
California Corporations Code. Subject to such limitation, at all elections of
directors of the Company, each holder of stock or of any class or classes or of
a series or series thereof shall be entitled to as many votes as shall equal the
number of votes which (except for this provision as to cumulative voting) such
stockholder would be entitled to cast for the election of directors
-20-
<PAGE>
with respect to such stockholder's shares of stock multiplied by the number of
directors to be elected, and such stockholder may cast all of such votes for a
single director or may distribute them among the number of directors to be voted
for, or for any two or more of them as such stockholder may see fit. At such
time as cumulative voting rights are not required under Section 2115 of the
California Corporations Code, this Article XIV shall no longer be effective and
may be deleted herefrom upon any restatement of this Certificate of
Incorporation.
Article XV.
The Company reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this Restated Certificate of
Incorporation to be signed by Mary E. Coleman, its Chief Executive Officer,
effective as of ____________________, 1996.
AURUM SOFTWARE, INC.
By: _______________________________________
Mary E. Coleman
President and Chief Executive Officer
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<PAGE>
Exhibit 3.2
BYLAWS
OF
AURUM SOFTWARE, INC.
a Delaware Corporation
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C> <C>
ARTICLE I - CORPORATE OFFICES................................................ 1
1.1 REGISTERED OFFICE................................................. 1
1.2 OTHER OFFICES..................................................... 1
ARTICLE II - MEETINGS OF STOCKHOLDERS........................................ 1
2.1 PLACE OF MEETINGS................................................. 1
2.2 ANNUAL MEETING.................................................... 1
2.3 SPECIAL MEETING................................................... 1
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...................... 3
2.7 QUORUM............................................................ 3
2.8 ADJOURNED MEETING; NOTICE......................................... 4
2.9 VOTING............................................................ 4
2.10 WAIVER OF NOTICE.................................................. 4
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING........... 5
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS....... 5
2.13 PROXIES........................................................... 6
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE............................. 6
2.15 CONDUCT OF BUSINESS............................................... 6
ARTICLE III - DIRECTORS...................................................... 7
3.1 POWERS............................................................ 7
3.2 NUMBER............................................................ 7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS........... 7
3.4 RESIGNATION AND VACANCIES......................................... 7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE.......................... 8
3.6 REGULAR MEETINGS.................................................. 8
3.7 SPECIAL MEETINGS; NOTICE.......................................... 9
3.8 QUORUM............................................................ 9
3.9 WAIVER OF NOTICE.................................................. 9
3.10 ADJOURNED MEETING; NOTICE......................................... 9
3.11 CONDUCT OF BUSINESS............................................... 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................. 10
</TABLE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
(continued)
Page
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<S> <C> <C>
3.13 FEES AND COMPENSATION OF DIRECTORS................................ 10
3.14 REMOVAL OF DIRECTORS.............................................. 10
ARTICLE IV - COMMITTEES...................................................... 10
4.1 COMMITTEES OF DIRECTORS........................................... 10
4.2 COMMITTEE MINUTES................................................. 11
4.3 MEETINGS AND ACTION OF COMMITTEES................................. 11
ARTICLE V - OFFICERS......................................................... 12
5.1 OFFICERS.......................................................... 12
5.2 APPOINTMENT OF OFFICERS........................................... 12
5.3 REMOVAL AND RESIGNATION OF OFFICERS............................... 12
5.4 CHAIRMAN OF THE BOARD............................................. 12
5.5 CHIEF EXECUTIVE OFFICER........................................... 13
5.6 PRESIDENT......................................................... 13
5.7 VICE PRESIDENT.................................................... 13
5.8 SECRETARY......................................................... 13
5.9 CHIEF FINANCIAL OFFICER........................................... 14
5.10 ASSISTANT SECRETARY............................................... 14
5.11 AUTHORITY AND DUTIES OF OFFICERS.................................. 15
ARTICLE VI - INDEMNITY....................................................... 15
6.1 THIRD PARTY ACTIONS............................................... 15
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION..................... 15
6.3 SUCCESSFUL DEFENSE................................................ 16
6.4 DETERMINATION OF CONDUCT.......................................... 16
6.5 PAYMENT OF EXPENSES IN ADVANCE.................................... 16
6.6 INDEMNITY NOT EXCLUSIVE........................................... 16
6.7 INSURANCE INDEMNIFICATION......................................... 16
6.8 THE CORPORATION................................................... 17
6.9 EMPLOYEE BENEFIT PLANS............................................ 17
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES....... 17
</TABLE>
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
(continued)
Page
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<S> <C> <C>
ARTICLE VII - RECORDS AND REPORTS............................................ 17
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................. 17
7.2 INSPECTION BY DIRECTORS........................................... 18
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.................... 18
ARTICLE VIII - GENERAL MATTERS............................................... 18
8.1 CHECKS............................................................ 18
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.................. 19
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES............................ 19
8.4 SPECIAL DESIGNATION ON CERTIFICATES............................... 19
8.5 LOST CERTIFICATES................................................. 20
8.6 CONSTRUCTION; DEFINITIONS......................................... 20
8.7 DIVIDENDS......................................................... 20
8.8 FISCAL YEAR....................................................... 20
8.9 SEAL.............................................................. 21
8.10 TRANSFER OF STOCK................................................. 21
8.11 STOCK TRANSFER AGREEMENTS......................................... 21
8.12 REGISTERED STOCKHOLDERS........................................... 21
ARTICLE IX - AMENDMENTS...................................................... 21
ARTICLE X - DISSOLUTION...................................................... 22
ARTICLE XI - CUSTODIAN....................................................... 22
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES....................... 22
11.2 DUTIES OF CUSTODIAN............................................... 23
ARTICLE XII - LOANS TO OFFICERS.............................................. 23
</TABLE>
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<PAGE>
BYLAWS
------
OF
--
AURUM SOFTWARE, INC.
--------------------
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 REGISTERED OFFICE
-----------------
The registered office of the Corporation shall be 1209 Orange Street, in
the City of Wilmington, County of New Castle, State of Delaware, 19801. The
name of the registered agent of the Corporation at such location is The
Corporation Trust Company.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish other offices at any place
or places where the Corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the Corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of stockholders shall be held each year on a date and at
a time designated by the board of directors. At the meeting, directors shall be
elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
---------------
A special meeting of the stockholders may be called at any time by the (i)
board of directors, (ii) the chairman of the board, (iii) the president, (iv)
the chief executive officer or (v) one or more
<PAGE>
stockholders holding shares in the aggregate entitled to cast not less than ten
percent (10%) of the votes at that meeting.
If a special meeting is called by any person other than the board of
directors, the request shall be in writing, specifying the time of such meeting
and the general nature of the business proposed to be transacted, and shall be
delivered personally or sent by registered mail or by telegraphic or other
facsimile transmission to the chairman of the board, the president, any vice
president, or the secretary of the corporation. No business may be transacted
at such special meeting otherwise than specified in such notice. The officer
receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5 of this Article II, that a meeting will be held at the time requested by
the person or persons who called the meeting, not less than thirty-five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is
not given within twenty (20) days after the receipt of the request, the person
or persons requesting the meeting may give the notice. Nothing contained in
this paragraph of this Section 3 shall be construed as limiting, fixing, or
affecting the time when a meeting of stockholders called by action of the board
of directors may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
--------------------------------
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.6 of these Bylaws not less
than 10 nor more than 60 days before the date of the meeting to each stockholder
entitled to vote at such meeting. The notice shall specify the place, date and
hour of the meeting, and, in the case of a special meeting, the purpose or
purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
---------------------------------------------------------------
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder, such stockholder must have given timely notice and in proper form
of his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the Corporation not less than 90 days prior to the meeting;
provided, however, that in the event that less than 100 days notice or prior
public disclosure of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be so received not later than the
close of business on the tenth day following the day on which such notice of the
date of the meeting was mailed or such public disclosure was made. To be in
proper form, a stockholder's notice to the secretary shall set forth:
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<PAGE>
(i) the name and address of the stockholder who intends to make the
nominations, propose the business, and, as the case may be, the name and
address of the person or persons to be nominated or the nature of the
business to be proposed;
(ii) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and, if
applicable, intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice or introduce the
business specified in the notice;
(iii) if applicable, 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
nomination or nominations are to be made by the stockholder;
(iv) such other information regarding each nominee or each matter of
business to be proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or intended to be
proposed by the board of directors; and
(v) if applicable, the consent of each nominee to serve as director of
the Corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of any
person or the proposal of any business not made in compliance with the foregoing
procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the Corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 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.
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
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time
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<PAGE>
to time, without notice other than announcement at the meeting, until a quorum
is present or represented. At such adjourned meeting at which a quorum is
present or represented, any business may be transacted that might have been
transacted at the meeting as originally noticed.
When a quorum is present or represented 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 provisions of the statutes or
of the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
2.8 ADJOURNED MEETING; NOTICE
-------------------------
When a meeting is adjourned to another time or place, unless these Bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the Corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than 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 Sections 2.12 and 2.14 of these
Bylaws, subject to the provisions of Sections 217 and 218 of the General
Corporation Law of Delaware (relating to voting rights of fiduciaries, pledgors
and joint owners of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.10 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
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<PAGE>
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Except as otherwise provided in this Section 2.11, any action required by
this chapter to be taken at any annual or special meeting of stockholders of a
Corporation, or any action that may be taken at any annual or special meeting of
such stockholders, may be taken without a meeting, without prior notice, and
without a vote if a consent in writing, setting forth the action so taken, is
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those stockholders who
have not consented in writing. If the action which is consented to is such as
would have required the filing of a certificate under any section of the General
Corporation Law of Delaware if such action had been voted on by stockholders at
a meeting thereof, then the certificate filed under such section shall state, in
lieu of any statement required by such section concerning any vote of
stockholders, that written notice and written consent have been given as
provided in Section 228 of the General Corporation Law of Delaware.
Notwithstanding the foregoing, effective upon the listing of the Common
Stock of the Corporation on the Nasdaq Stock Market and the registration of any
class of securities of the Corporation pursuant to the requirements of the
Securities Exchange Act of 1934, as amended, the stockholders of the Corporation
may not take action by written consent without a meeting but must take any such
actions at a duly called annual or special meeting.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to express consent to corpo rate action in writing without a
meeting, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than 60 nor less than 10 days before the date of such meeting, nor
more than 60 days prior to any other action.
If the board of directors does not so fix a record date, the fixing of such
record date shall be governed by the provisions of Section 213 of the General
Corporation Law of Delaware.
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.
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2.13 PROXIES
-------
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action in writing without a meeting may
authorize another person or persons to act for 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 3 years from its date, unless the proxy
provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
-------------------------------------
The officer who has charge of the stock ledger of a Corporation shall
prepare and make, at least 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 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 stock ledger 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 stock holders 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 CONDUCT OF BUSINESS
-------------------
Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his absence by the president, or in his absence by a vice
president, or in the absence of the foregoing persons by a chairman designated
by the board of directors, or in the absence of such designation by a chairman
chosen at the meeting. The secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting. The chairman of any meeting of 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 conduct of business.
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ARTICLE III
DIRECTORS
---------
3.1 POWERS
------
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these Bylaws relating to
action required to be approved by the 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
------
The authorized number of directors of the Corporation shall be eight (8).
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
-------------------------------------------------------
Except as provided in Section 3.4 of these Bylaws, at each annual meeting
of stockholders, directors of the Corporation shall be elected to hold office
until the expiration of the term for which they are elected, and until their
successors have been duly elected and qualified; except that if any such
election shall not be so held, such election shall take place at a stockholders'
meeting called and held in accordance with the Delaware General Corporation Law.
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 at any time upon written notice to the Corporation.
Stockholders may remove directors with or without cause. Any vacancy occurring
in the board of directors with or without cause may be filled by a majority of
the remaining members of the board of directors, although such majority is less
than a quorum, or by a plurality of the votes cast at a meeting of stockholders,
and each director so elected shall hold office until the expiration of the term
of office of the director whom he has replaced.
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
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right to vote as a single class may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole
remaining director.
(ii) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of
the certificate of incorporation, vacancies and newly created directorships
of such class or classes or series may be filled by a majority of the
directors elected by such class or classes or series thereof then in
office, or by a sole remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
Corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may 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 10% of the total number of the shares at the time outstanding having the
right to vote for such directors, summarily order an election to be held to fill
any such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office as aforesaid, which election shall be
governed by the provisions of Section 211 of the General Corporation Law of
Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
The board of directors of the Corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
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<PAGE>
3.7 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two 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 4 days before the time of
the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least 48 hours before the time of the holding of the
meeting. Any oral notice given personally or by telephone may be communicated
either to the director or to a person at the office of the director who the
person giving the notice has reason to believe will promptly communicate it to
the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
Corporation.
3.8 QUORUM
------
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation.
3.9 WAIVER OF NOTICE
----------------
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 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.
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<PAGE>
3.11 CONDUCT OF BUSINESS
-------------------
Meetings of the board of directors shall be presided over by the chairman
of the board, if any, or in his absence by the chief executive officer, or in
their absence by a chairman chosen at the meeting. The secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. The chairman of any
meeting shall determine the order of business and the procedures at the meeting.
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.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Unless otherwise restricted by the certificate of incorporation or these
Bylaws, the board of directors shall have the authority to fix the compensation
of directors. The directors may be paid their expenses, if any, of attendance
at each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.14 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. If at any time a class or series
of shares is entitled to elect one or more directors, the provisions of this
Article 3.14 shall apply to the vote of that class or series and not to the vote
of the outstanding shares as a whole.
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,
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<PAGE>
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 3.6 (regular meetings),
Section 3.7 (special meetings and notice), Section 3.8 (quorum), Section 3.9
(waiver of notice), Section 3.10 (adjournment and notice of adjournment),
Section 3.11 (conduct of business) and 3.12 (action without a meeting), with
such changes in the context of those Bylaws as are necessary to substitute the
committee and its members for the board of directors and its members; provided,
however, that the time of regular meetings of committees may 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.
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ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the Corporation shall be a chief executive officer, 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, a president, a chief operating officer, one or more
executive, senior or assistant vice presidents, assistant secretaries and any
such other officers as may be appointed in accordance with the provisions of
Section 5.2 of these Bylaws. Any number of offices may be held by the same
person.
5.2 APPOINTMENT OF OFFICERS
-----------------------
Except as otherwise provided in this Section 5.2, the officers of the
Corporation shall be appointed by the board of directors, subject to the rights,
if any, of an officer under any contract of employment. The board of directors
may appoint, or empower an officer to appoint, such officers and agents of the
business as the Corporation may require (whether or not such officer or agent is
described in this Article V), 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. Any vacancy
occurring in any office of the Corporation shall be filled by the board of
directors or may be filled by the officer, if any, who appointed such officer.
5.3 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 or, in the case of an officer appointed by
another officer, by such other officer.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
5.4 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
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no chief executive officer, 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 5.5 of these Bylaws.
5.5 CHIEF EXECUTIVE OFFICER
-----------------------
The Chief Executive Officer of the Corporation 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 or she shall
preside at all meetings of the stockholders and, in the absence or nonexistence
of a Chairman of the Board at all meetings of the Board of Directors. He or she
shall have the general powers and duties of management usually vested in the
chief executive officer of a Corporation, including general supervision,
direction and control of the business and supervision of other officers of the
Corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
The Chief Executive Officer shall, without limitation, have the authority
to execute bonds, mortgages and other contracts requiring a seal, under the seal
of the Corporation, except where required or permitted by law to be otherwise
signed and executed and except where the signing and execution thereof shall be
expressly delegated by the Board of Directors to some other officer or agent of
the Corporation.
5.6 PRESIDENT
---------
Subject to such supervisory powers as may be given by these Bylaws or the
Board of Directors to the Chairman of the Board or the Chief Executive Officer,
if there be such officers, the president shall have general supervision,
direction and control of the business and supervision of other officers of the
Corporation, and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws. In the event a Chief Executive Officer
shall not be appointed, the President shall have the duties of such office.
5.7 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 chief executive officer and when so acting shall have all the
powers of, and be subject to all the restrictions upon, the chief executive
officer. 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 chief executive officer or the chairman of
the board.
5.8 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the Corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show
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the time and place of each meeting, whether regular or special (and, if special,
how authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the Corporation or at the office of the Corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these Bylaws. 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.
5.9 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
chief executive officer and directors, whenever they request it, an account of
all of his transactions as treasurer 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.
5.10 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.
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<PAGE>
5.11 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
---------
6.1 THIRD PARTY ACTIONS.
-------------------
The Corporation shall 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 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 expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
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 conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner which he
reasonably believed to be in or not opposed to the best interest of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
6.2 ACTIONS BY OR IN THE RIGHT OF THE CORPORATION.
---------------------------------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
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 expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
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6.3 SUCCESSFUL DEFENSE.
------------------
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 6.1 and 6.2, or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
6.4 DETERMINATION OF CONDUCT.
------------------------
Any indemnification under Sections 6.1 and 6.2 (unless ordered by a court)
shall be made by the Corporation only as authorized in the specific case upon a
determination that the indemnification of the director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Sections 6.1 and 6.2. Such determination shall be made
(1) by the board of Directors or the Executive Committee by a majority vote of a
quorum consisting of directors who were not parties to such action, suit or
proceeding, or (2) or if such quorum is not obtainable or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (3) by the stockholders.
6.5 PAYMENT OF EXPENSES IN ADVANCE.
------------------------------
Expenses incurred in defending a civil or criminal action, suit or
proceeding shall be paid by the Corporation in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of the director, officer, employee or agent to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article VI.
6.6 INDEMNITY NOT EXCLUSIVE.
-----------------------
The indemnification and advancement of expenses provided or granted
pursuant to the other subsections of this section shall not be deemed exclusive
of any other rights to which those seeking indemnification or advancement of
expenses may be entitled under any by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another while holding such office.
6.7 INSURANCE INDEMNIFICATION.
-------------------------
The Corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and incurred by him in any such capacity, or arising out of his status as such,
whether or not the Corporation would have the power to indemnify him against
such liability under the provisions of this Article VI.
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6.8 THE CORPORATION.
---------------
For purposes of this Article VI, references to "the Corporation" shall
include, in addition to the resulting Corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, and employees or agents, so that
any person who is was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
and subject to the provisions of this Article VI (including, without limitation
the provisions of Section 6.4) with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
6.9 EMPLOYEE BENEFIT PLANS.
----------------------
For purposes of this Article VI, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably deemed to have acted in a manner "not opposed to the best interests
of the Corporation" as referred to in this Article VI.
6.10 CONTINUATION OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES.
-----------------------------------------------------------
The indemnification and advanced of expenses provided by, or granted
pursuant to, this Article VI shall, unless otherwise provided 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
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
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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 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the chief executive officer, 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
chief executive officer 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 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.
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<PAGE>
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 treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
Corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has 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 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
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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 cancelled 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 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a Corporation and a natural
person.
8.7 DIVIDENDS
---------
The directors of the Corporation, subject to any restrictions contained in
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.
8.8 FISCAL YEAR
-----------
The fiscal year of the Corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
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<PAGE>
8.9 SEAL
----
The Corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
8.10 TRANSFER OF STOCK
-----------------
Upon surrender to the Corporation or the transfer agent of the Corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
Corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
-------------------------
The Corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
Corporation to restrict the transfer of shares of stock of the Corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
-----------------------
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
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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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.
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:
(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.
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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.
ARTICLE XII
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
subsidiaries, including any officer or employee who is a Director of the
Corporation or its subsidiaries, whenever, in the judgment of the Board of
Directors, such loan, guarantee or assistance may reasonably be expected to
benefit the Corporation. The loan, guarantee 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 Bylaw shall be deemed to deny, limit
or restrict the powers of guaranty or warranty of the Corporation at common law
or under any statute.
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<PAGE>
EXHIBIT 10.1
AURUM SOFTWARE, INC.
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of
_______________, 1996, by and between Aurum Software, Inc., a Delaware
corporation (the "Company"), and 1 ("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
advancement of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and the Indemnitee and other
directors, officers, employees, agents and fiduciaries of the Company may not be
willing to continue to serve in such capacities without additional protection;
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 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
<PAGE>
represented by the Company's then outstanding Voting Securities, (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
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 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 Aurum
Software, Inc., any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger to which Aurum Software, Inc.
(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) "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 withheld) of any Claim regarding any
Indemnifiable Event 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.
(e) "Expense Advance" shall mean an advance payment of Expenses to
Indemnitee pursuant to Section 3(a).
(f) "Indemnifiable 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
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<PAGE>
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.
(g) "Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Section 2(c) 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 any appropriate person or body
consisting of a member or members of the Company's Board of Directors or any
other person or body appointed by the Board of Directors who is not a party to
the particular Claim for which Indemnitee is seeking indemnification, or
Independent Legal Counsel.
(j) "Voting Securities" shall mean any securities of the Company that
vote generally in the election of directors.
2. Indemnification.
---------------
(a) Indemnification of Expenses. The Company shall indemnify
---------------------------
Indemnitee 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 by reason of (or
arising in part out of) any Indemnifiable Event against Expenses, including all
interest, assessments and other charges paid or payable in connection with or in
respect of such Expenses. Such payment of Expenses shall be made by the Company
as soon as practicable but in any event no later than five (5) business days
after written demand by Indemnitee therefor is presented to the Company.
(b) Reviewing Party. Notwithstanding the foregoing, (i) the
---------------
obligations of the Company under Section 2(a) shall be subject to the condition
that the Reviewing Party shall not have determined (in a written opinion, in any
case in which the Independent Legal Counsel referred to in Section 2(c) hereof
is involved) that Indemnitee would not be permitted to be indemnified under
applicable law, and (ii) the obligation of the Company to make an Expense
Advance shall be subject to the condition that, if, when and to the extent that
the Reviewing Party determines that Indemnitee would
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<PAGE>
not be permitted to be so indemnified under applicable law, the Company shall be
entitled to be reimbursed by Indemnitee (who hereby agrees to reimburse the
Company) for all such amounts theretofore paid; provided, however, that if
-------- -------
Indemnitee has commenced or thereafter commences legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be indemnified under applicable law
shall not be binding and Indemnitee shall not be required to reimburse the
Company for any Expense Advance 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
Expense Advance shall be unsecured and no interest shall be charged thereon. If
there has not been a Change in Control, the 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), the Reviewing Party shall be the Independent Legal Counsel. If there
has been no determination by the Reviewing Party or if the Reviewing Party
determines that Indemnitee substantively would not be permitted to be
indemnified 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 the Reviewing Party or any aspect thereof,
including the legal or factual bases therefor, and the Company hereby consents
to service of process and to appear in any such proceeding. Absent such
litigation, any determination by the Reviewing Party shall be conclusive and
binding on the Company and Indemnitee.
(c) Change in Control. The Company agrees that if there is a Change
-----------------
in Control of the Company (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), then with respect to all matters
thereafter arising concerning the rights of Indemnitee to payments of Expenses
and Expense Advances under this Agreement or any other agreement or under the
Company's Certificate of Incorporation or Bylaws as now or hereafter in effect,
Independent Legal Counsel, if desired by Indemnitee, shall be 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 permitted to be indemnified 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 written statement setting forth in detail a
reasonable objection to such Independent Legal Counsel representing other
Indemnitees.
(d) 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
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<PAGE>
Claim regarding any Indemnifiable Event, Indemnitee shall be indemnified against
all Expenses incurred by Indemnitee in connection therewith.
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all Expenses
-----------------------
incurred by Indemnitee. The advances to be made hereunder shall be paid by the
Company to Indemnitee as soon as practicable but in any event no later than five
(5) business days after written demand by Indemnitee therefor to the Company.
Expenses incurred in defending any proceeding may be advanced by the Company
prior to the final disposition of the proceeding upon receipt of an undertaking
by or on behalf of Indemnitee to repay the Expenses incurred, if it shall be
determined ultimately that Indemnitee is not entitled to be indemnified.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to Indemnitee's right to be indemnified 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.
(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 applicable law. In
addition, neither the failure of the 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 the
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
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.
(d) Notice to Insurers. If, at the time of the receipt by the Company
------------------
of a notice of a Claim pursuant to Section 3(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 pay the Expenses of any Claim the Company, if appropriate, shall be
entitled to assume the defense of such Claim with counsel approved by Indemnitee
(not to be unreasonably withheld) upon the delivery to
-5-
<PAGE>
Indemnitee of written notice of the Company's election so to do. 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 of counsel subsequently incurred by Indemnitee with
respect to the same Claim; provided 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 at the expense of the Company.
4. 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 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 9(a) hereof.
(b) Nonexclusivity. The indemnification 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 provided under this
Agreement shall continue as to Indemnitee for any action taken or not taken
while serving in an indemnified capacity even though Indemnitee may have ceased
to serve in such capacity.
5. 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, bylaw or otherwise) of the amounts otherwise indemnifiable
hereunder.
6. 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.
7. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge
---------------------
that in certain instances, federal law or applicable public policy may prohibit
the Company from indemnifying its direc-
-6-
<PAGE>
tors, 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.
8. 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 Company's key employees, agents or fiduciaries, if Indemnitee
is not an officer or director but is a key employee, agent or fiduciary.
9. 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 acts,
----------------------------
omissions or transactions from which Indemnitee may not be relieved of liability
under applicable law.
(b) Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to Indemnitee with respect to Claims initiated or brought voluntarily by
Indemnitee and not by way of defense, 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 Indemnifiable 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,
regardless of whether Indemnitee ultimately is determined to be entitled to such
indemnification, advance expense payment 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 proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good 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.
10. Period of Limitations. No legal action shall be brought and no cause
---------------------
of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's estate, spouse, heirs, executors or personal or legal
representatives after the expiration of two years from the date of accrual of
such cause of action, and any claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such two-year period;
-7-
<PAGE>
provided, however, that if any shorter period of limitations is otherwise
- -------- -------
applicable to any such cause of action, such shorter period shall govern.
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. Attorneys' Fees. 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 paid all Expenses incurred by
Indemnitee with respect to such action, regardless of whether Indemnitee is
ultimately successful in such action, and shall be entitled to the advancement
of Expenses with respect to such action, unless as a part of such action a court
of competent jurisdiction over such action determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous. 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 paid all Expenses incurred by
Indemnitee in defense of such action (including costs and expenses incurred with
respect to Indemnitee's counterclaims and cross-claims made in such action), and
shall be entitled to the advancement of Expenses with respect to such action,
unless as a part of such action a court having jurisdiction over such action
determines that each of Indemnitee's material defenses to such action were made
in bad faith or were frivolous.
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.
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
-8-
<PAGE>
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 limitations, 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 shall be governed by and its provisions
-------------
construed and enforced in accordance with the laws of the State of Delaware as
applied to contracts between Delaware residents entered into and to be performed
entirely within the State of Delaware.
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.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Indemnification
Agreement as of the date first above written.
AURUM SOFTWARE, INC.
By:
--------------------------------
Title:
-----------------------------
Address: 3385 Scott Boulevard
Santa Clara, CA 95054
(408) 986-8100
AGREED TO AND ACCEPTED
INDEMNITEE:
----------------------------------------
(signature)
----------------------------------------
(name of Indemnitee)
----------------------------------------
----------------------------------------
----------------------------------------
(address)
-10-
<PAGE>
AURUM SOFTWARE, INC.
AMENDED 1995 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock 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 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 and the regulations promulgated thereunder. Stock Purchase Rights may
also be granted under the Plan.
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 a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Aurum Software, Inc., a California corporation.
-------
(g) "Consultant" means any person who is engaged by the Company or
----------
any Parent or Subsidiary to render consulting or advisory 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 that the
----------------------------------------------
employment or consulting relationship with the Company or any Parent or
Subsidiary is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted 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. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
90 days unless reemployment upon expiration of such leave is guaranteed by
statute or contract, including Company policies. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
on 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.
<PAGE>
(i) "Director" means a member of the Board of Directors of the
--------
Company.
(j) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a Director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "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 National
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 for the last market trading day prior to the
time of determination and 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 Stock Market Out
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
on the last market trading day prior to the day of determination; 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.
(m) "Incentive Stock Option" means an Option intended to qualify as
----------------------
an incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(o) "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.
(p) "Option" means a stock option granted pursuant to the Plan.
------
(q) "Optioned Stock" means the Common Stock subject to an Option or a
--------------
Stock Purchase Right.
(r) "Optionee" means an Employee or Consultant who receives an Option
--------
or Stock Purchase Right.
-2-
<PAGE>
(s) "Parent". means a "parent corporation," whether now or hereafter
existing as defined in Section 424(e) of the Code.
(t) "Plan" means this 1995 Stock Plan.
----
(u) "Restricted Stock" means shares of Common Stock acquired pursuant
----------------
to a grant of a Stock Purchase Right under Section 11 below.
(v) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 below.
(w) "Stock Purchase Right" means a right to purchase Common Stock
--------------------
pursuant to Section 11 below.
(x) "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 12 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be subject to option
and sold under the Plan is 2,105,695 Shares (after adjustment for the one-for-
four reverse split of the Common Stock effected in September 1996). The Shares
may be authorized but unissued or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable
without having been exercised in full or is surrendered pursuant to an Option
Exchange Program, the unpurchased Shares that were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). However, Shares that have actually been issued under the Plan,
upon exercise of either an Option or Stock Purchase Right, shall not be returned
to the Plan and shall not become available for future distribution under the
Plan, except that if Shares of Restricted Stock are repurchased by the Company
at their original purchase price, and the original purchaser of such Shares did
not receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
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 Securities
------------------------------
and Exchange Commission Rule 16b-3 promulgated under the Exchange Act ("Rule
16b-3"), the Plan
-3-
<PAGE>
may be administered by different committees appointed by the Board of Directors
with respect to Directors, Officers, and Employees.
(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 Plan shall be administered by the
Board or a committee of two or more "non-employee directors" within the meaning
of 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 the legal requirements relating to the
administration of stock option plans, of applicable federal and state corporate
and securities laws, of the Code, and of any applicable stock exchange.
(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 upon which the Common
Stock is listed, 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(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of Shares to be covered by each such
award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under subsection 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 has declined since the date the Option was granted;
-4-
<PAGE>
(ix) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights;
(x) to provide for the early exercise of Options for the
purchase of unvested Shares, subject to such terms and conditions as the
Administrator may determine; and
(xi) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Optionees and any other holders of any Options or Stock Purchase
Rights.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options and Stock Purchase Rights 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 or
Stock Purchase Right may, if otherwise eligible, be granted additional Options
or Stock Purchase Rights.
(b) 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 Shares subject to an Optionee's Incentive Stock Options granted by the
Company or any Parent or Subsidiary, that become exercisable for the first time
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. The
Fair Market Value of the Shares shall be determined as of the time the Option
with respect to such Shares is granted.
(c) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon any Optionee any right with respect to continuation of his or her
employment or consulting relationship with the Company, nor shall it interfere
in any way with his or her right or the Company's right to terminate his or her
employment or consulting relationship at any time, with or without cause.
(d) Upon the Company or a successor corporation issuing any class of
common equity securities required to be registered under Section 12 of the
Exchange Act or upon the Plan being assumed by a corporation having a class of
common equity securities required to be registered under Section 12 of the
Exchange Act, the following limitations shall apply to grants of Options and
Stock Purchase Rights to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options and Stock Purchase Rights to purchase more than 1,000,000
Shares (after adjustment for the one-for-four reverse split of the Common Stock
effected in September 1996).
-5-
<PAGE>
(ii) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as described in
Section 12.
(iii) If an Option or Stock Purchase Right is canceled in the same
fiscal year of the Company in which it was granted (other than in connection
with a transaction described in Section 12), the canceled Option shall be
counted against the limit set forth in Section 5(d)(i). For this purpose, if the
exercise price of an Option is reduced, such reduction will be treated as a
cancellation of the Option and the grant of a new Option.
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
shareholders of the Company, as 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. 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 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 upon
exercise of an Option shall be such price as is determined by the Administrator
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of
such Option, 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 other 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
(A) granted to a person who, at the time of grant of such
Option, 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 the grant.
-6-
<PAGE>
(B) granted to any other 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). Such consideration may consist 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 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) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
a 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, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider whether acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. 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, [but in no case at a rate of less than 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 full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) hereof. 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 stock certificate
evidencing such Shares, no right to vote, receive dividends or any other rights
as a shareholder shall exist with respect to the Optioned Stock, notwithstanding
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 shall 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 12 hereof.
___________________
/*/ The bracketed provision shall terminate at such time as the Common
Stock of the Company is listed as a Nasdaq National Market Security.
-7-
<PAGE>
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which 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. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (but not in the event of an Optionee's change of status from Employee
to Consultant (in which case an Employee's Incentive Stock Option shall
automatically convert to a Nonstatutory Stock Option on the ninety-first (91st)
day following such change of status) or from Consultant to Employee), such
Optionee may, but only within such period of time as is determined by the
Administrator, of at least thirty (30) days, with such determination in the case
of an Incentive Stock Option 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 the Optionee was not entitled to exercise the
Option at the date of such termination, or if the Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her disability, the Optionee may, but only within twelve (12) months from the
date of such termination (and 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.
If such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall automatically cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option on
the day three months and one day following such termination. To the extent that
the Optionee was not entitled to exercise the Option at the date of termination,
or if the Optionee does not exercise such Option to the extent so entitled
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. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant) by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent that the Optionee was entitled to exercise the Option on the date of
death. If, at the time of death, the Optionee was not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable portion of the
Option shall immediately revert to the Plan. If, after the Optionee's death,
the Optionee's estate or a person who acquires the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) 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.
-8-
<PAGE>
10. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, Options and Stock Purchase Rights 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.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued either
------------------
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions, and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed thirty (30) days from the date
upon which the Administrator makes the determination to grant the Stock Purchase
Right. The offer shall be accepted by execution of a Restricted Stock purchase
agreement in the form determined by the Administrator. Shares purchased pursuant
to the grant of a Stock Purchase Right shall be referred to herein as
"Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines
-----------------
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, [but in no case at a rate of less than 20% per year
over five years from the date of purchase.]/*/
(c) Other Provisions. The Restricted Stock purchase agreement shall
----------------
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have rights equivalent to those of a shareholder
and shall be a shareholder when his or her purchase is entered upon the records
of the duly authorized transfer agent of the Company. No adjustment shall be
made for a dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in Section 12 of
the Plan.
__________________
/*/ The bracketed provision shall terminate at such time as the Common
Stock of the Company is listed as a Nasdaq National Market Security.
-9-
<PAGE>
12. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, 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. The 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 or Stock Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator 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 or Stock Purchase Right shall
terminate immediately prior to the consummation of such proposed action.
(c) Merger. In the event of a merger of the Company with or into
------
another corporation or the sale of all or substantially all of the assets of the
Company, each outstanding Option or Stock Purchase Right 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. [If, in such event an
Option or Stock Purchase Right is not assumed or substituted, the Option or
Stock Purchase Right shall terminate as of the date of the closing of the
merger.]/*/ For the purposes of this paragraph, the Option or Stock Purchase
Right shall be considered assumed if, following the merger or asset
_______________
/*/ At such time as the Common Stock of the Company is listed as a Nasdaq
National Market security, the bracketed provision shall be superseded
and replaced with the following: "In the event the successor
corporation refuses to assume or substitute for the Option, the Board
shall have the discretion either (i) to permit each Optionee to
exercise the Option as to all of the Optioned Stock, including Shares
as to which it would not otherwise be exercisable or (ii) to terminate
the Option with respect to unvested Shares. If an Option is
exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the Optionee that the
Option shall be fully 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."
-10-
<PAGE>
sale, the Option or Stock Purchase Right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or Stock
Purchase Right immediately prior to the merger, the consideration (whether
stock, cash, or other securities or property) received in the merger or asset
sale by holders of Common Stock for each Share held on the effective date of the
transaction (and if the holders are offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger 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 or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, 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 asset sale.
13. Time of Granting Options and Stock Purchase Rights. The date of grant
--------------------------------------------------
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option or Stock Purchase Right is so granted within a reasonable time
after the date of such grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options or Stock Purchase Rights
already granted, and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee and the Administrator, 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 or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right 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 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 or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any
-11-
<PAGE>
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 relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
shall 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 and Stock Purchase Rights shall be evidenced by
----------
written agreements in such form as the Administrator shall approve from time to
time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder 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.
19. Information to Optionees and Purchasers. The Company shall provide to
---------------------------------------
each Optionee and to each individual who acquires Shares pursuant to the Plan,
not less frequently than annually during the period such Optionee or purchaser
has one or more Options or Stock Purchase Rights outstanding, and, in the case
of an individual who acquires Shares pursuant to the Plan, during the period
such individual owns such Shares, copies of annual financial statements. The
Company shall not be required to provide such statements to key employees whose
duties in connection with the Company assure their access to equivalent
information.
-12-
<PAGE>
AURUM SOFTWARE, INC.
1995 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Stock Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
DEAR: FIELD(1)
You have been granted an option to purchase Common Stock of Aurum Software,
Inc. (the "Company"), subject to the terms and conditions of the Plan and this
Stock Option Agreement, as follows:
Date of Grant FIELD(2)
Vesting Commencement Date FIELD(3)
Exercise Price per Share FIELD(4)
Total Number of Shares Granted FIELD(5)
Total Exercise Price $FIELD(6)
Type of Option: ___________ Incentive Stock Option
___________ Nonstatutory Stock Option
Term/Expiration Date: FIELD(7)
Exercise and Vesting Schedule:
- -----------------------------
This Option is exercisable immediately, in whole or in part, conditioned
upon Optionee's entering into a Restricted Stock Purchase Agreement with respect
to any unvested Option Shares. The Shares subject to this Option shall vest
and/or be released from the Company's repurchase option, as set forth in the
Restricted Stock Purchase Agreement, according to the following schedule:
<PAGE>
25% of the Shares subject to the Option shall vest one year after the
Vesting Commencement Date, and 1/48th of the Shares subject to the Option shall
vest each month thereafter, so that all of the Shares shall be vested 48 months
after the Vesting Commencement Date.
Termination Period:
------------------
This Option may be exercised, to the extent vested, for three months after
termination of Optionee's employment or consulting relationship with the
Company, or such longer period as may be applicable upon death or disability of
Optionee as provided in the Plan, but in no event later than the Term/Expiration
Date as provided above. In the event of the Optionee's change in status from
Employee to Consultant or Consultant to Employee, the Option Agreement shall
remain in effect.
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 Stock Option Agreement and
1995 Stock 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, the Agreement, 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, the Agreement or this Option. Optionee further agrees to notify
the Company upon any change in the residence address indicated below.
OPTIONEE: COMPANY:
___________________________ By:_________________________
FIELD(1)
Title:______________________
Residence Address:
___________________________ 3385 Scott Boulevard
___________________________ Santa Clara, CA 95054
___________________________
-2-
<PAGE>
AURUM SOFTWARE, INC.
1995 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Aurum Software,
Inc. 1995 Stock Plan (the "Plan") shall have the same defined meanings in this
Stock Option Agreement.
I. AGREEMENT
---------
1. Grant of Option. Aurum Software, Inc., a California corporation (the
---------------
"Company"), hereby grants to the Optionee (the "Optionee") named in the Notice
of Stock Option Grant (the "Notice of Grant"), an option (the "Option") to
purchase the total number of shares of Common Stock (the "Shares") 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, definitions and provisions of
the Plan, which is incorporated herein by reference. Subject to Section 14(b)
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 ISO as defined in Section 422
of the Code. However, if this Option is intended to be an ISO, 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").
2. Exercise of Option. This Option shall be exercisable during its term
------------------
in accordance with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) Subject to subsections 2(i)(b) through 2(i)(e) below,
this Option shall be exercisable cumulatively according to the vesting schedule
set out in the Notice of Grant. Alternatively, at the election of the Optionee,
this option may be exercised in whole or in part at any time as to Shares which
have not yet vested. For purposes of this Stock Option Agreement, Shares subject
to Option shall vest based on continued employment of Optionee with the Company.
(b) This Option may not be exercised for a fraction of a
Share.
(c) In the event of Optionee's death, disability or other
termination of the employment or consulting relationship, the exercisability of
the Option is governed by the applicable provisions of the Plan and this Option
Agreement.
<PAGE>
(d) In no event may this Option be exercised after the date
of expiration of the term of this Option as set forth in the Notice of Grant.
(ii) Method of Exercise. This Option shall be exercisable by
------------------
written notice (in the form attached as Exhibit A) 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 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
the 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 aggregate Exercise Price as to all exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
No Shares shall be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of law
and the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the 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 the Optionee:
(i) cash; or
(ii) check; or
(iii) to the extent permitted by the Administrator, a full
recourse promissory note on such terms as shall be determined by the
Administrator; or
(iv) to the extent permitted by the Administrator, 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; or
(v) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an option, 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 for the Shares
being exercised.
4. Termination of Relationship. In the event an Optionee's Continuous
---------------------------
Status as an Employee or Consultant terminates, Optionee may, to the extent the
Option was vested at the date of such termination (the "Termination Date"),
exercise this Option during the Termination Period set out in the Notice of
Grant. To the extent that Optionee was not vested in this Option at the date of
such termination, or if Optionee does not exercise this Option within the time
specified therein, the Option shall terminate.
-4-
<PAGE>
5. 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 Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
6. 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. The limitations set out
in Section 7 of the Plan regarding Options designated as ISOs and Options
granted to more than ten percent (10%) stockholders shall apply to this Option.
7. Tax Consequences. Set forth below is a brief summary as of the date
----------------
of this Option of some of the federal and state tax consequences of exercise of
this Option and disposition of the Shares. 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.
(i) Exercise of ISO. If this Option qualifies as an ISO, there
---------------
will be no regular federal income tax liability or state 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 the Optionee to the alternative minimum tax in the year of
exercise.
(ii) Exercise of ISO Following Disability. If the Optionee's
------------------------------------
Continuous Status as an Employee or Consultant terminates as a result of
disability that is not total and permanent disability as defined in Section
22(e)(3) of the Code, to the extent permitted on the date of termination, the
Optionee must exercise an ISO within 90 days of such termination for the ISO to
be qualified as an ISO.
(iii) Exercise of NSO. There may be a regular federal income tax
---------------
liability and state income tax liability upon the exercise of an NSO. The
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. If the Optionee is subject to Section 16 of the Securities
Act of 1934, as amended, the date of income recognition may be deferred for up
to six months.
(iv) Disposition of Shares. In the case of an NSO, 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 state income tax
purposes. In the case of an ISO, 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 state income tax
purposes. If Shares purchased under an ISO are disposed of within such one-year
period 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
-5-
<PAGE>
Exercise Price and the lesser of (1) the Fair Market Value of the Shares on the
date of exercise, or (2) the sale price of the Shares.
(v) 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.
(vi) Section 83(b) Election for Unvested Shares Purchased
----------------------------------------------------
Pursuant to Nonqualified Stock Options. With respect to the exercise of a
- --------------------------------------
nonqualified stock option for unvested Shares, an election may be filed by the
Optionee with the Internal Revenue Service and, if necessary, the proper state
taxing authorities, within 30 days of the purchase of the Shares, electing
--------------
pursuant to Section 83(b) of the Code (and similar state tax provisions if
applicable) to be taxed currently on any difference between the purchase price
of the Shares and their Fair Market Value on the date of purchase. This will
result in a recognition of taxable income to the Optionee on the date of
exercise, measured by the excess, if any, of the fair market value of the
Shares, at the time the Option is exercised over the purchase price for the
Shares. Absent such an election, taxable income will be measured and recognized
by Optionee at the time or times on which the Company's Repurchase Option
lapses. Optionee is strongly encouraged to seek the advice of his or her own tax
consultants in connection with the purchase of the Shares and the advisability
of filing of the Election under Section 83(b) and similar tax provisions. A form
of Election under Section 83(b) is attached hereto as Exhibit B-1 for reference.
-----------
(vii) Section 83(b) Election for Unvested Shares Purchased
----------------------------------------------------
Pursuant to Incentive Stock Options. With respect to the exercise of an
- -----------------------------------
incentive stock option for unvested Shares, an election may be filed by the
Optionee with the Internal Revenue Service and, if necessary, the proper state
taxing authorities, within 30 days of the purchase of the Shares, electing
--------------
pursuant to Section 83(b) of the Code (and similar state tax provisions if
applicable) to be taxed currently on any difference between the purchase price
of the Shares and their Fair Market Value on the date of purchase for
alternative minimum tax purposes. This will result in a recognition of income to
the Optionee on the date of exercise, for alternative minimum tax purposes,
measured by the excess, if any, of the fair market value of the Shares, at the
time the option is exercised, over the purchase price for the Shares. Absent
such an election, alternative minimum taxable income will be measured and
recognized by Optionee at the time or times on which the Company's Repurchase
Option lapses. Optionee is strongly encouraged to seek the advice of his or her
tax consultants in connection with the purchase of the Shares and the
advisability of filing of the Election under Section 83(b) and similar tax
provisions. A form of Election under Section 83(b) for alternative minimum tax
purposes is attached hereto as Exhibit B-2 for reference.
-----------
OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY AND NOT THE
COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b), EVEN IF OPTIONEE
REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO MAKE THIS FILING ON OPTIONEE'S
BEHALF.
-6-
<PAGE>
8. 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 California law as applied to agreements
between California residents entered to be performed entirely within California.
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: AURUM SOFTWARE, INC.
__________________________________ By:________________________________
Signature
__________________________________ Title:_____________________________
Print Name
__________________________________
Residence Address
__________________________________
[SIGNATURE PAGE TO AURUM SOFTWARE, INC. 1995 STOCK PLAN
OPTION AGREEMENT]
-7-
<PAGE>
EXHIBIT A
---------
1995 STOCK PLAN
EXERCISE NOTICE
Aurum Software, Inc.
3385 Scott Boulevard
Santa Clara, CA 95054
1. Exercise of Option. Effective as of today, ___________, 19__, the
------------------
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of Aurum Software, Inc. (the
"Company") under and pursuant to the Aurum Software, Inc. 1995 Stock Option
Plan, as amended (the "Plan") and the [ ] Incentive [ ] Nonstatutory Stock
Option Agreement dated _________, 19___ (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.
3. Representations of Optionee. Optionee acknowledges that Optionee 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 Stockholder. Until the stock certificate evidencing such
---------------------
Shares is 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 stock certificate as soon as
practicable 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 stock
certificate is issued, except as provided in Section 12 of the Plan.
5. Tax Consultation. Optionee understands that Optionee may suffer
----------------
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Administrator, which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
the Company and on Optionee.
<PAGE>
7. Entire Agreement; Governing Law. The Plan and Notice of Grant/Option
-------------------------------
Agreement are incorporated herein by reference. This Agreement, the Plan, the
Option Agreement, and the Restricted Stock Purchase Agreement (if applicable)
constitute the entire agreement of the parties 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 the
Optionee. This Agreement is governed by California law as applied to agreements
between California residents entered and to be performed entirely within
California.
Submitted by: Accepted by:
OPTIONEE: AURUM SOFTWARE, INC.
__________________________________ By:________________________________
(Print Name)
__________________________________ Title:_____________________________
(Signature)
Address:
- -------
__________________________________
__________________________________
[SIGNATURE PAGE TO EXERCISE NOTICE]
-2-
<PAGE>
EXHIBIT B-1
-----------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME : TAXPAYER: SPOUSE:
ADDRESS: :
IDENTIFICATION NO. : TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of Aurum
Software, Inc. (the "Company").
3. The date on which the property was transferred is: ______________, 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on certain
events. This right lapses with regard to a portion of the Shares based on
the continued performance of services by the taxpayer over time.
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 is:
$_______________.
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.
- -------------------------------------------
Dated: ___________________, 19__ _______________________________________
(signature of Taxpayer)
_______________________________________
(print name of Taxpayer)
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19__ _______________________________________
<PAGE>
EXHIBIT B-2
-----------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to the provisions of Sections
55-56 and 83(b) of the Internal Revenue Code of 1986, as amended, to include in
taxpayer's alternative minimum taxable income for the current taxable year, as
compensation for services, the excess, if any, of the fair market value of the
property described below at the time of transfer over the amount paid for such
property.
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: __________ shares (the "Shares") of the Common Stock of Aurum
Software, Inc. (the "Company").
3. The date on which the property was transferred is: ___________________.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, at its
original purchase price, on certain events. This right lapses with regard
to a portion of the Shares over time.
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 paid for such property is:
$_______________
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.
- -------------------------------------------
Dated: ___________________________, Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19__ _____________________________________
<PAGE>
EXHIBIT 10.3
PLANAURUM SOFTWARE, INC.
1996 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this Aurum Software, Inc.,
--------------------
1996 Director Option Plan are to attract and retain the best available personnel
for service as Outside Directors (as defined herein) of the Company, to provide
additional incentive to the Outside Directors of the Company to serve as
Directors, and to encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Board of Directors of the Company.
-----
(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 Aurum Software, Inc., a Delaware
-------
corporation.
(e) "Director" shall mean a member of the Board.
--------
(f) "Employee" shall mean any person, including officers and
--------
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended.
(h) "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
National Market of The Nasdaq Stock Market, the Fair Market Value of a Share of
Common Stock 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) 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 quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or 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 date of determination, as reported in The
Wall Street Journal or such other source as the Board deems reliable, or;
<PAGE>
(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.
(i) "Inside Director" shall mean a Director who is an Employee.
---------------
(j) "Option" shall mean a stock option granted pursuant to the
------
Plan.
(k) "Optioned Stock" shall mean the Common Stock subject to an
--------------
Option.
(l) "Optionee" shall mean a Director who holds an Option.
--------
(m) "Outside Director" shall mean a Director who is not an
----------------
Employee.
(n) "Parent" shall mean a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" shall mean this 1996 Director Option Plan.
----
(p) "Share" shall mean a share of Common Stock, as adjusted in
-----
accordance with Section 10 of the Plan.
(q) "Subsidiary" shall mean a "subsidiary corporation," whether
----------
now or hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986.
3. Stock Subject to the Plan. Subject to the provisions of Section 10
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 150,000/*/ Shares of Common Stock (the "Pool"). 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). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
---------------------------------------------------
(a) Procedure for Grants. All grants of Options to Outside
--------------------
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
- ----------------------
/*/ After adjustment for the one-for-four reverse split of the Common
Stock in September 1996.
-2-
<PAGE>
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares to be
covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an
Option to purchase 18,750 Shares/*/ (the "First Option") on 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; and provided
--------
further, that any Outside Director who already serves in such capacity on the
- -------
date of adoption of the Plan by the Board shall not receive a First Option.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 18,750 Shares/*/ (a "Subsequent Option") at the next meeting
of the Board of Directors following the Annual Meeting of Stockholders in each
year commencing with the 1997 Annual Meeting of Stockholders provided he or she
is then an Outside Director and if as of such date, he or she shall have served
on the Board for at least the preceding six (6) months.
(iv) Notwithstanding the provisions of subsections (ii) and
(iii) hereof, any exercise of an Option made before the Company has obtained
stockholder approval of the Plan in accordance with Section 16 hereof shall be
conditioned upon the Company's obtaining such stockholder approval of the Plan
in accordance with Section 16 hereof.
- ---------------------
/*/ After adjustment for the one-for-four revenue split of the Common
Stock in September 1996.
-3-
<PAGE>
(v) The terms of an Option granted hereunder shall be
as follows:
(A) the term of the Option shall be ten (10) years.
(B) the Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) the exercise price per Share shall be one hundred
percent (100%) of the Fair Market Value per Share on the date of grant of the
Option. In the event that the date of grant of the Option is not a trading day,
the exercise price per Share shall be one hundred percent (100%) of the Fair
Market Value on the next trading day immediately following the date of grant of
the Option.
(D) subject to Section 10 hereof, the Option shall become
exercisable as to 1/48th of the Shares subject to the Option on each monthly
anniversary of its date of grant, provided that the Optionee continues to
serve as a Director on such dates.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the number of
Shares previously purchased under Options to exceed the Pool, then the remaining
Shares available for Option grant shall be granted under Options to the Outside
Directors on a pro rata basis. No further grants shall be made until such time,
if any, as additional Shares become available for grant under the Plan through
action of the Board or the stockholders to increase the number of Shares which
may be issued under the Plan or through cancellation or expiration of Options
previously granted hereunder.
5. Eligibility. Options may be granted only to Outside Directors. All
-----------
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
The Plan shall not confer upon any Optionee any right with respect
to continuation of service as a Director or nomination to serve as a Director,
nor shall it interfere in any way with any rights which the Director or the
Company may have to terminate the Director's relationship with the Company at
any time.
6. Term of Plan. The Plan shall become effective upon the later to
------------
occur of its approval by the stockholders of the Company as described in
Section 16 of the Plan or the effective date of the Company's initial public
offering of its Common Stock that is registered with the Securities and Exchange
Commission. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 11 of the Plan.
-4-
<PAGE>
7. Form of Consideration. The consideration to be paid for the Shares
---------------------
to be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) 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, (iv) delivery of a properly
executed exercise notice together with such other documentation as the Company
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, or (v) any combination of the foregoing methods of payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable until
-------- -------
stockholder approval of the Plan in accordance with Section 16 hereof has been
obtained.
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 full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. 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 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, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall 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 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which 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 Continuous Status as a Director. Subject to
----------------------------------------------
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her
Option, but only within three (3) months following the date of such termination,
and only to the extent that the Optionee was entitled to exercise it on the date
of such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of such termination, and to the extent that the Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
-5-
<PAGE>
(c) Disability of Optionee. In the event Optionee's status as a
----------------------
Director terminates as a result of total and permanent disability (as defined in
Section 22(e)(3) of the Code), the Optionee may exercise his or her Option, but
only within twelve (12) months following the date of such termination, and only
to the extent that the Optionee was entitled to exercise it on the date of such
termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of an Optionee's death, the
-----------------
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that the Optionee was
entitled to exercise it on the date of death (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was not
entitled to exercise an Option on the date of death, and to the extent that the
Optionee's estate or a person who acquired the right to exercise such Option
does not exercise such Option (to the extent otherwise so entitled) within the
time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The 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.
10. Adjustments Upon Changes in Capitalization, Dissolution, Merger,
----------------------------------------------------------------
Asset Sale or Change of Control.
-------------------------------
(a) Changes in Capitalization. Subject to any required action by
-------------------------
the stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares 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, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares 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 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." 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
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
-6-
<PAGE>
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of all or substantially all of the
assets of the Company, each outstanding Option may be assumed or an equivalent
option may be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If the Successor Corporation assumes or
substitutes an equivalent option for the Option, the Option or equivalent option
shall continue to become exercisable as provided in Section 4 hereof for so long
as Optionee remains a Director or the Optionee serves as a director of the
Successor Corporation. Following such assumption or substitution, if the
Optionee's status as a Director or director of the Successor Corporation, as
applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or option shall become fully exercisable, including as to
Shares for which it would not otherwise be exercisable. Thereafter, the Option
or option shall remain exercisable in accordance with Sections 8(c) through (e)
above.
In the event that the Successor Corporation does not agree to assume the
Option or to substitute an equivalent option, each outstanding Option shall
become fully vested and exercisable, including as to Shares as to which it would
not otherwise be exercisable. In such event, the Board shall notify the
Optionee that the Option shall be fully exercisable for a period of thirty (30)
days from the date of such notice, and the Option shall terminate upon the
expiration of such period. For the purposes of this Section 10(c), the Option
shall be considered assumed if, following the merger or sale of assets, the
Option confers the right to purchase, 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).
11. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. Except as set forth in Section 4,
-------------------------
the Board may at any time amend, alter, suspend, or discontinue the Plan, but no
amendment, alteration, suspension, or discontinuation shall be made which 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 under the Exchange Act (or any other applicable law or
regulation), 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. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date determined in accordance with Section 4 hereof.
13. 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
-7-
<PAGE>
of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, 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 relevant provisions of law.
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.
14. 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.
15. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
16. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company at or prior to the first annual
meeting of stockholders held subsequent to the granting of an Option hereunder.
Such stockholder approval shall be obtained in the degree and manner required
under applicable state and federal law.
-8-
<PAGE>
AURUM SOFTWARE, INC.
DIRECTOR STOCK OPTION AGREEMENT
Aurum Software, Inc., a Delaware corporation (the "Company"), has granted
to ______________________________________ (the "Optionee"), an option to
purchase a total of __________________ (_________) shares of the Company's
Common Stock (the "Optioned Stock"), at the price determined as provided herein,
and in all respects subject to the terms, definitions, and provisions of the
Company's 1996 Director Option Plan (the "Plan") adopted by the Company, which
is incorporated herein by reference. The terms defined in the Plan shall have
the same defined meanings herein.
17. Nature of the Option. This Option is a nonstatutory option and is
--------------------
not intended to qualify for any special tax benefits to the Optionee.
18. Exercise Price. The exercise price is $_______ for each share of
--------------
Common Stock.
19. Exercise of Option. This Option shall be exercisable during its term
------------------
in accordance with the provisions of Section 8 of the Plan as follows:
(a) Right to Exercise.
-----------------
(i) This Option shall become exercisable in installments
cumulatively [with respect to twenty-five percent (25%) of the Optioned Stock on
the first anniversary of the date of grant, and 1/48th of the Shares each month
thereafter so that one hundred percent (100%) of the Optioned Stock shall be
exercisable four (4) years after the date of grant][or][with respect to 1/48th
of the Shares of the Optioned Stock on each monthly anniversary of its date of
grant.] In no event shall any Option be exercisable prior to the date the
shareholders of the Company approve the Plan.
(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 service as a Director, the exercisability of the Option shall be
governed by Section 8 of the Plan.
(b) Method of Exercise. This Option shall be exercisable by
------------------
written notice which shall state the election to exercise the Option and the
number of Shares in respect of which the Option is being exercised. Such written
notice, in the form attached hereto as Exhibit A, shall be signed by the
---------
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.
-9-
<PAGE>
20. Method of Payment. Payment of the exercise price shall be by any of
-----------------
the following, or a combination thereof, at the election of the Optionee:
(a) cash;
(b) check;
(c) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) 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; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Company 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.
21. Restrictions on Exercise. This Option may not be exercised 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 regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. 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.
22. 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 this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
23. Term of Option. This Option may not be exercised more than ten (10)
--------------
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
24. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercise of this 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 purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale
-10-
<PAGE>
price and the Fair Market Value of the Shares on the date of exercise of the
Option, to the extent not included in income as described above, will be treated
as capital gain or loss.
DATE OF GRANT: ______________
AURUM SOFTWARE, INC.
a Delaware corporation
By:
Name:
Title:
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, 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 hereby agrees to accept as binding,
conclusive, and final all decisions or interpretations of the Board upon any
questions arising under the Plan.
Dated: _________________
______________________________
Optionee
-11-
<PAGE>
EXHIBIT A
DIRECTOR STOCK OPTION EXERCISE NOTICE
Aurum Software, Inc.
3385 Scott Boulevard
Santa Clara, CA 95054
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Aurum Software, Inc. (the "Company") under and pursuant to the
Company's 1996 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read, and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the Shares
--------------------------------
must be held indefinitely unless they are registered under the Securities Act of
1933, as amended (the "1933 Act"), or unless an exemption from such registration
is available, and that the certificate(s) representing the Shares may bear a
legend to that effect. Optionee understands that the Company is under no
obligation to register the Shares and that an exemption may not be available or
may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer adverse
----------------
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by reference.
----------------
This Exercise Notice and the Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof.
-1-
<PAGE>
This Exercise Notice and the Agreement are governed by California law except for
that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: AURUM SOFTWARE, INC.
__________________________________ By:_________________________________
Name:
Title:______________________________
Address: Address:
3385 Scott Boulevard
Santa Clara, CA 95054
Dated:____________________________ Dated:_____________________________
-2-
<PAGE>
EXHIBIT 10.4
AURUM SOFTWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1996 Employee Stock Purchase
Plan of Aurum 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.
-----
(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 Aurum Software, Inc. and any Designated
-------
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
------------
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have
-----------------------
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 day of each Offering
---------------
Period.
<PAGE>
(i) "Exercise Date" shall mean the last day of each Purchase Period.
-------------
The Exercise Date of the first Purchase Period shall be the last Trading Day on
or before April 30, 1997.
(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the National
Market of The Nasdaq Stock Market, its Fair Market Value shall be the closing
sales price for the Common Stock (or the mean of the closing bid and asked
prices, if no sales were reported) as quoted on such exchange (or the exchange
with the greatest volume of trading in Common Stock) or system on the date of
such determination, as reported in The Wall Street Journal or such other source
as the Board deems reliable; or
(2) If the Common Stock is quoted on The Nasdaq Stock Market
(but not on the National Market thereof) or 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 such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable; or
(3) 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;
provided, however, for purposes of the Enrollment Date under the first Offering
- -------- -------
Period, the Fair Market Value shall be the inital price to the public as set
forth in the final Prospectus included within the Registration Statement on Form
SB-2 filed with the Securities and Exchange commission for the inital public
offering of the Company's Common Stock.
(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 May 1 and November
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later. The first Offering Period shall being on the date the
registration statement covering the Company's initial public offering of its
Common Stock is declared effective by the Securities and Exchange Commission and
shall end on the last Trading Day on or before [October 31, 1998]. The duration
and timing of Offering Periods may be changed pursuant to Section 4 of this
Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
----
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
--------------
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month period
---------------
commencing after 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.
-2-
<PAGE>
(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.
(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 Stock Market are open for trading.
3. Eligibility.
-----------
(a) Any Employee (as defined in Section 2(g)), 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) if, 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) which
permits his or her rights to purchase stock under all employee stock purchase
plans of the Company and its subsidiaries to accrue 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 January 1 and July 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 19 hereof. 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, and the aggregate of such payroll deductions during the Offering Period
shall not exceed fifteen percent (15%) of the participant's Compensation during
said Offering Period.
(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 Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. 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 such time during any
Purchase Period which is scheduled to end during the current calendar year (the
"Current Purchase Period") that the aggregate of all payroll deductions which
were previously used to purchase stock under the Plan in a prior Purchase Period
which ended during that calendar year plus all payroll deductions accumulated
with respect to the Current Purchase Period equal Twenty Five Thousand Dollars
($25,000). 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.
-4-
<PAGE>
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 a
number of shares determined by dividing $12,500 by the Fair Market Value of a
share of the Company's Common Stock on the Enrollment Date, and provided further
that such purchase shall be subject to the limitations set forth in Sections
3(b) and 12 hereof. 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. 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.
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.
10. Withdrawal; Termination of Employment.
-------------------------------------
(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) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), 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 14 hereof, and
such participant's option shall be automatically terminated.
-5-
<PAGE>
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.
(c) 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. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
12. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be Three Hundred Thousand
(300,000) shares*, subject to adjustment upon changes in capitalization of the
Company as provided in Section 18 hereof. If, on a given Exercise Date, the
number of shares with respect to which options are to be exercised exceeds the
number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(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.
13. Administration.
--------------
(a) Administrative Body. 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.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
----------------------
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or
any successor provision ("Rule 16b-3") provides specific requirements
- -----------------------------
* After adjustment of the one-for-four reverse split of the Common Stock
in September 1996.
-6-
<PAGE>
for the administrators of plans of this type, the Plan shall be administered
only by such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3.
14. 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.
15. 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 14 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.
16. 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.
17. 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.
18. 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, 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
-7-
<PAGE>
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 Periods shall terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board.
(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, 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.
19. 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 18 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 Plan is in the best
interests of the Company and its stockholders. Except as provided in Section 18
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 Rule 16b-3 or under Section 423 of the Code (or any successor rule
or provision or any other applicable law or regulation), 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
-8-
<PAGE>
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.
20. 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.
21. 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 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.
22. 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 19 hereof.
23. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by Rule 16b-3 of the Exchange Act, 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 as of the first day thereof.
-9-
<PAGE>
EXHIBIT A
AURUM SOFTWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
FORM OF SUBSCRIPTION AGREEMENT
<PAGE>
EXHIBIT A
---------
AURUM SOFTWARE, INC.
1996 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 Aurum Software, Inc. 1996 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 1 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 "Aurum Software, Inc. 1996 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
<PAGE>
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
------------------------------------------------------------------------
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)
-2-
<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)
-3-
<PAGE>
EXHIBIT B
AURUM SOFTWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
<PAGE>
EXHIBIT B
---------
AURUM SOFTWARE, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Aurum Software,
Inc. 1996 Employee Stock Purchase Plan which began on ____________, 19____ (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 10.5
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE-MODIFIED NET
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
Company Logo
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes
only, March 5,1996 is made by and between COOPERAGE-ROSE PROPERTIES II, a
general partnership ("LESSOR")and AURUM SOFTWARE INCORPORATED, a California
Corporation ("LESSEE"). (collectively the "PARTIES," or Individually a "PARTY").
1.2(a) PREMISES: That certain portion of the Building, including all
improvements therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 3385 Scott Blvd., located in the City of
Santa Clara, County of Santa Clara, State of California, with zip code 95054, as
outlined on Exhibit A attached hereto ("PREMISES"). The "BUILDING" is that
certain building containing the Premises and generally described as (describe
briefly the nature of the Building): Approximately 18,600 sq. ft. of space
situated in the southerly most portion of a single story building which is,
part of a two (2) building complex situated, the northwesterly corner of Scott
Blvd. and In addition to Lessee rights to use and occupy the Premises as
hereinafter specified, Lessee shall have non-exclusive rights to the Common
Areas (as defined In Paragraph 2.7 below) as hereinafter specified, but shall
not have any rights to the roof, exterior walls or utility raceways of the
Building or to any other buildings in the Industrial Center. The Premises, the
Building, the Common Areas, the land upon which they are located, along with all
other buildings and improvements thereon, are herein collectively referred to as
the "INDUSTRIAL CENTER." (Also see Paragraph 2.)
1.2(b) PARKING: Seventy-Five (75) UNRESERVED VEHICLE PARKING SPACES
("Unreserved Parking Spaces"); and none reserved vehicle parking spaces
("RESERVED PARKING SPACES"). (Also see Paragraph 2.6)
1.3 TERM: 0 years and 9 months("ORIGINAL TERM")commencing August 1,
1996 ("COMMENCEMENT DATE") and ending April 30, 1997 ("EXPIRATION DATE"). (Also
see Paragraph 3.)
1.4 EARLY POSSESSION: N/A.("EARLY POSSESSION DATE"). (Also see
Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: $17,700.00 per month ("BASE RENT"), payable on the 1st
day of each month commencing August 1, 1996 (Also see Paragraph 4.) [ ] If this
box is checked, this Lease provides for the Base Rent to be adjusted per
Addendum, attached hereto.
1.6(a) BASE RENT PAID UPON EXECUTION: $0 as Base Rent for the period.
N/A
1.6(b) LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: 28% Project,
51% Bldg. percent ( %) ( "LESSEE'S SHARE") as determined by [x] prorata square
footage of the Premises as compared to the total square footage of the Building
or [ ] other criteria as described in Addendum.
1.7 SECURITY DEPOSIT: $17,700,00("SECURITY DEPOSIT"). (Also see
Paragraph Q
1.8 PERMITTED USE: general office, research and development, storage,
and distribution of software products. (PERMITTED USE) (Alto see Paragraph 6.)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY." (Also see Paragraph 8.)
1.10(a) REAL ESTATE BROKERS, The following real estate broker(s)
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
[ ] Terrence J. Rose, Inc. represents Lessor exclusively ("LESSOR'S BROKER");
[ ] C, B, Commercial represents Lessee exclusively ("LESSEE'S BROKER"); or
represents both Lessor and Lessee ("DUAL AGENCY"). (Also see Paragraph 15.)
1.10(b) PAYMENT TO BROKERS. Upon the execution of this Lease by both
Parties, Lessor shall pay to said Broker(s) jointly, or In such separate shares
as they may mutually designate in writing, a fee as set forth in a separate
written agreement between Lessor and said Broker(s) (or In the event there is no
separate written agreement between Lessor and said Broker(s), the sum of $per
agree for brokerage services rendered by said Broker(s) in connection with this
transaction.
<PAGE>
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by N/ A ("GUARANTOR"). (Also see Paragraph 37.) 1.12 ADDENDA AND
EXHIBITS. Attached hereto is an Addendum or Addenda consisting of Paragraphs 1
through 3, and Exhibits A through B all of which constitute a part of this
Lease.
2. PREMISES, PARKING AND COMMON AREAS.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of square footage set forth In this Lease, or
that may have been used in calculating rental and/or Common Area Operating
Expenses, is an approximation which Lessor and Losses agree is reasonable and
the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon Is
not subject to revision whether or not the actual square footage is more or
less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the existing
plumbing, electrical systems, fire sprinkler system, lighting, air conditioning
and heating systems and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the Commencement
Date. If a noncompliance with said warranty exists as of the Commencement Date,
Lessor shall, except as otherwise provided in this Lease, promptly after receipt
of written notice from Lessee setting forth with specificity the nature and
extent of such non-compliance, rectify same at Lessor's expense. If Lessee does
not give Lessor written notice of a non-compliance with this warranty within
thirty (30) days after the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants that any Improvements (other than those constructed by Lessee or at
Lessee's direction) on or In the Premises which have been constructed or
Installed by Lessor or with Lessor's consent or at Lessor's direction shall
comply with all applicable covenants or restrictions of record and applicable
building codes, regulations and ordinances In effect on the Commencement Date.
Lessor further warrants to Lessee that Lessor has no knowledge of any claim
having been made by any governmental agency that a violation or violations of
applicable building codes, regulations, or ordinances exist with regard to the
Premises as of the Commencement Date. Said warranties shall not apply to any
Alterations or Utility Installations (defined in Paragraph 7.3(a)) made or to be
made by Lessee. If the Premises do not comply with said warranties, Lessor
shall, except as otherwise provided in this Lease, promptly after receipt of
written notice from Lessee given within six (6) months following the
Commencement Date and setting forth with specificity the nature and extent of
such non-compliance, take such action, at Lessor's expense, as may be reasonable
or appropriate to rectify the non-compliance. Lessor makes no warranty that the
Permitted Use in Paragraph 1.8 Is permitted for the Premises under Applicable
Laws (as defined In Paragraph 2.4).
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that N has
been advised by the Broker(s) to satisfy itself with respect to the condition of
the Premises (Including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
covenants or restrictions of record (collectively, "APPLICABLE LAW") and the
present and future suitability of the Premises for Lessee's intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee's occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of
Lessor's agents, has made any oral or written representations or warranties with
respect to said matters other than as set forth In this Lease.
<PAGE>
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises. In
such event, Lessee shall, at Lessee's sole cost and expense, correct any non-
compliance of the Premises with said warranties.
<PAGE>
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said number.
Said parking spaces shall be used for parking by vehicles no larger than full-
size passenger automobiles or pick-up trucks, herein called "PERMITTED SIZE
VEHICLES." Vehicles other than Permitted Size Vehicles shall be parked and
loaded or unloaded as directed by Lessor in the Rules and Regulations (as
defined In Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.)
(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, upon
reasonable notice in addition to such other rights and remedies that it may
have, to remove or tow away the vehicle involved and charge the cost to Lessee,
which cost immediately payable upon demand by Lessor.
(c) Lessor shall at the Commencement Date of this Lease, provide
the parking facilities required by Applicable Law.
2.7 COMMON AREAS - DEFINITION. The term "COMMON AREAS" Is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Industrial Center and interior utility raceways within the Premises
that are provided and designated by the Lessor from time to time for non-
exclusive use of Lessor, Lessee and other lessees of the Industrial Center and
their respective employees, suppliers, shippers, customers, contractors
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways and landscaped areas.
2.8 COMMON AREAS - LESSEE'S RIGHTS. Lessor hereby grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the-non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and regulations
or restrictions governing the use of the Industrial Center. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor's designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur then Lessor
shall have the right, upon reasonable notice, in addition to such other rights
and remedies that it may have, to remove the property and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.
2.9 COMMON AREAS - RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable Rules and Regulations with respect thereto
in accordance with Paragraph 40. Lessee agrees to abide by and conform to all
such Rules and Regulations, and to cause its employees, suppliers, shippers
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations of
the Industrial Center.
2.10 COMMON AREAS - CHANGES. Lessor shall have the right, In Lessor's
sole discretion, from time to time:
<PAGE>
(a) To make changes to the Common Areas, including, without
limitation, changes In the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the
Industrial Center to be a part of the Common Areas;
(d) To add additional buildings and Improvements to the Common
Areas;
(e) To use the Common Areas while engaged In making additional
Improvements, repairs or alterations to the Industrial Center, or any portion
thereof; and
(f) To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Industrial Center as Lessor may,
in the exercise of sound business judgment, deem to be appropriate.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified In Paragraph 1.3.
3.2 EARLY POSSESSION. If an Early Possession Date is specified In
Paragraph 1.4 and if Lessee totally or partially occupies the Premises after the
Early Possession Date but prior to the Commencement Date, the obligation to pay
Base Rent shall be abated for the period of such early occupancy. All other
terms of this Lease, however, (including but not limited to the obligations to
pay Lessee's Share of Common Area Operating Expenses and to carry the Insurance
required by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee by the Early Possession Date, If one is
specified in Paragraph 1.4, or if no Early Possession Date is specified, by the
Commencement Date, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease, or the obligations of
Lessee hereunder, or extend the term hereof, but in such case, Lessee shall not,
except as otherwise provided herein, be obligated to pay rent or perform any
other obligation of Lessee under the terms of this Lease until Lessor delivers
possession of the Premises to Lessee. If possession of the Premises is not
delivered to Lessee within sixty (60) days after the Commencement Date, Lessee
may, at its option, by notice In writing to Lessor within ten (10) days after
the and of said sixty (60) day period, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder: provided further,
however, that It such written notice of Lessee Is not received by Lessor within
said ten (10) day period, Lessee's right to cancel this Lease hereunder shall
terminate and be of no further force or effect. Except as may be otherwise
provided, and regardless of when the Original Term actually commences, if
possession is not tendered to Lessee when required by this Lease and Lessee does
not terminate this Lease, as aforesaid, the period free of the obligation to pay
Base Rent, if any, that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to the period
during which the Lessee would have otherwise enjoyed under the terms hereof, but
minus any days of delay caused by the acts, changes or omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall pay Base Rent and other rent or charges, as
the same may be adjusted from time to time, to Lessor in lawful money of the
United States, without
<PAGE>
offset or deduction, on or before the day on which It Is due under the terms of
this Lease. Base Rent and all other rent and charges for any period during the
term hereof which is for less than one full month shall be prorated based upon
the actual number of days of the month involved. Payment of Base Rent and other
charges shall be made to Lessor at its address stated herein or to such other
persons or at such other addresses as Lessor may from time to time designate in
writing to Lessee.
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes of
this Lease, as all costs Incurred by Lessor relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:
(i) The operation, repair and maintenance, in neat, clean,
good order and condition, of the following:
(aa) The Common Areas, Including parking areas,
loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways, landscaped areas, striping, bumpers, Irrigation systems,
Common Area lighting facilities, fences and gates, elevators and roof.
(bb) Exterior signs and any tenant directories.
(cc) Fire detection and sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to
service the Common Area.
(iii) Trash disposal property management and security
services and the costs of any environmental Inspections.
(iv) Reserves set aside for maintenance and repair of Common
Areas.
(v) Real Property Taxes (as defined In Paragraph 10.2) to
be paid by Lessor for the Building and the Common Areas under Paragraph 10.
(vi) The cost of to premiums for the Insurance policies
maintained by Lessor under Paragraph 8 hereof.
(vii) Any deductible portion of an Insured loss concerning
the Building or the Common Areas.
(viii) Any other services to be provided by Lessor that are
stated elsewhere In this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that
are specifically attributable to the Building or to any other building in the
Industrial Center or to the operation, repair and maintenance thereof, shall be
allocated entirely to the Building or to such other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Industrial Center.
(c) The inclusion of the improvements, facilities and services set
forth In Subparagraph 4.2(a) shall not be deemed to impose Lessor to either have
said improvements or facilities or to provide those services unless the
Industrial Center already has the
<PAGE>
same, Lessor at services, or Lessor has agreed elsewhere in this Lease to
provide the same or some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be
payable by Lessee within (30) thirty days after a reasonably detailed statement
of actual expenses is presented to Lessee by Lessor. At Lessor's option,
however, an amount may be estimated by Lessor from time to time of annual Common
Area Operating Expenses and the same shall be payable monthly or quarterly, as
Lessor shall designate, during each 12-month period of to Lease term, on the
same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee
within sixty (60) days after the expiration of each calendar year a reasonably
detailed statement showing Lessee's Share of the actual Common Area Operating
Expenses Incurred during the preceding year. If Lessee's payments under this
Paragraph 4.2(d) during said preceding year exceed Lessee's Share as indicated
on said statement, Lessor shall be credited the amount of such over-
<PAGE>
payment against Lessee's Share of Common Area Operating Expenses next becoming
due. If Lessee's payments under this Paragraph 4.2(d) during said Share as
indicated in said statement, Lessee shall pay to Lessor the amount of the
deficiency within thirty days after thirty (30) days after delivery by Lessor to
Lessee of said statement.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon Lessee's execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for Lessee's
faithful performance of Lessee's obligations under this Lease. If Lessee fails
to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults
under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, cost, expense,
loss or damage (Including attorneys' fees) which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ton (10) days after written request therefore
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Any time the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor as an addition to the Security Deposit so that the
total amount of the Security Deposit shall at all times bear the same proportion
to the then current Base Rent as the initial Security Deposit bears to the
initial Base Rent set forth in Paragraph 1.5. Lessor shall not be required to
keep all or any part of the Security Deposit separate from its general accounts.
Lessor shall, at the expiration or earlier termination of the term hereof and
after Lessee has vacated the Premises, return to Lessee (or, at Lessor's option,
to the last assignee, if any, of Lessee's interest herein), that portion of the
Security Deposit not used or applied by Lessor. Unless otherwise expressly
agreed in writing by Lessor, no part of the Security Deposit shall be considered
to be held in trust, to bear interest or other increment for its use, or to be
prepayment for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 PERMITTED USE.
(a) Lessee shall use and occupy the Premises only for the Permitted
Use set forth in Paragraph 1.8, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful, creates waste or a nuisance,
or that disturbs owners and/or occupants of, or causes damage to the Premises or
neighboring Premises or properties.
(b) Lessor hereby agrees to not unreasonably withhold or delay its
consent to any written request by Lessee, Lessee's assignees or subtenants, and
by prospective assignees and subtenants of Lessee, its assignees and subtenants,
for a modification of said Permitted Use, so long as the same will not impair
the structural integrity of the improvements on the Premises or in the Building
or the mechanical or electrical systems therein, does not conflict with uses by
other lessees, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lessor's reasonable objections to
the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous
Substance" as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or effect,
either by itself or in combination with other materials expected to be on the
Premises, Is either: (1) potentially injurious to the public health, safety or
welfare the environment, or the Premises; (ii) regulated or monitored by any
governmental authority, or (iii) a basis for potential liability of
<PAGE>
Lessor to any governmental agency or third party under any applicable statute or
common law theory. Hazardous Substance shall Include, but not be limited to,
hydrocarbons, petroleum, gasoline, crude oil or any products or by-products
thereof. Lessee shall not engage In any activity in or about the Premises which
constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances
without the express prior written consent of Lessor and compliance in a timely
manner (at Lessee's sole cost and expense) with all Applicable Requirements (as
defined in Paragraph 6.3). "REPORTABLE USE" shall mean (1) the installation or
use of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and
(iii) the presence in, on or about the Premises of a Hazardous Substance with
respect to which any Applicable Laws require that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may, without Lessor's prior consent, but upon notice to
Lessor and in compliance with all Applicable Requirements, use any ordinary and
customary materials reasonably required to be used by Lessee in the normal
course of the Permitted Use, so long as such use is not a Reportable Use and
does not expose the Premises or neighboring properties to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may (but without any obligation to do so) condition its consent to any
Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving Lessor
such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefor, including but
not limited to the installation (and, at Lessor's option, removal on or before
Lease expiration or wazzu earlier termination) of reasonably necessary
protective modifications to the Premises (such as concrete encasements) and/or
the deposit of an additional Security Deposit under Paragraph 5 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises or the Building, other than as previously consented
to by Lessor, Lessee shall immediately give Lessor written notice thereof,
together with a copy of any statement, report, notice, registration,
application, permit, business plan, license, claim, action, or proceeding given
to, or received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to, such Hazardous Substance
Including but not limited to all such documents as may be involved in any
Reportable Use involving the Premises. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under or about the
Premises (including, without limitation, through the plumbing or sanitary sewer
system).
(c) INDEMNIFICATION. Lessee shall Indemnity, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's
obligations under this Paragraph 6.2(c) shall include, but not be limited to,
the effects of any contamination or Injury to person, property or the
environment created or suffered by Lessee, and the cost of Investigation
(including consultants' and attorneys' fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein Involved,
and shall survive the expiration or earlier termination of this Lease. No
termination, cancellation or release agreement entered into by Lessor and Lessee
shall release Lessee from its obligations under this Lease with respect to
Hazardous Substances, unless specifically so agreed by Lessor in writing at the
time of such agreement.
6.3 LESSEE'S COMPLIANCE WITH REQUIREMENTS. Lessee shall, at Lessee's sole
cost and expense, fully, diligently and in a timely manner, comply with ALL
"APPLICABLE REQUIREMENTS," which term is used in this Lease to mean all laws,
rules, regulations, ordinances, directives, covenants, easements and
restrictions of record, permits, the requirements of any applicable fire
Insurance underwriter or rating bureau, and the
<PAGE>
recommendations of Lessor's engineers and/or consultants, relating in any manner
to the Premises (including but not limited to matters pertaining to (i)
Industrial hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and groundwater conditions, and (iii) the use,
generation, manufacture, production, installation, maintenance, removal,
transportation, storage, spill, or release of any Hazardous Substance), now in
effect or which may hereafter come Into effect. Lessee shall, within five (5)
days after receipt of Lessor's written request, provide Lessor with copies of
all documents and information including but not limited to permits,
registrations, manifests, applications, reports and certificates, evidencing
Lessee's compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or the
Premises to comply With any Applicable Requirements.
6.4 INSPECTION; COMPLIANCE WITH LAW. Lessor, Lessor's agent, employee
contractors and designated representatives, and the holders of any mortgages
deeds of trust or ground leases on the Premises ("Lenders") shall have the right
to enter the Premises at any time in the case of an emergency, and otherwise at
reasonable times, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease and all Applicable
Requirements (as defined In Paragraph 6.3), and Lessor shall be entitled to
employ experts and/or consultants in connection therewith to advise Lessor with
respect to Lessee's activities, including but not limited to Lessee's
Installation, operation, use, monitoring, maintenance, or removal of any
Hazardous Substance on or from the Premises. The costs and expenses of any such
Inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Lessee or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Losses, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or Imminent violation
or contamination. In such case, Losses shall upon request reimburse Lessor or
Lessor's Lender, as the case may be, for the costs and expenses of such
inspections.
7. MAINTENANCE, REPAIRS, UTILITY INSTALLATIONS, TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's
Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at
Lessee's sole cost and expense and at all times, keep the Premises and every
part thereof in good order, condition and repair (whether or not such portion of
the Premises requiring repair, or the means of repairing the same, are
reasonably or readily accessible to Lessee, and whether or not the need for such
repairs occurs as a result of Lessee's use, any prior use, the elements or the
age of such portion of the Premises), including, without limiting the generality
of the foregoing, all equipment or facilities specifically serving the Premises,
such as plumbing, heating, air conditioning, ventilating, electrical lighting
facilities, boilers, fired or unfired pressure vessels, fire hose connections if
within the Premises, fixtures, interior walls, interior surfaces of exterior
walls, ceilings, floors, windows, doors, plate glass, and skylights, but
excluding any items which are the responsibility of Lessor pursuant to Paragraph
7.2 below. Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices. Lessee's obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a pan their good order, condition and
state of repair.
(b) (Paragraph omitted in original)
(c) If Lessee falls to perform Lessee's obligations under this
Paragraph 7.1, Lessor may enter upon the Premises after thirty days prior
written notice to Lessee (except in the case of an emergency, In which case no
notice shall be required), perform such obligations on Lessee's behalf, and put
the Premises In good order, condition and repair, In accordance with Paragraph
13.2 below.
<PAGE>
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building 4.2
(Common Area Operating Expenses), 7.1 (Lessee's Obligations), 9 (Damage or
Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to
Paragraph 4.2, shall keep in good order, condition and repair the foundations,
exterior walls, structural condition of interior bearing walls, exterior roof,
fire sprinkler and/or standpipe and hose (if located in the Common Areas) or
other automatic fire extinguishing system Including fire alarm and/or smoke
<PAGE>
detection systems and equipment, fire hydrants, parking lots, walkways,
parkways, driveways, landscaping, fences, signs and utility systems serving the
Common Areas and all parts thereof, as well as providing the services for which
there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall
not be obligated to paint the exterior or interior surfaces of exterior walls
nor shall Lessor be obligated to maintain, repair or replace windows, doors or
plate glass of the Premises. Lessee expressly waives the benefit of any statute
now or hereafter In effect which would otherwise afford Lessee the right to make
repairs at Lessor's expense or to terminate this Lease because of Lessor's
failure to keep the Building, Industrial Center or Common Areas in good order,
condition and repair.
7.3 UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY
INSTALLATIONS" is used in this Lease to refer to all air lines, power panels,
electrical distribution, security, fire protection systems, communications
systems, lighting fixtures, heating, ventilating and air conditioning equipment,
plumbing, and fencing in, on or about the Premises. The term "TRADE FIXTURES"
shall mean Lessee's machinery and equipment which can be removed without doing
material damage to the Premises. The term "ALTERATIONS" shall mean any
modification of the improvements on the Premises which are provided by Lessor
under the terms-of this Lease, other than Utility Installations or Trade
Fixtures. "LESSEE-OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be
made any Alterations or Utility Installations in, on, under or about the
Premises without Lessor's prior written consent. Lessee may, however, make non-
structural Utility Installations to the interior of the Premises (excluding the
roof) without Lessor's consent but upon notice to Lessor, so long as they are
not visible from the outside of the Premises, do not involve puncturing,
relocating or removing the roof or any existing walls, or changing or
interfering with the fire sprinkler or fire detection systems and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$2,500.00.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent,
shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits
required by governmental authorities; (ii) the furnishing of copies of such
permits together with a copy of the plans and specifications for the Alteration
or Utility Installation to Lessor prior to commencement of the work thereon; and
(iii) the compliance by Lessee with all conditions of said permits in a prompt
and expeditious manner. Any Alterations or Utility Installations by Lessee
during the term of this Lease shall be done in a good and workmanlike manner
with good and sufficient materials, and be In compliance with all Applicable
Requirements. Lessee shall promptly upon completion thereof furnish Lessor with
as-built plans and specifications therefor. Lessor may, (but without obligation
to do so) condition its consent to any requested Alteration or Utility
Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a
lien and completion bond in an amount equal to one and one-half times the
estimated cost of such Alteration or Utility Installation.
(c) LIEN PROTECTION. Lessee shall pay when due all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic's or materialmen's lien against the Premises or any Interest therein.
Lessee shall give Lessor not less than ten (10) days' notice prior to the
commencement of any work In, on, or about the Premises, and Lessor shall have
the right to post notices of non-responsibility in or on the Premises as
provided by law. If Lessee shall, in good faith, contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense, defend and
protect itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof against the Lessor or the Premises. If Lessor shall require,
Lessee shall furnish to Lessor a surety bond satisfactory to
<PAGE>
Lessor in an amount equal to one and one-half times the amount of such contested
lien claim or demand, indemnifying Lessor against liability for the same, as
required by law for the holding of the Premises free from the effect of such
lien or claim. In addition, Lessor may require Lessee to pay Lessor's attorneys'
fees and costs in participating In such action if Lessor shall decide it is to
its best interest to do so.
7.4 OWNERSHIP, REMOVAL, SURRENDER, AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal
and to cause Lessee to become the owner thereof as hereinafter provided in this
Paragraph 7.4, all Alterations and Utility Installations made to the Premises by
Lessee shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing to
Lessee to be the owner of all or any specified part of the Lessee-Owned
Alterations and Utility Installations. Unless otherwise instructed per
Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this Lease,
become the property of Lessor and remain upon the Premises and be surrendered
with the Premises by Lessee.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may
require that any or all Lessee-Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease, notwithstanding
that their installation may have been consented to by Lessor. Lessor may require
the removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date, clean
and free of debris and in good operating order, condition and state of repair,
ordinary wear and tear excepted. Ordinary wear and tear shall not include any
damage or deterioration that would have been prevented by good maintenance
practice or by Lessee performing all of its obligations under this Lease. Except
as otherwise agreed or specified herein, the Premises, as surrendered, shall
include the Alterations and Utility Installations. The obligation of Lessee
shall include the repair of any damage occasioned by the installation,
maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and
Lessee-Owned Alterations and Utility Installations, as well as the removal of
any storage tank installed by or for Lessee, and the removal, replacement, or
remediation of any soil, material or ground water contaminated by Lessee, all as
may then be required by Applicable Requirements and/or good practice. Lessee's
Trade Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per this
Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUMS. The cost of the premiums for the insurance
policies maintained by Lessor under this Paragraph 8 shall be a Common Area
Operating Expense pursuant to Paragraph 4.2 hereof. Premiums for policy periods
commencing prior to, or extending beyond, the form of this Lease shall be
prorated to coincide with the corresponding Commencement Date or Expiration
Date.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force
during the term of this Lease a Commercial General Liability policy of Insurance
protecting Lessee, Lessor and any Lender(s) whose names have been provided to
Lessee in writing (as additional insureds) against claims for bodily injury,
personal injury and property damage based upon, Involving or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an "Additional Insured-Managers or Lessors of Premises" endorsement and contain
the
<PAGE>
"Amendment of the Pollution Exclusion" endorsement for damage caused by heat,
smoke or fumes from a hostile fire. The policy shall not contain any intra-
insured exclusions as between Insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "Insured contract"
for the performance of Lessee's indemnity obligations under this Lease. The
limits of said Insurance required by this Lease or as carried by Lessee shall
not, however, limit the liability of Lessee nor relieve Lessee of any obligation
hereunder. All insurance to be carried by Lessee shall be primary to and not
contributory with any similar Insurance carded by Lessor, whose insurance shall
be considered excess Insurance only.
(b) CARRIED BY LESSOR. Lessor shall also maintain liability
Insurance described in Paragraph 8.2(a) above, in addition to and not in lieu
of, the insurance required to be maintained by Losses. Lessee shall riot be
named as an additional insured therein.
8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING END IMPROVEMENTS. Lessor shall obtain and keep In
force during the term of this Lease a policy or policies In the name of Lessor,
with loss payable to Lessor and to any Lender(s), insuring against loss or
damage to the Premises. Such Insurance shall be for full replacement cost, as
the same shall exist from time to time, or the amount required by any Lender(s),
but In no event more than the commercially reasonable and available Insurable
value thereof if, by reason of the unique nature or age of the improvements
involved, such latter amount is less than full replacement cost. Lessee-Owned
Alterations and Utility Installations, Trade Fixtures and Lessee's personal
property shall be Insured by Lessee pursuant to Paragraph 8.4. If the coverage
is available and commercially appropriate, Lessor's policy or policies shall
Insure against all risks of direct physical loss or damage (except the perils of
flood and/or earthquake, including coverage for any additional costs resulting
from debris removal and reasonable amounts of coverage for the enforcement of
any ordinance or law regulating the reconstruction or replacement of any
undamaged sections of the Building required to be demolished or removed by
reason of the enforcement of any building, zoning, safety or land use laws as
the result of a covered loss, but not including plate glass insurance. Said
policy a also contain an agreed valuation provision in lieu of any co-insurance
clause, waiver of subrogation, and Inflation guard protection causing an
increase of property insurance coverage amount by a factor of not less than the
adjusted U.S. Department of Labor Consumer Price Index for All Urban Con city
nearest to where the Premises are located.
(b) RENTAL VALUE. Lessor shall also obtain and keep In force
during the term of this Lease a policy or policies In the name of the payable to
Lessor and any Lender(s), insuring the loss of the full rental and other charges
payable by all lessees of the Building to Lessor for one all Real Property
Taxes, insurance costs, all Common Area Operating Expenses and any scheduled
rental increases). Said insurance may event the Lease is terminated by reason of
an Insured loss, the period of Indemnity for such coverage shall be extended
beyond the date of completion of repairs or replacement of the Premises, to
provide for one full year's loss of rental revenues from the date of any such
loss. Said insurance shall contain an agreed valuation provision in lieu of any
co-insurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected rental Income, Real Property Taxes, insurance premium
costs and other expenses, if any, otherwise payable, for the next 12-month
period. Common Area Operating Expenses shall include any deductible amount in
the event of such loss.
(c) ADJACENT PREMISES. Lessee shall pay for any increase In the
premiums for the property Insurance of the Building and for the Common Areas or
other buildings in the Industrial Center If said increase Is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
<PAGE>
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee-Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, by
endorsement to a policy already carried, maintain insurance coverage on all of
Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and
Utility Installations in, on, or about the Premises similar in coverage to that
carded by Lessor as the Insuring Party under Paragraph 8.3(a).
8.5 Insurance Policies. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the Premises are
located, and maintaining during the policy term a "General Policyholders Rating"
of at least B+, V, as set forth in the most current issue of "Best's Insurance
Guide." Lessee shall not do or permit to be done anything which shall invalidate
the insurance policies referred to in
<PAGE>
this Paragraph 8. Lessee shall cause to be delivered to Lessor, within seven (7)
days after the earlier of the Early Possession Date or the Commencement Date,
certified copies of, or certificates evidencing the existence and amounts of,
the insurance required under Paragraph 8.2(a) and 8.4. No such policy shall be
cancelable or subject to modification except after thirty (30) days' prior
written notice to Lessor. Lessee shall at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
"Insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages (whether in contract or in tort) against
the other, for loss or damage to their property arising out of or incident to
premises required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited by the
amount of insurance carried or required, or by any deductibles applicable
thereto. Lessor and Lessee agree to have their respective insurance companies
issuing property damage insurance waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as the
insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of express
warranties, Lessee shall indemnity, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners and
Lenders, from and against any and all claims, loss of rents and/or damages,
costs, liens, judgments, penalties, loss of permits, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in connection
with, the occupancy of the Premises by Lessee, the conduct of Lessee's business,
any act, omission or neglect of Lessee, its agents, contractors, employees or
invitees, and out of any Default or Breach by Lessee in the performance in a
timely manner of any obligation on Lessee's part to be performed under this
Lease. The foregoing shall include, but not be limited to, the defense or
pursuit of any claim or any action or proceeding involved therein, and whether
or not (in the case of claims made against Lessor) litigated and/or reduced to
judgment. In case any action or proceeding be brought against Lessor by reason
of any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by of
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects 61 pipes, fire sprinklers, wires,
appliances, plumbing. air conditioning or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of any other
lessee of Lessor nor from the failure by Lessor to enforce the provisions of any
other lease in the Industrial Center. Notwithstanding Lessor's negligence or
breach of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall mean damage or destruction to
the Premises, other than Lessee-Owned Alterations and Utility Installations, the
repair cost
<PAGE>
of which damage or destruction is less than fifty percent (50%) of the then
Replacement Cost (as defined in Paragraph 9.11(d)) of the Premises (excluding
Lessee-Owned Alterations and Utility Installations and Trade Fixtures)
immediately prior to such damage or destruction.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction
to the Premises, other than Lessee-Owned Alterations and Utility Installations,
the repair cost of which damage or destruction is fifty percent (50%) or more of
the then Replacement Cost of the Premises (excluding Lessee-Owned Alterations
and Utility Installations and Trade Fixtures) immediately prior to such damage
or destruction. In addition, damage or destruction to the Building, other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction is fifty per
cent (50%) or more of the then Replacement Cost (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures of any lessees of the
Building) of the Building shall, at the option of Lessor, be deemed to be
Premises Total Destruction.
(c) "INSURED LOSS" shall mean damage or destruction to the
Premises, other than Lessee-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described In Paragraph 8.3(a) irrespective of any deductible amounts
or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing Immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of applicable building codes, ordinances or
laws, and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined In Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PREMISES PARTIAL DAMAGE - INSURED LOSS. If Premises Partial Damage
that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect. In the event, however, that there Is a
shortage of insurance proceeds and such shortage is due to the fact that, by
reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in Insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. It Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, Lessor shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect. If Lessor does not receive such funds or assurance within such
ten (10) day period, and if Lessor does not so elect to restore and repair, then
this Lease shall terminate sixty (60) days following the occurrence of the
damage or destruction. Unless otherwise agreed, Lessee shall in no event have
any right to reimbursement from Lessor for any funds contributed by Lessee to
repair any such damage or destruction, Premises Partial Damage due or earthquake
shall be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding
that there may be some insurance coverage, but the net any such insurance shall
be made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If Premises Partial Damage that is
not an Insured Loss occurs, Lessor may at Lessor's option either (i) repair such
damage as soon
<PAGE>
as reasonably possible at Lessor's expense, in which event this Lease shall
continue In full force and effect, or ten notice to Lessee within thirty (30)
days after receipt by Lessor of knowledge of the occurrence of such damage of
Lessor's desire to terminate this Lessee the date sixty (60) days following the
date of such notice. In the event Lessor elects to give such notice of Lessor's
intention to terminate this Lease, Lessee shall have the right within ten (10)
days after the receipt of such notice to give written notice to Lessor of
Lessee's commitment to pay for the repair of such damage totally at Lessee's
expense and without reimbursement from Lessor. Lessee shall provide Lessor with
the required funds or satisfactory assurance thereof within thirty (30) days
following such commitment from Lessee. In such event this Lease shall continue
in full force and effect, and Lessor shall proceed to make such repairs as soon
as reasonably possible after the required funds are available. If Lessee does
not give such notice and provide the funds or assurance thereof within the times
specified above, this Lease shall terminate as of the date specified in Lessor's
notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, If
Premises Total Destruction occurs (including any destruction required by any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the damage
or destruction.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost exceeds one
month's Base Rent, whether or not an Insured Loss, Lessor may, at Lessor's
option, terminate this Lease effective sixty (60) dc of occurrence of such
damage by giving written notice to Lessee of Lessor's election to do so within
thirty (30) days after the date of occurrance of such damage. Provided, however,
if Lessee at that time has an exercisable option to extend this Lease or to
purchase the Premises, then Lessee may preserve this Lease by (a) exercising
such option, and (b) providing Lessor with any shortage in Insurance proceeds
(or adequate assurance thereof) needed to make the repairs on or before the
earlier of (i) the date which is ten (10) days after Lessee's receipt of
Lessor's written notice purporting to terminate this Lease, or (ii) the day
prior to the date upon which such option expires. If Lessee duly exercises such
option during such period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's
expense repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effort. It Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate as of the date set forth in the first sentence of this Paragraph 9.5.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of (i) Premises Partial Damage or (ii) Hazardous
Substance Condition for which Lessee is not legally responsible, the Base Rent,
Common Area Operating Expenses and other charges, If any, payable by Lessee
hereunder for the period during which such damage or condition, its repair,
remediation or restoration continues, shall be abated In proportion to the
degree to which Lessee's use of the Premises is Impaired, but not in excess of
proceeds from insurance required to be carried under Paragraph 8.3(b). Except
for abatement of Base Rent, Common Area Operating Expenses and other charges, if
any, as aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage suffered
by reason of any such damage, destruction, repair, remediation or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises within
ninety (90) days after such obligation shall accrue, Lessee may, at any time
prior to the commencement of such repair or restoration, give written notice to
Lessor and to any Lenders of which Lessee has actual notice of Lessee's election
to terminate this Lease on a date not less than sixty (60) days following the
giving of such notice. If Lessee gives such notice to Lessor and such Lenders
and such repair or restoration is not commenced within thirty (30) days after
receipt of such notice, this Lease shall terminate as of the date specified in
said notice. If Lessor or a Lender commences the repair or restoration of the
Premises within thirty (30) days after
<PAGE>
the receipt of such notice, this Lease shall continue in full force and effect.
"COMMENCE" as used In this Paragraph 9.6 shall mean either the unconditional
authorization of the preparation of the required plans, or the beginning of the
actual work on the Premises, whichever occurs first.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance Condition
occurs, unless Lessee is legally responsible therefor (in which case Lessee
shall make the investigation and remediation thereof required by Applicable
Requirements and this Lease shall continue in full force and effect, but subject
<PAGE>
to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to investigate and remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000 whichever is greater, give written
notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of
the occurrence of such Hazardous Substance Condition of Lessor's desire to
terminate this Lease as of the date sixty (60) days following the date of such
notice. In the event Lessor elects to give such notice of Lessor's intention to
terminate this Lease, Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee's commitment
to pay for the excess costs of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable Requirements,
over (b) an amount equal to twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater. Lessee shall provide Lessor with the funds
required of Lessee or satisfactory assurance thereof within thirty (30) days
following said commitment by Lessee. In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such investigation and
remediation as soon as reasonably possible after the required funds are
available. It Lessee does not give such notice and provide the required funds or
assurance thereof within the time period specified above, this Lease shall
terminate as of the date specified in Lessor's notice of termination.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment
made by Lessee to Lessor and so much of Lessee's Security Deposit as has not
been, or is not then required to be, used by Lessor under the terms of this
Lease.
9.9 WAIVER OF STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the Premises
and the Building with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent it is inconsistent
herewith.
10. REAL PROPERTY TAXES.
10.1 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.
10.2 REAL PROPERTY TAX DEFINITION. As used herein, the term "REAL
PROPERTY TAXES" shall Include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed upon the Industrial Center by any
authority having the direct or Indirect power to tax, including any city, state
or federal government, or any school, agricultural, sanitary, fire, street,
drainage, or other Improvement district thereof, levied against any legal or
equitable interest of Lessor in the Industrial Center or any portion thereof,
Lessor's right to rent or other income therefrom, and/or Lessor's business of
leasing the Premises. The term "REAL PROPERTY TAXES" shall also include any tax,
fee, levy, assessment or charge, or any increase therein, imposed by reason of
events occurring, or changes In Applicable Law taking effect, during the term of
this Lease, including but riot limited to a change in the ownership of the
Industrial Center or in the improvements thereon, the execution of this Lease,
or any modification, amendment or transfer thereof, and whether or not
contemplated by the Parties. In calculating Real Property Taxes for any calendar
year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessors records and work
sheets as being caused
<PAGE>
by additional improvements placed upon the Industrial Center by other lessees or
by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding
Paragraph 10.1 hereof, Lessee shall, however, pay to Lessor at the time Common
Area Operating Expenses are payable under Paragraph 4.2, the entirety of any
increase in Real Property Taxes if assessed solely by reason of Alterations,
Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at
Lessee's request.
10.4 JOINT ASSESSMENT. It the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.
10.5 LESSEE'S PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained In the Premises or stored within the Industrial Center. When
possible, Lessee shall cause its Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all other personal
property to be assessed and billed separately from the real property of Lessor.
If any of Lessee's said property shall be assessed with Lessor's real property,
Lessee shall pay Lessor the taxes attributable to Lessee's property within ten
(10) days after receipt of a written statement setting forth the taxes
applicable to Lessee's property.
11. UTILITIES. Lessee shall pay directly for all utilities and services
supplied to the Premises, including but not limited to electricity, telephone,
security, gas and cleaning of the Premises, together with any taxes thereon. It
any such. utilities or services are not separately metered to the Premises or
separately billed to the Premises, Lessee shall pay to Lessor a reasonable
proportion to be determined by Lessor of all such charges jointly metered or
billed with other premises in the Building, in the manner and within the time
periods set forth in Paragraph 4.2(d).
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively, "assigned or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent given under and subject to the terms of
Paragraph 36.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Losses shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs, which
results or will result in a reduction of the Net Worth of Lessee, as hereinafter
defined, by an amount equal to or greater than twenty-five percent (25%) of such
Net Worth of Lessee as it was represented to Lessor at the time of full
execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or Is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent. "NET
WORTH OF LESS" for purposes of this Lease shall be the net worth of Lessee
(excluding any Guarantors) established under generally accepted accounting
principles consistently applied.
<PAGE>
(d) An assignment or subletting of Lessee's interest In this Lease
without Lessor's specific prior written consent shall, at Lessor's option, be a
Default curable after notice per Paragraph 13.1, or a non-curable Breach without
the necessity of any notice and grace period. It Lessor elects to treat such
unconsented to assignment or subletting as a non-curable Breach, Lessor shall
have the right to either: (1) terminate this Lease, or (ii) upon thirty (30)
days' written notice ("Lessor's Notice"), increase the monthly Base Rent for the
Premises to the greater of the then fair market rental value of the Premises, as
reasonably determined by Lessor. or one hundred ten percent (110%) of the Base
Rent then in effect. Pending determination of the now fair market rental value,
if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice,
with any overpayment credited against the next Installments) of Base Rent coming
due, and any underpayment for the period retroactively to the effective date of
the adjustment being due and payable immediately upon the determination thereof.
Further, in the event of such Breach and rental adjustment, (1) the purchase
price of any option to purchase the Premises held by Lessee shall be subject to
similar adjustment to the then fair market value as reasonably determined by
Lessor (without the Lease being considered an encumbrance or any deduction for
depreciation or obsolescence, and considering the Premises at its highest and
best use and in good condition) or one hundred ten percent (110%) of the price
previously in effect, (ii) any index-oriented rental or price adjustment
formulas contained in this Lease shall be adjusted to require that the base
Index be determined with reference to the index applicable to the time of such
adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the new
rental bears to the Base Rent in effect immediately prior to the adjustment
specified in Lessor's Notice.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not (i) be effective without the express written assumption by such
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, nor (111) after the primary
liability of Lessee for the payment of Base Rent and other sums due Lessor
hereunder or for the performance of any other obligations to be performed by
Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or disapproval of
an assignment. Neither a delay In the approval or disapproval of such assignment
nor the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for the Default or Breach by
Lessee of any of the terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting by Losses or to
any subsequent or successive assignment or subletting by the assignee or
sublessee. However, Lessor may consent to subsequent sublettings and assignments
of the sublease or any amendments or modifications thereto without notifying
Lessee or anyone else liable under this Lease or the sublease and without
obtaining their consent, and such action shall not relieve such persons from
liability under this Lease or the sublease.
(d) In the event of any Default or Breach of Lessee's obligation
under this Lease, Lessor may proceed directly against Lessee, any Guarantors or
anyone else responsible for the performance of the Lessee's obligations under
this Lease, including any sublessee, without first exhausting Lessor's remedies
against any other person or entity responsible therefor to Lessor, or any
security held by Lessor.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's determination as
to the financial
<PAGE>
and operational responsibility and appropriateness of the proposed assignee or
sublessee, Including but not limited to the intended use and/or required
modification of the Premises, if any, together with a non-refundable deposit of
$ 1,000 or ten percent (10%) of the monthly Base Rent applicable to the portion
of the Premises which is the subject of the proposed assignment or sublease,
whichever Is greater, as reasonable consideration for Lessor's considering and
processing the request for consent. Lessee agrees to provide Lessor with such
other or additional Information and/or documentation as may be reasonably
requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed.
for the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other than
such obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented in writing.
<PAGE>
(g) The occurrence of a transaction described in Paragraph 12.2(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased by an amount equal to six (6) times the then
monthly Base Rent, and Lessor may make the actual receipt by Lessor of the
Security Deposit increase a condition to Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment
or subletting, may require that the amount and adjustment schedule of the rent
payable under this Lease be adjusted to what is then the market value and/or
adjustment schedule for property similar to the Premises as then constituted, as
determined by Lessor.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
Interest in all rentals and income arising from any sublease of all or a portion
of the Premises heretofore or hereafter made by Lessee, and Lessor may collect
such rent and income and apply same toward Lessee's obligations under this
Lease: provided, however, that until a Breach (as defined in Paragraph 13.1)
shall occur in the performance of Lessee's obligations under this Lease, Lessee
may, except as otherwise provided in this Lease, receive, collect and enjoy the
rents accruing under such sublease. Lessor shall not, by reason of the foregoing
provision or any other assignment of such sublease to Lessor, nor by mason of
the collection of the rents from a sublessee, be deemed liable to the sublessee
for any failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor stating
that a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor the rents and other charges due and to become due under
the sublease. Sublessee shall rely upon any such statement and request from
Lessor and shall pay such rents and other charges to Lessor without any
obligation or right to inquire as to whether such Breach exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee, or, until the Breach has
been cured, against Lessor, for any such rents and other charges so paid by said
sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any obligation
to do so, may require any sublessee to attorney to Lessor, In which event Lessor
shall undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any other prior defaults
or breaches of such sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee under a sublease approved by Lessor shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default of
Lessee within the grace period, if any, specified in such notice. The sublessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor In connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is
<PAGE>
a reasonable minimum sum per such occurrence for legal services and costs in the
preparation and service of a notice of Default, and that Lessor may include the
cost of such services and costs in said notice as rent due and payable to cure
said default. A "DEFAULT" by Lessee is defined as a failure by Lessee to
observe, comply with or perform any of the terms, covenants, conditions or rules
applicable to Lessee under this Lease. A "BREACH" by Lessee is defined as the
occurrence of any one or now of the following Defaults, and, where a grace
period for cure after notice is specified herein, the failure by Lessee to cure
such Default prior to the expiration of the applicable grace period, and shall
entitle Lessor to pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent, Lessee's Share Area
Operating Expenses, or any other monetary payment required to be made by Lessee
hereunder as and when due, the failure by Lessee to p with reasonable evidence
of insurance or surety bond required under this Lease, or the failure of Lessee
to fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of five (5) days following
written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure to provide Lessor to provide Lessor with reasonable written evidence (in
duly executed original form, if applicable) of (i) compliance with Applicable
Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service
contracts required under Paragraph 7.1 (b), (iii) the rescission of an
unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy
Statement per Paragraph the subordination or non-subordination of this Lease per
Paragraph 30, (vi) the guaranty of the performance of Lessee's obligations under
this Law under Paragraphs 1.11 and 37, (vii) the execution of any document
requested under Paragraph 42 (easements), or (viii) any other documentation or
which Lessor may reasonably require of Lessee under the terms of this lease,
where any such failure continues for a period of ten (10 days following notice
by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that
are to be observed, complied with or performed by Lessee, other than those
described in Subparagraphs 13.1 (a), (b) or (c), above, where such Default is
such that more than thirty (30) days after written notice thereof by or on
behalf of Lessor to Lessee; provided, however, that if the nature of Lessee's
Default is s that more than thirty (30) days are reasonably required for its
cure, then it shall not be deemed to be a Breach of this Lease by Lessee if
Lessee commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (1) the making
by Lessee of any general arrangement or assignment for the benefit of creditors;
(if) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's assets
located at the Premises or of Lessee's interest In this Lease, where possession
is not restored to Lessee within thirty (30) days; or (iv) the attachment,
execution or other judicial seizure of substantially all of Lessee's assets
located at the Premises or of Lessee's interest in this Lease, where such
seizure is not discharged within thirty (30) days; provided, however, in the
event that any provision of this Subparagraph 13.1 (e) is contrary to any
applicable law, such provision shall be of no force or effect, and shall not
affect the validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement of Lessee
or of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially
false.
<PAGE>
(g) If the performance of Lessee's obligations under this Lease Is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (ill) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory breach basis,
and Lessee's failure, within sixty (60) days following written notice by or on
behalf of Lessor to Lessee of any such event, to provide Lessor with written
alternative assurances of security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee falls to perform any affirmative duty or
obligation of Lessee under this Lease, within the time period set forth above
after written notice to (or in case of an emergency, without notice), Lessor may
at its option (but without obligation to do so), perform such duty or obligation
on Lessee's behalf, but not limited to the obtaining of reasonably required
bonds, insurance policies, or governmental licenses, permits or approvals. The
costs and expenses such performance by Lessor shall be due and payable by Lessee
to Lessor upon invoice therefor. If any check given to Lessor by Lessee shall
not be honored by the bank upon which it is drawn, Lessor, at its own option,
may require all future payments to be made under this Lease by Lessee to be made
only by cashier check. In the event of a Breach of this Lease by Lessee (as
defined In Paragraph 13.1), with or without further notice or demand, and
without limiting Lessor exercise of any right or remedy which Lessor may have by
reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall terminate and
Losses shall immediately surrender possession of the Premises to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the worth at the time
of the award of the unpaid rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom. including but not limited to the cost of recovering
possession of the Premises, expenses of retailing, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District
in which the Premises are located at the time of award plus one percent (1%).
Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of
this Lease shall not waive Lessor's right to recover damages under this
Paragraph 13.2. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding the unpaid rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any pan thereof in a separate suit for such
rent and/or damages. If a notice and grace period required under Subparagraph
13.1(b), (c) or (d) was not previously given, a notice to pay rent or quit, or
to perform or quit, as the case may be, given to Lessee under any statute
authorizing the forfeiture of leases for unlawful detainer shall also constitute
the applicable notice for grace period purposes required by Subparagraph 13.1
(b),(c) or (d). In such case, the applicable grace period under the unlawful
detainer statue shall run concurrently after the one such statutory notice, and
the failure of Lessee to cure the Default within the greater of the two (2) such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.
<PAGE>
(b) Continue the Lease and Lessee's right to possession in effect
(In California under California Civil Code Section 1951.4) after Lessee's Breach
and recover the rent as it becomes due, provided Lessee has the right to sublet
or assign, subject only to reasonable limitations. Lessor and Lessee agree that
the limitations on assignment and subletting in this Lease are reasonable. Acts
of maintenance or preservation, efforts to relet the Premises, or the
appointment of a receiver to protect the Lessor's interest under this Lease,
shall not constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises are
located.
<PAGE>
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters occurring
or accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or for the
giving or paying by Lessor to or for Lessee of any cash or other bonus,
inducement or consideration for Lessee's entering into this Lease, all of which
concessions are hereinafter referred to as "INDUCEMENT PROVISIONS" shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease to be performed or observed by
Lessee during the term hereof as the same may be extended. Upon the occurrence
of a Breach (as defined in Paragraph 13.1) of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this Lease and
of no further force or effect, and any rent, other charge, bonus, inducement or
consideration theretofore abated, given or paid by Lessor under such an
Inducement Provision shall be immediately due and payable by Lessee to Lessor,
and recoverable by Lessor, as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by
Lessor of rent or the cure of the Breach which initiated the operation of this
Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this
Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of
such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by the terms of any ground lease, mortgage or deed of trust covering the
Premises. Accordingly, if any installment of rent or other sum due from Lessee
shall not be received by Lessor or Lessor's designee within ten (10) days after
such amount shall be due, then, without any requirement for notice to Lessee,
Lessee shall pay to Lessor a late charge equal to six percent (6%) of such
overdue amount. The parties hereby agree that such late charge represents a fair
and reasonable estimate of the costs Lessor will incur by reason of late payment
by Lessee. Acceptance of such late charge by Lessor shall in no event constitute
a waiver of Lessee's Default or Breach with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor's option, become due and payable quarterly
in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor falls within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph 13.5, a
reasonable time shall in no event be less than thirty (30) days after receipt by
Lessor, and by any Lender(s) whose name and address shall have been furnished to
Lessee in writing for such purpose, of written notice specifying wherein such
obligation of Lessor has not been performed; provided, however, that if the
nature of Lessor's obligation is such that more than thirty (30) days after such
notice are reasonably required for its performance, then Lessor shall not be in
breach of this Lease if performance is commenced within such thirty (30) day
period and thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(all of which are herein called "condemnation"), this Lease shall terminate as
to the part so taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of the floor
area of the Premises, or more than twenty-five percent (25%) of the portion of
the Common Areas designated for Lessee's parking, is taken by condemnation,
Lessee may, at Lessee's option, to be exercised in writing within ten (10) days
after Lessor shall have given Lessee written notice of such taking (or in the
<PAGE>
absence of such notice, within ten (10) days after the condemning authority
shall have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises taken
bears to the total rentable floor area of the Premises. No reduction of Base
Rent shall occur it the condemnation does not apply to any portion of the
Premises. Any award for the taking of all or any part of the Premises under the
power of eminent domain or any payment made under threat of the exercise of such
power shall be the property of Lessor, whether such award shall be made as
compensation for diminution of value of the leasehold or for the taking of the
fee, or as severance damages; provided, however, that Lessee shall be entitled
to any compensation, separately awarded to Lessee for Lessee's relocation
expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is
not terminated by reason of such condemnation, Lessor shall to the extent of its
net severance damages received, over and above Lessee's Share of the legal and
other expenses incurred by Lessor in the condemnation matter, repair any damage
to the Premises caused by such condemnation authority Lessee shall be
responsible for the payment of any amount in excess of such net severance
damages required to complete such repair.
15. BROKERS' FEES.
15.1 PROCURING CAUSE. The Broker(s) named in Paragraph 1.10 is/are the
procuring cause of this Lease.
15.2 ADDITIONAL TERMS. Unless Lessor and Broker(s) have otherwise agreed
In writing, Lessor agrees that: (a) if Lessee exercises any Option (as defined
in Paragraph 39. 1) granted under this Lease or any Option subsequently granted,
or (b) if Lessee acquires any rights to the Premises or other premises in which
Lessor has an interest, or (c) it Lessee remains in possession of the Premises
with the consent of Lessor after the expiration of the term of this Lease after
having failed to exercise an Option, or (d) If said Brokers are the procuring
cause of any other lease or sale entered into between the Parties pertaining to
the Premises and/or any adjacent property in which Lessor has an interest, or
(e) If Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then as to any of said transactions, Lessor shall pay
said Broker(s) a fee In accordance with the schedule of said Broker(s) in effect
at the time of the execution of this Lease.
15.3 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease, whether such transfer is by agreement or by operation of
law, shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be an intended third party beneficiary of the provisions
of Paragraph 1.10 and of this Paragraph 15 to the extent of its interest in any
commission arising from this Lease and may enforce that right directly against
Lessor and its successors.
15.4 REPRESENTATIONS AND WARRANTIES. Lessee and Lessor each represent
and warrant to the other that it has had no dealings with any person, firm,
broker or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder's fee in
connection with said transaction. Lessee and Lessor do each hereby agree to
indemnity, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, and/or attorneys' fees
reasonably incurred with respect thereto.
16. TENANCY AND FINANCIAL STATEMENTS.
16.1 TENANCY STATEMENT. Each Party (as "RESPONDING PARTY") shall within
ten (10) days after written notice from the other Party (the "REQUESTING PARTY")
execute,
<PAGE>
acknowledge and deliver to the Requesting Party a statement In writing In a form
similar to the then most current "TENANCY STATEMENT" published by the American
Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reason the Requesting Party.
16.2 FINANCIAL STATEMENT. If Lessor desires to finance, refinance or
sell the Premises or the Building, or any part thereof, Lessee a shall deliver
to any potential lender or purchaser designated by Lessor such financial
statements of Lessee and such Guarantors as may be reasonably required by such
lender or purchaser, including but not limited to Lessee's financial statements
for the past three (3) years. All such financial statements by Lessor and such
lender or purchaser In confidence and shall be used only for the purposes herein
set forth.
17. LESSOR'S LIABILITY. The term "LESSOR" as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises. In the event
of a transfer of Lessor's title or interest in the Premises or in this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit hold by Lessor at the time of such transfer or
assignment. Except as provided In Paragraph 15.3, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants under this Lease to be performed
by the Lessor shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision
19. INTEREST ON POST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within ten (10) days
following the date on which it was due, shall bear interest from the date due at
the prime rate charged by the largest state chartered bank in the state in which
the Premises are located plus four percent (4%) per annum, but not exceeding the
maximum rate allowed by law, in addition to the potential late charge provided
for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under the terms
of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the nature. quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. Each Broker shall be an intended third party beneficiary
of the provisions of this Paragraph 22.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
messenger or courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission during normal business hours, and shall be deemed sufficiently
given if served In a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notice purposes. Either Party may by written notice to
<PAGE>
the other specify a different address for notice purposes, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for of mailing or delivering notices to Lessee. A copy of all
notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by written notice to Lessee.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail, the notice shall be deemed given three (3) business days after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
<PAGE>
delivery shall be deemed given twenty-four (24) hours after delivery of the same
to the United States Postal Service or courier. If any notice is transmitted by
facsimile transmission or similar means, the same shall be deemed served or
delivered upon telephone or facsimile confirmation of receipt of the
transmission thereof, provided a copy is also delivered via delivery or mail. If
notice is received on a Saturday or a Sunday or a legal holiday, it shall be
deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any such act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent
or similar act by Lessee, or be construed as the basis of an estoppel to enforce
the provision or provisions of this Lease requiring such consent. Regardless of
Lessor's knowledge of a Default or Breach at the time of accepting rent, the
acceptance of rent by Lessor shall not be a waiver of any Default or Breach by
Lessee of any provision hereof. Any payment given Lessor by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or earlier termination of
this Lease. In the event that Lessee holds over in violation of this Paragraph
26 then the Base Rent payable from and after the time of the expiration or
earlier termination of this Lease shall be increased to one Hundred Twenty-Five
percent (125%) of the Base Rent applicable during the month immediately
preceeding such expiration or earlier termination. Nothing contained herein
shall be construed as a consent by Lessor to any holding over by Lessee.
27. 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.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed or
performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed by Lessor upon the real property of which the Premises are a
part, to any and all advances made on the security thereof, and to all renewals,
modifications, consolidations, replacements and extensions thereof, Lessee
agrees that the Lenders holding any such Security Device shall have no duty,
liability or obligation to perform any of the obligations of Lessor under this
Lease, but that in the event of Lessor's default with respect to any such
obligation, Lessee will give any Lender whose name and address have been
furnished Lessee in writing for such purpose notice of Lessor's default pursuant
to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any
Option granted hereby superior to the lien of its Security Device and shall give
written notice thereof to Lessee, this Lease and such
<PAGE>
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership, (ii) be subject to any offsets or defenses
which Lessee might have against any prior lessor, or (iii) be bound by
prepayment of more than one month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this lease, Lessee's subordination of this Lease
shall be subject to receiving assurance (a non-disturbance agreement") from the
Lender that Lessee's possession and this Lease, including any options to extend
the form hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises.
30.4 SELL-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding to
enforce the terms hereof or declare rights hereunder, the Prevailing Party (as
hereafter defined) in any such proceeding, action, or appeal thereon, shall be
entitled to reasonable attorneys' fees. Such fees may be awarded in the same
suit or recovered in a separate suit, whether or not such action or proceeding
is pursued to decision or judgment. The term "Prevailing Party" shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fee award shall not be computed In accordance with any court tee
schedule, but shall be such as to fully reimburse all attorneys' fees reasonably
Incurred. Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach. Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.
32. LESSOR'S ACCESS; Showing Premises; Repairs. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the same
to prospective purchasers, lenders, or lessees, and making such alterations,
repairs, improvements or additions to the Premises or to the Building, as Lessor
may reasonably deem necessary. Lessor may at any time place on or about the
Premises or Building any ordinary "For Sale" signs and Lessor may at any time
during the lost one hundred eighty (180) days of the term hereof place on or
about the Premises any ordinary "For Lease" signs. All such activities of Lessor
shall be without abatement of rent or liability to Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises without first having
obtained Lessor's prior written consent. Notwithstanding anything to the
contrary in this Lease, Lessor shall not be obligated to exercise any standard
of reasonableness in determining whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the exterior of the Premises
or the Building, except that Lessee may, with Lessor's prior written consent,
install (but not on the roof) such signs as are reasonably required to advertise
Lessee's own business so long
<PAGE>
as such signs am in a location designated by Lessor and comply with Applicable
Requirements and the signage criteria established for the Industrial Center by
Lessor. The installation of any sign on the Premises by or for Lessee shall be
subject to the provisions of Paragraph 7 (Maintenance, Repairs, Utility
Installations, Trade Fixtures and Alterations). Unless otherwise expressly
agreed herein, Lessor reserves all rights to the use of the roof of the
Building, and the right to install advertising signs on the Building, including
the roof, which do not unreasonably interfere with the conduct of Lessee's
business: Lessor shall be entitled to all revenues from such advertising signs.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, Lessor shall in to event of any such surrender,
termination or cancellation, have the option to continue any one or all of any
existing subtenancies. Lessor's failure within ten (10) days following any such
event to make a written election to the contrary by written notice to the holder
of any such lesser interest, shall constitute Lessor's election to have such
event constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor's actual reasonable costs and expenses (including but not
limited to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent pertaining to this Lease or the Premises, including but not
limited to consents to an assignment a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefore in addition to the deposit
described in Paragraph 12.2(e), Lessor may, as a condition to considering any
such request by Lessee, require that Lessee deposit with Lessor an amount of
money (in addition to the Security Deposit held under Paragraph 5) reasonably
calculated by Lessor to represent the cost Lessor will incur In considering and
responding to Lessee's request. Any unused portion of said deposit shall be
refunded to Losses without Interest. Lessor's consent to any act, assignment of
this Lease or subletting of the Premises by Lessee shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Lessor at the time
of such consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein any
particular condition to Lessor's consent shall not preclude the impositions by
Lessor at the time of consent of such further or other conditions as are then
reasonable with reference to the particular matter for which consent is being
given.
37. GUARANTOR.
37.1 FORM OF GUARANTY. If there are to be any Guarantors of this Lease
per Paragraph 1.11, the form of the guaranty to be executed by each such
Guarantor shall be in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations as Lessee under this lease, including but not limited to the
obligation to provide the Tenancy Statement and Information required in
Paragraph 16.
37.2 ADDITIONAL OBLIGATIONS OF GUARANTOR. It shall constitute a Default
of the Lessee under this Lease if any such Guarantor fails or refuses, upon
reasonable request by Lessor to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor (and
of the party signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and resolution of its board of
<PAGE>
directors authorizing the making of such guaranty, together with a certificate
of incumbency showing the signatures of the persons authorized to sign on its
behalf, (b) current financial statements of Guarantor as may from time to time
be requested by Lessor, (c) a Tenancy Statement, or (d) written confirmation
that the guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises and
the performance of all of the covenants, conditions and provisions on Lessee's
part to be observed and performed under this Lease, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
<PAGE>
39. OPTIONS.
39.1 DEFINITION. As used in this Lease, the word "OPTION" has the
following meaning: (a) the right to extend the term of this Lease or to renew
this Lease or to extend or renew any lease that Lessee has on other property of
Lessor; (b) the right of first refusal to lease the Premises or the right of
first offer to lease the Premises or the right of first refusal to lease other
property of Lessor or the right of first offer to lease other property of
Lessor; (c) the right to purchase the Premises, or the right of first refusal to
purchase the Premises, or the right of first offer to purchase the Premises, or
the right to purchase other property of Lessor, or the right of first refusal to
purchase other property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee
in this Lease is personal to the original Lessee named in Paragraph 1.1 hereof,
and cannot be voluntarily or involuntarily assigned or exercised by any person
or entity other than said original Lessee while the original Lessee is in full
and actual possession of the Premises and without the intention of thereafter
assigning or subletting. The Options, if any, herein granted to Lessee are not
assignable, either as a part of an assignment of this Lease or separately or
apart therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later option cannot be exercised unless the
prior Options to extend or renew this Lease have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary: (i) during
the period commencing with the giving of any notice of Default under Paragraph
13.1 and continuing until the noticed Default is cured, or (ii) during the
period of time any monetary obligation due Lessor from Lessee is unpaid (without
regard to whether notice thereof is given Lessee), or (iii) during the time
Lessee is in Breach of this Lease, or (iv) in the event that Lessor has given to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during the twelve (12) month period immediately preceding the exercise of the
Option, whether or not the Defaults are cured.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a)
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's due and
timely exercise of the Option, if, after such exercise and during the term of
this Lease, (i) Lessee falls to pay to Lessor a monetary obligation of Lessee
for a period of thirty (30) days after such obligation becomes due (without any
necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to
Lessee three (3) or more notices of separate Defaults under Paragraph 13.1
during any twelve (12) month period, whether or not the Defaults are cured, or
(III) if Lessee commits a Breach of this Lease.
40. RULES AND REGULATIONS. Lessee agrees that it will abide by, and keep and
observe all reasonable rules and regulations ("Rules and Regulations" which
Lessor may make from time to time for the management, safety, care, and
cleanliness of the grounds, the parking and unloading of vehicles and the
preservation of good order, as well as for the convenience of other occupants or
tenants of the Building and the Industrial Center and their Invitees.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that
<PAGE>
Lessor shall have no obligation whatsoever to provide same. Lessee assumes all
responsibility for the protection of the Premises, Lessee its agents and
invitees and their property from the acts of third parties.
42. RESERVATIONS. Lessor reserves the right, from time to time, to grant,
without the consent or joinder of Lessee, such easements, rights of way, utility
raceways, and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights
of way, utility raceways, dedications, maps and restrictions do not reasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If It shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or general or
limited partnership, each individual executing this Lease on behalf of such
entity represents and warrants that he or she is duly authorized to execute and
deliver this Lease on its behalf. If Lessee Is a corporation, trust or
partnership, Lessee hall, within thirty (30) days after request by Lessor,
deliver to Lessor evidence satisfactory to Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and
the typewritten or handwritten provisions shall be controlled by the typewritten
or handwritten provisions.
46. OFFER. Preparation of this Lease by either Lessor or Lessee or Lessor's
agent or Lessee's agent and submission of same to Lessee or Lessor shall not be
deemed an offer to lease. This Lease is not intended to be binding until
executed and delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
parties In interest at the time of the modification. The Parties shall amend
this Lease from time to time to reflect any adjustments that are made to the
Base Rent or other rent payable under this Lease. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by an Institutional insurance company or pension plan Lender In
connection with the obtaining of normal financing or refinancing of the property
of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if more
then one person or entity is named herein as either Lessor or Losses, the
obligations of such multiple parties shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or Lessee.
<PAGE>
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM MD
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAI OR THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR
ATTORNEYS REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED
TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE
OF ASBESTOS, UNDERGROUND STORAGE TANKS OF HAZARDOUS SUBSTANCES. NO
REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL
REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS 0R THEIR
CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION To
WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA,
AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE
CONSULTED.
The parties hereto have executed this Lease at the place and on the dates above
their respective signatures.
Executed at: 3375 Scott Blvd., Suite 308 Executed at: 338S Scott Blvd.
Santa Clara, CA 95054 Santa Clara, CA
95054
on: 13 May 96 on:
By LESSOR: By LESSEE:
COOPERAGE-ROSE PROPERTIES II AURUM SOFTWARE INCORPORATED
By: By:
Name Printed: Terrence J. Rose Name Printed: Brigette Wilson
Title: Partner Title: CFO
By: BY:
Name Printed: Name Printed:
Title: Title:
Address: 3375 Scott Blvd., Suite 308 Address: 3385 Scott Blvd.
Santa Clara, CA 95054 Santa Clara, CA 95054
Telephone:(408) 426-1234 Telephone: (408) 986-8100
Facsimile:(408) 988-4768 Facsimile: (408) 654-3550
BROKER: BROKER:
Executed at: Executed at:
on: on:
By: By:
Name Printed: Name Printed:
Title: Title:
Address: Address:
Telephone: ( ) Telephone: ( )
Facsimile: ( ) Facsimile: ( )
NOTE: These forms are often modified to meet changing requirements of law and
needs of the industry. Always write or call to make sure you are utilize the
most current form:
<PAGE>
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 345 So. Figueroa Street, M-1, Los
Angeles, CA 90071. (213) 687-8777.
<PAGE>
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
MULTI-TENANT LEASE - MODIFIED NET
1. Late Charge. In reference to Paragraph 13.4 of the Lease, the ten (10) day
-----------
time period for performance shall end at 4:00 p.m. Pacific Time on the tenth
(10) day. Notwithstanding anything to the contrary contained in the previous
sentence, if the ten (10) day time period for performance ends on a Saturday,
Sunday, or federal, state, city or legal holiday, then such date for performance
shall automatically be accelerated to 4:00 p.m. Pacific Time on the prior day
which is not a Saturday, Sunday or federal, state, city or legal holiday.
2. Legal Fees: Any legal fees incurred by Lessor related to this transaction
----------
shall be paid by Lessee. Lessee's obligation for such fees shall not exceed
$2,000.00
3. Option to Extend: Lessee shall have one (1) option to renew the lease for a
----------------
period of three(3) months, exerciseable by written notice to Lessor no later
than January 1, 1997, at the same terms and conditions set forth in the lease,
including without limitations the monthly Base Rental rate.
<PAGE>
[EXHIBIT A NOT SHOWN]
<PAGE>
[EXHIBIT B NOT SHOWN]
<PAGE>
SECOND ADDENDUM TO STANDARD INDUSTRIAL/
COMMERCIAL MULTI-TENANT LEASE - MODIFIED-NET
--------------------------------------------
THIS SECOND ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL MULTITENANT LEASE
(this "Addendum") is made by and between Cooperage-Rose Properties 11, a
California general partnership ("Lessor") and Aurum Software Incorporated, a
California corporation ("Lessee"), to be a part of that certain Lease Agreement
(the "Lease") of even date herewith between Lessor and Lessee concerning. space
located at 3385 Scott Boulevard , Santa Clara, California 95054 ("Premises").
Lessor and Lessee agree that, notwithstanding anything to the contrary in the
Lease, the Lease is hereby modified and supplemented as set forth below.
1. COMMON AREA OPERATING EXPENSES, "Common Area Operating Expenses" shall not
------------------------------
include and Lessee shall in no event have any obligation to perform or to pay
directly or to reimburse lessor for, all or any portion of the following
repairs, maintenance, improvements, replacements, premiums, claims, losses,
fees, charges, costs and expenses (collectively, "Costs"): (a) Costs occasioned
by the act, omission or violation of any Applicable Law by Lessor, any other
occupant of the Building, the Industrial Center, or their respective agents,
employees or contractors; (b) Costs occasioned by fire, acts of God, or other
insured casualties or by the exercise of the power of eminent domain; Costs to
correct any construction defect in the Premises or the Industrial Center or to
comply with any Applicable Law on the Commencement Date; (d) Costs of any
renovation, improvement, painting or redecorating of any portion of the
Industrial Center not made available for Lessee's use; (e) Costs incurred in
connection with negotiations or disputes with any other occupant of the
Industrial Center and Costs arising from the violation by Lessor or any occupant
of the Industrial Center (other than Lessee) of the terms and conditions of any
lease or other agreement; (f) insurance Costs for coverage not customarily paid
by tenants of similar projects in the vicinity of the Premises (including
earthquake insurance), insurance deductibles, and co-insurance payments; (g)
Costs incurred in connection with the presence of any Hazardous Substances,
except to the extent caused by the release or emission of the Hazardous
Substance in question by Lessee; (h) Costs which could properly be capitalized
under generally accepted accounting principles; (1) Costs relating to the
repair, maintenance and replacement of the structural elements of the Building
and the Industrial Center; (j) interest, charges and fees incurred on debt,
payments on mortgages and rent under ground leases; (k) any fee, profit or
compensation retained by Lessor or its affiliates for management and
administration of the Industrial Center in excess of the management fee which
would be charged by a professional management service for operation of
comparable projects in the vicinity of the Building; and (1) reserves set aside
for maintenance or repair of the Common Areas.
2. HAZARDOUS SUBSTANCES. To the best knowledge of Lessor, (a) no Hazardous
---------------------
Substances are present on the Industrial Center or the soil, surface water or
groundwater thereof, (b) no underground storage tanks or asbestos containing
building materials are present on the Industrial Center, and 0 no action,
proceeding, or claim is pending or threatened involving the Industrial Center
concerning any Hazardous Substances or pursuant to any Applicable Laws or
Requirements. Under no circumstances shall Lessee be liable for or indemnify
Lessor from and against, all losses, costs, claims, liabilities and damages
(including attorneys' and consultants' fees) of every type and nature, directly
or indirectly arising out of or in connection with any hazardous Substance
present at any time on or about the Industrial Center, or the soil, air,
improvements, groundwater or surface water thereof, or the violation of any
Applicable Laws or Requirements, relating to any such Hazardous Substance,
except to the extent that any of the foregoing actually results from the release
or emission of Hazardous Substance on or about the Premises during the term of
the Lease by Lessee or its agents or employees in violation of Applicable Laws
or Requirements.
<PAGE>
3. CAPITAL IMPROVEMENTS. If any of Lessee's obligations under the Lease would
--------------------
require Lessee to pay any charge which could be treated as a capital improvement
under generally accepted accounting principles, then Lessor shall instead pay
such charge, the cost of the improvement shall be amortized over the useful
including life thereof (as reasonably determined by Lessor),and Lessee shall pay
the monthly amortized amount for interest such improvement for each month of
such useful life as it occurs during the term of the Lease.
4. MAINTENANCE REPAIRS. Lessor shall perform and construct, and Lessee shall
-------------------
have no responsibility to perform, construct or pay for, any repair, maintenance
or improvement (a) necessitated by the acts or omissions of Lessor or any other
occupant of the Industrial Center, or their respective agents, employees or
contractors, (b) required as a consequence of any violation of Applicable Law or
construction defect in the Premises or Building as of the Commencement Date, (C)
for which Lessor has a right of reimbursement from others, (d) which could be
treated as a "capital expenditure" under generally accepted accounting
principles, except as provided in paragraph 3, above.
<PAGE>
5. UTILITY INSTALLATIONS, TRADE FIXTURES, ALTERATIONS. Lessee-Owned
---------------------------------------------------
Alterations and/or Utility Installations and Lessee's trade fixtures, furniture,
equipment and other personal property installed in the Premises ("Lessee's
Property") shall at all times be and remain Lessee's property. Except for
Alterations and/or Utility Installations which cannot be removed without
structural injury to the Premises, at any time Lessee may remove Lessee's
Property from the Premises, provided that Lessee repairs all damage caused by
such removal, Upon request, Lessor shall advise Lessee in writing whether it
reserves the right to require Lessee to remove any Lessee-Owned Alterations
and/or Utility Installations from the Premises upon termination of the Lease.
6. INDEMNITY. Lessor shall not be released or indemnified from, and shall
---------
indemnify, defend, protect and hold harmless Lessee from , any damages,
liabilities, judgments, actions, claims, attorneys' fees, consultants' fees,
payments, costs or expenses arising from the negligence or willful misconduct of
Lessor or its agents, contractors, licenses or invitees, Lessor's violation of
Applicable Law, or a breach of Lessor's obligations or representations under the
Lease. Provided in no event shall Lessor be liable to Lessee for Lessee's lost
income or profit.
7. ASSIGNMENT AND SUBLETTING LESSEE. Without Lessor's prior written consent
--------------------------------
and without complying with any of the restrictions of Sections 12 or 39 of be
Lease, may sublet the Premises or assign the Lease to:(a) a subsidiary, or
corporation controlling, controlled by or under common control with Lessee; (b)
a successor corporation related to Lessee by merger, consolidation,
nonbankruptcy reorganization or government action; or (C) a purchaser of
substantially all of Lessee's assets located at the Premises. Provided that in
no such event shall Aurum Software, Inc. be released from its obligations under
the Lease. For purposes of the Lease, a sale of Lessee's capital stock shall not
be deemed an assignment, subletting or other transfer of the Lease or the
Premises requiring Lessor's consent.
8. APPROVALS. Whenever the Lease requires an approval consent, designation,
---------
definition, selection or judgment by either Lessor or Lessee, such approval,
consent, designation, determination, selection or judgment and any conditions
imposed thereby shall be reasonable and shall not be unreasonably withheld or
delayed and, in exercising any right or remedy hereunder, each party shall at
all times act reasonably and in good faith.
9. REASONABLE EXPENDITURES. Any expenditure by a party permitted or required
-----------------------
under the Lease, for which such party is entitled to demand and does demand
reimbursement from the other party, shall be limited to the fair market value of
the goods and services involved, shall be reasonably incurred and shall be
substantiated by documentary evidence available for inspection and review by the
other party or its representative during normal business hours.
10. EFFECT OF ADDENDUM. All terms with initial capital letters used herein as
------------------
defined terms shall have the meanings ascribed to them in the Lease unless
specifically defined herein. In the event of any inconsistency between this
Addendum and the Lease, the terms of this Addendum shall prevail.
<PAGE>
LESSOR: LESSEE:
COOPERAGE-ROSE PROPERTIES II, AURUM SOFTWARE INCORPORATED,
a California general partnership a California corporation
By: /s/ Terrance J. Ross By: /s/ Brigitte Wilson
Name: Terrance J. Ross Name: Brigitte Wilson
Its: Partner Its:
<PAGE>
EXHIBIT 10.6
December __, 1994
Mary E. Coleman
17095 Crescent Drive
Los Gatos, California 95032
Dear Mary:
It gives me great pleasure to offer you a promotion from Vice
President of Marketing to President and Chief Executive Officer of Aurum
Software, Inc. Your promotion will be effective November 23, 1994. The terms
of your employment are as follows:
1. Base Compensation. Your monthly base salary will be $14,583 per month. The
-----------------
base salary and bonus shall be reviewed annually by the Board or its
Compensation Committee and any annual increase will be effective as of the date
determined appropriate by the Board or its Compensation Committee.
2. Bonuses.
-------
(a) You will be eligible for a bonus of $6,250 per quarter based on
the financial performance of the Company each quarter based on a bonus formula
to be determined by the Board of Directors by January 1995. Financial
measurements will be based on the current fiscal year operating plan. Payments
for financial plan bonus achievements will be made 30 days after each quarter.
(b) You will be eligible for a bonus of $12,500 every six months for
completion of strategic objectives approved by the Board or its Compensation
Committee. The initial six month bonus period will begin January 1, 1995.
Bonus periods thereafter will be based on a six month period. Payments for
bonus achievements will be made 30 days after each period.
(c) The Company will pay the Q3'94 bonus of $5,250 as soon as cash
reasonably permits, representing 75% of the bonus payment for Q3'94, as agreed
to by Tom McNeight. In addition, the Company will pay the Q4'94 bonus of $7,000
due as VP of Marketing in lieu of any prorated CEO bonus during this Q4'94.
This bonus will be paid 30 days after close of Q4'94.
3. Stock Options and Other Incentives.
----------------------------------
(a) You will be granted a new stock option for that number of shares,
at the fair market value per share, at the first Board
<PAGE>
meeting after the close of the third round financing or subordi nated
convertible debt financing, such that the new option and your existing options
will give you the right to purchase an aggregate of five percent (5%) of the
Company's common stock (on a fully diluted basis) at the end of the Company's
third round of equity financing or subordinated convertible debt financing. The
vesting start date for this additional option will be November 23, 1994. To the
extent possible under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), such new option shall be an incentive stock option. The
option will vest at the rate of 1/60 per month from November 23, 1994, and shall
provide that the exercise price may be paid with a promissory note due five
years from the exercise date with interest at the minimum rate necessary to
prevent interest being imputed under the Code. The principal of this note will
be secured by the shares of stock. Your existing options will be repriced at
the same fair market value per share with vesting to remain unchanged from the
date of the initial grant of such options.
(b) In the event of the sale of all or substantially all of the
Company's assets, the sale of more than 50% of the Company's equity securities
or a merger following which the shareholders of the Company prior to the merger
do not own at least 50% of the voting power of the Company ("Corporate Sale"),
as long as you are continuing as President and Chief Executive Officer of the
Company, you will be entitled to receive a payment equal to five percent (5%) of
the value of the total sales price paid to the Company or its shareholders
("Sales Price"), subject to the following:
(i) If all or a portion of the consideration paid in the Corporate
Sale is other than cash, then the value of such non-cash consideration shall be
the fair market value thereof on the date the Corporate Sale is consummated as
determined in good faith by the Company's Board of Directors, disregarding,
solely for this purpose, any discount for restricted securities that was taken
into account in determining the Sales Price. If all or a portion of the
consideration payable in connection with the Corporate Sale in cludes contingent
future payments or an installment purchase at a fixed price in a fixed time
schedule, then the Company shall make an additional payment to you, determined
in accordance with this paragraph, as, when and if such contingency or
installment payments are received.
(ii) The form of any payment to you in this Section 3(b) shall be the
same as the form of payment constituting the Sales Price, and where such payment
may include restricted securi ties, you shall be entitled to receive on parity
any rights or benefits accorded the holders of the Preferred Stock in respect of
such restricted securities (including, for example, registration
<PAGE>
rights or information rights). The amount of any payment owing to you hereunder
shall be reduced by the value of any consideration you receive in a Corporate
Sale as a shareholder of the Company. Non-cash consideration will be valued as
provided above.
(iii) Your right to receive any payment hereunder shall be
subordinate to the aggregate liquidation preference accorded to the holders of
all series of the Preferred Stock of the Company outstanding at the consummation
of the Corporate Sale (without taking into account any right of participation
that may be included as part of such liquidation preference after such holders
have re covered the full dollar amount of their original investment) and no
payment shall be made to you until such aggregate liquidation preference has
been paid in full. For example, if the Sales Price in a Corporate Sale is
$10,250,000 and the aggregate liquidation preference is $10,000,000, you will
have the right to receive only $250,000, even though 5% of the Sales Price is
$512,500. By contrast, if such Sales Price is $15,000,000, you will have the
right to receive $750,000.
(c) Subject to your continuation as the President and Chief Executive
Officer of the Company, all stock options held by you shall accelerate and
become 100% vested immediately prior to the occurrence of a Corporate Sale.
(d) It is understood that on or before the execution of this letter
agreement, the holders of not less than 75% in interest of the voting stock of
the Company will have executed a written consent approving the vesting of your
stock options and the other compensation payments to be made to you pursuant to
this agreement in the event of a Corporate Sale. In the event of a change in
the ownership of the Company prior to any Corporate Sale that would render
ineffective such approval of the shareholders for purposes of Section 280G of
the Code, the parties agree that they will use their best efforts to satisfy the
requirements of Section 280G such that payment to you will not constitute a
"parachute payment" within the meaning of Section 280G; it is understood that
you will not be required to give up your right to receive any payments pursuant
to this agreement without your consent, which may be withheld in your
discretion, even if the result of withholding your consent is that the Company
will be unable to obtain the appropri ate shareholder approval of the payments.
4. Indemnification. The Company agrees to provide you with the same
---------------
indemnification as is provided for all directors and officers.
5. Termination and Termination Payments.
------------------------------------
<PAGE>
(a) You have the right to terminate your employment at any time upon
not less than one month's written notice to the Company. In the event of such an
election, your employment shall terminate effective upon the date set forth in
such notice. In such event, the Company shall pay you all compensation
(including base salary and pro rata bonus) due to you to the date of
termination.
(b) The Company shall have the right to terminate your employment with
"cause" upon three days' written notice to you. In such event, the Company
shall pay you all compensation (including base salary and accrued vacation but
excluding bonus) to you on the date of termination. For the purposes of this
agreement, "cause" shall mean (i) willful and repeated failure to comply with
the lawful written directions of the Company's Board of Directors, (ii) gross
negligence or willful misconduct in the performance of duties to the Company,
(iii) commission of any act of fraud with respect to the Company, or
(iv) conviction of a felony or a crime involving moral turpitude causing
material harm to the standing and reputa tion of the Company, in each case as
determined in good faith by the Company's Board of Directors.
(c) The Company shall have the right to terminate your Employment for
any reason without cause upon not less than one month written notice to you. If
the Company terminates your employment for any reason, without cause, the
Company shall pay you all compensation (including base salary and bonus) due to
you at the date of your termination and continue to pay you in equal
installments, an amount at an annual rate equal to the sum of your then current
base salary plus bonus, for the most recently com pleted fiscal period prior to
the effective date of termination, for a period of six months after the date of
such termination. During such period, you shall continue to be entitled to
partici pate in the Company's employee health, medical and other benefits on the
same basis as if you were an employee. The Company's obligation to make
payments under this section shall not terminate in the event you accept other
full time employment.
(d) If you resign for any of the following reasons, it shall be deemed
a termination of your employment by the Company without cause: (A) You shall be
assigned duties, performance requirements or working conditions significantly
different from or at signifi cant variance from the CEO position; (B) You shall
be placed in a lower stature position than the position described in this offer
letter; (C) Your benefits or compensation or potential bonus amounts hereunder
shall be reduced; (D) You shall cease to be the Chief Executive Officer of the
Company reporting to the Board of Directors; or (E) the Company shall otherwise
breach the material terms of this agreement.
<PAGE>
6. Vacation. You shall be entitled to paid vacation in accordance with the
--------
Company's vacation policy for employees, as in effect from time to time. The
Company shall reimburse you for any expenses incurred for cancellation of a
vacation in December 1994 (not to exceed $4,000) in conjunction with accepting
this position and transitioning responsibilities from Tom McNeight.
7. Benefits. Aurum will provide you with benefits as part of its standard
--------
employee medical and dental plan, life, accidental death and dismemberment
insurance, and long term disability with the option to buy additional life and
LTD benefits. Aurum also offers a 401K plan for eligible employees.
8. Entire Agreement. This agreement represents the entire agreement between
----------------
you and the Company concerning the matters addressed herein, and supersedes all
prior agreements and under standings on such matters.
_________________________
To indicate your acceptance of this offer, please sign this letter. We are
pleased to have you as Aurum's President and CEO and look forward to a long and
beneficial working relationship.
Sincerely,
AURUM SOFTWARE, INC.
By: /s/ David Buchanan
---------------------------
Signed: /s/ Mary E. Coleman Date: December 22, 1994
------------------- -----------------
Mary E.Coleman
<PAGE>
Aurum Software, Inc.
3385 Scott Boulevard
Santa Clara, California 95054
September __, 1996
Mary E. Coleman
17095 Crescent Drive
Los Gatos, California 95032
Re: Amendment of Employment Agreement dated December 22, 1994
---------------------------------------------------------
Dear Mary:
The purpose of this letter is to clarify certain provisions of the
employment offer letter dated December 22, 1994 pursuant to which you became
President and Chief Executive Officer of Aurum Software, Inc. (the "Employment
Letter").
The Company and you agree that it is in your mutual interests that
your right set forth in Section 3(b) of the Employment Letter to receive an
incentive payment equal to five percent of the Sales Price (as defined in the
Employment Letter) in the event of a Corporate Sale (as defined in the
Employment Letter) should terminate effective with the closing of the Company's
anticipated initial public offering. By executing this letter in the space
provided below, you consent to the amendment of the Employment Letter such that
all the provisions of Section 3(b) of the Employment Agreement shall terminate
automatically upon the closing of a firmly underwritten initial public offering
of the Company's Common Stock. Except as expressly set forth herein, the
Employment Letter shall continue in full force and effect in accordance with its
terms.
Sincerely,
AURUM SOFTWARE, INC.
By:/s/ Christopher L. Dier
-----------------------
Christopher L. Dier
Vice President, Finance & CFO
Acknowledged and Agreed:
/s/ Mary E. Coleman
- --------------------------------------
Mary E. Coleman
<PAGE>
EXHIBIT 10.7
July 8, 1996
Chris Dier
2793 Gardendale Dr.
San Jose, CA 95125
Dear Chris:
It gives me great pleasure to offer you a position as an employee of Aurum
Software, Inc. with the title of Vice President of Finance/Chief Financial
Officer. Your employment will be effective based on a mutually convenient start
date. The terms of your employment follow:
COMPENSATION
Your starting salary will be $2,884.62 per week, (which amounts to $150,000.00
annualized), payable in accordance with Aurum's standard practices. You will be
an exempt employee.
In addition, you will be eligible for the 1996 Incentive Compensation Plan which
provides a quarterly bonus up to $10,000, (which amounts to $40,000 annually)
provided you are employed by Aurum when the bonus becomes payable. Bonuses are
paid 30 days after the close of each quarter.
Subject to your acceptance of our offer, it is Aurum's intention to issue Stock
Options for 365,895 shares (equivalent to 1.0% of current outstanding shares) of
Aurum's Common Stock pursuant to Aurum's 1996 Stock Option Plan based on Board
approval. The purchase price of the shares will be $1.50 per share and has been
approved by the Board of Directors today. The options vest over a 4 year period
with the first 25% vesting at the end of the first year of employment.
Subsequent to the first year of employment options vest on a monthly basis at a
rate of 1/48 per month. Your vesting date will be your first day of employment.
In the event of a change in control of the company due to a merger or
acquisition, and if you are not offered a comparable position in the combined
company, you will be guaranteed accelerated vesting of 24 months of your
original grant of 365,895 shares. If a change of control occurs after 24 months
from your hire date, the board of directors will consider acceleration of a
portion or the remainder of your unvested stock options on a discretionary
basis.
<PAGE>
BENEFITS
Aurum currently provides medical and dental coverage for you and contributes
half of the cost of the monthly premium for your eligible dependents. In
addition, Aurum provides life, accidental death and dismemberment insurance, and
long term disability with the option to buy additional life and LTD benefits.
Aurum also offers a 401k plan for eligible employees.
GENERAL
Please note that the United States Immigration and Naturalization Service
requires that employers establish the eligibility of all employees as a U.S.
citizen, permanent resident or individual authorized for employment in the
United States. You will be required to present adequate documentation on your
first working day.
California Labor Code 3714 requires notification by Aurum that any employee who
is injured on the job is entitled to Workers' Compensation benefits.
If you accept Aurum's offer of employment, your employment will be for an
unspecified duration and will constitute an "at will" employment arrangement,
which may be terminated at any time with or without cause at the option of
either you or Aurum with or without notice.
Lastly, in exchange for the above stated compensation, you will be required to
sign Aurum's Standard Invention and Secrecy Agreement. A copy of this document
has been enclosed. Please sign and return along with this letter. Should you
have any questions regarding this document, please feel free to contact me.
To indicate your acceptance of Aurum's offer of employment, please sign this
letter. Return the original to our Human Resources Dept., the other is intended
for your records. I look forward to having you on board and towards a long and
beneficial working relationship.
This offer is valid through July 12, 1996.
Sincerely,
/s/ MARY E. COLEMAN
Mary E. Coleman
President & CEO
Date: 7/12/96
---------------------
Accepted: /s/ CHRIS L. DIER
-2-
<PAGE>
GUPTA EXHIBIT 10.8
OEM SOFTWARE LICENSE AGREEMENT
(GENERAL TERMS AND CONDITIONS)
PREAMBLE: The following are the general terms and conditions of an agreement
("Agreement ")which consists of (i) these General Terms and Conditions and (ii)
the Signature Pages. The documents are referenced together by the contract
number and are to be taken together and not separately. THIS AGREEMENT SHALL BE
EFFECTIVE AS OF THE "EFFECTIVE DATE SPECIFIED IN THE SIGNATURE PAGES ONLY WHEN
THE SIGNATURE PAGES ARE EXECUTED BY BOTH PARTIES AND ALL PAGES OF BOTH THE
GENERAL TERMS AND CONDITIONS AND THESE SIGNATURE PAGES ARE INITIALED WHERE
INDICATED BY BOTH PARTIES.
IN CASE OF CONFLICT BETWEEN THE TERMS AND CONDITIONS SPECIFIED IN THE GENERAL
TERMS AND CONDITIONS BELOW AND THOSE OF THE SIGNATURE PAGES THE TERMS AND
CONDITIONS OF THE SIGNATURE PAGES SHALL CONTROL.
NOTATIONAL CONVENTION: Provisions of these General Terms and Conditions shall
be referred to as "Section X.Y(z) GTC". Provisions of the Signature Pages shall
be referred to as "Item A.B(c) SP"
1. PURPOSE OF THIS AGREEMENT
This Agreement is between GUPTA Corporation ("GUPTA"), a California corporation,
with offices at 1060 Marsh Road, Menlo Park, CA 94025 and the organization as
specified in the Signature Pages ("OEM"), GUPTA and OEM desire to establish the
terms and condition under which GUPTA will provide software programs for
manufacturing and integration into OEM Products for subsequent sublicensing and
distribution by OEM and its distributors subject to the terms and conditions
below.
2. CERTAIN DEFINITIONS
2.1 "Distributor" shall mean a value added reseller, dealer, software
-------------
develo per or other third party which is granted certain non-exclusive rights by
OEM in accordance with the terms of the Agreement.
2.2 "End User" shall mean a customer of OEM (or a Distributor) who acquires
----------
(and has proof of) a valid license to use the OEM Product (and the Programs as
an embedded component for personal or internal business purposes in accordance
with the End User License Agreement.
2.3 "End User License Agreement" shall mean the standard OEM license
----------------------------
agreement accompanying each copy of Me OEM Product which specifies the terms and
conditions of the license to use the OEM Product and the Programs as an embedded
component.
2.4 "Marks" shall mean the trademarks, service marks and logos of GUPTA and
-------
or its licensors.
2.5 "OEM Product" shall mean only the OEM software programs or products
-------------
specifically described or listed in the Signature Pages and shall also include
any Derivative Works. ANY OEM PRODUCT MUST NOT FUNCTION AS A GENERAL PURPOSE
DATABASE MANAGEMENT OR APPLICATION DEVELOPMENT SYSTEM.
2.6 "Product Update(s)" shall mean all maintenance releases of the Programs
-------------------
(denoted by
**Confidential treatment requested**
<PAGE>
GUPTA by changing a number to the right of the second decimal point in the then
current version number, e.g., a change from version 3.1.1 to 3.1.2.) and certain
other modifications to the Programs designed to provide bug fixes or minor
function improvements to the Programs which may be denoted as Product Updates by
GUPTA from time to time in its generally published programs and policies.
2.7 "Product Upgrade(s)" shall mean all minor version releases and major
--------------------
version releases of the Programs (denoted by GUPTA by changing a number to the
left of the first decimal point in the then-current version number, e.g., a
change from version 3.1.2 to 4.0 or from version 3.1.2 to 3.2) and certain other
modifications to the Programs which may be denoted as Product Upgrades by GUPTA
from time to time in its generally published programs and policies.
2.8 "Program (s)" shall mean only the current (as of the date of execution
-------------
of this Agreement) versions of the software program(s) in object code form
specified in the Signature Pages.
2.9 "Territory" shall mean the geographic region(s) specified in the
-----------
Signature Pages.
2.10 "List Price" shall mean GUPTA suggested list price in the Territory for a
------------
single copy of a Program, or of a specified product or service. Such prices are
specified in the applicable Territory Price List or other pricing document as
generally published by GUPTA from time to time during the term of this
Agreement. GUPTA reserves the right to change Program List Price(s), at its sole
discretion, upon 30 days written notice to OEM.
2.11 "Trademark Use Policy" shall mean the written policies, as amended by
----------------------
GUPTA from time-to-time, for the proper usage of the Marks.
2.12 "Derivative Works" shall mean a revision, enhancement, abridgment or
------------------
other modification of an OEM Product.
3. GRANT OF RIGHTS
3.1 Nonexclusive License Grant. GUPTA grants OEM, subject to Sections 3.2
--------------------------
and 4 GTC and the other applicable provisions of this Agreement, the following
nontransferable, nonexclusive, rights which may be exercised solely within the
Territory during the term of this Agreement and provided the Program is for use
only in conjunction with and as an embedded component of an OEM Product:
(a) To manufacture and package copies of the Programs.
(b) To distribute and sublicense OEM manufactured copies of the Programs
to End Users directly and through Distributors.
(c) To grant Distributors the right to distribute OEM manufactured copies
of the Programs to End Users.
(d) To use, in unaltered form, the Marks solely to promote the OEM
Product.
3.2 License Restrictions and Requirements. The rights granted in Section 3.1
-------------------------------------
GTC are
**Confidential treatment requested**
<PAGE>
limited to or conditioned upon the following:
(a) Use of Program by End Users:
---------------------------
(1) THE USE OF THE PROGRAMS DISTRIBUTED AND SUBLICENSED BY OEM
HEREUNDER MUST BE SOLELY IN CONJUNCTION WITH AND AS AN EMBEDDED COMPONENT OF AN
OEM PRODUCT.
(b) GUPTA's Intellectual Property and Proprietary Rights":
----------------------------------------------------
(1) GUPTA and/or its licensors shall retain all and sole right, title
and interest in and to the Programs.
**Confidential treatment requested**
<PAGE>
(2) Other than or exercising the not expressly granted to OEM hereunder.
OEM shall not. nor shall OEM cause or permit a third party (except as required
by law with written notice to GUPTA), to copy, manufacture, adapt, rent. lease,
lend, trade-in, create derivative works from, translate, reverse engineer.
disassemble or decompile or otherwise modify the Programs.
(3) OEM Shall not, nor shall OEM cause or permit a third party to delete,
GUPTA's copyright notice as it appears anywhere in the Programs.
(4) OEM agrees to sublicense the Programs to End Users directly and
through Distributors only under an enforceable End User License Agreement, which
may be shrinkwrapped, between OEM and End Users, which: (i) protects GUPTA's
(and/or any of GUPTA's licensors') intellectual property and proprietary rights
and title to the Programs, and (ii) expressly prohibits the End User from using
the Programs for any purpose that would violate the restrictions specified
Sections 2.5 and 3.2 (a) or (b).
(5) The use of the Marks by OEM and Distributors shall strictly adhere to
the terms and conditions of GUPTA's Trademark Use Policy, and to written
instructions GUPTA may issue from time to time.
(6) OEM agrees that all use of the Marks by OEM or its Distributors will
inure to the benefit of GUPTA.
(c) Distributors:
------------
(1) OEM shall have no authority to grant any rights to a Distributor other
than those set forth in Section 3.1 (c) GTC.
(2) Each agreement between OEM and Distributor shall (1) contain
provisions which am consistent with the terms of this Agreement and do not
exceed the distribution rights granted to OEM herein, (ii) include the
provisions of Sections 3, 6, 7, 8, 9, 10 and 11 GTC in substantially similar
terms, and (iii) provide that the, Distributor shall comply with all of OEM's
relevant obligations under this Agreement. OEM shall make a good faith effort to
ensure that all Distributors comply with the Distributors obligations under its
agreement with OEM.
4. FEES AND PAYMENTS
4.1 Initial Payment and Commitment. OEM irrevocably agrees to make the
------------------------------
payment as specified in the Signature Pages.
4.2 License Fees. For Programs distributed, sublicensed and/or shipped to an
------------
End Useror Distributor by OEM under the terms of this Agreement, OEM agrees to
pay License Fees as specified in the Signature Pages.
4.3 Support Fee. In consideration for the support and maintenance services
-----------
provided by GUPTA as specified in Section 5 GTC, OEM agrees to pay GUPTA a
Support Fee as specified in the Signature Pages.
4.4 Product Upgrade Fees. For Product Upgrades sublicensed, distributed
--------------------
and/or shipped by OEM to End Users or Distributors under the terms of this
Agreement, OEM shall pay to GUPTA fees ("Product Upgrade Fee") as specified in
the Signature Pages.
4.5 Reports and Payments.
---------------------
**Confidential treatment requested**
<PAGE>
(a) All payments under this Agreement shall be made in U.S. dollars or
other currency as GUPTA may designate. The terms of payment for OEM's initial
commitment and any orders for Programs or other products or services acquired by
OEM from GUPTA hereunder shall be as specified in the Signature Pages. Such
payment terms may be modified by GUPTA, in its sole discretion, should: (i) OEM
be in default of any payment due to GUPTA or (ii) exceed its credit limit
established by GUPTA in its sole discretion.
(b) Within thirty (30) days of the end of each calendar quarter. OEM shall
report ("Report") to GUPTA in writing all copies of OEM Products and the
Programs sublicensed. distributed and/or shipped by OEM with a geographic
breakdown by country or other geographic region designated by GUPTA. Such Report
shall also include a calculation of License Fees and Product Upgrade Fees due to
GUPTA for such copies, based upon: (i) the fees specified in Sections 4.2 and
4.4 GTC and (ii) the gross number of copies of the Programs distributed,
sublicensed and/or shipped by OEM less returned copies and a reasonable number
of demonstration and evaluation copies. OEM shall make payment of the fees
specified in each Report, with an adjustment for advances if any are
outstanding. Should the calculation of fees due to GUPTA be found to be in
error, an adjustment shall be made within fifteen (15) days of the discovery of
such error.
Provided, however, if such Report is not provided on time, or is not accompanied
- -----------------
by any payment which may be due to GUPTA, GUPTA may, at its sole discretion. and
without waiving any other rights or remedies under this Agreement (i) withhold
providing any Programs to OEM, and/or (ii) withhold providing any support or
maintenance services to OEM under Section 5 GTC, until such Report is filed or
the payment is received by GUPTA.
(c) Payment of the Support Fee shall be made as specified in the Signature
Pages.
4.6 Records and Review. OEM shall keep accurate records necessary to verify
------------------
compliance with the licensing and payment terms of this Agreement, along with
reasonable detail. OEM shall, with reasonable advance notice, make such records
available to GUPTA for inspection and copying during normal business hours.
4.7 Shipping Expenses. All prices are FOB GUPTA's point of origin, and OEM
-----------------
shall (i) reimburse GUPTA for any shipping expenses incurred by GUPTA under this
Agreement, and (ii) bear the risk of loss, damage or theft while the Programs
are in transit to OEM.
5. SUPPORT AND MAINTENANCE
5.1 Technical Support. GUPTA shall provide OEM such technical support
-----------------
servicesas specified in the Signature Pages, and consistent with GUPTA's
generally published support programs and policies, which may be changed from
time-to-time by GUPTA.
5.2 Support of OEM's End Users and/or Distributors. OEM shall be responsible
----------------------------------------------
for supporting OEM's End Users and/or Distributors.
5.3 Product Updates. Provided that OEM has paid the support Fee in Section
---------------
4.3 GTC, during the term of this Agreement, Product Updates will be provided to
OEM contemporaneously with if and when GUPTA first makes such Product Updates
commercially available to its other OEM customers. Such Product Updates shall be
considered "Programs" and OEM shall have the light to sublicense and distribute
(on the same basis as provided in Sections 3.1 and 3.2 GTC such Product Updates
to its: (i) new customers for the OEM Products subject to payment of the
applicable License Fees, and (ii) existing customers for the OEM Products
without payment of additional fees to GUPTA.
**Confidential treatment requested**
<PAGE>
5.4 Product Upgrades. Provided that OEM has paid the Support Fee in Section
----------------
4.3 GTC, during the term of this Agreement, Product Upgrades will be provided to
OEM contemporaneously with if and when GUPTA first makes such Product Upgrades
commercially available to its other OEM customers. Such Product Upgrades will
include versions of the Programs adapted to run on additional operating system
platforms and foreign language translations, if and when made commercials
available. Such Product Upgrades shall be considered "Programs" and OEM shall
have the right to sublicense and distribute (on the same basis as provided in
Sections 3.1 and 3.2 GTC) such Product Upgrades to: (i) now customers for the
OEM Products subject to payment of the applicable License Fees and (ii) existing
customers for the OEM Products subject to the payment of Product Upgrade Fees as
provided in Sects 4.4 above.
**Confidential treatment requested
<PAGE>
6. CONFIDENTIALITY
GUPTA and OEM agree that each of them shall, during the term of this Agreement
and for three (3) years thereafter. take all steps which are reasonable to
safeguard the confidentiality of and proprietary rights to, the confidential
information ("Confidential Information"} of the other party which may be
disclosed hereunder (including but not limited to product plans, designs,
business plans. technical specifications, research, customer or financial data)
and shall not, without the prior written consent of the other party. (i) use
such Confidential Information for its own benefit or the benefit of any third
party except for purposes expressly provided for in this Agreement, or (ii)
disclose such Confidential Information to any third party, provided, however,
that this provision shall not be construed to restrict the disclosure of
information which (a) is publicly known at Me We of its disclosure to a party,
(b) is lawfully received by a party from a third party not bound in a
confidential relationship to GUPTA or OEM, (c) was already known by GUPTA or OEM
prior to entering into this Agreement or (d) is required by law to be disclosed.
7. WARRANTIES AND INDEMNIFICATION BY OEM
7.1 Warranties, Representations and other Obligations. OEM represents,
-------------------------------------------------
warrants and covenants that as of the Effective Date and continuing until
termination of this Agreement:
(a) OEM will use its reasonable efforts to protect GUPTA's intellectual
property and proprietary rights as specified in Section 3.2 (b).
(b) OEM will make no representations or warranties about the Programs in
excess of the representations or warranties contained in written materials
published by GUPTA and provided by GUPTA to OEM.
(c) OEM has not relied on any promises or representations not expressly made
in this Agreement. OEM possess the facilities, personnel and experience
necessary to meet its financial and other commitments under this Agreement.
(d) If OEM becomes aware of any actual or suspected unauthorized use, copying
or disclosure of the Programs, Marks or Confidential Information of GUPTA, OEM
will promptly notify GUPTA and will assist GUPTA, at GUPTA's request and
expense, in the investigation and prosecution of such unauthorized use, copying
or disclosure.
(e) OEM has the full right, power and authority to enter into this Agreement
and to carry out its obligations hereunder and there are no impediments known to
OEM which would prevent OEM compliance with all the terms of this Agreement.
7.2 Indemnification by OEM. OEM agrees to indemnity and hold GUPTA harmless
----------------------
from and against any and all claims, losses, damages or other liability
whatsoever associated with: (a) the use of the Programs by any End User of OEM
or its Distributors, except to the extent that such liability results from
GUPTA's breach of Section 8.1 GTC; (b) a breach of any of OEM's representations,
warranties or covenants contained in Section 7.1 GTC; or (c) any claims brought
by OEM's Distributors. To qualify for indemnity under this Section, GUPTA must:
(i) give OEM prompt written notice of any such claim, and (ii) allow OEM to
control and cooperate with OEM at OEM's expense in the defense of any such claim
and in all related settlement negotiations. In the event that GUPTA wishes to
participate in the defense of any such claim, OEM shall allow GUPTA to
participate at its own expense.
**Confidential treatment requested**
<PAGE>
8. WARRANTIES AND INDEMNIFICATION BY GUPTA
8.1 Representations and Warranties by GUPTA to OEM. GUPTA represents and
----------------------------------------------
warrants to and for the benefit of OEM that: (i) to the best of GUPTA's
knowledge, the Programs do not infringe any patent, copyright, trade secret or
any other proprietary right of any third party, and (ii) GUPTA has full right,
power and authority to enter into this Agreement and to carry out its
obligations hereunder.
8.2 Limitation of Warranties. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
------------------------
SET FORTH IN SECTION 8.1 GTC, THE PROGRAMS ARE OFFERED "AS IS" WITH ALL FAULTS.
ALL WARRANTIES AND OTHER TERMS WHICH WOULD OTHERWISE BE IMPLIED OR INCORPORATED
INTO THIS AGREEMENT BY STATUTE OR COMMON LAW ARE HEREBY EXCLUDED. THE WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE SPECIFICALLY
DISCLAIMED BY GUPTA. IT IS EXPRESSLY AGREED THAT GUPTA SHALL NOT BE IN ANY WAY
RESPONSIBLE FOR THE COMMERCIAL SUCCESS OF THE PROGRAMS.
8.3 Exclusive Remedies and Indemnification by GUPTA. GUPTA's sole obligation
-----------------------------------------------
for a breach of any of the representations and warranties contained in Section
8.1 GTC shall be to indemnity and hold OEM harmless from and against any and all
direct damages (including reasonable attorneys' fees) arising out of GUPTA's
breach of any of the warranties contained in such Sections, provided OEM: (i)
gives GUPTA prompt written notice of any such claim or liability, and (ii)
allows GUPTA to control, and provides all reasonable assistance to GUPTA (at
GUPTA's expense) in the defense of any such claim and in all related settlement
negotiations. In the event that OEM wishes to participate in the defense of any
such claim, GUPTA shall allow OEM to participate at its own expense. GUPTA has
no obligations or liability under this Section for any claim based on the use of
the Programs or portions thereof: (i) with respect to software not delivered by
GUPTA; (ii) in a manner for which it was not designed; (iii) where modified by
or for OEM in a manner to become infringing; or (iv) which is in violation of
this Agreement. In the event of any claim being made that the use or possession
of the Programs or any portion thereof infringes any third party's intellectual
property rights then GUPTA may, in its sole discretion and at its own expense:
(i) procure the right to continue using the concerned Program(s) or portions
thereof; or (ii) modify or replace all or part of the concerned Program(s) in
order to avoid any infringement
9. LIMITATION OF LIABILITY
9.1 Limitation of Liability. EXCEPT AS SET FORTH IN SECTION 8.3 GTC, GUPTA's
-----------------------
LIABILITY ARISING OUT OF THE AGREEMENT OR THE USE OR DISTRIBUTION OF ANY PROGRAM
SHALL BE LIMITED TO THE AMOUNT PAID BY OEM TO GUPTA FOR THAT PROGRAM UNDER THE
TERMS OF THIS AGREEMENT.
9.2 Exclusion of Consequential and Other Damages. IN NO EVENT SHALL GUPTA BE
--------------------------------------------
LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS BY ANYONE, NOR WILL GUPTA BE
LIABLE FOR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING
LOST PROFITS, HOWEVER CAUSED, WHETHER FOR A BREACH OF CONTRACT, NEGLIGENCE OR
OTHERWISE, AND WHETHER OR NOT GUPTA HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
9.3 Essential Purpose. THE ESSENTIAL PURPOSE OF THIS SECTION 1S TO LIMIT THE
-----------------
POTENTIAL LIABILITY OF GUPTA ARISING OUT OF THIS AGREEMENT.
10. TERMINATION
10.1 Term of Agreement. This Agreement shall commence on the Effective Date
-----------------
and, unless
**Confidential treatment requested**
<PAGE>
otherwise terminated in accordance with Section 10.2 GTC, shall expire on the
date specified in the Signature Pages.
10.2 Termination for Breach. Either party may terminate this Agreement for a
----------------------
material breach of this Agreement if at the end of a thirty (30) day period
after providing the other party written notice specifying a material breach, the
breaching party has not cured such breach. GUPTA reserves the night to terminate
this Agreement immediate upon written notice if: (i) OEM becomes insolvent or
involuntary bankrupt; or (ii) a receiver or other liquidating officer is
appointed for substantially all of the assets or business of OEM, or if OEM
makes an assignment for the benefit of creditors, or such rights become an asset
under any bankruptcy, insolvency or reorganization proceeding.
**Confidential treatment requested**
<PAGE>
10.3 Continuing Obligations. The termination of this Agreement for any reason
----------------------
shall not relieve my party of its obligations to: (i) make payments which may
have accrued hereunder. but which remained unpaid as of the date of termination:
or (ii) maintain the confidentially of Confidential Information as provided in
Section 6 GTC.
10.4 Results of Termination
----------------------
(a) All licenses and other rights granted by GUPTA shall become null and
void upon termination of this Agreement, regardless of the reason for
termination, except for the End User licenses for the Programs previously
distributed by OEM or a Distributor.
(b) Within thirty (30) days of termination of this Agreement for any
reason, OEM shall return to GUPTA all materials related to the Programs
originally delivered to OEM by GUPTA. Within this time, shall deliver to GUPTA
written notice signed by an officer of OEM that OEM has complied with the
requirements of this Section.
(c) Regardless of the reason for termination of this Agreement, OEM shall
have no right to receive any compensation or other amounts from GUPTA. and shall
have no ownership or other right whatsoever in or to: (i) the Programs, (ii) the
Marks or any intellectual or proprietary rights relating to the Programs. (iii)
any copyrighted materials relating to the Programs, (iv) any goodwill relating
to the Programs that may have been created during the term of this Agreement.
11. MISCELLANEOUS PROVISIONS
11.1 GUPTA's Reservation of Rights and Remedies. In addition to any specific
-------------------------------------------
right or remedy provided for in this Agreement. GUPTA reserves all other rights
and remedies available by law.
11.2 Sale or Assignment. OEM may not assign, transfer or delegate any of its
-------------------
rights or duties under this Agreement without the prior written consent of
GUPTA.
11.3 Force Majeure. Neither party shall be liable for any delays in the
--------------
performance of any of its obligations hereunder (other than the obligation to
pay money ) due to causes beyond is reasonable control, including but not
limited to, fire, strike, war, riots, acts of any civil or military authority,
judicial action, acts of God, or other casualty or natural calamity for so long
as and to the extent that the effects of such circumstance continue.
11.4 Entire Agreement/Waiver. This Agreement sets forth the entire agreement
------------------------
between GUPTA and OEM with respect to the subject matter hereof and supersedes
any and all prior agreements, understandings, promises and representations made
by either party to the other concerning the subject matter hereof and the terms
hereof. This Agreement may not be amended, modified, released or discharged,
amended or modified in any manner, or any term or breach waived except by an
instrument in writing signed by both OEM and GUPTA's General Counsel.
11.5 Conflicts and Additions. In the event of any conflict between the terms
-----------------------
of this Agreement and the terms of any OEM document or other writing exchanged
between the parties (e.g., OEM purchase order), the terms of this Agreement
shall control. In the event that any term contained in any such writing attempts
to add to the terms of this Agreement, such additional term(s) shall not be
effective unless such writing is signed by both OEM and GUPTA's General Counsel.
**Confidential treatment requested**
<PAGE>
11.6 Import and Export Provisions. OEM shall, at its own expense, pay all
-----------------------------
import and export licenses and permits, pay customs charges and duty fees
required to accomplish the export and import of the Programs acquired by OEM.
OEM shall, at all times, strictly comply with all laws, regulations and orders
of the United States of America and other applicable jurisdictions regarding the
import, export or export of the Programs.
11.7 Parties Independent. The parties are and shall act at all times as
--------------------
independent contractors and nothing contained in this Agreement shall be
construed or implied to create an agency, partnership or employer and employee
relationship between OEM and GUPTA. At no time shall any party make commitments
or incur any charges or expenses for or in the name of the other party.
11.8 Severability. The invalidity or unenforceability of one or more
------------
provision of this Agreement shall not affect the validity or enforceability of
any of the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provisions were omitted.
11.9 Governing Law.
-------------
(a) This Agreement shall be construed and enforced in accordance with the
laws of the state of California and venue shall be exclusive in the federal or
state courts of California.
(b) Notwithstanding the foregoing, GUPTA may seek relief in any court of
competent jurisdiction in any action to: (i) obtain injunctive relief for
protection or enforcement of its Confidential Information or its intellectual
and proprietary rights, (ii) recover monies due GUPTA but not paid hereunder, or
(iii) enforce any judgment obtained by GUPTA against OEM arising out of any such
proceeding.
11.10 Headings. The headings of the sections used in this Agreement are
--------
included for convenience only and are not used in construing or interpreting
this Agreement.
11.11 Notices. Required notices under this Agreement shall be deemed delivered
--------
when: (i) personally delivered, (ii) faxed with confirmation to a designated fax
number, or (iii) upon signed receipt when delivered by certified or registered
mail. Such notices shall be sent to the other party at the address set forth in
this Agreement or to such other address as such party shall designate by written
notice.
11.12 Taxes. All charges in this Agreement are exclusive of sales and use
-----
taxes. If any such taxes (other than GUPTA's income taxes) are imposed on
transactions covered by this Agreement by any state or federal jurisdiction in
the United States of America, GUPTA reserves the right to charge OEM, and OEM
agrees to pay, any such taxes.
11.13 Counterparts and Exchanges by Fax. This Agreement may be executed in any
----------------------------------
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument. This
exchange of a fully executed Agreement (in counterparts or otherwise) by fax
shall be sufficient to bind the parties to the terms and conditions of this
Agreement.
**Confidential treatment requested**
<PAGE>
11.14 Joint Marketing and Promotional Activities. As soon as practicable after
-------------------------------------------
the Effective Date of this Agreement, both parties will issue a joint press
release announcing OEM's rights to distribute and market the Programs, but in no
case shall such press release be issued without the consent of both parties,
GUPTA shall have the right to use the OEM name in customer lists or promotional
documents that incorporate such lists.
**Confidential treatment requested**
<PAGE>
OEM SOFTWARE LICENSE AGREEMENT
(SIGNATURE PAGES)
PREAMBLE: The following are the Signature Pages of an agreement ("Agreement")
which consists of
(i) the General Terms and Conditions and (ii) these Signature Pages. The
documents are referenced together by the contract number and are to be taken
together and not separately. THIS AGREEMENT SHALL BE EFFECTIVE AS OF THE
"EFFECTIVE DATE" SPECIFIED BELOW ONLY WHEN THESE SIGNATURE PAGES ARE EXECUTED BY
BOTH PARTIES AND ALL PAGES OF BOTH THE GENERAL TERMS AND CONDITIONS AND THESE
SIGNATURE PAGES ARE INITIALED WHERE INDICATED BY BOTH PARTIES.
IN CASE OF CONFLICT BETWEEN THE TERMS AND CONDITIONS SPECIFIED IN THE SIGNATURE
PAGES BELOW AND THE GENERAL TERMS AND CONDITIONS, THE TERMS AND CONDITIONS OF
THESE SIGNATURE PAGES SHALL CONTROL
NOTATIONAL CONVENTION: Provisions of the General Terms and Conditions shall be
referred to as "Section X.Y(z) GTC". Provisions of these Signature Pages shall
be referred to as "Item A.B(c) SP".
1. OEM: For purposes of this Agreement, OEM shall be the following organization
at the designated address:
Organization Name: Aurum Software, Inc.
Organized under the laws of: California
Headquarters Address: 3385 Scoff Boulevard
Santa Clara, CA 95054
Telephone: (408) 986-8100 Fax: (408) 654-3400
2. Territory: Worldwide
3. Effective Date of Agreement: December 31,1994
4. Termination Date: December 31, 1 997 subject to early
cancellation as provided specified
in Item 11 (a) SP.
5. PROGRAMS [LIST]: SQLBase Single Tasking Engine for Windows *
SQLBase Multi-Tasking Engine for Windows *
SQLBase Server (all commercially available (as of the date
of execution of this Agreement) operating platforms and
user levels)**
Quest Reporter
SQLRouter/Oracle Server License***
SQLRouter/SQLServer License***
SQLRouter/AS/400 Server License***
SQLRouter/Informix Server License
SQLRouter/Ingres Server License
*COLLECTIVELY, THE "SQLBASE ENGINE PROGRAMS"
**THE "SQLBASE SERVER PROGRAMS"
***"COLLECTIVELY, THE SQLROUTER PROGRAMS"
**Confidential treatment requested**
<PAGE>
6. INITIAL PAYMENT AND COMMITMENT:
In consideration for be rights granted in Section 3.1 GTC, OEM irrevocably
agrees that the sum of [* *] is immediately due and payable to GUPTA and shall
serve as a noncontingent, nonrefundable advance against License Fees that may
become due to GUPTA under Section 4.2 GTC. Such sum shall be paid to GUPTA by
OEM on or before February 28, 1 995.
7. LICENSE FEES/DISCOUNTS:
(a) For each copy of a Program distributed, sublicensed and/or shipped to an
End User or Distributor by OEM under the terms of this Agreement, OEM agrees to
pay GUPTA the following License Fees:
(i) The License Fee for copies of the SQLBase Engine Programs shall be [* *]
per copy;
(ii) The License Fee for a single copy of the Quest Reporter Program shall be
[* *] per copy. Provided, however, OEM may convert SQLBase Engine Program
-----------------
Sublicenses to Quest Reporter Program Sublicenses by paying an additional [* *]
per copy.
(iii) The License Fee for a single copy of the SQLBase Server Programs shall be
[* *] for each PC workstation (i) on which the SQLBase Server Program (or
components thereof) is distributed, sublicensed and/or shipped by OEM and/or
(ii) any PC workstation that is connected to the SQLBase Server Program and/or
accesses the SQLBase Server Program, subject to the terms of this Agreement.
(iv) The License Fee for the SQLRouter Programs under the terms of this
Agreement shall be [* *].
**Confidential treatment requested**
<PAGE>
8. OEM SUPPORT FEE: In consideration for the support services and
maintenance provided by GUPTA as specified in Section 5 GTC, and for STAR
Support Services to be provided under GUPTA's STAR Support program (or the
equivalent GUPTA premium support program which may then be in effect), OEM
agrees to pay GUPTA follows :
(a) Commencing December 31, 1994 and on the last day each subsequent calendar
quarter thereafter during the term of this Agreement, OEM agrees to pay GUPTA a
quarterly support fee equal to the sum of (a) [* *] of the cumulative License
Fees for the Programs sublicensed by OEM (or distributed by OEM under Section
3.1 GTC) as of the end of that previous calendar quarter, reduced by those
License Fees paid to GUPTA by OEM customers who are not receiving maintenance
support for the OEM Product from OEM or are not actively installed and in OEM
use by such OEM customers (such reduction shall not exceed [* *] of those
cumulative License Fees for the Programs sublicensed or distributed by OEM in
any given quarter) plus commencing July 31, 1995 (b) one-fourth of GUPTA's then
current fee for STAR Support Services (as of the date of execution of this
Agreement such fee is [* *].
Payment of the Support Fee shall be due to GUPTA by OEM within thirty (30) days
of the end of each calendar quarter. Customers who are not receiving
maintenance support may include customers who have elected not to renew
maintenance as well as customers who bought licenses, but not installed them
until after a pilot is completed. In this case, maintenance obligations to
GUPTA shall cover the same period that OEM receives maintenance.
Such STAR Support Services shall be provided by GUPTA consistent with GUPTA's
then-current published service features of the STAR Support program which may be
changed from time-to-time by GUPTA. A copy of the features of the STAR Support
program current as of the date of this Agreement shall be provided to OEM upon
OEM's request.
9. PRODUCT UPGRADE FEE: For each Copy of a Product Upgrade of any of the
Programs (as specified A Section 5.4 GTC) sublicensed, distributed and/or
shipped by OEM to its existing customers for the OEM Product under the terms of
this Agreement, OEM shall pay to GUPTA a Product Upgrade Fee equal to GUPTA's
generally published United States and Canada List Price for such Product Upgrade
less a Discount of [* *].
10. OEM PRODUCT: For purposes of this Agreement the OEM Product shall mean
OEM's "SalesTrak" "SupporTrak", TeleTrak", and "QualityTrak" software
application products and by whatever name such products become known in the
future.
11. OTHER TERMS:
(a) EARLY CANCELLATION: The term of this Agreement shall expire December 31,
1997. Provided, however, that GUPTA shall have the right to terminate this
Agreement cm December 31, 1996, unless OEM has either (i) notified GUPTA on or
before June 30, 1995 of its intent to pay to GUPTA an additional noncontingent,
nonrefundable payment to GUPTA of [* *] and make such payment on or before
August 30, 1995 or (ii) notified GUPTA on or before September 30, 1995 of its
intent to pay to GUPTA an additional noncontingent, nonrefundable payment to
GUPTA of [* *] and makes such payment on or before November 30, 1995 or (iii)
in the event that option (i) or (ii) are not elected, OEM notified GUPTA on or
before November 30, 1996 of its intent to pay to GUPTA an additional
noncontingent, nonrefundable payment to GUPTA of [* *] and makes such payment
on or before December 31 , 1996, or if the additional [* *] payment is made
in (i) or (ii) above, then OEM may notify GUPTA on or before November 30, 1997
of it's intent to pay to GUPTA the sum of [* *] and makes such payment on or
before December 31, 1997.
**Confidential treatment requested**
<PAGE>
If OEM notifies GUPTA under Item 11(a)(i) SP above, the License Fees/Discount
for the Programs shall be as specified below in Item 11(a)(aa); if OEM notifies
GUPTA under Item 11(a)(ii) SP above, the LicenseFees/Discount for the Programs
shall be as specified below in Item 11(a)(bb) SP; if OEM notifies Gupta under
Item 11(a)(iii) above License Fees shall remain as provided under Item 7(a) SP
above and the Agreement will be extended for a similar one (1) year period.
(aa)
PRODUCT LICENSE FEE/DISCOUNT
------- --------------------
SQLBase Engine Programs [* *] per Copy;
SQLBase Server Programs [* *] per PC Workstation
Quest Reporter Program [* *] per Copy.
(bb)
SQLBase Engine Programs [* *] per Copy;
SQLBase Server Programs [* *] per PC Workstation
Quest Reporter Program [* *] per copy.
This additional payment, if made by OEM, shall serve as a further noncontingent,
nonrefundable advance against License Fees that may become due to GUPTA under
Section 3.2 of this Agreement.
(b) DISCOUNTS FOR PURCHASES OF STANDARD PRODUCTS.
--------------------------------------------
(ii) OEM shall be eligible to acquire Copies of the Standard Product(s) for
OEM's internal use or distribution at a discount of [* *] from the then-current
Territory List Price for such Standard Product. Provided, however, that for
internal use, OEM shall be eligible for the following:
(aa) OEM shall be eligible to acquire five (5) Copies of the SQLWindows
Corporate Edition Standard Product solely for OEM's internal use at a discount
------------
of [* *] from the then-current Territory List Price for such Standard Product.
(bb) OEM shall be eligible to acquire an additional one hundred (100) Copies of
the SQLWindows Corporate Edition Standard Product (over and above the five (5)
copies specified in Item I 1 (b)(aa) above] solely for OEM's internal use at a
------------
discount of [* *] from the then-current Territory List Price for such Standard
Product.
(iv) Terms of payment for any order for the Standard Products shall be net
thirty (30) days from receipt of GUPTA's invoice. Advance payments paid to GUPTA
under Item 6 SP above shall not be applicable against such purchases. OEM shall
specify on its purchase order for the Standard Products the country or territory
to which such Standard Product is to be used by OEM.
**Confidential treatment requested**
<PAGE>
(v) OEM or OEM's customers shall be eligible to acquire support services for
the Standard Products under GUPTA's then current prices, terms and according to
GUPTA's Product Support Policy in effect at the time for the applicable country
or territory.
(c) SECTION 2.0 GTC, CERTAIN DEFINITIONS, IS MODIFIED BY ADDING THE FOLLOWING
-------------------
ADDITIONAL DEFINITIONS:
2.16 "GUPTA Software License Agreement" shall mean the standard form license
--------------------------------
agreements between the end user and GUPTA which and accompanies each Standard
Product when delivered by GUPTA to OEM in a packaged form.
2.17 "Standard Product(s)" shall mean only the generally commercially
-------------------
available GUPTA proprietary PC software program(s) in packaged form listed below
each of which includes (a) the object code form of the software program(s), (b)
the applicable User Documentation, and (c) a GUPTA Software License Agreement.
Standard Products: SQI-Windows SOLO*
SQLWindows Starter Edition*
SQLWindows Corporate Edition*
SQLWindows Network Edition*
SQLHost/DB2
SQLConsole
User Documentation and GUPTA training videos
*Collectively referred to as the "SQLWindows Standard Products".
2.18 "User Documentation" shall mean the GUPTA user manual(s) and other
------------------
published written materials, if any, regarding the proper installation and use
of the Standard Products which normally accompany each Standard Product.
(D) SECTION 3.1 GTC, NONEXCLUSIVE LICENSE GRANT, IS DELETED AND REPLACED WITH
--------------------------
THE FOLLOWING:
3.1 Nonexclusive License Grant
--------------------------
GUPTA hereby grants OEM, subject to Sections 3.2 GTC and 4 GTC and the other
applicable provisions of this Agreement, the following nontransferable,
nonexclusive, rights and licenses which may be exercised solely within the
Territory and provided the use or distribution of the Program or Standard
Product is for use or distribution only in conjunction with an OEM Product:
(a) To manufacture and package copies of the Programs as an embedded
component of component embedded or coupled with an OEM Product.
(b) To distribute and sublicense OEM manufactured copies of the Programs
under perpetual use licenses as an embedded component of component embedded or
coupled with an OEM Product to End Users directly and through Distributors.
(c) To order (from GUPTA) and distribute the Standard Products in unaltered
form in the original sealed package manufactured by GUPTA to End Users and
Distributors.
**Confidential treatment requested**
<PAGE>
(d) To grant Distributors the following rights:
(i) The right to manufacture, sublicense and distribute OEM and/or
Distributor manufactured copies of the Programs under perpetual use licenses as
an embedded component of component embedded or coupled with an OEM Product to
End Users.
(ii) The right to distribute the Standard Products in conjunction with
the OEM Product in unaltered form in the original sealed package manufactured by
GUPTA to End Users.
(iii) The right to use, in unaltered form, the Marks solely to promote
the distribution of the Programs or Standard Products.
(e) To use, in unaltered form, the Marks solely to promote the
distribution of the Programs or Standard Products.
(e) SECTION 3.2(a) GTC, "LICENSE RESTRICTIONS", IS MODIFIED TO ADD THE
FOLLOWING RESTRICTION:
(10) Any Standard Product, when provided to an end user by OEM or a
Distributor under this Agreement, must not be embedded in any value added
software other than that marketed by GUPTA, must be contained in the original
sealed package manufactured by GUPTA and must be accompanied by the appropriate
GUPTA Software License Agreement.
(f) SECTION 3.2(b)(4) GTC, "GUPTA INTELLECTUAL PROPERTY AND PROPRIETARY
-------------------------------------------
RIGHTS", IS MODIFIED TO ADD AFTER THE WORD, "MAY" IN THE SECOND SENTENCE, "OR
- ------
MAY NOT."
(g) SECTION 5.2 GTC, "SUPPORT OF OEM'S END USERS AND/OR DISTRIBUTORS", IS
----------------------------------------------
MODIFIED TO ADD AFTER THE WORD, "DISTRIBUTORS" IN THE SECOND SENTENCE, THE
FOLLOWING, "USE OF THE PROGRAMS."
(h) SECTION 11.2 GTC, SALE AND ASSIGNMENT, IS DELETED AND REPLACED WITH THE
-------------------
FOLLOWING:
11.2 Sale or Assignment: Neither party may assign this Agreement without the
------------------
prior written consent of the other party, except that either party may assign
this Agreement in connection with a merger, consolidation, reorganization or
sale of substantially all of the assigning party's assets without the other
party's consent. Each party shall give prompt written notice to the other party
of any permitted assignment.
(i) DISTRIBUTION OF LIMITED VERSIONS: GUPTA grants to OEM, at no additional
charge, the right to deploy a limited (5mb) version of GUPTA's SQLBase Engine
and/or Quest Reporter software products, for OEM's and OEM's channels
demonstration, eval and promotional purposes only.
(j) LARGE VOLUME PURCHASE AGREEMENTS: IN THE EVENT THAT OEM HAS AN
OPPORTUNITY WITH A SINGLE CUSTOMER FOR THE OEM PRODUCT(S) OF SUCH VALUE AND
VOLUME WHERE OEM IN GOOD FAITH BELIEVES THAT THE LICENSE FEE PROVISIONS OF THIS
AGREEMENT DO NOT ALLOW IT TO PROVIDE DISCOUNTS TO SUCH CUSTOMER NECESSARY TO
CONCLUDE THE TRANSACTION, GUPTA AGREES TO NEGOTIATE WITH OEM IN GOOD FAITH ON A
CASE-BY-CASE BASIS FOR AN ALTERNATIVE PRICING SCHEDULE APPLICABLE TO SUCH
TRANSACTION ONLY. PROVIDED, HOWEVER, THAT SUCH TRANSACTION SHALL NOT INVOLVE
LESS THAN 2,000 PC WORKSTATIONS AND, (I) PAYMENTS OF LICENSE FEES FOR SUCH
TRANSACTION SHALL BE SEPARATE AND APART FROM ANY PREPAYMENTS OF LICENSE FEES
THAT MAY BE OUTSTANDING IN FAVOR OF OEM AT THE TIME SUCH ALTERNATIVE PRICING IS
AGREED TO BY GUPTA AND (III) SUCH AGREEMENT MUST BE DOCUMENTED AND APPROVED BY
GUPTA IN WRITING PRIOR TO OEM ENTERING INTO THE AGREEMENT WITH ITS CUSTOMER.
**Confidential treatment requested**
<PAGE>
(k) PAYMENT TO OEM FOR STANDARD PRODUCT SUPPORT SERVICES: During the term of
this Agreement, for qualifying End User orders for Gupta Standard Product
Support Services delivered by OEM to GUPTA and accepted by GUPTA, GUPTA will pay
OEM a [* *] fee based on the net invoice amount for such orders thirty (30)
days after receipt of payment by GUPTA.
(l) TIME IS OF THE ESSENCE Time is of the essence of this Agreement. GUPTA
and OEM hereby agree that this Agreement shall be null and void if not executed
on or before December 30, 1994.
IN WITNESS WHEREOF, the parties hereby confirm that this Agreement is effective
at the date set forth above and that all terms and conditions have been agreed
to:
OEM: GUPTA:
By: /s/ Mary E Coleman By: /s/ Richard J. Heaps
Name: Mary E Coleman Name: Richard J Heaps
Title: President Title: Vice President
Date: 12/30/94 Date: 12\30\94
**Confidential treatment requested**
<PAGE>
AMENDMENT NUMBER ONE
TO THE
OEM SOFTWARE LICENSE AGREEMENT
BETWEEN
GUPTA CORPORATION ("GUPTA")
AND
AURUM ("OEM")
This Amendment Number One ("Amendment One") to the OEM Software License
Agreement effective December 31, 1994 ("Agreement"), is between Gupta
Corporation ("GUPTA"), a California Corporation with offices at 1060 Marsh Road,
Menlo Park, CA and Aurum Software, Inc., located at 3385 Scott Boulevard, Santa
Clara, California 95054.
WHEREAS GUPTA and OEM have agreed to amend the terms and conditions of
the Agreement with respect to documentation.
NOW THEREFORE, GUPTA and OEM agree as follows:
1. CONFLICTS, USE OF TERMS: In the event of conflict between the terms and
conditions of the Agreement, as previously amended, and this Amendment One, the
terms and conditions of this Amendment One shall take precedence. Where
applicable, the defined terms in the Agreement shall have the same meaning in
this Amendment One.
2. MODIFICATION OF SECTION 3.1 GTC, NONEXCLUSIVE LICENSE GRANT: Upon the
--------------------------
execution of this Amendment, GUPTA will provide OEM with a master electronic
version of the User Documentation. GUPTA hereby grant to OEM a personal, fully
paid-up nonexclusive license to use, copy and distribute the printed copies of
the User Documentation made by OEM from the electronic version of such User
Documentation for the Programs, provided that (i) the provision of such
documentation is consistent with the limitations on use of the Programs as
provided in Sections 3.1 and 3.2 GTC hereunder and (ii) distribution of copies
of the User Documentation is made only in conjunction with the OEM Product. OEM
may also acquire pre-printed copies of User Documentation from GUPTA at GUPTA's
then-current price.
3. NO OTHER MODIFICATION: Other than as provided in this Amendment One
above, the terms and conditions of the Agreement, as previously amended, remain
unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment One to be duly
executed and effective as of: February 15, 1995.
OEM: GUPTA CORPORATION:
By /s/ Mary E Coleman By /s/ Richard J. Heaps
Name Mary E Coleman Name Richard J. Heaps
Title President Title Vice President
Date 2/15/95 Date 2/15/95
**Confidential treatment requested**
<PAGE>
AMENDMENT NUMBER TWO
TO THE
OEM SOFTWARE LICENSE AGREEMENT
BETWEEN
AURUM SOFTWARE, INC. ("OEM")
AND
GUPTA CORPORATION ("GUPTA")
This Amendment Number Two ("Amendment") to the OEM Software License
Agreement ("Agreement") dated December 31, 1994, and as amended February 15,
1995 ("Amendment Number One") is between Gupta Corporation ("GUPTA") and Aururm
Software, Inc.("OEM").
WHEREAS GUPTA and OEM have agreed to amend the terms and conditions of
the Agreement with respect to an additional prepayment, additional Programs and
License Fees; and
Now, Therefore, GUPTA and OEM agree as follows:
1. CONFLICTS, USE OF TERMS: In the event of conflict between the terms and
conditions of the Agreement and the Amendment Number One and the terms and
conditions of this Amendment, the terms and conditions of this Amendment shall
control. The meaning of the definitions used in this Amendment shall, unless
otherwise stated herein, have the same meaning as the definitions contained in
the Agreement. The headings used in this Amendment are included for convenience
only and are not to be used in construing or interpreting the Agreement
2. MODIFICATION OF ITEM 7 (a) (iii) SP OF THE AGREEMENT "LICENSE
FEES/DISCOUNTS": Effective July l,1995, Items 7(a)(i) and 7(a)(iii) SP of the
Agreement are modified by replacing the figure [* *].
3. PAYMENT: Upon execution of this Amendment, and in consideration for
GUPTA's agreement to Sections 2 above, OEM irrevocably agrees to pay GUPTA the
sum of U.S. [* *] paid to GUPTA under the Agreement] This sum shall be
immediately due and payable to GUPTA by OEM on or before August 31, 1995. Such
sum to serve as a noncontingent, nonrefundable advance against License Fees that
may become due to GUPTA under Section 3.2 GTC.
4. MODIFICATION OF ITEM 8 SP OF THE AGREEMENT "OEM SUPPORT FEE," Effective
July 1, 1995, Item 8(a) SP of the Agreement is modified by:
(a) REPLACING in Item 8(a) SP beginning on the third line:"...[* *] of the
---------
cumulative License Fees for the Programs sublicensed by OEM (or distributed by
OEM under Section 3.1 GTC) as of the end of the previous calendar quarter,
reduced by those License Fees paid to GUPTA by OEM customers who are not
receiving maintenance support for the OEM Product from OEM or are not actively
installed and in use by such OEM customers (such reduction shall not exceed [*
*] of those cumulative License Fees for the Programs sublicensed or distributed
by OEM in any given calendar quarter)..." with
"...the sum of (i) [* *] of the cumulative License Fees for the Programs
sublicensed by OEM (or distributed by OEM under Section 3.1 GTC) as of
the end of the previous calendar quarter, reduced by those License Fees
paid to GUPTA by OEM customers who are not receiving maintenance support
for the OEM Product from OEM or are not actively installed and in use by
such OEM customers (such reduction shall not exceed [* *] of those
cumulative License Fees for the Programs sublicensed or distributed by
OEM in any given calendar quarter), plus (ii) [* *] of the outstanding
advance balance (if any) of License Fees as of the end of the previous
calendar quarter..."
**Confidential treatment requested**
<PAGE>
(b) INSERTING after the end of the first paragraph as a new paragraph, the
---------
following:
"In consideration for the above support payment GUPTA will provide to OEM
updates and upgrades to the Programs. Such upgrades will cover future like-for-
like releases (identical product user capacity and operating system) of the
Program that may become available from GUPTA during the term of this Agreement."
5. PARTIAL WAIVER OF ITEM 9 SP: Product Upgrade Fees are waived to the
---------------------------
extent covered under Section 4 of this Amendment above.
6. CLARIFICATION OF SCOPE OF EMBEDDED LICENSE: For the absence of
------------------------------------------
confusion, GUPTA hereby confirms that the use of the SQLBase Server Programs by
OEM's customers for the OEM Product under the terms and conditions of the
Agreement includes the right to use the Programs in conjunction with such
customers' modifications to the OEM Product (e.g., by modifying OEM Product
source code that may be supplied to a customer by OEM) and the applicable
underlying data and database schema. The rights do not extend to OEM's use of
the SQLBase Sewer Programs (i) outside the functionality of the OEM Product as
defined by OEM or (ii) for general purpose application development.
7. WAIVER OF EARLY CANCELLATION: Effective upon execution of this
----------------------------
Amendment, GUPTA waives its rights to early cancellation of the Agreement as
provided under Item 11 (a) SP.
8. NO FURTHER MODIFICATIONS: Other than as provided above in this
------------------------
Amendment, all other provisions of the Agreement shall remain unchanged.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and effective as of 06/29 ,1995.
Gupta Corporation Aurum Software, Inc.
By: By:/s/ Mary E. Colleman
Name: Name:Mary E. Colleman
Title: Title: CFO
Date: 06/29/95 Date: 06/29/95
**Confidential treatment requested**
<PAGE>
AMENDMENT NUMBER THREE
TO THE
OEM SOFTWARE LICENSE AGREEMENT
BETWEEN
AURUM SOFTWARE, INC. ("OEM")
AND
GUPTA CORPORATION ("GUPTA")
This Amendment Number Three ("Amendment") to the OEM Software License
Agreement ("Agreement") dated December 31,1994, and as amended February 15, 1995
("Amendment Number One") and as 06/29/95, ("Amendment Number Two") is between
Gupta Corporation ("GUPTA") and Aurum Software, Inc.("OEM").
WHEREAS GUPTA and OEM have entered into the Agreement, and pursuant to
Item 11(j)SP of the Agreement ("Large Volume Purchase Agreements"), OEM requests
and GUPTA grants special pricing for the licensing of the Programs to a single
named customer of OEM ("Hilte").
Now, Therefore, GUPTA and OEM agree as follows:
1. CONFLICTS, USE OF TERMS: In the event of conflict between the terms and
conditions of the Agreement, Amendment Number One and Amendment Number Two, the
terms and conditions of this Amendment shall control. The meaning of the
definitions used in this Amendment shall, unless otherwise stated herein, have
the same meaning as the definitions contained in the Agreement. The headings
used in this Amendment are included for convenience only and are not to be used
in construing or interpreting the Agreement
2. HILTE CORPORATION DEPLOYMENT: Upon execution of this Amendment and
pursuant to Item 11(j) SP of be Agreement ("Large Volume Purchase Agreements"),
GUPTA hereby grants to OEM special pricing for the sublicensing of the Programs
by OEM to a single named end-user customer of OEM ("Hilte") under the terms and
conditions specified in Sections 3 and 4 below.
3. PAYMENT FOR HILTE LICENSE FEES: Upon execution of this Amendment, OEM
irrevocably agrees to pay GUPTA the sum of U.S.[ * *] [over and above the [* *]
paid to GUPTA under the Agreement]. This sum shall be immediately due and
payable to GUPTA on or before August 31, 1995. Such sum serve as a
noncontingent, nonrefundable advance against License Fees that may become due to
GUPTA under Section 4 of this Amendment below.
(a) OEM may, at its option and upon written notice to GUPTA, elect to apply
this payment against License Fees that may become due to GUPTA under Section 3.2
GTC during the remaining term of the Agreement.
4. LICENSE FEE AND SCOPE OF RIGHTS: With respect to Hilte only the License
Fees under Items 7(a)(i)SP and 7(a)(iii)SP are modified by replacing the figure
[* *] with [* *].
**Confidential treatment requested**
<PAGE>
5. NO FURTHER MODIFICATIONS: Other than as provided above in this
Amendment, all other provisions of the Agreement shall remain unchanged.
IN WITNESS WHEREOF, the pates have caused this Amendment to be duly
executed and effective as of 06/29/95, 1995.
Gupta Corporation Aurum Software, Inc.
By: B y:/s/ Mary E. Coleman
Name Name: Mary E. Coleman
Title: Title: President
Date: 06/29/95 Date:06/29/95
**Confidential treatment requested**
<PAGE>
AMENDMENT NUMBER FOUR
TO THE
OEM SOFTWARE LICENSE AGREEMENT
BETWEEN
AURUM SOFTWARE, INC. ("OEM")
AND
GUPTA CORPORATION ("GUPTA")
This Amendment Number Four ("Amendment") to the OEM Software License
Agreement ("Agreement") dated December 31, 1994, and as amended February 15,
1995 ("Amendment Number One') and as amended June 29, 1995, ("Amendment Number
Two") and as amended June 29, 1995, ("Amendment Number Three") is between Gupta
Corporation ("GUPTA") and Aurum Software, Inc.("OEM").
WHEREAS GUPTA and OEM have entered into the Agreement and have agreed to
add a source code escrow provision.
Now, Therefore, GUPTA and OEM agree as follows:
1. CONFLICTS, USE OF TERMS: In the event of conflict between the terms and
conditions of the Agreement, Amendment Number One and Amendment Number Two, the
terms and conditions of this Amendment shall control. The meaning of the
definitions used in this Amendment shall, unless otherwise stated herein, have
the same meaning as the definitions contained in the Agreement. The headings
used in this Amendment are included for convenience only and are not to be used
in construing or interpreting the Agreement
2. ADDITION OF ITEM 11 (m) SP OF THE AGREEMENT: Upon execution of this
Amendment, Item 11 (m) SP of the Agreement shall be added as follows:
"(m) Source Code:
(a) SOURCE CODE ESCROW: GUPTA represents that master copies of its current
Source Code for the Programs owned by GUPTA are stored with Data Securities
International, a California corporation having an address of 49 Stevenson
Street, San Francisco, California 94105 ("Escrow Agent"). GUPTA agrees to notify
OEM of any change in the identity or address of the Escrow Agent. GUPTA agrees
to replace such Source Code in possession of the Escrow Agent, at six-month
intervals, with a master copy of each Program's most recent Source Code. In the
event of (i) GUPTA's ceasing to do business as a going concern or (ii) GUPTA's
voluntary filing for liquidation under Chapter 7 or Chapter 11 of the United
States Bankruptcy Code or (iii) GUPTA discontinuing all support for the Programs
and/or GUPTA does not make support available to OEM within sixty (60) days after
receiving a written request from OEM to do so (provided that OEM is current on
all support and/or maintenance fees due hereunder), GUPTA agrees to authorize
the Escrow Agent to deliver to OEM a copy of the Source Code in the Escrow
Agent's possession for such Program or Programs if such Program is owned by
GUPTA for which a License has been previously acquired by OEM under the terms of
this Agreement.
**Confidential treatment requested**
<PAGE>
(b) SOURCE CODE LICENSE:
Effective upon delivery of the copy of the Source Code to OEM under Section 2(a)
above, GUPTA hereby grants to OEM a non-transferable, non-exclusive license to
use and modify the Source Code for the sole purpose of supporting the use of the
Program, under the provisions of this Agreement. The Source Code, and all
modifications made to it, shall at all times remain the trade secret,
confidential and exclusive property of GUPTA. OEM will limit the distribution of
Source Code within its organization to only those with a need to know, and will
take appropriate steps to prevent its unauthorized disclosure. Upon delivery of
Source Code, GUPTA shall not be required to provide further support or
maintenance for the Program, nor shall it be required to provide Product
Updates, or updates to the Source Code. Notwithstanding the above, OEM shall
continue to be obligated to make payments to GUPTA for Licenses used by OEM
under the terms of this Agreement."
3. NO FURTHER MODIFICATIONS: Other than as provided above in this
Amendment, all other provisions of the Agreement shall remain unchanged.
IN WITNESS WHEREOF the pates have caused this Amendment to be duly
executed and effective as of 01/12,1996.
Gupta Corporation Aurum Software, Inc.
By: /s/ Richard J. Heaps BY:/s/ Mary E. Coleman
Name: Richard J. Heaps Name: Mary E. Coleman
Title:Vice President Title: CEO
Date: 01/12/96 Date: 01/12/96
**Confidential treatment requested**
<PAGE>
AMENDMENT NUMBER FIVE
TO THE
OEM SOFTWARE LICENSE AGREEMENT
BETWEEN
AURUM SOFTWARE, INC. ("OEM")
AND
GUPTA CORPORATION ("GUPTA")
This Amendment Number Five ("Amendment") to the OEM Software License
Agreement ("Agreement") dated December 31, 1994, and as amended February 15,1995
("Amendment Number One") and June 29, 1995 ("Amendment Number Two") and June 29,
1995, ("Amendment Number Three") and January 12, 19969 ("Amendment Number Four")
is between Gupta Corporation ("GUPTA") and Aurum Software, Inc.("OEM").
WHEREAS GUPTA and OEM have agreed to amend the terms and conditions of
the Agreement with respect to an additional prepayment, additional Programs and
License Fees; and
Now, Therefore, GUPTA and OEM agree as follows:
1. CONFLICTS, USE OF TERMS: In the event of conflict between the terms and
conditions of the Agreement and Amendment Number One and/or Amendment Number
Two, and/or Amendment Number Three, and/or Amendment Number Four and the terms
and conditions of this Amendment, the terms and conditions of this Amendment
shall control. The meaning of the definitions used in this Amendment shall,
unless otherwise stated herein, have the same meaning as the definitions
contained in the Agreement. The headings used in this Amendment are included for
convenience only and are not to be used in construing or interpreting the
Agreement.
2. PAYMENT: As payment in full for GUPTA's agreement to Section 3 below,
OEM agrees to pay GUPTA the nonrefundable sum of [* *] [over and above any
amounts previously paid by OEM to GUPTA and separate and apart from amounts to
be paid by OEM to GUPTA]. This sum shall be immediately due and payable to GUPTA
by OEM net thirty (30) days after receipt of order (in the form of a purchase
order, license agreement or other equivalent document) from MCI converting the
applicable SQLBase Server Program sublicenses (as provided in Section 3 below).
OEM agrees to notify GUPTA in writing immediately upon receipt of such order and
to pay the applicable GUPTA invoice upon receipt.
3. RIGHT TO CONVERT MCI EMBEDDED PROGRAM SUBLICENSES TO UNRESTRICTED USE:
In consideration for the payment specified in Section 2 above, GUPTA grants to
OEM the right to extend the rights to use the SQLBase Server Programs previously
sublicensed by OEM to MCI for use as an embedded component of and in conjunction
with the OEM Product. Such extension may permit MCI to use such SQLBase Server
Programs outside the scope of the OEM Product , including for general purpose
application development. The fee paid under Section 2 above covers a maximum of
4,000 PC Workstations on which the SQLBase Server Programs are installed for use
and/or are connected to such SOLBase Server Programs by MCI.
4. RIGHT TO EXTEND PROGRAM SUBLICENSE USE TO OTHER CUSTOMERS: In addition
to the specific rights granted to OEM for MCI under Section 3 above, GUPTA
grants the right to OEM to extend the rights of use of SQLBase Server Program
sublicenses to its OEM Product customers only. Such extension of rights shall be
subject to an additional License Fee on a per-PC Workstation basis equal to the
difference between (1) [* *] and (ii) the License Fee previously paid or due (if
any) to GUPTA for the relevant SQLBase Server Program sublicense.
**Confidential treatment requested**
<PAGE>
5. MODIFICATION OF ITEM 8 SP OF THE AGREEMENT, ("OEM SUPPORT FEE"): Upon
the Effective Date of this Amendment, in the third line of Item 8 SP, the
percentage of [* *] is deleted and replaced with the percentage, of [* *].
6. NO FURTHER MODIFICATIONS: Other than as provided above in this
Amendment, all other provisions of the Agreement shall remain unchanged.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly
executed and effective as of 1996.
Gupta Corporation Aururn Software, Inc.
By:/s/ Richard J. Heaps By:/s/ Mary E. Coleman
Name: Richard J Heaps Name: Mary E. Coleman
Title:Sr. Vice President and General Counsel Title: CEO
Date: Date: 4/3/96
**Confidential treatment requested**
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Exhibit 10.9
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of July 15, 1996, by
and between Aurum Software, Inc. (the "Borrower") whose address is 3385 Scott
Boulevard, Santa Clara, CA 95054 and Silicon Valley Bank, (the "Lender"), whose
address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
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owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated July 13, 1993, in the original
principal amount of Five Hundred Thousand and 00/100 Dollars ($500,000.00) (the
"Note") and a Promissory Note, executed concurrently herewith, in the original
principal amount of One Million Two Hundred Fifty Thousand and 00/100 Dollars
($1,250,000.00) (the "Term Note"). The Note has been modified pursuant to Loan
Modification Agreements, dated October 14, 1993, April 12th, 1994, December 15,
1994, May 15, 1995, pursuant to which, among other things, the principal amount
of the Note was increased to Two Million and 00/100 Dollars ($2,000,000.00),
however capped at One Million Five Hundred Thousand and 00/100 Dollars (the "Cap
Amount"), and May 14, 1996. The Note and the Term Note, together with other
promissory notes from Borrower to Lender, are governed by the terms of a
Business Loan Agreement, dated July 13, 1993, between Borrower and Lender, as
such agreement may be amended from time to time (the "Loan Agreement"). Defined
terms used but not otherwise defined herein shall have the same meanings as in
the Loan Agreement.
Hereinafter, the above-described security documents, together with all other
documents securing repayment of the Indebtedness shall be referred to as the
"Security Documents". Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Indebtedness shall be referred to as
the "Existing Loan Documents".
2. DESCRIPTION OF COLLATERAL: Repayment of the Indebtedness is secured by a
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Commercial Security Agreement, dated July 8, 1992, as amended, and a Collateral
Assignment, Patent Mortgage and Security Agreement, dated April 11, 1994.
Hereinafter, the above-described security documents, together with all other
documents securing payment of the Indebtedness shall be referred to as the
"Security Documents". Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Indebtedness shall be referred to as
the "Existing Loan Documents."
3. DESCRIPTION OF CHANGE IN TERMS.
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A. Modification(s) to Note.
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1. Payable in one payment of all outstanding principal plus all
accrued unpaid interest on July 14, 1997. In addition, Borrower will
pay regular monthly payments of all accrued unpaid interest due as of
each payment date beginning August 14, 1996, and all subsequent
interest payments are due on the same day of each month thereafter.
2. The principal amount of the Note is Two Million and 00/100
Dollars ($2,000,000.00), accordingly, all references to the term "Cap
Amount" are hereby deleted in their entirety.
3. The interest rate to be applied to the unpaid principal balance
of the Note, effective as of this date, is one (1.00) percentage point
over the Lender's current Index (as defined therein).
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B. Modification(s) to Loan Agreement.
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1. The paragraph entitled "Financial Covenants" is hereby amended in its
entirety, to read as follows:
Beginning with the month ending June 30, 1996, Borrower shall
maintain, on a monthly basis, a minimum quick ratio of 1.10 to 1.00,
increasing to 1.30 to 1.00 as of the month ending September 30, 1996,
and further increasing to 1.50 to 1.00 as of the month ending December
31, 1996; and in the event there are outstandings under the term loan
facility a minimum liquidity of 2.00 to 1.00; provided, however, upon
achieving the debt service coverage covenant (as defined herein) for
two (2) consecutive quarters, the above-described liquidity covenant
shall be replaced with a minimum debt service coverage ratio of 1.50
to 1.00. Additionally, Borrower shall maintain, on a quarterly basis,
beginning with the quarter ended June 30, 1996, a minimum tangible net
worth of $3,000,000.00; and a maximum total debt to tangible net worth
ratio of 1.75 to 1.00. Furthermore, Borrower shall be profitable on a
quarterly basis, beginning with the quarter ended June 30, 1996, with
allowance for one quarterly loss not to exceed $500,000.00, and a
maximum loss for Borrower's fiscal year end not to exceed $250,000.00.
Borrower shall be profitable on an annual basis by its fiscal year
ending December 31, 1997.
For purposes of calculation: (i) "liquidity" shall be defined as cash
plus cash equivalents plus the availability under the line of credit
facility divided by the total term debt outstanding; (ii) "debt
service coverage" shall be defined as earnings after taxes plus
interest and non-cash expenses divided by the current portion of long
term debt plus interest; (iii) deferred maintenance revenue and
restricted cash shall be excluded from the quick ratio and debt to
tangible net worth ratio; (iv) profitability and debt service coverage
shall be adjusted for capitalized software development costs.
2. The paragraph entitled "Borrowing Base Formula" is hereby amended in
its entirety, to read as follows:
Funds shall be advanced under the line of credit facility according to
a borrowing base formula, as determined by Lender on a monthly basis,
defined as follows: the lesser of (a) $2,000,000.00 minus the face
amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) minus the Cash Management Services
Sublimit (as defined herein) or (b) the sum of (i) seventy-five
percent (75%) of eligible accounts receivable minus (ii) the face
amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) minus (iii) the Cash Management
Services sublimit Eligible accounts receivable shall include, but not
be limited to, those accounts outstanding less than 95 days from the
date of invoice, excluding foreign, government, contra, and
intercompany accounts; and exclude accounts wherein 50% or more of the
account is outstanding more than 95 days from the date of invoice. Any
account which alone exceeds 25% of total accounts will be ineligible
to the extent said account exceeds 25% of total accounts. Also exclude
any credit balances which are aged past 95 days. Also ineligible are
any accounts which Lender in its sole judgment excludes for valid
credit reasons.
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3. Notwithstanding anything to the contrary contained in the paragraph
entitled "Continuity of Operations", Lender hereby agrees to allow
Borrower to repurchase up to $350,000.00 in stock; provided, however,
Borrower remains in compliance with the financial covenants as amended
herein, and an Event of Default has not occurred and is not
continuing.
4. The following paragraphs are hereby incorporated into the Loan
Agreement:
Letter of Credit Sublimit. Subject to the terms and conditions of
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this Agreement, as may be amended from time to time, Lender agrees to
issue or cause to be issued under the line of credit facility standby
and commercial letters of credit for the account of Borrower in an
aggregate face amount not to exceed $1,000,000.00 minus the face
amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit). Each such letter of credit shall have
an expiry date of no later than ninety (90) days after the maturity
date of the line of credit facility (as described therein); provided
that Borrower's letter of credit reimbursement obligation shall be
secured by cash on terms acceptable to Lender at any time after the
maturity date if the term of this Agreement is not extended by Lender.
All such letters of credit shall be, in form and substance, acceptable
to Lender in its sole discretion and shall be subject to the terms and
conditions of Lender's form of application and letter of credit
agreement.
Cash Management Services Sublimit. Borrower may utilize up to an
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aggregate amount not to exceed $1,000,000.00 for Cash Management
Services provided by Lender, which services may include merchant
services, PC-ACH, direct deposit of payroll, Business Visa, Firstax,
and other check cashing services as defined in that certain Cash
Management Services Agreement provided to Borrower in connection
herewith (a "Cash Management Service", or the "Cash Management
Services"). All amounts actually paid by Lender in respect of a Cash
Management Service or Cash Management Services shall, when paid,
constitute an Advance under the line of credit facility.
5. The paragraph entitled "Accounts Receivable and Accounts Payable" is
hereby amended in its entirety, to read as follows:
Provide to Lender, not later than twenty (20) days after the end of
each month with a Borrowing Base Certificate and aged lists of
accounts receivable and accounts payable. Semi-annual accounts
receivable audit to be performed by Lender's agent Borrower's deposit
account will be debited for the audit expense and a notification will
be mailed to Borrower.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
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wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay to Lender a fee in the amount of
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Ten Thousand and 00/100 Dollars ($10,000.00) (the "Loan Fee") plus all out-of-
pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
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below) agrees that, as of this date, it has no defenses against the obligations
to pay any amounts under the Indebtedness.
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7. CONTINUING VALIDITY, Borrower (and each guarantor and pledgor signing
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below) understands and agrees that in modifying the existing Indebtedness,
Lender is relying upon Borrower's representations, warranties, and agreements,
as set forth in the Existing Loan Documents. Except as expressly modified
pursuant to this Loan Modification Agreement, the terms of the Existing Loan
Documents remain unchanged and in full force and effect. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender to make any future modifications to
the Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Lender and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement. The
terms of this Paragraph apply not only to this Loan Modification Agreement, but
also to all subsequent loan modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
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conditioned upon Borrower's payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: LENDER:
AURUM SOFTWARE, INC, SILICON VALLEY BANK
By: /s/Brigitte Wilson By: M.Devery
Name: Brigitte Wilson Name: Michael Devery
Title: CFO Title: V.P.
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BUSINESS LOAN AGREEMENT
Borrower: Aurum Software, Inc. Lender: Silicon Valley Bank
5201 Great America Parkway #240 3000 Lakeside Drive
Santa Clara, CA 95054 P.O.Box 3762
Santa Clara, CA 95054
THIS BUSINESS LOAN AGREEMENT between Aurum Software, Inc. ("Borrower") and
Silicon Valley Bank ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans". Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement; (b)
the granting, renewing, or extending of any Loan by Lender at all times shall be
subject to Lender's sole judgment and discretion; and (c) all such Loans shall
be and shall remain subject to the following terms and conditions of this
Agreement.
TERM. This Agreement shall be effective as of July 13, 1993, and shall continue
thereafter until all Indebtedness of Borrower to Lender has been performed in
full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
AGREEMENT. The word "Agreement" means this Business Loan Agreement, as
this Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
BORROWER. The word "Borrower" means Aurum Software, Inc.. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates".
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response
Compensations, and Liability Act of 1980, as amended.
CASH FLOW. The words "Cash Flow" mean net income after taxes, and
exclusive of extraordinary gains and income, plus depreciation and
amortization.
COLLATERAL. The word "Collateral" means and includes without limitation
all property and assets granted as collateral security for a Loan, whether
real or personal property, whether granted directly or indirectly, whether
granted now or in the future, and whether granted in the form of a security
interest, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien, charge, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien
interest whatsoever, whether created by law, contract, or otherwise.
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ERISA. The word "ERISA" means the Employee Retirement Income Security Act
of 1974, as amended.
EVENT OF DEFAULT. The words "Event of Default" mean and include any of the
Events of Default set forth below in the section titled "EVENTS OF
DEFAULT."
GRANTOR. The word "Grantor" means and includes each and all of the persons
or entities granting a Security Interest in any Collateral for the
Indebtedness, including without limitation all Borrowers granting such a
Security Interest.
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GUARANTOR. The word "Guarantor" means and includes without limitation,
each and all of the guarantors, sureties, and accommodation parties in
connection with any Indebtedness.
INDEBTEDNESS. The word "Indebtedness" means and includes without
limitation all Loans, together with all other obligations, debts and
liabilities of Borrower to Lender, or any one or more of them, as well as
all claims by Lender against Borrower, or any one or more of them; whether
now or hereafter existing, voluntary or involuntary, due or not due,
absolute or contingent, liquidated or unliquidated; whether Borrower may be
liable individually or jointly with others; whether Borrower may be
obligated as a guarantor, surety, or otherwise; whether recovery upon such
Indebtedness may be or hereafter may become barred by any statute of
limitations; and whether such Indebtedness may be or hereafter may become
otherwise unenforceable.
LENDER. The word "Lender" means Silicon Valley Bank, its successors and
assigns.
Liquid Assets. The words "Liquid Assets" mean. Borrower's cash on hand
plus Borrower's receivables.
Loan. The word "Loan" or "Loans" means and includes any and all commercial
loans and financial accommodations from Lender to Borrower, whether now or
hereafter existing, and however evidenced, including without limitation
those loans and financial accommodations described herein or described on
any exhibit or schedule attached to this Agreement from time to time.
NOTE. The word "Note' means Borrower's promissory note or notes, if any,
evidencing Borrower's Loan obligations in favor of Lender, as well as any
substitute, replacement or refinancing note or notes therefor.
RELATED DOCUMENTS. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
guaranties, security agreements, mortgages, deeds of trust, and all other
instruments, agreements and documents, whether now or hereafter existing,
executed in connection with the Indebtedness.
SECURITY AGREEMENT. The words "Security Agreement" mean and include
without limitation any agreements, promises, covenants, arrangements,
understandings or other agreements, whether created by law, contract, or
otherwise, evidencing, governing, representing, or creating a Security
Interest.
SECURITY INTEREST. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt lien or title retention contract, lease or consignment intended as
a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization
Act of 1986.
SUBORDINATE DEBT. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have and been subordinated by written
agreement to indebtedness owed by Borrower to Lender in form and substance
acceptable to Lender.
TANGIBLE NET WORTH. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks,
patents, copyrights,
<PAGE>
organizational expenses, and similar intangible items, but including
leaseholds and leasehold improvements) less total Debt.
WORKING CAPITAL. The words "Working Capital" mean Borrower's current
assets, excluding prepaid expenses, less Borrower's current liabilities.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender as
of the date of this Agreement and as of me date of each disbursement of Loan
proceeds:
ORGANIZATION. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the state of Borrower's
incorporation. Borrower has the full power and authority to own its
properties
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and to transact the businesses in which it is presently engaged or
presently proposes to engage. Borrower also is duly qualified as a foreign
corporation and is in good standing in all states in which the failure to
so qualify would have a material adverse effect on its businesses or
financial condition.
AUTHORIZATION. The execution, delivery, and performance of this Agreement
and all Related Documents, by Borrower, to the extent to be executed,
delivered or performed by Borrower, have been duly authorized by all
necessary action by Borrower; do not require the consent or approval of any
other person, regulatory authority or governmental body; and do not
conflict with, result in a violation of, or constitute a default under (a)
any provision of its articles of incorporation or organization, or bylaws,
or any agreement or other instrument binding upon Borrower or (b) any law,
governmental regulation, court decree, or order applicable to Borrower.
FINANCIAL INFORMATION. To the best of Borrower's knowledge, each financial
statement of Borrower supplied to Lender truly and completely disclosed
Borrower's financial condition as of the date of the statement, and there
has been no material adverse change in Borrower's financial condition
subsequent to the date of the most recent financial statement supplied to
Lender. Borrower has no material contingent obligations except as disclosed
in such financial statements.
LEGAL EFFECT. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against
Borrower in accordance with their respective terms.
PROPERTIES. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has a good title to all of
Borrower's properties free and clear of all Security Interests, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower's properties are titled in Borrower's legal
name, and Borrower has not used, or filed a financing statement under, any
other name for at least the last five (5) years.
HAZARDOUS SUBSTANCES. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release" as used in this Agreement,
shall have the same meanings as set forth in the Comprehensive
Environmental Response, Compensations, and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 ("SARA"),
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq., the Resource Conservation and Recovery Act 49 U.S.C.Section 6901, et
seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and
Safety code, Section 25100, et seq., or other applicable state or Federal
laws, rules, or regulations adopted pursuant to any of the foregoing.
Except as disclosed to and acknowledged by Lender in writing, Borrower
represents and wan-ants that: (a) During the period of Borrower's ownership
of Borrower's properties, there has been no use, generation, manufacture,
storage, treatment, disposal, release or threatened release of any
hazardous waste or substance by any person on, under, or about any of the
properties. (b) Borrower has no knowledge of, or reason to believe that
there has been (i) any use, generation, manufacture, storage, treatment,
disposal, release, or threatened release of any hazardous waste or
substance by any prior owners or occupants of any of the properties, or
(ii) any actual or threatened litigation or claims of any kind by any
person relating to such matters. (c) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the properties shall
use, generate, manufacture, store, treat, dispose of, or release any
hazardous waste or substance on, under, or about any of the properties; and
any such activity
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shall be conducted in compliance with all applicable federal, state, and
local laws, regulations, and ordinances, including without limitation those
laws, regulations and ordinances described above. Borrower authorizes
Lender and its agent, following 24 hours' notice by Lender to Borrower, to
enter upon the properties to make such inspections and tests as Lender may
deem appropriate to determine compliance of the properties with this
section of the Agreement. Any inspections or tests made by Lender shall be
for Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any
other person. The representations and warranties contained herein are based
on Borrower's reasonable due diligence in investigating the properties for
hazardous waste. Borrower hereby (a) releases and waives any future claims
against Lender for indemnity or contribution in the event Borrower becomes
liable for cleanup or other costs under any such laws, and (b) agrees to
indemnify and hold harmless Lender against any and all claims. losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of
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any use generation, manufacture, storage, disposal, release or threatened
release occurring prior to Borrower's ownership or interest in the
properties, whether or not the same was or should have been known to
Borrower. The provisions of this section of the Agreement including the
obligation to indemnify, shall survive the payment of the Indebtedness and
the termination or expiration of this Agreement and shall not be affected
by Lender' acquisition of any interest in any of the properties, whether by
foreclosure or otherwise.
LITIGATIONS AND CLAIMS. To the best of Borrower's knowledge, no
litigation, claim, investigation, administrative proceeding or similar
action (including those for unpaid taxes) against Borrower is pending or
threatened, and no other event has occurred which may materially adversely
affect Borrower's financial condition or properties, other than litigation,
claims, or other events, if any, that have been disclosed to and
acknowledged by Lender in writing.
TAXES. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.
LIEN PRIORITY. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or
affecting any of the Collateral directly or indirectly securing repayment
of Borrower's Loan and Note, that would be prior or that may in any way be
superior to Lender's Security Interests and rights in and to such
Collateral.
BINDING EFFECT. This Agreement, the Note and all Security Agreements
directly or indirectly securing repayment of Borrower's Loan and Note are
binding upon Borrower as well as upon Borrower's successors,
representatives and assigns, and are legally enforceable in accordance with
their respective terms.
COMMERCIAL PURPOSES. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
EMPLOYEE BENEFIT PLANS. To the best of Borrower's knowledge, each employee
benefit plan as to which Borrower may have any liability complies in all
material respects with all applicable requirements of law and regulations,
and (i) no Reportable Event nor Prohibited Transaction (as defined in
ERISA) has occurred with respect to any such plan, (ii) Borrower has not
withdrawn from any such plan or initiated steps to do so, and (iii) no
steps have been taken to terminate any such plan.
LOCATION OF BORROWERS' OFFICES AND RECORDS. The chief place of business of
Borrower and the office or offices where Borrower keeps its records
concerning the Collateral is located at 5201 Great America Parkway #240,
Santa Clara, CA 95054.
INFORMATION. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all
information hereafter furnished by or on behalf of Borrower to Lender will
be, true and accurate in every material respect on the date as of which
such information is dated or certified; and none of such information is or
will be incomplete by omitting to state any material fact necessary to make
such information not misleading.
SURVIVAL OF REPRESENTATIVES AND WARRANTIES. Borrower understands and
agrees that Lender is relying upon the above representations and warranties
in extending Loan
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Advances to Borrower. Borrower further agrees that the foregoing
representations and warranties shall be continuing in nature and shall
remain in full force and effect (except as previously disclosed by Borrower
to Lender in writing) until such time as Borrower's Loan and Note shall be
paid in full, or until this Agreement shall be terminated in the manner
provided above, whichever is the last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
LITIGATION. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial
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condition, and (b) all litigation and claims and all threatened litigation
and claims affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of
any Guarantor.
FINANCIAL RECORDS. Maintain its books and record in accordance with
generally accepted accounting principles, applied on a consistent basis,
and permit Lender, following 24 hours' notice to Borrower, to examine and
audit Borrower's books and records at all reasonable times.
FINANCIAL STATEMENTS. Furnish Lender with, as soon as available, but in no
event later than one hundred (100)days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended, audited
by a certified public accountant satisfactory to Lender, and as soon as
available, but in no event later than thirty (30) days after the end of
each month, Borrower's balance sheet and income statement for the period
ended,prepared and certified as correct to the best knowledge and belief by
Borrower's chief financial officer or other officer or person acceptable to
Lender. Each monthly balance sheet and income statement and the annual
financial statements required to be provided under this Agreement shall be
prepared in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true and
correct.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE AGINGS. Furnish Lender, as soon
as available but in no event later than 15 days after the end of each
month, with a Borrowing Base Certificate and aged list of accounts
receivable and accounts payable. Semi-annual accounts receivable audits to
be performed by Lender's agent. Borrower's deposit account will be debited
for the audit expense and a notification will be mailed to Borrower.
ADDITIONAL INFORMATION. Following Lender's prior notice to Borrower,
furnish such additional information and statements, lists of assets and
liabilities, inventory schedules, budgets, forecasts, tax returns, and
other reports with respect to Borrower's financial condition and business
operations as Lender may request form time to time.
FINANCIAL COVENANTS AND RATIOS. Comply with the following covenants and
ratios: Borrower shall maintain, on a monthly basis, a minimum Quick Ratio
of 1.50 to 1.00; a minimum Tangible Net Worth of $1,500,000.00, increasing
to $3,500,000.00 effective as of the 4th quarter of 1993; a maximum total
Debt to Tangible Net Worth plus Subordinated Debt ratio of 1.50 to 1.00,
decreasing to 1.00 to 1.00 effective as of the 4th quarter of 1993; a
minimum Debt Service ratio of 1.25 to 1.00 effective the as of the end of
the month wherein the Term Loan is removed from under the Borrowing Base.
No quarterly losses in excess of $750,000.00 shall be allowed and Borrower
shall be profitable by the 4th quarter of 1993. Borrower shall be
profitable thereafter with an allowance of one quarterly loss per calendar
year not to exceed $100,000.00.
For purposes of this Agreement and to the extent the following terms are
utilized in this Agreement, the term "Tangible Net Worth" shall mean
Borrower's total assets excluding all intangible assets (i.e., goodwill,
trademarks, patents, copyrights, organizational expenses, and similar
intangible items, but including leaseholds and leasehold improvements) less
total Debt. The term "Debt" shall mean all of Borrower's liabilities
excluding Subordinated Debt. The term "Subordinated Debt" shall mean
indebtedness and liabilities of Borrower which have been subordinated by
written agreement to indebtedness owed by Borrower to Lender in form and
substance acceptable to Lender. The term "Working Capital" shall mean
Borrower's current assets, excluding prepaid expenses, less Borrower's
current liabilities. The term "Liquid Assets" shall mean Borrower's cash on
hand plus Borrower's receivables. The
<PAGE>
term "Cash Flow" shall mean net income after taxes, and exclusive of
extraordinary gains and income, plus depreciation and amortization. Except
as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with
generally accepted accounting principles, applied on a consistent basis,
and certified by Borrower as being true and correct.
BORROWING BASE FORMULA. Funds shall be advanced under the line of credit
according to a borrowing base formula, as determined by Lender on a monthly
basis, defined as follows: Sixty percent (60%) of eligible accounts
receivable, increasing to seventy percent (70%) after a $2,000,000.00
equity event by the 4th quarter of 1993 and two consecutive quarters of
profitability is achieved with minimum quarterly Debt Service of at least
1.50 to 1.00. Eligible account receivable shall include, but not be limited
to, those accounts outstanding less than 90 days from the date of invoice.
excluding foreign, government. contra and intercompany accounts and exclude
accounts wherein 50% or more of the account is outstanding more than 90
days from the date of invoice. Any
<PAGE>
Page 6
account which alone exceeds 25% of total account will be ineligible to the
exten balances which are aged past 90 days. also ineligible are any
accounts which Lender in its sole judgment excludes for valid credit
reasons.
Borrowings under Borrower's Equipment Term Loan (which borrowings shall be
a maximum of 75% of invoice cost, up to $250,000.00) to be included under
accounts receivable borrowing base formula, until a minimum equity event of
$2,000,000.00 by 12-31-93 and two consecutive quarters of profitability is
achieved with minimum quarterly debt service of at least 1.50 to 1.00.
INSURANCE. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts customary to the
industry, coverages and with insurance companies reasonably acceptable to
Lender. Borrower, upon request of Lender, will deliver to Lender from time
to time the policies or certificates of insurance in form satisfactory to
Lender, including stipulations that coverages will not be cancelled or
diminished without at least ten (10) days' prior written notice to Lender.
In connection with all policies covering assets in which Lender holds or is
offered a security interest for the Loans, Borrower will provide Lender
with such loss payable or other endorsements as Lender may require.
INSURANCE REPORTS. Furnish to Lender, upon request of Lender, reports on
each existing insurance policy showing such information as Lender may
reasonably request, including without limitation the following: (a) the mae
of the insurer; (b) the risks insured; (c) the amount of the policy; (d)
the properties insured; (e) the then current property values on the basis
of which insurance has been obtained, and the manner of determining those
values; and (f) the expiration date of the policy.
OTHER AGREEMENTS. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any
other creditor and notify Lender immediately in writing of any default in
connection with any other such agreements.
LOAN PROCEEDS. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
TAXES, CHARGES AND LIENS. Pay and discharge when due all of its
indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature,
imposed upon Borrower or its properties, income, or profits, prior to the
date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower's properties,
income, or profits. Provided however, Borrower will not be required to pay
and discharge any such assessment, tax, charge, levy, lien or claim so long
as (a) the legality of the same shall be contested in good faith by
appropriate proceedings, and (b) Borrower shall have established on its
books adequate reserve with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with generally accepted
accounting practices. Borrower, upon request of Lender, will furnish to
Lender evidence of payment of the assessments, taxes, charges, levies,
liens and claims and will authorize the appropriate governmental official
to deliver to Lender at any time a written statement of any assessments,
taxes, charges, levies, liens and claims against Borrower's properties,
income, or profits.
PERFORMANCE. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in all other instruments and agreements
between Borrower
<PAGE>
and Lender in a timely manner, and promptly notify Lender if Borrower
learns of the occurrence of any event which constitutes and Event of
Default under this Agreement.
OPERATIONS. Substantially maintain its present executive and management
personnel; conduct its business affairs in a reasonable and prudent manner
and in compliance with all applicable federal, state and municipal laws,
ordinances, rules and regulations respecting its properties, charters,
businesses and operations, including compliance with all minimum funding
standards and other requirements of ERISA and other laws applicable to
Borrower's employee benefit plans.
INSPECTIONS. Following 24 hours' notice by Lender to Borrower, permit
employees or agents of Lender at any
<PAGE>
Page 7
reasonable time to inspect any and all collateral for the Loan or Loans and
Borrower's other properties and to examine or audit Borrower's books,
accounts, and records and to make copies and memoranda of Borrower's books,
accounts, and records. If Borrower now or at any time hereafter maintains
any records (including without limitation computer generated records and
computer software programs for the generation of such records) in the
possession of a third party, Borrower, upon request of Lender, shall notify
such party to permit Lender free access to such records at all reasonable
times and to provide Lender with copies of any records it may request, all
at Borrower's expense.
COMPLIANCE CERTIFICATE. Unless waived in writing by Lender, provide Lender
at least annually and at the time of each disbursement of Loan proceeds
with a certificate executed by Borrower's chief financial officer, or other
officer or person acceptable to Lender, certifying that the representations
and warranties set forth in this Agreement are true and correct as of the
date of the certificate and further certifying that, as of the date of me
certificate, no Event of Default exists under this Agreement.
ADDITIONAL ASSURANCES. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender what while this
Agreement in effect, Borrower shall not, without the prior written consent of
Lender:
INDEBTEDNESS AND LIENS. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this
Agreement, create, incur or assume indebtedness for borrowed money,
including capital lease, (b) sell, transfer, mortgage, assign, pledge,
lease, grant a security interest in, or encumber any of Borrower's assets,
or (c) sell with recourse any of Borrower's accounts, except to Lender.
CONTINUITY OF OPERATIONS. (a) Engage in any business activities
substantially different than those in which Borrower is presently engaged,
(b) cease operations, liquidate, merge, transfer, acquire or consolidate
with any other entity, change ownership, dissolve or transfer or sell
Collateral out of the ordinary course of business, or (c) pay any dividends
on Borrower's stock (other than dividends payable in its stock and except
as may be statutorily required for Subchapter S corporations) or purchase
or retire any of Borrower's outstanding shares or alter or amend Borrower's
capital structure.
LOANS AND ACQUISITIONS AND GUARANTIES. (a) Loan, invest in or advance
money or assets, (b) purchase, create or acquire any interest in any other
enterprise or entity, or (c) incur any obligation as surety or guarantor
other than in the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower whether under this Agreement or under any other agreement, Lender shall
have no obligation to make Loan Advances or to disburse Loan proceeds if: (a)
Borrower or any Guarantor is in default under the terms of this Agreement or any
of the Related Documents or any other agreement that Borrower or any Guarantor
has with Lender; (b) Borrower becomes insolvent, files a petition in bankruptcy
or similar proceedings, or is adjudged a bankrupt; (c) there occurs a material
adverse change in Borrower's financial condition, in the financial condition of
any Guarantor, or in the value of any Collateral securing any Loan; or (d) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor's guaranty of the Loan or any other loan with Lender.
<PAGE>
LOAN ADVANCES. Lender, in its discretion, will make loans to Borrower in
amounts determined by Lender. up to the amounts as defined and permitted in the
Agreement and Related Documents, including but not limited to any Promissory
Notes, executed by Borrower (the "Credit Limit"). The Borrower is responsible
for monitoring the total amount of Loans and Indebtedness outstanding from time
to time, and Borrower shall not permit the same at any time to exceed the Credit
Limit. If at any time the total of all outstanding Loans and Indebtedness
exceeds the Credit Limit the Borrower shall immediately pay the amount of the
excess to Lender, without notice or demand.
DEFAULT RATE. Upon default. including failure to pay upon final maturity,
Lender, at its option. may do one or both of the following: (a) increase the
variable interest rare of the Note to rive percentage points (5.000%) over the
Interest Rate otherwise payable thereunder and (b) add any unpaid accrued
interest to principal and such sum will bear interest
<PAGE>
Page 8
therefrom until paid at the rate provided in the Note.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Borrower to make any payment when due
on the Loans.
OTHER DEFAULTS. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition
contained in this Agreement or in any of the Related documents, or failure
of Borrower to comply with or to perform any other term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower.
DEFAULT IN FAVOR OF THIRD PARTIES. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially adversely affect any of Borrower's property or
Borrower's or any Grantor's ability to repay the Loans or perform their
respective obligations under this Agreement or any of the Related
Documents.
FALSE STATEMENTS. Any warranty, representation, or statement made or
furnished to Lender by or on behalf of Borrower or any Grantor under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished.
DEFECTIVE COLLARTERALIZATION. This Agreement or any of the Related
documents ceases to be in full force and effect (including failure of any
Security Agreement to create a valid and perfected Security Interest) at
any time and for any reason.
INSOLVENCY. The dissolution or termination of Borrower's existence as a
going business, insolvency, appointment of a receiver for any part of
Borrowers property, any assignment for the benefit of creditors, any, type
of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower, any creditor
of any Grantor against any collateral securing the Indebtedness, or by any
governmental agency. This includes a garnishment, attachment, or levy on or
of any of Borrower's deposit accounts with Lender. However, this Event of
Default shall not apply if there is a good faith dispute by Borrower or
Grantor, as the case may be, as to the validity or reasonableness of the
claim which is the basis of the creditor or forfeiture proceeding, if
Borrower or Grantor gives Lender written notice of the creditor or
forfeiture proceeding and furnishes reserves or a surety bond for the
credit or forfeiture proceeding satisfactory to Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor dies
or becomes incompetent. Lender, at its option, may, but shall not be
required to, permit the Guarantor's estate to assume unconditionally the
obligations arising under the guaranty in a manner satisfactory to Lender,
and, in doing so, cure the Event of Default.
CHANGE IN OWNERSHIP. Any change in ownership of twenty five percent (25%)
or more of the common stock of Borrower.
<PAGE>
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option, all
Loans immediately will become due and payable, all without notice of any kind to
Borrower, except that in the case of an Event of Default of the type described
in the "Insolvency" subsection above, such acceleration shall be automatic and
not optional.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
AMENDMENT. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
<PAGE>
Page 9
Agreement shall be effective unless given in writing and signed by the
party or parties sought b=to be charged or bound by the alteration or
amendment.
APPLICABLE LAW. THIS AGREEMENT HAS BEEN DELIVERED TO LENDER AND ACCEPTED
BY LENDER IN THE STATE OF CALIFORNIA. IF THERE IS A LAWSUIT, BORROWER
AGREES UPON LENDER'S REQUEST TO SUBMIT TO THE JURISDICTION OF THE COURTS OF
SANTA CLARA COUNTY, THE STATE OF CALIFORNIA. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
CALIFORNIA.
CAPTION HEADINGS. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions
of this Agreement.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Borrower under
this Agreement shall be joint and several, and all references to Borrower
shall mean each and every Borrower. This means that each of the persons
signing below is responsible for all obligations in this Agreement.
CONSENT TO LOAN PARTICIPATION. Borrower agrees and consents to Lender's
sale or transfer, whether now or later, of one or more participation
interests in the Loans to one or more purchasers, whether related or
unrelated to Lender. Lender may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter relating
to the Loan, and Borrower hereby waives any rights to privacy it may have
with respect to such matters. Borrower additionally waives any and all
notices of sale of participation interests, as well as all notices of any.
repurchase of such participation interests. Borrower also agrees that the
purchasers of any such participation interests will be considered as the
absolute owners of such interests in the Loans and will have all the rights
granted under the participation agreement or agreements governing the sale
of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or
against any purchaser of such a participation interest and unconditionally
agrees that either Lender or such purchaser may enforce Borrower's
obligation under the Loans irrespective of the failure or insolvency of any
holder of any interest in the Loans. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have
against Lender.
COSTS AND EXPENSES. Borrower agrees to pay upon demand all of Lender's
reasonable out-of-pocket expenses, including attorneys' fees, incurred in
connection with the preparation, execution, enforcement and collection of
this Agreement or in connection with the Loans made pursuant to this
Agreement. Lender may pay someone else to help collect the Loans and to
enforce this Agreement, and Borrower will pay that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also will pay any court costs,
in addition to all other sums provided by law.
NOTICES. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the party's address. To the
extent permitted by applicable law, if there is more than one Borrower,
notice to any Borrower will constitute notice to all Borrower. For notice
purposes,
<PAGE>
Borrower agrees to keep Lender informed at all times of Borrowers current
address(es).
SEVERABILITY. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any
such offending provision shall be deemed to be modified to be within the
limits of enforceability or validity; however, if the offending provision
cannot be so modified, it shall be stricken and all other provisions of
this Agreement in all other respects shall remain valid and enforceable.
SUBSIDIARIES AND AFFILIATES OF BORROWER. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used
<PAGE>
Page 10
herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other
financial accommodation to any subsidiary or affiliate of Borrower.
SUCCESSORS AND ASSIGNS. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and sell inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
SURVIVAL. All warranties, representations, and covenants made by Borrower
in this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making o the Loan and delivery
to Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
TIME IS OF THE ESSENCE. Time is of the essence in the performance of this
Agreement.
WAIVER. Lender sell not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by Lender of
a provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the
granting of such consent by Lender in any instance shall not constitute
continuing consent in subsequent instances where such consent is required
and in all cases such consent may be granted or withheld in the sole
discretion of Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF JULY
13, 1993.
BORROWER:
Aurum Software, Inc.
By:/s/Craig F. Dawson
Name:Craig F. Dawson
Title: VP,CFO
LENDER:
Silicon Valley Bank
By:/s/P McCarthy
Name:Patrick McCarthy
Title:Asst. Vice President
<PAGE>
Exhibit 10.10
PROMISSORY NOTE
Borrower: Aurum Software, Inc. Lender: Silicon Valley Bank
3385 Scott Blvd. 3003 Tasman Drive
Santa Clara, CA 95054 Santa Clara, CA 95054
Principal Amount: $1,250,000.00 Initial Rate: 9.750% Date of Note: July 15,
1996
PROMISE TO PAY Aurum Software, Inc. ("Borrower") promises to pay to Silicon
Valley Bank ("Lender"), or order, in lawful money of the United States of
America, the principal amount of One Million Two Hundred Fifty Thousand and
00/100 Dollars ($1,250,000.00) or so much as may be outstanding, together with
Interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan in accordance with the following payment
schedule:
The Draw Period shall begin as of this date and shall end on April 30, 1997
(the "Draw Period"). During the Draw Period, Borrower shall pay regular
monthly payments of all accrued unpaid Interest due as of each payment
date, beginning August 30, 1996 and all subsequent Interest payments will
be due on the same day of each month thereafter. The outstanding principal
balance on April 30, 1997, will be payable In thirty (30) even payments of
principal plus Interest due as of each payment date, beginning May 30, 1997
and all subsequent payments of principal plus Interest will be due on the
same day of each month thereafter. The final payment due on October 30,
1999, will be for all outstanding principal plus all accrued Interest not
yet paid.
Interest on this Note is computed on a 365/360 simple interest basis; that is,
by applying the ratio of the annual interest rate over a year of 360 days,
multiplied by the outstanding principal balance, multiplied by the actual number
of days the principal balance is outstanding. Borrower will pay Lender at
Lender's address shown above or at such other place as Lender may designate in
writing. Unless otherwise agreed or required by applicable law, payments will be
applied first to accrued unpaid interest, then to principal, and any remaining
amount to any unpaid collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate (the
"Index"). This is the rate Lender charges, or would charge, on 90-day unsecured
loans to the most creditworthy corporate customers. This rate may or may not be
the lowest rate available from Lender at any given time. Lender will tell
Borrower the current Index rate upon Borrower's request. Borrower understands
that Lender may make loans based on other rates as well. The Interest rate
change will not occur more often than each time the prime rate is adjusted by
Silicon Valley Bank. The Index currently is 8.250 per annum. The interest rate
to be applied to the unpaid principal balance of this Note will be at a rate of
1.500 percentage point over the Index, resulting In an initial rate of 9.750%
per annum. NOTICE: Under no circumstances will the interest rate on this Note be
more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance
charges are earned fully as of the date of the loan and will not be subject to
refund upon early payment (whether voluntary or as a result of default), except
as otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
<PAGE>
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower falls to perform promptly at the time
and strictly in the manner provided in this Note or any agreement related to
this Note, or in any other agreement or loan Borrower has with Lender. (c)
Borrower defaults under any loan, extension of credit, security agreement,
purchase or sales agreement, or any other agreement, in favor of any other
creditor or person that may materially affect any of Borrower's property or
Borrower's ability to repay this Note or perform Borrowers obligations under
this Note or any of the Related Documents. (d) Any representation or statement
made or furnished to Lender by Borrower or on Borrower's behalf Is false or
misleading in any material respect. (e) Borrower becomes Insolvent, a receiver
is appointed for any part of Borrower's property, Borrower makes an assignment
for the benefit of creditors, or any proceeding is commenced either by Borrower
or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor
tries to take any of Borrowers property on or in which Lender has a lion or
security Interest This includes a garnishment of any of Borrower's accounts with
Lender. (g) Any of the events described in this default section occurs with
respect to any guarantor of this Note.
LENDERS RIGHTS. Upon default, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due, without
notice, and then Borrower will pay that amount. Upon Borrower's failure to pay
all amounts declared due pursuant to this section, including failure to pay upon
final maturity, Lender, at its option, may also, If permitted under applicable
low, do one or both of the following: (a) Increase the variable Interest rate on
this Note to 5.000 percentage points over the otherwise effective Interest rate,
and (b) add any unpaid accrued Interest to principal and such sum will bear
interest therefrom until paid at the rate provided In this Note (including any
increased rate). Lender may hire or pay someone else to help collect this Note
if Borrower does not pay. Borrower also will pay Lender that amount. This
Includes, subject to any limits under applicable law, Lender's attorneys' fees
and Lender's legal expenses whether or not there is a lawsuit, including
attorneys' fees and legal expenses for bankruptcy proceedings (including efforts
to modify or vacate any automatic stay or Injunction), appeals, and any
anticipated post-judgment collection services. Borrower also will pay any court
costs, in addition to all other sums provided by law. This Note has been
delivered to Lender and accepted by Lender in the State of California, If there
Is a lawsuit Borrower agrees upon Lender's request to submit to the jurisdiction
of the courts of Santa Clara County, the State of California. (Initial Here /s/
) Lender and Borrower hereby waive the right to any jury trial in any action,
proceeding, or counterclaim brought by either Lender or Borrower against the
other. This Note shall be governed by and construed in accordance with the laws
of the State of California.
<PAGE>
PROMISSORY NOTE
CONTINUED
LINE OF CREDIT. This Note evidences a straight line of credit through the end
of the Draw Period. Once the total amount of principal has been advanced,
Borrower is not entitled to further loan advances. Advances under this Note, as
well as directions for payment from Borrower's accounts, may be requested orally
or in writing by Borrower or by an authorized person, Lender may, but need not,
require that all oral requests be confirmed in writing. Borrower agrees to be
liable for all sums either (a) advanced in accordance with the instructions of
an authorized person or (b) credited to any of Borrower's accounts with Lender.
The unpaid principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender's internal records, including daily
computer print-outs. Lender will have no obligation to advance funds under this
Note if: (a) Borrower or any guarantor is in default under the terms of this
Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (b) Borrower or
any guarantor ceases doing business or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; or (d) Borrower has
applied funds provided pursuant to this Note for purposes other than those
authorized by Lender.
ADVANCE RATE. At any time from the date hereof through the end of the Draw
Period, Borrower may request advances (each an "Advance" and collectively, the
"Advances") from Lender in an aggregate amount not to exceed the principal
amount of the Note. The minimum Advance amount shall be One Hundred Thousand and
00/100 Dollars ($100,000.00) and Borrower will be limited to a total of seven
(7) Advances. To evidence the Advances, Borrower shall deliver to Lender, at the
time of each advance request, an invoice for the Eligible Equipment (as defined
herein) to be purchased. The Advances shall be used only to purchase Eligible
Equipment and shall not exceed one hundred percent (100%) of the invoice amount
approved from time to time by Lender, excluding taxes, shipping and installation
expense, All Advances must be made within ninety (90) days of Borrower's
purchase of the Eligible Equipment. Software licenses, leasehold improvements
and other soft costs may, however, comprise up to ten percent (10%) of the loan
amount. Eligible Equipment shall consist of computer equipment, office
equipment, furniture and other machinery and equipment as approved by Lender, in
which Lender has a valid security interest.
BUSINESS LOAN AGREEMENT. This Note is subject to and shall be governed by all
the terms and conditions of the Business Loan Agreement dated July 13,1993, as
such agreement may be amended from time to time, between Borrower and Lends,
which Business Loan Agreement Is incorporated herein by reference.
PAYMENT OF LOAN FEE. This Note is subject to a loan fee in the amount of Six
Thousand Two Hundred Fifty and 00/100 Dollars ($6,250.00) plus all out-of-pocket
expenses.
REQUEST TO DEBIT. Borrower will regularly deposit funds received from its
business activities In accounts maintained at Silicon Valley Bank. Borrower
hereby authorizes Lender to debit any accounts with Lender, Including, without
limitation, Account Number. 0350178770 for payments of principal and interest
due on the loan and any other obligations owing by Borrower to Lender. Lender
will notify Borrower of all debts which Lender makes against Borrower's
accounts. Any such debts against Borrower's accounts in no way shall be deemed a
set-off.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive any
applicable statute of limitations, presentment, demand for payment, protest and
notice of dishonor. Upon any change in the terms of this Note, and unless
otherwise expressly stated In writing, no party who signs this Note, whether as
maker, guarantor, accommodation maker or endorser, shall be released from
liability. All such parties agree that Lender may renew or extend
<PAGE>
(repeatedly and for any length of time) this loan, or release any party or
guarantor or collateral; or impair, fall to realize upon or perfect Lender's
security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also
agree that Lender may modify this loan without the consent of or notice to
anyone other than the party with whom the modification Is made.
PRIOR TO SIGNING THIS NOTE, BORROWER HAS READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES
TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE
NOTE.
BORROWER:Aurum Software, Inc.
By:/s/Brigitte Wilson
Name:Brigitte Wilson
Title:CFO
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form SB-2
(File No. 333- ) of our report dated March 5, 1996, except for Note 12 as
to which the date is September 12 1996, on our audits of the financial
statements and financial statement schedule of Aurum Software, Inc. We also
consent to the reference to our firm under the caption "Experts."
Coopers & Lybrand l.l.p.
San Jose, California
September 12, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINES SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS, INCOME STATEMENTS, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 JUN-30-1996
<CASH> 2,795 2,006
<SECURITIES> 0 0
<RECEIVABLES> 5,042 7,988
<ALLOWANCES> (340) (262)
<INVENTORY> 0 0
<CURRENT-ASSETS> 7,935 10,347
<PP&E> 3,001 4,098
<DEPRECIATION> (1,442) (1,920)
<TOTAL-ASSETS> 9,795 12,762
<CURRENT-LIABILITIES> 5,730 8,197
<BONDS> 0 0
17,356 29,592
0 0
<COMMON> 236 0
<OTHER-SE> (13,764) (25,449)
<TOTAL-LIABILITY-AND-EQUITY> 9,795 12,762
<SALES> 10,475 10,938
<TOTAL-REVENUES> 10,475 10,938
<CGS> (4,898) (4,879)
<TOTAL-COSTS> (9,935) (6,628)
<OTHER-EXPENSES> 63 23
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (159) (61)
<INCOME-PRETAX> (4,452) (607)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (4,452) (607)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,452) (607)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
