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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-23446
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
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<S> <C>
CALIFORNIA 94-3008888
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
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999 BAKER WAY, FIFTH FLOOR, SAN MATEO, CALIFORNIA 94404
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(650) 578-0700
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
TITLE OF EACH CLASS
COMMON STOCK, NO PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The registrant's revenues for the fiscal year ended December 31, 1999 were
$3,244,400.
The approximate aggregate market value of the registrant's Common Stock
held by non-affiliates on February 28, 2000 was $29,504,551. This amount
excludes shares held by directors, executive officers and holders of 5% or more
of the outstanding Common Stock since such persons may be deemed to be
affiliates of the registrant. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
The number of common shares outstanding as of February 28, 2000 was
4,235,841.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the definitive proxy statement for the 2000 Annual Meeting are
incorporated by reference into Part III hereof.
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PART I.
ITEM 1. DESCRIPTION OF BUSINESS
Certain statements contained in this Annual Report on Form 10-K, including,
without limitation, statements containing the words "anticipates," "believes,"
"expects," "intends," "future" and similar expressions constitute
forward-looking statements within the meaning of the Private Securities Reform
Act of 1995. These forward-looking statements are subject to certain risks and
uncertainties, including those discussed below, that could cause actual results
to differ materially from historical results or those anticipated. Factors that
could cause or contribute to such differences include, but are not limited to,
those discussed below and in "Management's Discussion and Analysis or Plan of
Operations." Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof.
OVERVIEW
We provide software products that automate administrative tasks and monitor
critical performance and operational characteristics for commercial servers and
workstations. Our products provide a single console management view of
customers' mixed technology environments consisting of Linux, Unix and Windows.
Our products enable integrated, coordinated operations and management of
networked and web based servers and workstations. Our products are designed for
distributed computing environments in the range of ten to 1,000 servers and
workstations. Our core product, the Enlighten(R) Distributed Systems Manager or
EnlightenDSM(TM), allows companies to manage their mission critical servers and
workstations by enabling information technology ("IT") staffs to standardize the
management of diverse Linux, Unix and Windows systems and to monitor the
on-going performance and availability of many different systems running
together.
Our software manages products from vendors such as Compaq Computer
Corporation, Hewlett-Packard Company, International Business Machines
Corporation ("IBM"), Intel Corporation ("Intel"), Microsoft Corporation, The
Santa Cruz Operation, Inc., Silicon Graphics, Inc., Sun Microsystems, Inc.
("Sun"), Red Hat, Inc. ("Red Hat"), TurboLinux, Inc. ("TurboLinux"), Caldera
Systems, Inc. and SuSE, Inc. Our award winning EnlightenDSM product suite is a
fully integrated, cross-platform software solution.
The key elements of our strategy include enabling the integration of Linux
into the corporate environment, focusing on the mid-sized organization and
departments of larger companies, adding timely effective manageability to web
based application environments and distributing our products through third-
party relationships such as software vendors, hardware vendors, Linux
distributors, systems management service providers, and Linux appliance
manufacturers.
Enlighten Software Solutions, Inc. was incorporated in California in June
1986 as LAB, Inc. In June 1986, LAB, Inc. changed its name to Software
Professionals, Inc. In May 1996, Software Professionals changed its name to
Enlighten Software Solutions, Inc. Unless the context otherwise requires, any
reference to "Enlighten," "we," "our" and "us" in this Annual Report on Form
10-KSB refers to Enlighten Software Solutions, Inc., a California corporation,
and its subsidiaries and predecessors. Enlighten's principal executive offices
are located at 999 Baker Way, Fifth Floor, San Mateo, California 94404.
Enlighten's telephone number is (650) 578-0700 and its facsimile number is (650)
578-0118.
RECENT DEVELOPMENTS FOR ENLIGHTEN
In 1999, we continued adding OEM partners and introduced versions of our
EnlightenDSM product for certain distributions of the Linux open source
operating system. Linux is a free, open source alternative to proprietary Unix
operating systems. The Linux operating system is bundled with complimentary
products, packaged, sold and supported by many different companies. These
products are commonly known as Linux distributions. During 1999, we released
version 3.4 of our product which operates on the Linux operating systems
distributed by Red Hat, Inc. and TurboLinux, Inc., entered into an agreement
with Intel to incorporate the Linux version of our technology into Intel's
LANDesk(R) product for its System Management Division, entered into an agreement
with IBM for IBM to integrate the EnlightenDSM product into IBM Suites for
Solaris and AIX and entered into an agreement with Sun to produce a seamless
integration between
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a unique product made up of certain administrative portions of the EnlightenDSM
product and Sun's Management Center products, (formerly Sun Enterprise SyMON).
With version 3.4, EnlightenDSM allowed event monitoring and system management
across each of the major Unix operating systems, Windows NT/98/95 and the
rapidly expanding Linux operating system.
Key Management Changes
Mr. Bill Bradley was promoted to Chief Executive Officer in December 1999
after joining Enlighten in August, 1998 as Vice President of Business
Development and in September 1999 becoming President and Chief Operating
Officer. Mr. Bradley possesses over twenty years of sales, marketing and
management experience. His emphasis has been high-technology, particularly in
the area of new business development. From October 1997 through August 1998, Mr.
Bradley served as a consultant to Enlighten focusing on business development,
strategic planning and marketing. Mr. Bradley served as President of Design
Technology, Inc., a software design and consulting firm in Denver, Colorado,
from July 1995 through October 1997. He started his career at IBM in the Data
Processing Division and is a graduate of Colorado College. Mr. Bradley replaced
David D. Parker as President and CEO, who held those positions since 1997. Mr.
Parker, a Director of Enlighten, was named Co-Chairman of the Board of
Directors. Additionally, Mr. Parker will continue to serve in various marketing
roles with Enlighten.
Mr. Stephen Giusti was promoted to Vice President, Finance and
Administration and Chief Financial Officer in December 1999 after joining
Enlighten in August 1999 as Controller. From January 1998 to August 1999, Mr.
Giusti served as Accounting and Financial Reporting Supervisor at Cadence Design
Systems, Inc. From January 1991 to December 1997, Mr. Giusti served various
positions at the public accounting firm of Meredith, Cardozo, and Lanz, LLP,
most recently as Manager. Mr. Giusti is a Certified Public Accountant in the
State of California. Mr. Giusti replaced Michael A. Morgan as Vice President and
CFO, who held those positions since 1991. Mr. Morgan remains a Director and
Secretary of Enlighten.
OEM Bundling Agreements
In October 1999, we entered into an agreement with Intel Corporation to
integrate the Linux version of the EnlightenDSM product into Intel's LANDesk(R)
Server Manager product. The LANDesk(R) Server Manager can be fully integrated
into Intel's LANDesk(R) Management Suite, the industry-leading system management
tool for Microsoft and Novell networks. Under this agreement, we will receive a
certain percent of the license revenues Intel records from the sale of each copy
of LANDesk(R) Server Manager for Linux shipped by Intel or its resellers.
In August 1999, we entered into an agreement with TurboLinux, Inc., in
which TurboLinux will bundle a single user copy of the EnlightenDSM product with
each copy of TurboLinux's workstation, server and TurboCluster Linux
distributions. Under this agreement, we will receive a certain amount for each
unit of EnlightenDSM shipped with revenue-generating versions of TurboLinux's
Linux distribution, up to a certain percent of these revenues.
In January 1999, we entered into an agreement with International Business
Machines, Inc. ("IBM") to integrate the EnlightenDSM product into IBM Suites for
Solaris and AIX. Under this agreement, we will receive a fixed percentage of the
total IBM Suites for Solaris and IBM Suites for AIX revenues.
Other OEM Developments
In January 1999, we entered into an agreement with Sun Microsystems, Inc.
to produce a product that will seamlessly integrate into the Sun Management
Center (formerly Sun Enterprise SyMON). We will sell this product directly to
Sun's Sun Management Center customers and will add certain administrative tools
from the EnlightenDSM product to complement the existing event monitoring
software that is the Sun Management Center product. Under this agreement, we
will also work with Sun to cooperatively market our complementary administrative
product to Sun Management Center customers.
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INDUSTRY BACKGROUND
The most dynamic changes in the industry continue to be in the market
consisting of networked computer systems comprised of servers and workstations.
These computer systems have traditionally been based upon Unix and NT operating
systems. In the last year Linux has moved in to compete with the growth of these
existing systems. At the same time many companies are increasingly using these
servers and their associated workstations for more time sensitive or mission
critical applications that are integral to the organization's day-to-day
operations. This trend is being accelerated by the increased use of the Internet
between businesses, between businesses and customers and within companies to
automate and communicate more efficiently. In more and more cases today the
Internet and the web-based applications that companies build to exploit it are
the business itself. Taken together, customers face the addition of Linux to the
already complex mix of many flavors of Unix and Windows and the increased need
for immediate, flexible and easy to use computing solutions that provide
business benefits quickly.
The Linux Operating System and the accelerated adoption of this platform in
customer IT departments are of high interest to Enlighten. Linux is an Open
Source operating system meaning that it is both free to download from the
Internet and open to modification and enhancement by users and other interested
parties. Linux is interesting because, according to International Data
Corporation, it has a growth rate twice that of traditional Unix and Windows
systems yet it lacks the sophisticated tools and utilities for management and
instrumentation that accompany traditional commercial products. Native Linux
management tools typically address the management of a single Linux machine one
at a time and do not address the management of Linux, Unix and Windows networks
that need to function collectively. Commercial adoption of Linux is being
promoted by companies such as Red Hat, SuSE, TurboLinux, VA Linux, Linuxcare,
Silicon Graphics, IBM and others.
The commercial providers of Linux fall into three primary categories. The
first is Linux Distributors. These companies take the freely available Linux
operating system and package it with enhancements that add commercial value and
make it easier to install and use. The second is Linux Service Providers. These
companies sell installation, customization, development and ongoing support
services that relate to and depend on Linux. The third is Linux Solution
Providers that combine the Linux operating system with other hardware or
software components to provide a turnkey solution. As an alternative to
traditional Unix operating systems, Linux systems have potential to provide
robust, reliable and scalable commercial computing performance at a much lower
price point.
Working in the same environment, Unix and Linux comprise the open systems
marketplace that offers several benefits to customers, such as common standards,
allowing for combinations of hardware and software from a variety of vendors.
Other benefits include lower price points than mainframes, cost effective
networking and a large pool of experienced technical personnel. However,
managing the operations of large client/server systems or massive rack mounted
servers in an Internet Service Provider ("ISP") or Application Service Provider
("ASP") environment can be difficult and labor intensive. As corporate customers
build mission critical applications and Internet based relationships on
distributed Linux, Unix and NT systems, they are demanding sophisticated yet
quick and easy to deploy management and administration tools. The diversity of
systems and applications has increased significantly in recent years. The
introduction and proliferation of the Linux operating system into existing Unix
and NT environments, the increased scope of applications from core business
transactional software to decision support, groupware and Internet/Intranet
products, and the advancement of requirements of a centralized information
technology, or IT, department to manage systems in remote physical locations has
greatly expanded the systems management expertise required within IT
organizations of these companies. Additionally, an inherent characteristic of
open systems is a lack of complete integration of the various vendors' products.
The development of standards such as Simple Network Management Protocol, or
SNMP, the leading protocol for network management and the leading standard for
information collection in multi-vendor computing environments, provide a
standard framework for systems management products in open environments, but
these standards must be integrated and managed. Many hardware manufacturers have
been slow to provide effective multi-vendor solutions to manage their own, let
alone their competitor's hardware, creating a market need for truly
heterogeneous system administration solutions.
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While open systems have produced significant advantages, the management of
distributed, heterogeneous open systems presents a major challenge. Add to that
the increased demands to reduce time to deployment and time to market that are
imposed by the Internet and web based applications and businesses face the
prospect of managing increasingly complex networks of resources with less time
and skill to make them productive and keep them available. The responsibility
for managing these open systems has become the domain of technicians who
typically use limited system utilities and historically prefer "home grown"
routines and manual procedures.
The market needs of open systems customers are currently being addressed
either through manual procedures and routines of a company's internal IT
organization, or by one of three types of solutions: (i) point products, or
stand-alone products designed to address one particular function or requirement;
(ii) interfaced products, or a set of point products loosely coupled by a common
interface but not truly integrated; and (iii) enterprise systems management
frameworks, or large monolithic products designed to manage a customer's entire
computing infrastructure from mainframe systems, to Unix/NT/Linux systems, to
desktop PCs. Many products serving this market were developed by porting dated
mainframe technology and architecture to the Unix environment. These solutions
are typically expensive to acquire and implement due to the extensive efforts
associated with installing and configuring these products to a customer's
particular environment.
THE ENLIGHTEN SOFTWARE SOLUTION
We offer a middle-tier framework for event monitoring and systems
administration for Linux, Unix and Windows environments. Our products are suited
for quick, effective implementation to provide a management infrastructure that
matches today's needs for immediate, flexible solutions in the Internet business
environment. Our mission is to provide the industry's most pervasive software
solutions to help enterprises monitor, manage and administer distributed,
heterogeneous computers simply and inexpensively. We intend to be a market
leader for easy to use, out-of-the-box, broad-based functionality for event
monitoring and systems administration across major open systems platforms. While
numerous standards are being introduced and companies are vying to position
themselves in the open systems management market, we are positioning our
EnlightenDSM product suite as the one product that is vital and affordable to
open systems managers in mixed Linux, Unix and Windows environments.
Our systems management solution differentiates itself from other companies'
systems management approaches. We believe that systems managers demand
management tools that are simple to use, easy to install, scalable and
customizable, intuitive to learn and reasonably priced. The EnlightenDSM product
suite is targeted to the broadest segment of the open systems market: customers
with ten to 1,000 servers and workstations from a variety of the most popular
vendors. We believe the product's key strengths that address the needs of this
market niche are:
- Ease of Use: EnlightenDSM is designed to be easily installed and
configured. The product is installed and managed from a graphical window.
Graphical templates drive the deployment and initial configuration of the
product and provide the interface for ongoing monitoring and management
once installed. EnlightenDSM adapts its management to the native
protocols and storage schemes of each supported platform. This easy to
use interface standardizes complex, proprietary rules and procedures
between various server vendors.
- Time to Deployment and ROI: EnlightenDSM installs and begins operating in
hours and can be fully configured with customized event alarms and
thresholds and integration with other third-party products in weeks.
Return On Investment associated with deployment of systems management
begins very early, giving customers immediate benefit. Customers benefit
from greater productivity of their professional IT staff because of
single-console, graphical management of the entire networked environment.
Customers also achieve higher availability of all managed servers and
workstations because EnlightenDSM monitors critical operating parameters
and will alert operators or take automatic corrective action when
necessary.
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- Broad Functionality: EnlightenDSM addresses a broad range of system
monitoring and administration needs, alleviating the customer from the
need to make a series of investments in "point" product solutions.
EnlightenDSM provides a common interface for an integrated product that
addresses (i) user account configuration, (ii) printer resource
management, (iii) network services configuration and management, (iv)
security auditing, (v) disk and file management, (vi) archive management,
(vi) systems management and (vii) event generation and monitoring.
- Price Performance: We believe our product is generally priced below
comparable point products in the market, as well as enterprise framework
products.
- Open Architecture: EnlightenDSM is based on an architecture which is
designed to be easily integrated with most existing point solutions as
well as solutions developed by customers internally. The product is also
designed to communicate "up" to the enterprise framework products with
event mechanisms or easy-to-write scripts in the product's Programmable
Event Processor ("PEP"). EnlightenDSM uses Structured Query Language
("SQL") with any Open Database Connectivity ("ODBC") databases and SNMP.
The product can operate as an integral part of an enterprise management
environment in a larger customer environment, or as the focal point of
administration and management in a smaller customer environment, or in
divisions/sites of a larger customer environment.
EnlightenDSM is scalable to large networks and supports the day-to-day
operational requirements of networked systems, such as adding users and nodes,
reconfiguring system processes, managing disk storage and managing
Internet/Intranet users. We believe our product suite is affordably priced,
scalable to match customer needs, designed to install quickly for most
configurations, and will integrate with other system console and network
administration products, such as those offered by Tivoli, CA Unicenter, Remedy
and many others.
STRATEGY
The following discussion regarding our response to the systems management
market and our product and marketing strategy contains forward-looking
statements and actual results may vary substantially depending upon a variety of
factors, including, but not limited to, the development of emerging markets for
systems management and administration software, competition, technological
change, changing customer needs, evolving industry standards, any product
development delays and our ability to manage future growth and new distribution
channels, if any. These and other factors are more fully discussed under the
caption "Factors That May Affect Future Results" on page 18.
Our objective is to become a market leader in integrated open systems event
monitoring and systems administration. To achieve this objective, we have
adopted a business strategy incorporating the following elements:
The integration of Linux into the corporate environment
The management tools and utilities available for the Linux operating system
are designed for single machine management only and are typically shareware or
freeware that address only one aspect of systems management. In addition, native
Linux management tools address Linux platforms only and thus are not beneficial
to the existing Unix and Windows environments found at our typical customers.
Because our EnlightenDSM product is cross-platform and addresses a broad range
of system management and administration needs, IT managers can easily integrate
Linux servers and workstations into their corporate environment and use the same
tool for a single-console view of the Linux, Unix and Windows systems in their
enterprise. These tools enable users to manage resources in a scalable way and
enable the further commercialization of Linux in the business environment.
Focus on the "under-served" market
We believe that most of the products in the enterprise systems management
market are currently focused toward Fortune 500 companies that possess the
resources necessary to implement a monolithic enterprise-wide
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systems management solution. Mid-sized companies, and smaller sites or
departments of larger companies cannot effectively and efficiently implement
these solutions. Additionally, these customers require less intrusive, more
cost-effective means to manage their Linux, Unix and Windows systems. We believe
there are very few products to assist these organizations in managing and
monitoring their open systems networks. Our focus for our Linux, Unix and
Windows products is this under-served market, defined as sites with ten to 1,000
Linux, Unix or Windows workstations or servers without a large mainframe
presence. We feel our low-cost, easy-to-use, non-intrusive workgroup
administration and systems monitoring solution is the most effective tool for
these companies.
Penetrate the market primarily through third-party relationships
Our sales and marketing focus is primarily through indirect sales and
partner relationships. We have entered into OEM bundling or technology
agreements with Silicon Graphics, IBM, Sun, TurboLinux and Intel. Our product
architecture and the design, price point and ease of use of the EnlightenDSM
product allow it to be effectively bundled with a hardware manufacturer's
operating system, integrated into a software vendor's offering, or bundled with
a Linux distribution. These relationships are allowing us to penetrate different
markets by proliferating our product and technology on thousands of systems. We
intend to continue to pursue additional partnering relationships and intend to
focus our sales and marketing efforts on the following:
- Systems Management and Other Software Application Vendors: We believe our
product suite is complementary with several software vendors'
applications. EnlightenDSM's architecture is designed to allow
integration with other third-party software products with minimal
engineering requirements. We intend to pursue relationships with software
companies providing systems management, web monitoring and management,
clustering, help desk software and other "customer care" applications
with which our product could be integrated and sold as a combined
solution.
- Linux Distributors: Linux distributors can use the same management tools
and appreciate the value that EnlightenDSM offers. All of the
distributors of Linux share the same base operating system with its need
for enhanced management and integration to the existing Unix and Windows
environment.
- Systems Management Service Providers: We believe that our product suite
can be effectively used by third party Linux and Unix systems management
consulting and outsourcing service providers to remotely monitor and
administer their customers IT infrastructure without those customers
having to use their valuable resources on critical corrective issues or
mundane administrative functions. We intend to pursue relationships with
service providers where our product can be used to increase the quality
and efficiency in managing heterogeneous open systems environments.
- Linux Hardware and Appliance Manufacturers: We believe that Linux
hardware and appliance manufacturers lack effective systems management
solutions. A Linux appliance is a hardware device bundled with the Linux
operating system and dedicated to a specific purpose. As the competition
for this hardware increases and price points drop, we feel these
manufacturers will need to add value through the ability to offer
solutions to customers that provide lower cost of ownership through ease
of use, administration and networked integration for their systems.
- Selected End-Users: Our primary focus is to market and distribute our
product through indirect channels. However, we maintain a small direct
sales force focused on select opportunities where we can provide value
through stronger, more dedicated customer relationships.
PRODUCTS
We offer software products designed to automate the management and
administration of computer systems. Set forth below is a summary of our
principal product offerings.
In the fast-paced Linux/Unix/Windows environment, millions of new computers
are being deployed annually. All system administrators must learn to manage
networks in which users are added on a regular and continuous basis. The tools
these system administrators need to effectively perform their jobs should be
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simple, easy to implement and intuitive; not complex, rules-based systems
management software. Our customers routinely use our products to add and manage
users in mixed environments from a single, template driven interface to all
machines at the same time.
In December 1994, we acquired core technology for Unix systems
administration products and released two complementary Unix products in the
second quarter of 1995. The features of these two products were combined in
EnlightenDSM version 2.0, which was released in May 1996. This product was
further updated to version 3.2 in 1999 and, in October 1999, we released version
3.4 of EnlightenDSM for Linux distributed by TurboLinux and Red Hat.
EnlightenDSM is a standards-based, multi-function management system
covering the following disciplines: user administration, file system management,
Internet/Intranet management, printer management, security checking, archiving,
subsystem monitoring, event generation/tracking and other system functions.
EnlightenDSM runs on a variety of open systems computer platforms, including Red
Hat Linux, TurboLinux Linux, HP/UX, SUN/Solaris, IBM/AIX, Intel and AMD X86
families, Silicon Graphics/IRIX, Compaq True64 and Microsoft Windows
2000/NT/98/95. Cross-platform functionality enables the management of diverse
and distributed systems from a centralized console.
EnlightenDSM automatically collects and saves status, configuration,
performance and capacity information and makes it available for monitoring by
most commercial SNMP managers. The product monitors system resources including
peripheral devices, processes, resources and services. Thresholds can be set to
generate alarms that warn users of an error or problem about to occur. For
example, in some cases our customers use the product to monitor the status of
business critical Oracle database servers. The EnlightenDSM product can be
programmed to automatically take corrective action and/or provide immediate
notification to operators before critical events escalate to cause significant
problems. EnlightenDSM monitors and reports changes in system inventory and can
track the addition or removal of memory, disk drives, tape drives and other
devices, thereby reducing costly downtime and improving system performance.
SALES AND DISTRIBUTION
Our revenues are derived from three sources: product license fees, product
maintenance fees and consulting services.
Product license fees
During 1999, we marketed our products through a direct field sales force
and third-party distributors. Our products were marketed throughout North
America, Europe and parts of the Pacific Rim by our product sales organization
located at our headquarters in San Mateo, California as well as through our
regional field sales office in Denver, Colorado and through independent
distributors. Additionally, in November 1999, we launched our Internet
e-commerce site which allows customers to purchase and download certain
EnlightenDSM products.
Product license fees in 1999 consisted primarily of revenue from the
granting of perpetual licenses and from the licensing of product upgrades
necessary when customers upgrade their system hardware. Revenue from end-user
licenses is payable in full at the commencement of the license period and is
recognized after all of the following events have occurred: (i) a product
evaluation has been shipped to the customer; (ii) the customer elects to
purchase the software following an evaluation period; and (iii) the customer
signs the related contract. Product license fees represented 55% and 64% of
total revenue in 1999 and 1998, respectively.
We continue to build our sales, marketing and customer support
organizations with a focus on delivery of our products to OEM partners,
resellers, system integrators and select end-users. An essential element of our
sales and marketing strategy is indirect distribution channels, such as OEMs,
ISVs and VARs, as well as other systems management and application software
vendors whose products are complementary with ours.
In January 1998, we established our first OEM relationship with Silicon
Graphics to bundle a subset of features of the EnlightenDSM product with each
server and workstation that SGI ships. Since that first agreement, we have
entered into agreements with four additional OEM's. In December 1998, we entered
into
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an agreement with Sun to produce a product that will seamlessly integrate into
the Sun Management Center product (formerly Sun Enterprise SyMON). In January
1999, we agreed with IBM to integrate the EnlightenDSM product into IBM Suites
for Solaris and AIX. In August 1999, we entered into an agreement with
TurboLinux in which TurboLinux will bundle a single user copy of the
EnlightenDSM product with each copy of TurboLinux's workstation, server and
TurboCluster Linux distributions. In October 1999, we entered into an agreement
with Intel to integrate a subset of the Linux version of the EnlightenDSM
product into Intel's LANDesk(R) Server Manager product for Linux shipped by
Intel or its resellers.
We are currently investing, and intend to continue to invest, significant
resources to develop the OEM, ISV and VAR channels. Our efforts to expand our
third-party channels are intended to penetrate the market and achieve widespread
commercial acceptance of our products as a workgroup administration standard.
There can be no assurance that we will be successful in our efforts to increase
the revenues represented by this channel. We will be dependent upon these
third-party relationships for a significant portion of our revenue for the
foreseeable future. There is no assurance that our third-party distributors will
effectively distribute and exploit our products. The inability to recruit
additional third parties to distribute, market and support our products could
have a material adverse affect on our business, operating results and financial
condition. A more detailed discussion of these and other risks associated with
our business is set forth under the caption "Factors That May Affect Future
Results" on page 18 of this report.
Product maintenance fees
All customers subscribing to our maintenance service agreements are
entitled to receive (i) technical support and consultation, primarily over the
telephone, and (ii) subsequent product enhancement and maintenance releases we
periodically produce. Product maintenance support is provided directly to
customers as well as through our authorized distributors. As part of the
business model to market through indirect channels, we provide training and
education for our third-party distributors to insure technical proficiency with
our products and technology.
Product maintenance fees consist of all maintenance revenue on new and
existing installed software products. We generally charge end users, on an
annual basis, for telephone support, product updates and product enhancements.
OEM, partner and distributor maintenance is negotiated separately. Product
maintenance revenue is recognized ratably over the maintenance contract period
(typically one year). Product maintenance fees accounted for 20% and 17% of
total revenue in 1999 and 1998, respectively.
Consulting services
Revenue from consulting services consists of fees charged for contract
services, product training and other service activities. This division of our
technical support organization provides fee-based consulting services to our
customers throughout the United States. Consulting service revenue is recognized
when services are performed for time and material contracts and on a percentage
of completion basis for fixed price contracts. Consulting services represented
17% and 7% of total revenue in 1999 and 1998, respectively.
PRODUCT DEVELOPMENT
The computer software industry is characterized by rapid technological
change and is highly competitive in regard to timely product innovation.
Accordingly, we believe that our future success depends on our ability to
enhance current products that meet a wide range of customer needs and to develop
new products rapidly to attract new customers and provide additional solutions
to existing customers. In particular, we believe we must continue to respond
quickly to users' needs for broad functionality and open systems support.
We address the needs of current users through regularly scheduled
maintenance and enhancement releases. At the same time, we seek to acquire and
develop new products to meet the needs of a broader group of users.
We provide an integrated workgroup administration and systems management
product for open systems currently running on two different Linux distributions,
six different Unix-based systems and Microsoft
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Windows 2000/NT/98/95. The EnlightenDSM product consists of the following
features: user administration, file system management, Internet/Intranet
management, printer management, security checking, archiving, subsystem
monitoring and event generation/tracking.
Our strategy is to continue to enhance EnlightenDSM's functionality through
new releases and new feature development to meet the continually advancing
systems administration and management requirements of our customers, including:
- increased scalability and performance;
- increased integration with other systems management point solutions as
well as other enterprise systems management frameworks;
- increased levels of automation and ease of use to further reduce
administrative costs and overhead;
- increased range of supported platforms; and
- continued customization for our current and new third-party distributors.
There can be no assurance that we will be successful in developing and
marketing new features or products that respond to technological change or
evolving industry standards, that we will not experience difficulties that could
delay or prevent the successful development, introduction and marketing of any
new features or products, or that our new features or products will adequately
meet the requirements of the marketplace and achieve market acceptance.
Additionally, our product development staff will be under increased pressure as
our products are deployed on a significantly greater number and variety of
machines by virtue of the Silicon Graphics, IBM, TurboLinux and Intel bundling
relationships (or other additional third-party relationships, if any). Due to
the complexity of the product and the large number of network configurations in
the market, it is extremely difficult to fully test EnlightenDSM in all possible
environments and, although we employ a continual effort to assure a quality
product, there is no assurance that errors will not be found in the released
commercial product resulting in delays of new feature development. If we are
unable, due to lack of resources or for technological or other reasons, to
develop and introduce new features and products in a timely manner in response
to changing market conditions or customer requirements, our business, operating
results and financial condition will be materially adversely affected. See
"Factors That May Affect Future Results" on page 18 of this report.
As of December 31, 1999, we had twelve (12) professional and technical
employees engaged in research and development. During the fiscal years ended
December 31, 1999 and 1998, our research and development expenditures were
$1,764,300 and $1,692,000, respectively.
COMPETITION
The systems management market in which we compete is intensely competitive,
highly fragmented and rapidly changing. In order to compete, we must enhance our
current products, enhance the interoperability of our products with other
products, management frameworks and operating systems through a truly open
architecture, develop new products in a timely fashion and develop key strategic
partnerships with other hardware and software vendors. Many of our competitors
in the open systems markets are larger and have greater financial, technical,
marketing and other resources than Enlighten. Because there are relatively low
barriers to entry in the software market, we expect additional competition from
other established and emerging companies. Increased competition is likely to
result in price reductions, reduced gross margins and increased difficulty in
establishing market share, any of which could have a material adverse affect on
our business, operating results and financial condition. See "Factors That May
Affect Future Results" on page 18 of this report.
Our principal competition in the market for open systems workgroup
administration and system management products is from enterprise systems
management vendors such as Tivoli, a wholly-owned subsidiary of IBM, and
Computer Associates, as well as point products from BMC Software, Inc., Platinum
Technologies, Inc., Veritas Software, Inc. and Legato Systems, Inc. We also face
competition from internal development groups of prospective end-user customers
and OEMs, including operating system vendors, many
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<PAGE> 11
of which have substantial internal programming resources and are capable of
developing specific operating system level products for their own needs. In
addition, certain operating systems vendors have already incorporated systems
management capabilities into their operating system, including HP, Sun, IBM and
Microsoft, which reduces such vendors' need for our products. Additional
hardware manufacturers may elect to offer similar competitive products in the
future. Given our size and the advantages our competition enjoys with respect to
size and resources, there can be no assurances we can effectively compete in
this market.
PRODUCT PROTECTION
We rely on a combination of copyright, trade secret and trademark laws and
software security measures, along with employee and third-party nondisclosure
agreements, to protect our intellectual property rights, products and
technology. Our products are typically licensed on a "right to use" basis
pursuant to perpetual licenses that restrict the use of the products to the
customer's internal purposes. We distribute our software under license
agreements that are signed by our end-users. Despite our precautions taken to
protect our software, unauthorized parties may attempt to reverse engineer,
copy, or obtain and use information we regard as proprietary. Policing
unauthorized use of our products is difficult and software piracy is expected to
be a persistent problem. Additionally, the laws of some foreign countries do not
protect our proprietary rights to the same extent as do the laws of the United
States.
We have entered into source code escrow agreements with some of our
customers that require the release of source code to the customer in the event
there is a bankruptcy proceeding by or against us, we ceases to do business, or
we are unable to fulfill our contractual obligations with respect to support. In
the event of a release of the source code, the customer is required to maintain
their confidentiality and, in general, to use the source code solely for the
purpose of maintaining the software's usability. The provision of source code
may increase the likelihood of misappropriation or other misuse of our
intellectual property.
We are not aware that our products, trademarks, or other proprietary rights
infringe the proprietary rights of third parties. However, from time to time, we
receive notices from third parties asserting that we have infringed their
patents or other intellectual property rights. In addition, we may initiate
claims or litigation against third parties for infringement of our proprietary
rights or to establish the validity of our proprietary rights. Any such claims
could be time-consuming, result in costly litigation, cause product shipment
delays or lead us to enter into royalty or licensing agreements rather than
disputing the merits of such claims. As the number of software products in the
industry increases and the functionality of such products further overlap, we
believe that software developers may become increasingly subject to infringement
claims. Any such claims, with or without merit, can be time consuming and
expensive to defend. An adverse outcome in litigation or similar proceedings
could subject us to significant liabilities to third parties, require
expenditure of significant resources to develop non-infringing technology,
require disputed rights to be licensed from others, or require us to cease the
marketing or use of certain products, any of which could have a material adverse
effect on our business, operating results and financial condition. See "Factors
That May Affect Future Results" on page 18 of this report.
EMPLOYEES
As of December 31, 1999, we employed 26 people. Of these employees, 13 were
engaged in product development, 9 in sales, marketing and customer support and 4
in finance and other administrative departments. We believe our future success
depends in large part upon the continued service of our key technical and senior
management personnel and our ability to attract and retain highly qualified
technical and managerial personnel. Competition for such personnel is intense,
as certain of these personnel have significant prior industry experience and are
in great demand. There can be no assurance that we can retain our key technical
and managerial employees or that we can attract, assimilate or retain other
highly qualified technical and managerial personnel in the future. None of our
employees are subject to any collective bargaining agreements. Each of our
employees have executed an agreement not to disclose trade secrets or other
confidential information. We believe our employee relations are good.
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ITEM 2. DESCRIPTION OF PROPERTIES
Enlighten leases approximately 17,000 square feet of office space in San
Mateo, California under a lease which expires in March 2001 and leases a sales
and support office in Denver, Colorado under a lease which expires in August
2000. Enlighten believes that its current facilities are adequate for its needs
through 2000 and for the foreseeable future and should additional space be
needed, it will be available to accommodate the expansion of Enlighten's
operations on commercially reasonable terms.
ITEM 3. LEGAL PROCEEDINGS
Enlighten is subject to certain legal actions that have arisen in the
ordinary course of business. Management believes that the ultimate outcome of
these actions will not have a material affect on Enlighten's consolidated
financial statements or results of operations, although there can be no
assurance as to the outcome of such litigation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Since October 23, 1998, Enlighten's Common Stock has been traded on the
Nasdaq SmallCap Market under the symbol "SFTW." Prior to such time, Enlighten's
Common Stock was traded on the Nasdaq National Market. As of December 31, 1999,
there were 36 record holders of the Company's Common Stock. As of the same date,
4,217,978 shares of Common Stock were outstanding and 10,000,000 shares of
Common Stock were authorized.
The following table sets forth, for the periods indicated, the high and low
sale prices per share of Common Stock on the Nasdaq National Market or the
Nasdaq SmallCap Market, as applicable:
<TABLE>
<CAPTION>
HIGH LOW
------ -----
<S> <C> <C>
1998
Quarter Ended:
March 31, 1998............................................ $ 5.25 $3.00
June 30, 1998............................................. $ 4.50 $2.75
September 30, 1998........................................ $ 3.69 $2.13
December 31, 1998......................................... $ 3.81 $1.91
1999
Quarter Ended:
March 31, 1999............................................ $ 4.13 $2.13
June 30, 1999............................................. $ 4.38 $2.56
September 30, 1999........................................ $ 4.00 $2.81
December 31, 1999......................................... $12.75 $2.75
</TABLE>
DIVIDEND POLICY
Enlighten has never paid cash dividends and does not anticipate paying cash
dividends in the foreseeable future. Enlighten anticipates that it will retain
earnings, if any, for future growth and expansion of its business.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
You should read the following discussion and analysis in conjunction with
our financial statements and the notes thereto included elsewhere herein. Except
for historical information contained herein, the following discussion contains
forward-looking statements based on current expectations that involve certain
risks and uncertainties. Such forward-looking statements include, among others,
those statements including the words "expects," "anticipates," "intends,"
"believes" and similar language. Our actual results could differ materially from
those discussed herein. Factors that could cause actual results or performance
to differ materially or contribute to such differences include, but are not
limited to, those discussed below in "Factors That May Affect Future Results,"
"Disclosures about Market Risk," and "Liquidity and Capital Resources."
OVERVIEW
Enlighten Software Solutions, Inc. or Enlighten(R) develops, markets, and
supports event monitoring and workgroup administration software products. Our
product solutions are designed for open systems distributed computing
environments in the range of ten to 1,000 servers and clients. Our Enlighten
Distributed Systems Manager ("EnlightenDSM(TM)") product allows companies to
manage their information systems by enabling systems managers and administrators
to control their systems from diverse Linux, Unix and Windows platform vendors
such as Compaq Computers Corporation, Hewlett-Packard Company, International
Business Machines Corporation ("IBM"), Intel Corporation ("Intel"), Microsoft
Corporation, The Santa Cruz Operation, Inc., Silicon Graphics, Inc., Sun
Microsystems, Inc. ("Sun"), Red Hat, Inc. ("Red Hat"), and TurboLinux, Inc
("TurboLinux"). Our award winning EnlightenDSM product suite is a fully
integrated, cross-platform software solution providing a middle-tier framework
that is a standards-based multi-function management system covering the breadth
of workgroup administration and systems management disciplines. Our objective is
to become a market leader in integrated open systems workgroup administration
and systems management.
Founded in 1986, we were a leading provider of systems management software
on the Tandem platform, providing a range of automated systems management
products to over 400 companies in 30 countries. In October 1997, we sold our
Tandem product line to New Dimension Software, Inc. (since purchased by BMC
Software, Inc.) in order to focus our efforts on our UNIX and Windows product
suite. Following the disposition of our Tandem product line, we shifted our
sales strategy to one based primarily upon third-party distributors and
restructured our sales department as a result of this shift. We continue to
build our sales, marketing, and customer support organizations with a focus on
delivery of our products to original equipment manufacturer ("OEM") partners,
resellers, system integrators, and select end-users. An essential element of our
sales and marketing strategy is the development of indirect distribution
channels, such as OEMs, independent software vendors ("ISVs"), and value added
resellers ("VARs"), as well as other systems management and application software
vendors whose products are complementary to our products.
VARIABILITY OF QUARTERLY RESULTS
We have experienced significant quarterly fluctuations in our operating
results and expect that these fluctuations will continue in future periods.
These fluctuations have been caused by a number of factors, including the timing
of new product or product enhancement introductions by us or our competitors,
the development and introduction of new operating systems that require
additional development efforts, purchasing patterns of our customers, size and
timing of individual orders, the rate of customer acceptance of new products,
and pricing and promotion strategies undertaken by us or our competitors. Future
operating results may fluctuate as a result of these and other factors,
including our ability to continue to develop, acquire, and introduce new
products on a timely basis, the timing and level of sales by our OEMs or other
third-party licensees of computer systems or software incorporating our
products, technological changes in computer systems and environments, quality
control of the products sold, our success in shifting our primary sales strategy
from direct to indirect channels, and general economic conditions. Additionally,
our operating results may be influenced by seasonality and overall trends in the
global economy. Because we operate with a relatively small backlog, quarterly
sales and operating results generally depend on the volume and timing of orders
received during the quarter, which are difficult to forecast. Historically, we
have recognized a
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substantial portion of our license revenues in the last month of the quarter.
Since our staffing levels and other operating expenses are based upon
anticipated revenues, delays in the receipt of orders can cause significant
fluctuations in income from quarter to quarter.
HISTORICAL RESULTS OF OPERATIONS
The following table sets forth the results of operations for Enlighten
expressed as a percentage of total revenue. The historical results are not
necessarily indicative of results to be expected for any future period.
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
--------------
1999 1998
----- -----
<S> <C> <C>
Revenue:
Product license fees...................................... 54.9% 64.3%
Product maintenance fees.................................. 19.8 17.5
Consulting services....................................... 16.6 6.9
Royalties................................................. 8.7 11.3
----- -----
Total revenue..................................... 100.0 100.0
Cost of revenue............................................. 13.5 17.8
----- -----
Gross profit...................................... 86.5 82.2
----- -----
Operating expenses:
Research and development.................................. 54.4 45.0
Sales and marketing....................................... 68.1 52.1
General and administrative................................ 29.7 24.7
Gain on sale of Tandem product line....................... -- (13.6)
----- -----
Total operating expenses.......................... 152.2 108.2
----- -----
Operating loss.................................... (65.7) (26.0)
Other income, net........................................... 5.2 4.4
----- -----
Loss before income taxes.......................... (60.5) (21.6)
Income tax benefit.......................................... (0.3) (0.7)
----- -----
Net loss.......................................... (60.2)% (20.9)%
===== =====
</TABLE>
Net Revenue
Net revenue decreased $514,000, or 14%, to $3,244,400 in 1999, as compared
to 1998. This increase was primarily due to lower license revenues from the SGI
OEM relationship.
Revenue from product license fees decreased $635,500, or 26%, to $1,781,200
in 1999, as compared to 1998. The decrease was primarily attributable to the
decrease in license fees from the SGI OEM relationship. License fees from SGI
are derived from SGI's Unix server and workstation sales on a per unit shipped
basis, of which, SGI had lower units shipped during 1999. License fees from SGI
decreased in 1999 when compared to 1998. If these license fees continue to
decline, our revenues and financial results may be harmed.
Product maintenance fees decreased slightly by $14,300, or 2%, to $641,200,
as compared to 1998. This decrease was primarily due to the timing of new
maintenance contracts.
Consulting services revenue increased by $279,500, or 107%, to $540,100 in
1999, as compared to 1998. This increase was primarily due to non-recurring
consulting revenues related to Enlighten's strategic relationships with IBM and
Intel.
Royalties consist primarily of royalties from BMC Corporation ("BMC"),
formerly New Dimensions Software, Inc., from product license fees and product
maintenance fees generated by the Tandem product line sold to BMC in October
1997. Total royalties decreased by $143,700, or 34%, to $281,900 in 1999, as
compared to 1998. This decrease was primarily due to a lower royalty rate used
during 1999 than 1998. Enlighten is entitled to receive royalties from BMC
through September 2000.
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Cost of Revenue
Cost of revenue consists of royalties paid to third parties, amortization
of software development and acquisition costs, product packaging and
documentation, software media and the costs of employees and contractors
providing consulting services. Cost of revenue decreased by $230,700, or 34%, in
1999, as compared to 1998. This decrease is due primarily to a decrease in
royalties paid to third party software vendors and a decrease in packaging and
documentation costs due to the distribution of documentation in electronic
format and the distribution of software over the Internet.
Research and Development
Research and development expenses consist of personnel expenses and
associated overhead and costs of short-term independent contractors required in
connection with product development efforts, less amounts capitalized.
Enlighten's investment in research and development, prior to the reduction for
capitalization of software development costs, was $1,996,200 and $1,692,000 for
1999 and 1998, respectively, representing 62% and 45% of total revenue for 1999
and 1998, respectively. The increase of $304,200 in 1999, as compared to 1998,
was primarily attributable to higher employee related costs due to increases in
headcount and increases in costs related to acquisitions of development computer
hardware and software. Enlighten capitalized approximately $231,900 of software
development costs in 1999 which represented approximately 12% of total research
and development expenditures incurred in that year. There were no software
development costs capitalized in 1998. The amount of capitalized software
development costs in any given period may vary depending on the exact nature of
the development performed.
Costs incurred in the research and development of new software products are
expensed as incurred until technological feasibility is established. Enlighten
expects research and development expenses to continue to increase in absolute
dollars as Enlighten continues to invest in the enhancement of existing products
and the development of new products.
Sales and Marketing
Sales and marketing expenses include costs of sales and marketing
personnel, advertising and promotion expenses, customer service and technical
support, travel and entertainment, and other selling and marketing costs. Sales
and marketing expenses increased by $249,900, or 13%, to $2,208,700 in 1999, as
compared to 1998. This increase was primarily due to increases in temporary
services, recruiting expenses and advertising costs.
General and Administrative
General and administrative expenses, which include personnel costs for
finance, administration, information systems, and general management, as well as
professional fees, legal expenses, and other administrative costs, increased by
$35,400, or 4%, to $965,100 in 1999, as compared to 1998. The increase is
primarily due to compensation costs on stock options granted to consultants to
Enlighten, partially offset by decreases in employee related costs.
Gain on sale of Tandem product line
On October 1, 1997, Enlighten sold its Tandem product line to BMC.
Enlighten recognized a gain on the sale of the operating assets of the Tandem
product line of approximately $515,500 and $2,158,000 in 1998 and 1997,
respectively. Enlighten received approximately $2.5 million in cash, of which
$1.6 million was received in 1997, and the rights to receive royalties on Tandem
related products for a period of three years. The sale of the Tandem product
line also included the transfer to BMC of approximately 12 employees associated
with Enlighten's Tandem operation.
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Other income, net
Other income and expense includes interest income net of interest expense
and gains and losses on foreign currency transactions. Interest income is
primarily derived from short term interest-bearing securities and money market
accounts. Other income, net remained relatively consistent at $169,900 in 1999,
as compared to 1998.
Income tax benefit
Enlighten's tax benefit recognized in 1999 of $10,400 is primarily due to
federal income tax refunds partially offset by minimum state tax expenses. In
1998, Enlighten recognized a tax benefit of $41,400 as a result of receiving
Federal tax refunds on net operating loss carrybacks in excess of amounts
previously provided for by Enlighten. The tax benefit was partially offset by a
$15,200 tax expense incurred as a result of the U.K. operations. No tax benefit,
other than those stated above, were recognized in these years due to the
uncertainty related to Enlighten's ability to recognize a tax benefit for loss
and credit carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, our cash and cash equivalents and short term
investments were $1,293,100, representing 36% of total assets as compared with
$3,185,600, or 65%, of total assets, at December 31, 1998. Cash equivalents are
highly liquid investments with original maturities of ninety days or less. Our
short term investments are primarily highly liquid investment grade commercial
paper. Our working capital was $2,045,100 and $3,274,300 as of December 31, 1999
and 1998, respectively. We had no debt as of December 31, 1999 and 1998, other
than normal trade payables and accrued liabilities.
Our operating activities used cash of $2,075,500 in 1999, compared to cash
used by operating activities of $1,334,200 in the prior year. The increase in
cash used by operating activities was principally caused by increases in net
losses and accounts receivable and a decrease in accrued and other liabilities,
partially offset by an increase in trade accounts payable and depreciation and
amortization expense.
Our investing activities have consisted primarily of short-term
investments, capitalization of software development costs, and additions to
capital equipment. Investing activities provided cash of $668,800 in 1999,
compared with using cash of $684,000 in 1998. The increase is primarily due to
an increase in sales of short-term investments, partially offset by capitalized
software development costs and equipment acquisitions.
Financing activities provided cash of $552,300 in 1999, compared with cash
provided of $2,512,100 in the prior year. The decrease is primarily due to cash
provided by the 1998 public offering of common stock, partially offset by the
proceeds from the exercise of employee stock options and the employee stock
purchase plan.
Our existing capital resources are adequate to maintain our current
operations through December 2000. However, we will require substantial
additional financing to implement our current plans to expand our operations and
fund our long term product development. We have been actively seeking financing
to expand our operations and recently signed a letter of intent with an
investment banker for a private placement of an aggregate of up to $6,000,000 of
our common stock. This financing is expected to close on or prior to May 31,
2000 but there can be no assurance that this financing will take place. If the
planned financing fails to close and we are unable to obtain alternative
financing as needed our long term product development and commercialization
programs would be delayed or prevented and we may be required to curtail our
operations.
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FACTORS THAT MAY AFFECT FUTURE RESULTS
Certain statements contained in this Annual Report on Form 10-KSB,
including, without limitation, statements containing the words "believes,"
"anticipates," "estimates," "intends," "expects" and words of similar import,
constitute forward-looking statements within the meaning of the Private
Securities Reform Act of 1995. Actual results could vary materially from those
expressed in those statements. Readers are referred to "Products," "Sales and
Distribution," "Product Development," "Competition," "Product Protection" and
"Management's Discussion and Analysis or Plan of Operation" sections contained
herein as well as the factors described below, which identify some of the
important factors or events that could cause actual results or performance to
differ materially from those contained in the forward looking statements.
OUR FUTURE REVENUES ARE UNPREDICTABLE, OUR OPERATING RESULTS ARE LIKELY TO
FLUCTUATE FROM QUARTER TO QUARTER AND IF WE FAIL TO MEET THE EXPECTATIONS OF
INVESTORS OR ANALYSTS, OUR STOCK PRICE COULD DECLINE SIGNIFICANTLY
We have experienced significant quarterly fluctuations in operating results
and expect that these fluctuations will continue in future periods. These
fluctuations have been caused by a number of factors, including the timing of
new product or product enhancement introductions by us or our competitors, the
development and introduction of new operating systems that require additional
development efforts, purchasing patterns of our customers, size and timing of
individual orders, the rate of customer acceptance of new products and pricing
and promotion strategies undertaken by us or our competitors. Future operating
results may fluctuate as a result of these and other factors, including our
ability to continue to develop, acquire and introduce new products on a timely
basis, the timing and level of sales by our OEM or other third-party licensees
of computer systems or software incorporating our products, technological
changes in computer systems and environments, quality control of the products
sold, our success in shifting our primary sales strategy from direct to indirect
channels and general economic conditions. Additionally, our operating results
may be influenced by seasonality and overall trends in the global economy.
Because we operate with a relatively small backlog, quarterly sales and
operating results generally depend on the volume and timing of orders received
during the quarter, which are difficult to forecast. Historically, we have
recognized a substantial portion of our license revenues in the last month of
the quarter, particularly the last week. Since our staffing levels and other
operating expenses are based upon anticipated revenues, delays in the receipt of
orders can cause significant fluctuations in income from quarter to quarter.
WE MAY NOT BE SUCCESSFUL IN THE OPEN SYSTEMS MARKET
Through 1997, we derived a substantial portion of our revenue from our
Tandem-based products. However, we sold all rights to our Tandem technology in
October 1997. The future success of our business is substantially dependent on
our ability to generate significant revenue from our Linux, Unix and Windows
product offering. In January 1998, we signed an OEM bundling agreement with
Silicon Graphics under which Silicon Graphics bundles a limited version of our
product on each Unix system shipped. In December 1998, we entered into an
agreement with IBM to integrate the EnlightenDSM product into IBM Suites for
Solaris and AIX. In January 1999, we entered into an agreement with Sun
Microsystems to produce a product that will seamlessly integrate into the Sun
Management Center product (formerly Sun's Enterprise SyMON). In September 1999,
we signed a software license and distribution agreement with TurboLinux in which
TurboLinux will bundle a single user copy of the EnlightenDSM product with its
Linux operating system distributions. In October 1999, we signed a software
license agreement with Intel in which we will integrate a subset of the Linux
version of the EnlightenDSM product into Intel's LANDesk(R) Server Manager
product. While significant, there can be no assurance that we will be successful
in our efforts to generate significant revenue from these agreements.
Additionally, the open systems market is characterized by rapid technological
growth and intense competition. We may not have the financial or personnel
resources to effectively capitalize on, and continue with, our early and limited
success in this market.
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WE ARE DEPENDENT ON RESELLERS AND IF WE ARE NOT SUCCESSFUL IN EXPANDING
DISTRIBUTION CHANNELS, OUR ABILITY TO MAINTAIN OR INCREASE OUR REVENUES WILL BE
HARMED
In 1997, we began to shift a majority of our sales and marketing resources
toward third-party resellers in the United States and internationally. Our
growth will be dependent on our ability to continue to expand our third-party
distribution channel to market, sell and support our software products. We are
currently investing, and intend to continue to invest, significant resources to
develop this channel, which could materially adversely affect our operating
margins. We have only limited experience in marketing our products through
distributors. Additionally, we will have no control over our third-party
distributors, their shipping dates, or volumes of systems shipped by our OEM and
other third-party customers. There can be no assurance that we will be
successful in our efforts to generate significant revenue from this channel, nor
can there be any assurance that we will be successful in recruiting new
organizations to represent us and our products.
Additionally, we have become more dependent on our third-party distributors
for the technical support and consultation to end users. We will need to
increase our training and education efforts related to our third-party
distributors to enable such third parties to obtain the technical proficiency
and knowledge with respect to our products. Despite these efforts, we may not be
able to successfully train our third party distributors to enable them to
provide adequate technical support to the customer base. This may result in,
among other things, increased workload on our internal support and engineering
staff, or poor customer acceptance of the products, or both, either of which
would significantly harm our business.
In January 1998, we signed an OEM bundling agreement with Silicon Graphics
under which Silicon Graphics will bundle a limited version of our product on
each Unix system shipped. In December 1998, we entered into an agreement with
IBM to integrate the EnlightenDSM product into IBM Suites for Solaris and AIX.
In January 1999, we entered into an agreement with Sun Microsystems to produce a
product that will seamlessly integrate into the Sun Management Center product
(formerly Sun's Enterprise SyMON). In September 1999, we signed a software
license and distribution agreement with TurboLinux in which TurboLinux will
bundle a single user copy of the EnlightenDSM product with its Linux operating
system distributions. In October 1999, we signed a software license agreement
with Intel in which we will integrate a subset of the Linux version of the
EnlightenDSM product into Intel's LANDesk(R) Server Manager product. While we
believe that these arrangements will be beneficial, there can be no assurance
that we will be able to deliver our products to these companies in a timely
manner or that these companies will license our products in volumes anticipated
by us. Further, these agreements are our only significant third-party
distribution agreements to date. While our strategy is to obtain additional
resellers to reduce the dependence on these vendors, we may not be able to
successfully attract additional vendors to distribute our products. Any such
failure would result in our having expended significant resources with little or
no return on its investment, which would significantly harm our business.
These additional investments and responsibilities will require us to expend
substantial resources and may require us to divert employees from other projects
to provide the support services and development efforts required to provide
products and services to these third party vendors and other new third parties,
if any.
OUR MARKET IS SUBJECT TO INTENSE COMPETITION AND CONTINUED COMPETITION IN OUR
MARKET MAY LEAD TO A REDUCTION IN OUR PRICES, REVENUES AND MARKET SHARE
We experience intense competition from other systems management companies
and the market is rapidly changing. We believe that our ability to compete
successfully depends on a number of factors, including the performance, price
and functionality of our products relative to those of our competitors. Most of
our competitors are larger and have greater financial, technical, marketing,
support and other resources than us. As a result, they may be able to respond
more quickly to new or emerging technologies and changes in customer
requirements than us. In addition, the software industry is characterized by low
barriers to entry. There can be no assurance that our current competitors or any
new market entrants will not develop systems management products that offer
significant performance, price, or other advantages over our technology. In
addition, operating system vendors could introduce new or upgrade existing
operating systems or environments that include systems management functionality
offered by us, which could render our products obsolete and
19
<PAGE> 20
unmarketable. We may not be able to successfully compete against current or
future competitors which could significantly harm our business.
100% OF OUR LICENSE REVENUE IS DERIVED FROM A SINGLE PRODUCT FAMILY AND IF THOSE
PRODUCTS FAIL TO ACHIEVE AND MAINTAIN MARKET ACCEPTANCE, OUR BUSINESS MAY BE
SIGNIFICANTLY HARMED
We expect that a substantial majority of our revenue in future periods will
be derived from our EnlightenDSM products. These products have accounted for
100% of our license revenue since October 1, 1997. We expect that the
EnlightenDSM product family and its extensions and derivatives will continue to
account for a substantial majority, if not all, of our revenue for the
foreseeable future. Broad market acceptance of EnlightenDSM is, therefore,
critical to our future success. Failure to achieve broad market acceptance of
EnlightenDSM, as a result of competition, technological change, or otherwise,
would significantly harm our business. Our future financial performance will
depend in significant part on the successful development, introduction and
market acceptance of EnlightenDSM and its product enhancements. There can be no
assurance that we will be successful in marketing EnlightenDSM or any new
products, applications or product enhancements, and any failure to do so would
significantly harm our business.
THE MARKET FOR OUR PRODUCTS IS CHARACTERIZED BY RAPID TECHNOLOGICAL CHANGE AND
WE MAY NOT BE ABLE TO DEVELOP OR MARKET NEW PRODUCTS TO RESPOND TO SUCH CHANGE
The market for our products is characterized by rapid technological
developments, evolving industry standards and rapid changes in customer
requirements. The introduction of products embodying new technologies, including
new operating systems, applications, hardware products, systems management
frameworks and network management platforms, the emergence of new industry
standards, or changes in customer requirements could render our existing
products obsolete and unmarketable. As a result, our success depends upon our
ability to continue to enhance existing products, respond to changing customer
requirements and rapidly develop and introduce new products that keep pace with
technological developments and emerging industry standards.
Additionally, other operating systems, such as Windows NT, may
significantly affect deployment of Unix and Linux systems for business critical
applications. A significant portion of our revenue will continue to be derived
from Unix and Linux based computer systems for the foreseeable future. While we
have ported our products to the Windows NT platform, the product requires
customers to control systems management for their heterogeneous environment from
Unix and Linux based systems. A significant decline in sales of Unix and Linux
based systems would decrease the demand for our products and would significantly
harm our business. Finally, we may not be successful in developing and
marketing, on a timely basis, product enhancements or new products that respond
to technological change or evolving industry standards, we may experience
difficulties that could delay or prevent the successful development,
introduction and sale of these products, and any such new products or product
enhancements may not adequately meet the requirements of the marketplace and
achieve market acceptance.
IF THE OPEN SYSTEMS MANAGEMENT MARKET FAILS TO GROW, OUR BUSINESS WOULD BE
SIGNIFICANTLY HARMED
For the foreseeable future, all of our business will be in the open systems
(Linux, Unix and Windows NT) management market, which is still an emerging
market. Our future financial performance will depend in large part on continued
growth in the number of companies adopting systems management solutions for
their client/server computing environments. The market for systems management
solutions may not continue to grow. If the systems management market fails to
grow or grows more slowly than we currently anticipate, or in the event of a
decline in unit price or demand for our products, as a result of competition,
technological change, or other factors, our business would be significantly
harmed. During recent years, segments of the computer industry have experienced
significant economic downturns characterized by decreased product demand,
production overcapacity, price erosion, work slowdowns and layoffs. Our
operations may in the future experience substantial fluctuations from
period-to-period as a consequence of such industry patterns, general economic
conditions affecting the timing of orders from major customers and other factors
affecting capital spending. Such factors may significantly harm our business.
20
<PAGE> 21
WE HAVE A HISTORY OF LOSSES AND ANTICIPATE FURTHER SIGNIFICANT LOSSES AND CANNOT
ASSURE YOU THAT WE WILL ACHIEVE PROFITABILITY
We have incurred significant operating losses each of the last five fiscal
years and cannot be certain that we will realize sufficient revenue to achieve
profitability. We expect to continue to incur significant losses for the
foreseeable future and these losses may be higher than our current losses. We
cannot be certain when or if we will achieve profitability. Failure to become
and remain profitable may adversely affect the market price or our common stock
and our ability to raise capital and continue operations. See "Management's
Discussion and Analysis or Plan of Operation."
FURTHER CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FINANCING
During the last five years we have financed our operations primarily
through sales of equity securities and the sale of our Tandem product line. Our
existing capital resources are adequate to maintain our current operations
through December 2000. However, we will require substantial additional financing
to implement our current plans to expand our operations and fund our long-term
product development. We have been actively seeking financing to expand our
operations and recently signed a letter of intent with an investment banker for
a private placement of an aggregate of up to $6,000,000 of our common stock.
This financing is expected to close on or prior to May 31, 2000 but there can be
no assurance that this financing will take place. If the planned financing fails
to close and we are unable to obtain alternative financing as needed, our long-
term product development and commercialization programs would be delayed or
prevented and we may be required to curtail our operations.
A SIGNIFICANT PERCENTAGE OF OUR REVENUES IS ATTRIBUTED TO SALES TO ONE OF OUR
CUSTOMERS
Our largest customer accounts for a substantial percentage of our revenues.
During 1999, approximately 60% of our revenues consisted of license fees
received under our OEM relationship with Silicon Graphics to bundle a subset of
features of the EnlightenDSM product with each Unix server and workstation that
SGI ships. License fees from SGI decreased in 1999 when compared to 1998. If
these license fees continue to decline, our revenues and financial results may
be harmed.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
See Consolidated Financial Statements included herein beginning on page
F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
21
<PAGE> 22
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 9 is set forth in Enlighten's
definitive Proxy Statement for its 2000 Annual Meeting of Shareholders under the
captions "Directors and Executive Officers" and "Section 16(b) Beneficial
Ownership Reporting Compliance" and is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this Item 10 is set forth in Enlighten's
definitive Proxy Statement for its 2000 Annual Meeting of Shareholders under the
caption "Executive Compensation and Other Matters" and is incorporated herein by
reference.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 11 is set forth in Enlighten's
definitive Proxy Statement for its 2000 Annual Meeting of Shareholders under the
caption "Stock Ownership of Certain Beneficial Owners and Management" and is
incorporated herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item 12 is set forth in Enlighten's
definitive Proxy Statement for its 2000 Annual Meeting of Shareholders under the
caption "Certain Relationships and Related Transactions" and is incorporated
herein by reference.
22
<PAGE> 23
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) Financial Statements:
<TABLE>
<S> <C>
Independent Auditors' Report................................ F-1
Consolidated Balance Sheets:
December 31, 1999 and 1998................................ F-2
Consolidated Statements of Operations:
Years ended December 31, 1999 and 1998.................... F-3
Consolidated Statements of Shareholders' Equity:
Years ended December 31, 1999 and 1998.................... F-4
Consolidated Statements of Cash Flows:
Years ended December 31, 1999 and 1998.................... F-5
Notes to Consolidated Financial Statements.................. F-6
</TABLE>
(a)(2) Exhibits:
See Exhibits Index on Page 24. The Exhibits listed in the accompanying
Exhibits Index are filed or incorporated by reference as part of this report.
Exhibit Nos. 10.24, 10.26, 10.28, 10.29, 10.31, 10.36 and 10.37 are compensatory
plans or arrangements.
(b) Reports on Form 8-K:
None
23
<PAGE> 24
EXHIBITS INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
3.1 The Registrant's Amended and Restated Articles of
Incorporation as filed with the Secretary of State of the
State of California on May 21, 1996 (incorporated by
reference to Exhibit 3.1 to the Registrant's Form S-1
Registration Statement (No. 33-75388) which became effective
April 19, 1994 (the 1994 Form S-1)).
3.2 The Registrant's By Laws, as currently in effect
(incorporated by reference to Exhibit 3.2 to the
Registrant's Form S-1 Registration Statement (No. 33-75388)
which became effective April 19, 1994).
10.01 The Registrant's Form of Indemnity Agreement for officers
and directors (incorporated by reference to Exhibit 10.1 of
the 1994 Form S-1).
10.02 The Registrant's First Amended and Restated 1992 Stock
Option Plan (incorporated by reference to Exhibit 10.2 of
the 1994 Form S-1).
10.03 The Registrant's 1994 Employee Stock Purchase Plan
(incorporated by reference to Exhibit 10.3 of the 1994 Form
S-1).
10.20 Lease, dated February 24, 1995, by and between Registrant
and Mariner's Island Ltd. for the Registrant's offices at
999 Baker Way, Fifth Floor, San Mateo, California
(incorporated by reference to Exhibit 10.20 of the
Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1994 (the 1994 Form 10-KSB)).
10.24* Termination and Change in Control Agreement, dated April 24,
1996, by and between Enlighten Software Solutions, Inc. and
Michael A. Morgan (incorporated by reference to Exhibit
10.24 of the Registrant's Annual Report on Form 10-KSB for
the year ended December 31, 1996 (the 1996 Form 10-KSB)).
10.26* Nonqualified Stock Option Agreement, dated December 27,
1996, by and between Enlighten Software Solutions, Inc. and
Mark Himelstein (incorporated by reference to Exhibit 10.26
of the Registrant's 1996 Form 10-KSB).
10.27 Agreement dated as of September 22, 1997, by and among
Enlighten Software Solutions, Inc., Peter J. McDonald, and
New Dimension Software, Inc (incorporated by reference to
Exhibit 10.27 of the Registrant's Current Report on Form 8-K
dated October 1, 1997).
10.28* Employment letter, dated July 3, 1997, by and between
Enlighten Software Solutions, Inc. and Mike Seashols
(incorporated by reference to Exhibit 10.28 of the
Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1997 (the 1997 Form 10-KSB)).
10.29* Employment letter, dated August 28, 1997, by and between
Enlighten Software Solutions, Inc. and David D. Parker
(incorporated by reference to Exhibit 10.29 of the
Registrant's 1997 Form 10-KSB).
10.30 Agreement dated as of January 21, 1998, by and between
Enlighten Software Solutions, Inc. and Silicon Graphics, Inc
(incorporated by reference to Exhibit 10.30 of the
Registrant's 1997 Form 10-KSB).
10.31* Employment letter, dated July 15, 1998, by and between
Enlighten Software Solutions, Inc. and Bill Bradley
(incorporated by reference to Exhibit 10.31 of the
Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1998 (the 1998 Form 10-KSB)).
10.32* Employment letter, dated January 15, 1999, by and between
Enlighten Software Solutions, Inc. and Tim Gardner
(incorporated by reference to Exhibit 10.32 of the
Registrant's 1998 Form 10-KSB).
10.33 Agreement dated as of December 31, 1998, by and between
Enlighten Software Solutions, Inc. and International
Business Machines Corporation (incorporated by reference to
Exhibit 10.33 of the Registrant's 1998 Form 10-KSB).
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.34 Agreement dated as of September 28, 1999, by and between
Enlighten Software Solutions, Inc. and TurboLinux, Inc.
(incorporated by reference to Exhibit 10.33 of the
Registrant's Quarterly Report on Form 10-QSB for the quarter
ended September 30, 1999).
10.35 Agreement dated as of October 21, 1999, by and between
Enlighten Software Solutions, Inc. and Intel Corporation.
10.36* Employment letter, dated November 24, 1999, by and between
Enlighten Software Solutions, Inc. and Bill Bradley.
10.37* Employment letter, dated December 8, 1999, by and between
Enlighten Software Solutions, Inc. and Stephen E. Giusti.
21.1 Subsidiaries of the Company.
23.1 Consent of KPMG LLP.
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* Compensatory or employment arrangement.
25
<PAGE> 26
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
/s/ BILL BRADLEY
--------------------------------------
Bill Bradley
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
/s/ BILL BRADLEY President and March 24, 2000
- ----------------------------------------------------- Chief Executive Officer
Bill Bradley (Principal Executive Officer)
/s/ STEPHEN E. GIUSTI Vice President, Finance March 24, 2000
- ----------------------------------------------------- and Administration
Stephen E. Giusti and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ MICHAEL SEASHOLS Co-Chairman of the Board March 24, 2000
- -----------------------------------------------------
Michael Seashols
/s/ DAVID D. PARKER Co-Chairman of the Board March 24, 2000
- -----------------------------------------------------
David D. Parker
/s/ PETER J. MCDONALD Director March 24, 2000
- -----------------------------------------------------
Peter J. McDonald
/s/ PETER J. SPRAGUE Director March 24, 2000
- -----------------------------------------------------
Peter J. Sprague
/s/ MICHAEL A. MORGAN Director March 24, 2000
- -----------------------------------------------------
Michael A. Morgan
</TABLE>
26
<PAGE> 27
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Enlighten Software Solutions, Inc.:
We have audited the consolidated financial statements of Enlighten Software
Solutions, Inc. and subsidiary as listed in the index under Item 13(a)(1). These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Enlighten
Software Solutions, Inc. and subsidiary as of December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the years in
the two-year period ended December 31, 1999, in conformity with generally
accepted accounting principles.
/s/ KPMG LLP
Mountain View, California
February 4, 2000
F-1
<PAGE> 28
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 1,045,600 $ 1,900,000
Short-term investments.................................... 247,500 1,285,600
Accounts receivable, less allowance for doubtful accounts
of $50,000 and $25,000, respectively................... 1,285,500 653,400
Prepaid expenses and other assets......................... 60,900 140,200
----------- -----------
Total current assets.............................. 2,639,500 3,979,200
Property and equipment, net................................. 402,700 588,600
Software development costs, net............................. 208,400 92,200
Other assets................................................ 312,100 269,400
----------- -----------
$ 3,562,700 $ 4,929,400
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade accounts payable.................................... $ 177,000 $ 202,500
Accrued and other current liabilities..................... 335,600 458,600
Deferred revenue.......................................... 81,800 43,800
----------- -----------
Total current liabilities......................... 594,400 704,900
Commitments and contingencies
Shareholders' equity:
Preferred stock, 1,000,000 shares authorized, none issued
and outstanding........................................ -- --
Common stock, no par value, 10,000,000 shares authorized,
4,217,978 and 3,899,761 issued and outstanding at
December 31, 1999 and 1998, respectively............... 8,410,400 7,591,500
Deferred stock-based compensation........................... (85,000) --
Accumulated other comprehensive income (loss)............... (32,200) 5,600
Accumulated deficit......................................... (5,324,900) (3,372,600)
----------- -----------
Total shareholders' equity........................ 2,968,300 4,224,500
----------- -----------
$ 3,562,700 $ 4,929,400
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 29
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Revenue:
Product license fees...................................... $ 1,781,200 $2,416,700
Product maintenance fees.................................. 641,200 655,500
Consulting services....................................... 540,100 260,600
Royalties................................................. 281,900 425,600
----------- ----------
Total revenue..................................... 3,244,400 3,758,400
Cost of revenue:
Product licenses.......................................... 335,200 550,500
Product maintenance....................................... 8,100 7,100
Consulting services....................................... 95,600 112,000
----------- ----------
Total cost of revenue............................. 438,900 669,600
----------- ----------
Gross margin......................................... 2,805,500 3,088,800
Operating expenses:
Research and development.................................. 1,764,300 1,692,000
Sales and marketing....................................... 2,208,700 1,958,800
General and administrative................................ 965,100 929,700
Gain on sale of Tandem product line....................... -- (515,500)
----------- ----------
Total operating expenses.......................... 4,938,100 4,065,000
----------- ----------
Operating loss.................................... (2,132,600) (976,200)
Other income, net........................................... 169,900 165,400
----------- ----------
Loss before income tax benefit.................... (1,962,700) (810,800)
Income tax benefit.......................................... (10,400) (25,400)
----------- ----------
Net loss.......................................... $(1,952,300) $ (785,400)
=========== ==========
Basic and diluted net loss per share........................ $ (0.49) $ (0.22)
=========== ==========
Shares used in computing basic and diluted net loss per
share..................................................... 4,022,600 3,508,258
=========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 30
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ACCUMULATED
COMMON STOCK DEFERRED OTHER TOTAL
COMPREHENSIVE ---------------------- STOCK-BASED COMPREHENSIVE ACCUMULATED SHAREHOLDERS'
LOSS SHARES AMOUNT COMPENSATION INCOME (LOSS) DEFICIT EQUITY
------------- --------- ---------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1997........ 2,963,635 $5,079,500 $ -- $ -- $(2,587,200) $ 2,492,300
Stock options
exercised.............. 184,449 242,100 -- -- -- 242,100
Employee stock purchase
plan shares issued..... 51,677 52,600 -- -- -- 52,600
Stock offering, net...... 700,000 2,217,300 -- -- -- 2,217,300
Unrealized gain on
investments............ $ 5,600 -- -- -- 5,600 -- 5,600
Net loss................. (785,400) -- -- -- -- (785,400) (785,400)
----------- --------- ---------- --------- -------- ----------- -----------
Comprehensive loss....... $ (779,800)
===========
Balance at
December 31, 1998........ 3,899,761 7,591,500 -- 5,600 (3,372,600) 4,224,500
Stock options
exercised.............. 278,824 483,100 -- -- -- 483,100
Employee stock purchase
plan shares issued..... 27,145 69,200 -- -- -- 69,200
Warrants exercised....... 12,248 -- -- -- -- --
Warrants issued for
services............... -- 42,600 -- -- -- 42,600
Deferred stock-based
compensation........... -- 224,000 (224,000) -- -- --
Compensation expense..... -- -- 139,000 -- -- 139,000
Unrealized loss on
investments............ $ (37,800) -- -- -- (37,800) -- (37,800)
Net loss................. (1,952,300) -- -- -- -- (1,952,300) (1,952,300)
----------- --------- ---------- --------- -------- ----------- -----------
Comprehensive loss....... $(1,990,100)
===========
Balance at
December 31, 1999........ 4,217,978 $8,410,400 $ (85,000) $(32,200) $(5,324,900) $ 2,968,300
========= ========== ========= ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 31
ENLIGHTEN SOFTWARE SOLUTIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss.................................................. $(1,952,300) $ (785,400)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.......................... 408,700 504,500
Gain on sale of Tandem product line.................... -- (515,500)
Loss on disposal of property and equipment............. 2,500 --
Provision for doubtful accounts........................ 25,000 (100,000)
Compensation expense for warrants issued............... 42,600 --
Compensation expense for stock options issued.......... 139,000 --
Changes in operating assets and liabilities:
Accounts receivable.................................. (657,100) (313,000)
Refundable income taxes.............................. -- 127,000
Prepaid expenses and other assets.................... 26,600 265,700
Trade accounts payable............................... 274,100 68,500
Accrued and other liabilities........................ (422,600) (270,400)
Deferred revenue..................................... 38,000 (315,600)
----------- -----------
Net cash used in operating activities............. (2,075,500) (1,334,200)
Cash Flows from Investing Activities:
Purchases of short-term investments....................... -- (1,200,000)
Sales of short-term investments........................... 1,000,300 206,000
Proceeds from sale of Tandem product line................. -- 515,500
Capitalization of software development costs.............. (232,000) --
Purchases of property and equipment....................... (99,500) (205,500)
----------- -----------
Net cash provided by (used in) investing
activities..................................... 668,800 (684,000)
Cash flows from financing activities:
Proceeds from public offering of stock, net............... -- 2,217,400
Proceeds from issuance of stock........................... 552,300 294,700
----------- -----------
Net cash provided by financing activities......... 552,300 2,512,100
----------- -----------
Net (decrease) increase in cash and cash equivalents........ (854,400) 493,900
Cash and cash equivalents at beginning of year.............. 1,900,000 1,406,100
----------- -----------
Cash and cash equivalents at end of year.................... $ 1,045,600 $ 1,900,000
=========== ===========
Supplemental cash flow information and disclosure of
non-cash investing and financing activities:
Income taxes paid......................................... $ 1,100 $ 800
=========== ===========
Warrants issued........................................... $ 42,600 $ --
=========== ===========
Deferred stock-based compensation......................... $ 224,000 $ --
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 32
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Enlighten Software Solutions, Inc. develops, markets, and supports products
that automate administrative tasks and monitor critical performance and
operational characteristics for commercial servers and workstations. Our
products provide a single console management view of customers' mixed technical
environments consisting of Linux, Unix and Windows. Enlighten's products enable
integrated, coordinated operations and management of networked and web based
servers and workstations. Enlighten's products are designed for distributed
computing environments in the range of ten to 1,000 servers and clients.
Founded in 1986, Enlighten was a leading provider of systems management
software on the Tandem platform, providing a range of automated systems
management products to over 400 companies in 30 countries. In 1997, Enlighten
sold its Tandem product line to BMC Corporation ("BMC") formerly New Dimension
Software, Inc., in order to focus efforts on its EnlightenDSM product suite.
Enlighten recognized a gain on the sale of the operating assets of the Tandem
product line of approximately $515,500 and $2,158,000 in 1998 and 1997,
respectively. In addition, BMC is required to pay Enlighten royalties through
September 2000 from BMC's licensing and support of the Tandem software products.
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of
Enlighten Software Solutions, Inc. and its wholly-owned subsidiary, a sales
corporation in Europe. All significant intercompany accounts and transactions
have been eliminated in consolidation. Certain prior year consolidated financial
statement balances have been reclassified to conform to the 1999 presentation.
Revenue Recognition
Enlighten recognizes product license revenue upon shipment if a signed
contract exists, the fee is fixed and determinable, collection of resulting
receivables is probable and product returns are reasonably estimable. Product
license revenues that are contingent upon sale to an end-user by OEMs are
recognized upon receipt of quarterly reports of shipments from OEMs.
Enlighten recognizes revenue from maintenance fees for ongoing customer
support and product updates ratably over the contract period, generally one
year. Payments for maintenance fees are generally made in advance and are
non-refundable. Consulting service revenue is recognized when services are
performed for time and material contracts and on a percentage of completion
basis for fixed price contracts.
Cash Equivalents and Short Term Investments
Enlighten considers all liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Enlighten has classified its investments in commercial paper and U.S.
Treasury notes as "held-to-maturity." All such investments mature in less than
one year and are stated at amortized cost, which approximates fair value.
Interest income is recorded using an effective interest rate, with the
associated discount or premium amortized to interest income.
Additionally, Enlighten has classified its investments in preferred stock
and municipal bonds as "available-for-sale." Such investments are recorded at
market value based on quoted market prices, with unrealized gains and losses
reported as a component of other comprehensive loss. The cost of securities sold
is determined based on the specific identification method.
F-6
<PAGE> 33
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated on
the straight-line method over the estimated useful lives of the assets,
generally five years. Leasehold improvements are amortized on a straight-line
basis over the lease term or the estimated useful life of the asset, whichever
is less.
Enlighten reviews property and equipment for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of property and equipment is measured by
comparison of its carrying amount to future net undiscounted cash flows the
property and equipment are expected to generate. If such assets are considered
to be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the property and equipment exceeds its fair value.
To date, Enlighten has made no impairment adjustments to the carrying values of
its property and equipment.
Software Development Costs
Software development costs incurred subsequent to the determination of
product technological feasibility are capitalized. Technological feasibility is
established at the completion of detail program design and testing. The
establishment of technological feasibility and the ongoing assessment of the
recoverability of these costs requires considerable judgement by management with
respect to certain external factors including, but not limited to, anticipated
future gross product revenue, estimated economic life and changes in software
and hardware technology. Costs related to computer software development incurred
prior to establishing product technological feasibility are expensed as
incurred. Amortization of capitalized software development costs begins when the
products are available for general release to customers and is computed on a
straight-line basis over the remaining estimated economic life of the product,
generally two to three years.
Enlighten periodically assesses the recoverability of these intangible
assets by comparing their amortized cost to the net realizable value of the
related products. The amount by which the unamortized costs exceed the net
realizable value is written off.
Foreign Currency Translation
The functional currency for Enlighten's foreign subsidiary is the U.S.
dollar. Accordingly, this entity remeasures monetary assets and liabilities at
year-end exchange rates while nonmonetary items are remeasured at historical
rates. Income and expense accounts are remeasured at the average rates in effect
during the year, except for depreciation which is remeasured at historical
rates. Transaction gains and losses are recognized in income in the period of
occurrence.
Use of Estimates
The preparation of consolidated 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 consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results may differ from those estimates.
Stock Based Compensation
Enlighten uses the intrinsic value-based method to account for all of its
employee stock-based compensation plans.
F-7
<PAGE> 34
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
Fair Value of Financial Instruments and Concentration of Credit Risk
The fair value of Enlighten's cash, cash equivalents, accounts receivable,
and accounts payable approximate the carrying amount due to the relatively short
maturity of these items. The fair value of Enlighten's short term investments
are based on quoted market prices. Financial instruments that potentially
subject Enlighten to concentrations of credit risk consist principally of short
term investments and trade account receivables. Enlighten has investment
policies that limit the amount of credit exposure to any one financial
institution and restrict placement of these investments to financial
institutions evaluated as credit worthy. Substantially all of Enlighten's
accounts receivable are derived from sales to large OEM partners and select
end-users. Enlighten performs ongoing credit evaluations of its customers'
financial condition and does not require collateral. Enlighten maintains
allowances for potential credit losses and such losses have been within
management's expectations.
Other Comprehensive Loss
Unrealized gains or losses on investments represent the only component of
comprehensive loss which is excluded from net loss. Comprehensive loss has been
presented in the consolidated statement of shareholders' equity. As of December
31, 1999 and 1998, the tax effects allocated to the component of other
comprehensive loss and accumulated other comprehensive loss balances were not
significant.
Income Taxes
Enlighten accounts for income taxes using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. Deferred tax assets are reduced by an allowance to an
amount whose realization is more likely than not. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
Net Loss Per Share
Basic net loss per share is based on the weighted average number of all
common shares issued and outstanding, and is calculated by dividing net loss by
the weighted average shares of common stock outstanding during the period.
Diluted net loss per share is calculated by dividing net loss by the weighted
average number of common shares outstanding plus all potentially dilutive common
shares outstanding. Potentially dilutive common shares included in the dilution
calculation consist of dilutive shares issuable upon the exercise of outstanding
common stock options computed using the treasury stock method. For the periods
in which Enlighten had losses, potential common shares from common stock options
are excluded from the computation of diluted net loss per share as their effect
would be antidilutive.
F-8
<PAGE> 35
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
The following is a reconciliation of the weighted average common shares
used to calculate basic net loss per share to the weighted average common and
potentially dilutive common shares used to calculate diluted net loss per share:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Weighted average common shares used to calculate basic net
loss per share............................................ 4,022,600 3,508,258
Stock options............................................. -- --
Warrants.................................................. -- --
--------- ---------
Weighted average common and potentially dilutive common
shares used to calculated diluted net loss per share...... 4,022,600 3,508,258
========= =========
</TABLE>
Dilutive weighted average stock options and warrants to purchase 495,108
and 474,364 shares of common stock for the years ended December 31, 1999 and
1998, respectively, were outstanding but not included in the computation of
diluted earnings per common share because they are anti-dilutive as a result of
Enlighten's net loss.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 is
effective for all fiscal years beginning after June 15, 2000, as amended by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133 -- An
Amendment of FASB Statement No. 133." SFAS No. 133 requires Enlighten to
recognize all derivatives as either assets or liabilities and measure those
instruments at fair value. It further provides criteria for derivative
instruments to be designated as fair value, cash flow and foreign currency
hedges and establishes respective accounting standards for reporting changes in
the fair value of the derivative instruments. Upon adoption, Enlighten will be
required to adjust hedging instruments to fair value in the balance sheet and
recognize the offsetting gains or losses as adjustments to be reported in net
income or other comprehensive income, as appropriate. Enlighten is evaluating
its expected adoption date and currently expects to comply with the requirements
of SFAS 133 in fiscal year 2001. Enlighten does not expect the adoption will be
material to Enlighten's financial position or results of operations since
Enlighten does not participate in such investments or activities.
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, with Respect to Certain Transactions." SOP 98-9
requires recognition of revenue using the "residual method" in a
multiple-element software arrangement when fair value does not exist for one or
more of the delivered elements in the arrangement. Under the "residual method,"
the total fair value of the undelivered elements is deferred and recognized in
accordance with SOP 97-2. Enlighten will be required to implement SOP 98-9 for
the year ending December 31, 2000. Enlighten does not expect the adoption will
have a material impact on Enlighten's financial position, results of operations
or cash flows.
F-9
<PAGE> 36
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(2) CASH, CASH EQUIVALENTS, AND SHORT TERM INVESTMENTS
Cash and cash equivalents consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Cash and cash equivalents................................... $ 87,300 $ 833,900
Money market funds.......................................... 958,300 1,066,100
---------- ----------
$1,045,600 $1,900,000
========== ==========
</TABLE>
Short term investments consisted of the following:
<TABLE>
<CAPTION>
1999 1998
-------- ----------
<S> <C> <C>
Equity securities........................................... $247,500 $ 285,600
Municipal bonds............................................. -- 1,000,000
-------- ----------
$247,500 $1,285,600
======== ==========
</TABLE>
(3) PROPERTY AND EQUIPMENT
A summary of property and equipment follows:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Equipment................................................... $1,173,700 $1,090,100
Furniture and fixtures...................................... 285,900 285,900
Leasehold improvements...................................... 142,200 142,200
---------- ----------
1,601,800 1,518,200
Less accumulated depreciation and amortization.............. 1,199,100 929,600
---------- ----------
$ 402,700 $ 588,600
========== ==========
</TABLE>
(4) SOFTWARE DEVELOPMENT COSTS
A summary of software development costs follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Software development costs.................................. $648,400 $416,400
Less accumulated amortization............................... 440,000 324,200
-------- --------
$208,400 $ 92,200
======== ========
</TABLE>
(5) INCOME TAX BENEFIT
Income tax benefit consist of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- --------- --------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1999:
Federal......................................... $(11,500) $ -- $(11,500)
State........................................... 1,100 -- 1,100
Foreign......................................... -- -- --
-------- --------- --------
$(10,400) $ -- $(10,400)
======== ========= ========
</TABLE>
F-10
<PAGE> 37
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-------- -------- --------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998:
Federal.......................................... $(40,600) $ -- $(40,600)
State............................................ 800 -- 800
Foreign.......................................... 14,400 -- 14,400
-------- -------- --------
$(25,400) $ -- $(25,400)
======== ======== ========
</TABLE>
Enlighten's income tax benefit differed from the expected income tax
benefit computed by applying the statutory U.S. federal income tax rate (34%) to
loss before income tax benefit as a result of the following:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Provision computed at federal statutory rate................ $(667,300) $(275,700)
State income tax, net of federal tax effect................. (114,400) 500
Change in valuation allowance............................... 835,700 229,900
Foreign taxes............................................... -- 14,400
Other....................................................... (64,400) 5,500
--------- ---------
$ (10,400) $ (25,400)
========= =========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities are presented
below:
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Reserves not currently deductible....................... $ 47,500 $ 95,300
Credit carryforward..................................... 664,300 500,500
Loss carryforward....................................... 1,603,000 851,100
----------- -----------
Total deferred tax assets....................... 2,314,800 1,446,900
Valuation allowance....................................... (2,178,600) (1,342,900)
----------- -----------
Net deferred tax assets......................... 136,200 104,000
----------- -----------
Deferred tax liabilities:
Software development costs.............................. 83,000 37,000
Depreciation and amortization........................... 53,200 67,000
----------- -----------
Total deferred tax liabilities.................. 136,200 104,000
----------- -----------
Net deferred tax assets......................... $ -- $ --
=========== ===========
</TABLE>
The net change in the total valuation allowance for the year ended December
31, 1999 was a net increase of $835,700. Management has determined that such
portion of deferred tax assets may not be realized.
Enlighten has federal and state net operating loss carryforwards of
approximately $5,412,400 and $2,940,000, respectively, that may be used to
offset future taxable income and federal and state research tax credits of
approximately $528,600 and $295,500, respectively, that may be used to offset
future tax liabilities. The federal net operating loss and research credit
carryforwards will expire primarily in 2018 and 2019 and the state net operating
loss carryforward will expire primarily in 2003 and 2004.
F-11
<PAGE> 38
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(6) ACCRUED AND OTHER CURRENT LIABILITIES
Accrued and other current liabilities consisted of the following:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Accrued employee compensation............................... $152,600 147,300
Deferred rent............................................... 38,300 51,600
Royalty payable............................................. 16,400 45,400
Other....................................................... 128,300 214,300
-------- --------
$335,600 $458,600
======== ========
</TABLE>
(7) SHAREHOLDERS' EQUITY
Preferred Stock
The Board of Directors has the authority to issue, without further action
by the shareholders, up to 1,000,000 shares of preferred stock in one or more
series and to fix the rights, preferences, privileges, and restrictions thereof,
including dividend rights, conversion rights, voting rights, terms of
redemption, liquidation preferences, sinking fund terms, and the number of
shares constituting any series or the designation of such series.
Employee Stock Option Plan
As of December 31, 1999, Enlighten had authorized 2,000,000 shares of
Common Stock for issuance under the 1992 Employee Stock Option Plan (the Option
Plan). The Option Plan may be administered by the Board of Directors or a
committee of the Board, which determines the terms of the options granted under
the Option Plan, including exercise price, number of shares subject to each
option, and the exercisability thereof. The vesting periods determined by the
Board of Directors generally provides for shares to vest ratably over 3.5 years
and expire over 10 years.
A summary of the status of all of Enlighten's stock option plans as of and
during the years ended December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
SHARES PRICE SHARES PRICE
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year................. 1,066,793 $2.21 922,924 $1.87
Granted.......................................... 748,750 $3.55 393,750 $2.71
Exercised........................................ (278,824) $1.73 (184,449) $1.37
Forfeited........................................ (257,230) $2.88 (65,432) $2.76
--------- ---------
Outstanding at end of year....................... 1,279,489 $2.97 1,066,793 $2.21
========= =========
Options exercisable at year end.................. 473,644 $2.35 468,618 $2.09
========= =========
Options available for future grant............... 489,185 980,705
========= =========
</TABLE>
F-12
<PAGE> 39
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
A summary of the status of all Enlighten's stock option plans at December
31, 1999 follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------------ OPTIONS EXERCISABLE
WEIGHTED -----------------------
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING REMAINING AVERAGE EXERCISABLE AVERAGE
RANGE OF AT CONTRACTUAL EXERCISE AT EXERCISE
PRICES 12/31/99 LIFE PRICE 12/31/99 PRICE
- -------------- ----------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.01 - $ 1.00.. 650 7.4 $1.00 650 $ 1.00
$1.01 - $ 2.00.. 378,122 7.8 $1.79 243,532 $ 1.79
$2.01 - $ 3.00.. 355,001 8.2 $2.69 146,471 $ 2.55
$3.01 - $ 4.00.. 475,716 9.1 $3.37 57,991 $ 3.26
$4.01 - $ 5.00.. 25,000 4.1 $4.68 25,000 $ 4.68
$5.01 - $10.00.. 45,000 9.9 $9.75 -- $ --
--------- -------
Total.. 1,279,489 473,644
========= =======
</TABLE>
Employee Stock Purchase Plan
Under Enlighten's 1994 Employee Stock Purchase Plan (the Purchase Plan) a
total of 200,000 shares of common stock remain reserved for issuance under the
Purchase Plan. The Purchase Plan permits eligible employees to purchase common
stock through payroll deductions, which may not be less than 1% nor exceed 10%
of an employee's compensation, not to exceed shares with a fair market value of
$25,000. The price of stock purchased under the Purchase Plan must be at least
85% of the lower of the fair market value of the common stock at the beginning
of each six-month offering period or at the end of the present purchasing
period. Employees may end their participation in the offering at any time during
the offering period, and participation ends automatically upon termination of
employment with Enlighten.
Warrants
In April 1994, in connection with Enlighten's initial public offering,
Enlighten issued warrants to purchase up to 100,000 shares of Common Stock at an
exercise price of $6.60, of which warrants to purchase up to 85,000 shares
expired on April 19, 1999. In April 1999, terms of the warrants to purchase up
to 15,000 shares were amended to extend their expiration to April 2001. The fair
value of the extension of this warrant as determined using the Black-Scholes
option pricing model was not significant using the following assumptions: an
expected life of 2 years, risk-free interest rate of 5.50%, 135.8% expected
volatility, and no dividend yield.
In June 1995, in connection with its facility lease, Enlighten issued
warrants to purchase up to 50,000 shares of Common Stock at an exercise price of
$5.50. In December 1999, Enlighten issued 12,248 shares of Common Stock pursuant
to the net exercise of warrants to purchase 50,000 shares of Common Stock at
$5.50 per share.
In January 1999, in connection with product marketing consulting performed,
Enlighten issued warrants to purchase up to 25,000 shares of Common Stock at an
exercise price of $2.50. Upon notice of exercise by the holders of the warrants,
Enlighten, at the holders option, may settle such exercise by either issuing the
full amount of shares and receiving cash proceeds or issuing a net amount of
shares with no cash proceeds. The fair value of these warrants, as determined
using the Black-Scholes option pricing model, was $42,600, using the following
assumptions: an expected life of 2 years, risk-free interest rate of 5.50%,
135.8% expected volatility, and no dividend yield. These warrants expire in
January 2001.
F-13
<PAGE> 40
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
Accounting for Stock-Based Compensation Plans
Enlighten has elected to use the intrinsic value-based method in accounting
for its Plan. Accordingly, no compensation cost has been recognized in the
accompanying consolidated financial statements for options granted to employees.
The exercise price of each option equaled or exceeded the fair value of the
underlying common stock as of the grant date for each option. Had compensation
cost for Enlighten's stock options been determined in a manner consistent with
SFAS No. 123, Enlighten's net loss and net loss per share as reported would have
been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Net loss (In thousands):
As reported............................................... $(1,952) $ (785)
======= =======
Pro forma................................................. $(2,636) $(1,302)
======= =======
Basic and diluted net loss per share:
As reported............................................... $ (0.49) $ (0.22)
======= =======
Pro forma................................................. $ (0.66) $ (0.37)
======= =======
</TABLE>
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted average
assumptions: 1999 -- an expected life of 3.5 years, risk-free interest rates of
5.50%, 135.8% expected volatility, and no dividend yield; 1998 -- an expected
life of 3.5 years, risk-free interest rates of 4.62%, 117.3% expected
volatility, and no dividend yield. The weighted-average fair value of options
granted during the year was $2.98 and $2.25 for the years ended December 31,
1999 and 1998, respectively.
(8) COMMITMENTS
Leases
Enlighten leases office space and certain office equipment under
noncancelable leases expiring through 2003. Future minimum lease payments under
these leases aggregate approximately $522,100, $169,300, $1,500 and $700 in
2000, 2001, 2002 and 2003. Enlighten will receive payments totaling $124,900 in
2000 under an office space sublease agreement. Rent expense was $311,600 and
$279,300 in 1999 and 1998, respectively.
Royalties
Enlighten has license agreements with unrelated third parties covering
certain of its products requiring royalty payments ranging from 10% to 50% of
product license and maintenance fees. Royalties related to these agreements were
$130,500 and $201,200 in 1999 and 1998, respectively.
Legal Proceedings
Enlighten is subject to certain legal actions that have arisen in the
ordinary course of business. Management believes that the ultimate outcome of
these actions will not have a material affect on Enlighten's consolidated
financial statements or results of operations, although there can be no
assurance as to the outcome of such litigation.
F-14
<PAGE> 41
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1999 AND 1998
(9) SEGMENT REPORTING AND MAJOR CUSTOMERS
SFAS No. 131 establishes standards for the way in which public companies
disclose certain information about operating segments in Enlighten's financial
reports. Based on the criteria of SFAS No. 131, Enlighten operates in one
segment and accordingly has provided only the required enterprise wide
disclosures.
For the years ended December 31, 1999 and 1998, sales to one customer
accounted for approximately 60% and 65% of total revenues, respectively.
Enlighten's operations outside of the United States consisted solely of a
sales corporation in the United Kingdom. Domestic operations are responsible for
the design, development, and licensing of all products. Following are selected
financial data, categorized by primary geographic area:
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Revenues:
United States............................................. $3,235,400 $3,722,800
International............................................. 9,000 35,600
---------- ----------
$3,244,400 $3,758,400
========== ==========
Long Lived Assets:
United States............................................. $ 611,100 $ 680,800
International............................................. -- --
---------- ----------
$ 611,100 $ 680,800
========== ==========
</TABLE>
F-15
<PAGE> 1
EXHIBIT 10.35
SOFTWARE DEVELOPMENT AND LICENSE AGREEMENT
BETWEEN
INTEL CORPORATION
AND
ENLIGHTEN SOFTWARE SOLUTIONS, INC.
EFFECTIVE DATE: 10/21/99
AGREEMENT No.: 1308605
Parties:
Intel Corporation (including all majority owned subsidiaries and affiliates,
hereinafter "Intel")
2200 Mission College Blvd.
Santa Clara, CA 95052
Licensor (hereinafter "Enlighten")
Enlighten Software Solutions, Inc.
999 Baker Way, 5th Floor
San Mateo, CA 94402
This Software Development And License Agreement ("Agreement") sets forth the
terms under which Enlighten agrees to develop, license and deliver the Licensed
Software to Intel in accordance with the provisions contained in the following
exhibits which are included in and made a part of this Agreement. Enlighten and
Intel are each referred to in the Agreement as a "Party," and collectively as
the "Parties:
Exhibit "A" - General Terms and Conditions
Exhibit "B" - Licensed Software Descriptions and Specifications
Exhibit "C" - Compensation Provisions
Exhibit "D" - Maintenance and Support Obligations
Exhibit "E" - Certificate of Originality
Exhibit "F" - Statement of Work
Exhibit "G" - Corporate Non-Disclosure Agreement
Exhibit "H" - Source Code Provisions
AGREED
INTEL CORPORATION ENLIGHTEN SOFTWARE SOLUTIONS, INC.
/s/ Ed Ekstrom /s/ Bill Bradley
- ------------------------------- ----------------------------------
Signature Signature
Ed Ekstrom Bill Bradley
- ------------------------------- ----------------------------------
Printed Name Printed Name
CPG Vice President,
SMD General Manager President
- ------------------------------- ----------------------------------
Title Title
10/21/99 10/21/99
- ------------------------------- ----------------------------------
Date Date
INTEL / ENLIGHTEN CONFIDENTIAL
Page 1
<PAGE> 2
EXHIBIT "A"
GENERAL TERMS AND CONDITIONS
1. DEFINITIONS
1.1 General Definitions.
(a) "DERIVATIVE WORKS" means, for purposes of this Agreement, any
work that would be deemed a Derivative Work under the Copyright
Act, Title 17 of the U.S. Code and any analogous provisions
under applicable patent or trade secret law.
(b) "DEVELOPMENT TOOLS" means those Enlighten proprietary software
development tools licensed to Intel by Enlighten to facilitate
the integration, modification, and support of the Licensed
Software. Development Tools are set forth in Exhibit B.
(c) "DISTRIBUTORS" means Intel's resellers, distributors, original
equipment manufacturers ("OEMs"), value-added resellers
("VARs"), system integrators, dealers, agents, and
subdistributors.
(d) "END-USER DOCUMENTATION" shall mean any end user installation
and user guides, manuals, and other technical information in
printed and machine-readable form that is normally provided by
Enlighten to end users of the Licensed Deliverables. End User
Documentation specifically excludes Technical Documentation.
(e) "FIRST CUSTOMER SHIPMENT" means the date of first commercial
shipment by Intel of the Integrated Intel Product to a
Distributor or end user.
(f) "ENLIGHTEN INTELLECTUAL PROPERTY RIGHTS" means Enlighten's
rights (including under licenses from third parties), now or
hereafter existing, in any (i) patents and patent applications,
(ii) copyrights in the Licensed Products, and (iii) trade
secrets in or necessary to the Licensed Deliverables.
(g) "INTEGRATED INTEL PRODUCT(S)" means the Intel Product(s) into
which the Licensed Deliverables are integrated in accordance
with this Agreement. The initial Intel Product(s) to include the
Licensed Deliverables shall be the Linux version of Intel's
LANDesk(R) Server Manager product as created under Exhibit F
(SOW). Upon Intel's request, the Parties may mutually agree to
add additional Intel Integrated Products to this Agreement
subject to mutual written agreement by the Parties as to an
applicable SOW and the applicable royalties for such additional
Intel Integrated Product(s).
(h) "INTEL ENABLING TECHNOLOGY" means the Intel proprietary
technology as defined and set forth in Exhibit A, which will be
used, modified and/or integrated by Enlighten with the Licensed
Deliverables (or portions thereof) in developing the Intel
Integrated Product as set forth in Exhibit F (SOW).
(i) "INTEL INTELLECTUAL PROPERTY RIGHTS" means Intel's rights
(including under licenses from third parties), now or hereafter
existing, in any (i) patents and patent applications, (ii)
copyrights in the Intel Enabling Technology, and (iii) trade
secrets in or necessary to the Intel Enabling Technology.
(j) "INTEL PRODUCTS" means any or all current and future Intel
products and/or services that are developed, provided, rendered,
manufactured, marketed, distributed, licensed, or sold by or for
Intel and/or its Distributors.
INTEL / ENLIGHTEN CONFIDENTIAL
Page 2
<PAGE> 3
(k) "INTEL UNIQUE TECHNOLOGY" means that subset of the Licensed
Deliverables to be developed by Enlighten pursuant to Exhibit F
(SOW) which consists of technology that is unique to the Intel
environment. Intel shall receive an exclusive license, including
Licensed Software Source Code rights, to Intel Unique
Technology.
(l) "LICENSED DELIVERABLES" means the Licensed Software, Development
Tools, Intel Unique Technology, Technical Documentation, End
User Documentation and all other deliverables set forth in
Exhibit B that Enlighten develops, delivers and licenses to
Intel under this Agreement for the fees paid in accordance with
Exhibit C.
(m) "LICENSED SOFTWARE" means Enlighten's current software programs
and technology, including all component parts thereof, and
Update(s) thereto provided to Intel by Enlighten in Object Code
form, which are included with the Licensed Deliverables as
described in Exhibit B.
(n) "NET REVENUES" means the amount Intel receives from sales of any
Integrated Intel Product, less any returns, discount allowances,
third party sales commissions, duties, taxes, freight and/or
insurance, if any, irrespective of how such Intel Integrated
Product is distributed (e.g. - initial sale, product upgrade,
software maintenance agreement, maintenance renewal agreement,
etc.). For purposes of this Net Revenue definition, sales of
Intel Integrated Products shall also include any amounts
received by Intel for distribution of the Intel Integrated
Product to Intel Product customers when bundled by Intel with
other Intel Products and/or third party offerings as set forth
in Exhibit C. Amounts received by a Party as deposits or
advances will not be deemed to have been received until
recognition of the revenue of the product to the party making
the deposits or advances have been made against such deposits or
advances. In determining amounts due in situations where Intel
receives a partial payment covering multiple Intel Products,
such partial payments will be prorated over all Intel Products
included in the invoice and the prorated portion attributable to
the Intel Integrated Product(s) will be included in Net Revenue
definition as defined above. Amounts received by the party in
foreign currencies will be deemed converted into United States
Dollars at the average exchange rates used by the party in its
financial statements for the month of receipt.
(o) "OBJECT CODE" means software, including all computer programming
code in binary form, that is directly executable by a computer
after suitable processing but without the intervening steps of
compilation or assembly, and all help, message, overlay files,
whether in electronic or hard copy form.
(p) "SOURCE CODE" means the software code from which Object Code is
compiled. Source Code includes the commented software source
code and design documentation for the relevant software, machine
readable form, that are used to develop or test the software.
Source Code includes, for example, relevant electronically
readable source documentation, design documents, data models,
help materials, tutorial programs necessary to compile the
Source Code into executable, fully-functioning Object Code.
(q) "TECHNICAL DOCUMENTATION" means any engineering and interface
documentation in connection with the Source Code for Licensed
Deliverables and includes, without limitation, the Licensed
Deliverables identified in Exhibit B as the High Level
Architectural Specification and the Low Level Design
Specification for the Enlighten Event Router and the Management
Directory Plug-In. Any delivery of Source Code must be
accompanied by Technical Documentation sufficient to enable
compilation of the Source Code into Object Code.
(r) "UPDATE" means any Major, Minor Releases, and Incremental
Releases as provided under the Enterprise Support Exhibit D
provided under this Agreement.
INTEL / ENLIGHTEN CONFIDENTIAL
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2. LICENSE GRANTS:
2.1 Licensed Software Object Code: Subject to the terms and conditions of
this Agreement, Enlighten hereby grants to Intel a non-exclusive,
world-wide, royalty-bearing, irrevocable (except for material breach)
and assignable license under Enlighten's Intellectual Property Rights
to, use, copy, modify, perform and display the Licensed Software in
Object Code form and to create Derivative Works therewith in the form of
Integrated Intel Products and to distribute and sell access to the
resulting Integrated Intel Product, either directly or indirectly
through Intel's Distributors. Notwithstanding the foregoing, the license
for Intel Unique Technology shall be exclusive to Intel. Additionally,
Intel shall be accorded the royalty free right and interest in all of
the aforementioned license rights to include and distribute those
portions of the Licensed Deliverables with the console of Intel's
LANDesk Management Suite product as further set forth in Exhibit B;
notwithstanding the foregoing, and for the avoidance of any doubt, the
foregoing sentence shall not affect the payment of applicable royalties
as specified under Exhibit C
2.2 Development Tools Object Code: Enlighten hereby grants to Intel a
non-exclusive, world-wide, irrevocable (except for material breach) and
assignable, internal license under Enlighten's Intellectual Property
Rights to use, copy (up to the number of Licenses purchased from
Enlighten), perform and display the Development Tools in Object Code
form for the purpose of developing and integrating the Licensed Software
with the Intel Product(s) listed in Section 1 (g) above, to form and
support Derivative Works in the form of Integrated Intel Products.
2.3 End User Documentation: Subject to the terms and conditions of this
Agreement, Enlighten hereby grants to Intel a royalty free,
non-exclusive, irrevocable (except for material breach) assignable,
worldwide license, under Enlighten's Intellectual Property rights for
any works of authorship embodied in the End User Documentation to (a)
copy and modify the Documentation for the purpose of creating
Documentation for the Integrated Intel Products; (b) have the End User
Documentation copied and modified for the purpose of creating
Documentation for the Integrated Intel Products; (c) incorporate the
whole or parts of the End User Documentation into other similar
materials prepared by or for Intel for the purpose of creating
Documentation for the Integrated Intel Products; and (d) distribute the
End User Documentation and copies thereof, in whole or in part, by any
means now known or developed in the future.
2.4 Technical Documentation: Subject to the terms and conditions of this
Agreement, Enlighten hereby grants to Intel a non-exclusive, assignable,
world-wide, irrevocable, non-royalty bearing, internal license under
Enlighten's Intellectual Property Rights to make, use, copy, modify,
perform and display the Technical Documentation and Derivative Works
therefrom.
2.5 Licensed Software Source Code: Subject to Terms and Conditions of this
Agreement, and more specifically Section 8.3 (c) and provided that a
triggering condition as set forth in Exhibit H has occurred, Enlighten
hereby grants to Intel a non-exclusive, world-wide, irrevocable,
non-royalty bearing, non-transferable, license under Enlighten's
Intellectual Property Rights to, use, copy, modify, perform and display
the Licensed Software in Source Code to support the pre-existing
Integrated Intel Product. Notwithstanding the foregoing, Intel shall be
provided such Source Code license rights for all Intel Unique Technology
regardless of whether a triggering condition has occurred with the
additional provisions that such Source Code license to Intel Unique
Technology shall be exclusive to and transferable by Intel.
2.6 Intel Enabling Technology: Intel hereby grants to Enlighten a
non-exclusive, world-wide, irrevocable (except for material breach)
internal license under Intel's Intellectual Property Rights to use,
copy, modify, perform and display the Intel Enabling Technology and
Technical Documentation for the sole and exclusive purpose of developing
the Intel Integrated Product pursuant to Exhibit F (SOW).
INTEL / ENLIGHTEN CONFIDENTIAL
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3. OWNERSHIP
3.1 Ownership of the Licensed Deliverables: Subject to the licenses granted
to Intel pursuant to this Agreement, all rights, title and interest in
and to the Licensed Deliverables, are and shall at all times remain
Enlighten's or Enlighten's supplier's sole and exclusive property.
3.2 Ownership of Derivative Works: Subject to the licenses granted to each
party by the other party pursuant to this Agreement, all rights, title
and interest in and to any material contributed by or for a Party in the
creation of Derivative Works under this Agreement, shall at all times
remain with such Party and/or its suppliers, subject to the other
Party's ownership interests in the original preexisting work.
Notwithstanding the foregoing, all Derivative Works of the Intel Unique
Technology created by or for Enlighten shall be the sole and exclusive
property of Intel and Enlighten shall assign to Intel all Enlighten
Intellectual Property Rights in such Intel Software Derivative Works
necessary to perfect Intel's ownership interest therein.
3.3 Ownership of Intel Enabling Technology: Subject to the licenses granted
to Enlighten pursuant to this Agreement, all rights, title and interest
in and to the Intel Enabling Technology shall at all times remain the
sole and exclusive property of Intel or Intel's suppliers.
3.4 Ownership of Licensed Software: Licensed Software delivered to either
party in Object Code form may not be reverse compiled, reverse
assembled, reverse engineered, used, executed, copied, or modified
except as stated in this Agreement. Each party must abide by all
proprietary rights on the Object Code software and its related
documentation.
4. COMPENSATION
Intel will compensate Enlighten according to the Compensation Provisions
set forth in Exhibit C.
5. MAINTENANCE AND SUPPORT OBLIGATION
Enlighten will provide engineering support and maintain and support the
Licensed Software and all Updates according to the provisions and period
set forth in Exhibit D.
6. WARRANTIES:
6.1 Enlighten makes the following representations and warranties to Intel in
connection with the Licensed Software:
(a) The Licensed Software will perform in substantial conformance
with the specifications set forth in Exhibit B (the
"Specification") and any applicable Statement of Work ("SOW")
and that the Licensed Software does not contain errors that
prohibit its operation in material conformance therewith. If the
Licensed Software fails to conform to either the Specification
or any applicable Statement of Work upon delivery to Intel and
testing by Intel, Enlighten agrees to use reasonable efforts to
modify the Licensed Software to conform therewith, in a timely
manner, in accordance with Section 5 of this Agreement.
(b) To the best of Enlighten's knowledge, the Licensed Software does
not contain any viruses at the time of delivery to Intel.
(c) Enlighten has the right to license the Licensed Deliverables to
Intel free of any claims, liens or conflicting rights in favor
of any third party. Enlighten further represents and warrants
that none of the Licensed Deliverables are designated by
Enlighten or its third party licensors as Open Source or are
otherwise subject to the General Public License or analogous
license agreements used to make the Licensed Deliverables or
Derivative Works thereof available as Open Source.
INTEL / ENLIGHTEN CONFIDENTIAL
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(d) Enlighten has no reason to believe that the Licensed
Deliverables violates any intellectual property right of any
third party. Enlighten will complete and provide to Intel
Exhibit E and Enlighten represents that all such information
provided to Intel is true and complete in all respects.
(e) Enlighten warrants that the Licensed Software when used in
accordance with their associated documentation, shall be Year
2000 Capable. "Year 2000 Capable" shall mean that the Licensed
Software is capable of correctly processing, providing and/or
receiving data within and between the 20th and 21st centuries,
provided that all other products (for example, hardware,
software, firmware, and/or user data) used with the Licensed
Software properly exchange accurate date data with it. The
foregoing statement shall not apply to a prior version of a
Licensed Software if a more recent version of such Licensed
Software is Year 2000 Capable. In the event that a Licensed
Software is not Year 2000 Capable as specified above, Intel's
sole remedy shall be for Enlighten to repair or replace the
Licensed Software, or if neither of the foregoing is
commercially practical, refund the amounts received by Enlighten
from Intel for the affected Licensed Software.
(f) EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH ABOVE, THE LICENSED
SOFTWARE AND THE ACCOMPANYING WRITTEN MATERIALS ARE PROVIDED "AS
IS" WITHOUT EXPRESS OR IMPLIED WARRANTY OF ANY KIND. ENLIGHTEN
FURTHER DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING WITHOUT
LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE. ENLIGHTEN DOES NOT WARRANT THAT THE
LICENSED SOFTWARE WILL BE ERROR FREE OR WILL OPERATE WITHOUT
INTERRUPTION.
7. INTELLECTUAL PROPERTY INDEMNIFICATION
[___]
8. TERM AND TERMINATION
8.1 Term: The term of this Agreement shall be Three (3) years beginning on
the Effective Date, which term shall be automatically renewed at the end
of such initial term on the anniversary date of the Effective Date for
additional one (1) year renewal terms, unless terminated by either Party
in writing at least ninety days (90) before any renewal date. Any
reference to the "Agreement Term" in the Agreement shall be deemed to
include any applicable annual renewal term following the initial
three-year term.
8.2 Termination:
(a) Either Party shall have the right to terminate this Agreement
should the other Party materially default in the performance of
any of its obligations if, within thirty (30) days after written
notice, the defaulting Party has failed to cure the default.
(b) In the event that this Agreement is terminated due to
Enlighten's material breach, Enlighten agrees that Intel shall
have the right to continue to use the Licensed Deliverables, and
Trademarks in accordance with the terms set forth in this
Agreement for the shorter of: (i) such time that Intel is able
to find and design-in an alternative product containing
substantially the same functionality as that supplied by
Enlighten hereunder, or (ii) nine (9) months.
(c) After initial acceptance, in the event that, in Intel's sole
discretion, the Licensed Software fails to meet Intel's product
requirements for the Intel Integrated Product(s) at any time
during the Agreement Term, Intel may, upon One Hundred Eighty
(180) days prior written
INTEL / ENLIGHTEN CONFIDENTIAL
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notice to Enlighten, terminate this Agreement. In the event of
such termination by Intel, Intel shall forfeit any payments made
to Enlighten as of the date of the notice.
8.3 Effects of Termination or Expiration: In the event of termination or the
expiration of this Agreement, the following provisions will apply:
(a) Post-termination Support: If this Agreement is terminated for
any reason, Enlighten shall continue to provide Support to
Intel's Customer Support personnel as set forth in Exhibit D
during such time as Intel is allowed to clear its channel of any
remaining inventory as set forth in provision (d) below, and
provided that Intel continues to remit payment to Enlighten for
such Support in the form of royalties as defined in this
Agreement.
(b) Return of Intel Enabling Technology: In the event of expiration
or termination of this Agreement for any reason, Enlighten shall
promptly return or destroy, at Intel's option, all copies of the
Intel Enabling Technology, regardless of form and certify to
Intel in writing of the compliance with such return or
destruction.
(c) Source Code Access Upon Termination: In the event of termination
due to any condition set forth in Exhibit H which would trigger
Intel's rights to access and use the Source Code pursuant to the
Source Code Provisions set forth in Exhibit H, Intel shall
receive the Source Code license set forth in Section 2.5.
(d) Other Survival Provisions: The pertinent provisions governing
Survival in Section 8.4 below will also survive.
(e) Licenses: If this Agreement expires or is terminated for any
reason other than as set forth in Section 8.2 (c) above, Intel
will receive a sell-through period of [___] from the date of
expiration or termination during which it may continue to
exercise its license rights under Section 2 above subject to
Intel's payment of applicable royalties. In addition, any and
all licenses granted to end-users as of the date of any
expiration or termination shall survive.
8.4 The following provisions shall survive any expiration or termination of
this Agreement: 1. Definitions; 2. License Grants (but only for a period
of 18 months following any Agreement expiration or termination) 3.
Ownership; 4. Compensation (but only to the extent that such
compensation terms would normally apply to other surviving Agreement
provisions (e.g. - License Grants), 5. Maintenance and Support
Obligations, 7. Intellectual Property Indemnification; 9.
Confidentiality and Non-disclosure, and 10. General Provisions.
Additionally, Intel shall have the right to possess and use a reasonable
number of archive copies of the Licensed Deliverables for the sole
purpose of providing end user customer support and maintenance for the
Intel Integrated Product(s) following any expiration or termination of
the Agreement.
9. CONFIDENTIALITY AND NON-DISCLOSURE
9.1 CONFIDENTIALITY GENERALLY: The existence, terms, and conditions of this
Agreement and either party's Source Code are confidential and neither
Party may make any disclosures regarding this Agreement without the
express prior written consent of the other, with the following
exceptions:
a. subject to (b) below, as otherwise may be required by law or
legal process, to legal and financial advisors in their capacity
of advising a Party in such matters; or
b. during the course of litigation so long as the disclosure of
such terms and conditions are restricted in the same manner as
is the confidential information of other litigating Parties and
so long as (i) the restrictions are embodied in a court-entered
Protective Order and (ii) the disclosing Party informs the other
Party in writing in advance of the disclosure; or
INTEL / ENLIGHTEN CONFIDENTIAL
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c. in confidence to its legal counsel, accountants, banks and
financing sources and their advisors solely in connection with
complying with financial transactions or to procure financing
from prospective investors.
To the extent that this Agreement must be filed with any government
regulatory agency, both parties will use reasonable efforts to maintain
the terms of confidentiality as set forth herein, including, but not
limited to, redacting the Agreement such that only those portions
mandated by the government agency are disclosed and obtaining the
non-disclosing Party's review and input prior to any such filing.
9.2 CONFIDENTIAL INFORMATION: Disclosures of confidential and proprietary
information by either Party to the other Party shall be governed by the
Intel Corporate Non-disclosure Agreement ("CNDA") number 5035068, and
related Confidential Information Transmittal Records ("CITR(s)") or
other appropriate written non-disclosure agreements as may be mutually
agreed to and executed by the Parties. Attached as Exhibit G is the
aforementioned CNDA.
10. LIMITATION OF LIABILITY
[___]
11. GENERAL PROVISIONS
11.1 Assignment. Except for the assignment of the Agreement by Enlighten
pursuant to the sale or transfer of all or substantially all of
Enlighten's assets, Enlighten may not assign this Agreement or any
obligations, rights, or benefits hereunder without the express written
consent of Intel which shall not be unreasonably withheld. Intel,
following acceptance of the Licensed Deliverables, at its sole
discretion, may assign this Agreement or any obligations, rights, or
benefits hereunder without the consent of Enlighten provided that Intel
has fully paid up all existing monetary obligations which are due and
owing to Enlighten pursuant to Exhibit C of this Agreement as of the
date of any such assignment.
11.2 Compliance with Laws. Notwithstanding anything contained in this
Agreement to the contrary, the obligations of the Parties shall be
subject to all laws, present and future, of any government having
jurisdiction over the Parties, and to orders, regulations, directions or
requests of any such government.
11.3 Dispute Resolution. All disputes arising directly under the express
terms of this Agreement or the grounds for termination thereof shall be
resolved as follows: The senior management of both Parties shall meet to
attempt to resolve such disputes. If the senior management cannot
resolve the disputes, either Party may make a written demand for formal
dispute resolution and specify therein the scope of the dispute. Within
thirty days after such written notification, the Parties agree to meet
for one day with an impartial mediator and consider dispute resolution
alternatives other than litigation. If an alternative method of dispute
resolution is not agreed upon within thirty (30) days after the one-day
mediation, either Party may begin litigation proceedings.
11.4 Export. In the event product is exported from the United States or
exported/re-exported from a foreign destination by either Party, such
exporting Party shall ensure that the distribution and export/re-export
of product is in compliance with all laws, regulations, orders, or other
restrictions of the U.S. Export Administration Regulations. As of the
Effective Date of this Agreement, Enlighten represents and warrants
that, to the best of its knowledge, the Licensed Deliverables, alone and
not in combination with any other technology or product, do not require
any special export licenses or other U.S. Government regulatory
approvals prior to export from the United States.
11.5 Force Majeure. Neither Party shall be responsible for its failure to
perform due to causes beyond its reasonable control such as acts of God,
fire, theft, war, riot, embargoes, or acts of civil or
INTEL / ENLIGHTEN CONFIDENTIAL
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military authorities. If delivery or services are to be delayed by such
contingencies, Enlighten shall immediately notify Intel in writing, and
Intel may, at its option, either (i) extend time of performance or (ii)
terminate the uncompleted portion of the order at no cost to Intel.
11.6 Governing Law. Any claim arising under or relating to this Agreement
shall be governed by the internal substantive laws of the State of
Delaware or federal courts located in Delaware, without regard to
principles of conflict of laws. Jurisdiction. Each Party hereby agrees
to jurisdiction and venue in the courts of the State of California for
all disputes and litigation arising under or relating to this Agreement.
11.7 Independent Development. This Agreement does not preclude Intel or
Enlighten from evaluating, acquiring from third parties not a party to
this Agreement, independently developing or marketing similar
technologies or products, or making and entering into similar
arrangements with other companies. Neither Party is obligated by this
Agreement to make such products or technologies available to the other.
11.8 Notice. All notices required or permitted to be given hereunder shall be
in writing, shall make reference to this Agreement, and shall be
delivered by hand, or dispatched by prepaid air courier or by registered
or certified airmail, postage prepaid, addressed as follows:
Notices to Intel: Notices to Enlighten:
Intel Corporation Enlighten Corporation
Attn: General Counsel ---------------------------
2200 Mission College Blvd. 999 Baker Way, 5th Floor
Santa Clara, CA 95052 ---------------------------
San Mateo, CA 94402
---------------------------
Attn: Mr. Bill Bradley
---------------------------
With copies to:
Intel Corporation
Attn: Legal Dept.
734 E. Utah Valley Drive
American Fork, UT 84003
Intel Corporation
Attn: Post Contract Management, MS JF3-149
2111 N.E. 25th
Hillsboro, OR 97124
Such notices shall be deemed served when received by addressee or, if
delivery is not accomplished by reason of some fault of the addressee,
when tendered for delivery. Either Party may give written notice of a
change of address and, after notice of such change has been received,
any notice or request shall thereafter be given to such Party at such
changed address.
11.9 Relationship of Parties. The Parties hereto are independent contractors.
Neither Party has any express or implied right or authority to assume or
create any obligations on behalf of the other or to bind the other to
any contract, agreement or undertaking with any third party. Nothing in
this Agreement shall be construed to create a partnership, joint
venture, employment or agency relationship between Enlighten and Intel.
11.10 Remedies. Except as set forth in Section 7.3 and 10, then (i) the
remedies set forth in this Agreement are in addition to those available
to either Party at law or in equity, and (ii) all rights and remedies,
legal or equitable, whether conferred hereunder, or by any other
instrument or law will be cumulative and may be exercised singularly or
concurrently.
INTEL / ENLIGHTEN CONFIDENTIAL
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11.11 Residuals. Notwithstanding anything herein to the contrary, either Party
may use Residuals for any purpose, including use in the development,
manufacture, promotion, sale and maintenance of its products and
services; provided that this right to Residuals does not represent a
license under any patents or copyrights of the disclosing Party. The
term "Residuals" means information of a general nature, such as general
knowledge, ideas, concepts, know-how, professional skills, work
experience or techniques (not specifics such as exact implementations)
that is retained in the unaided memories of the receiving Party's
employees who have had access to the disclosing Party's information
pursuant to the terms of this Agreement. An employee's memory is unaided
if the employee has not intentionally memorized the information for the
purpose of retaining and subsequently using or disclosing it.
11.12 Severability. The terms and conditions stated herein are declared to be
severable. If any paragraph, provision, or clause in this Agreement
shall be found or be held to be invalid or unenforceable in any
jurisdiction in which this Agreement is being performed, the remainder
of this Agreement shall be valid and enforceable and the Parties shall
use good faith to negotiate a substitute, valid and enforceable
provision which most nearly effects the Parties' intent in entering into
this Agreement.
11.13 Waiver. Failure by either Party to enforce any term of this Agreement
shall not be deemed a waiver of future enforcement of that or any other
term in this Agreement or any other agreement that may be in place
between the Parties.
11.14 Entire Agreement. The terms and conditions of this Agreement, including
its exhibits, constitutes the entire agreement between the Parties with
respect to the subject matter hereof, and merges and supersedes all
prior and contemporaneous agreements, understandings, negotiations and
discussions. Neither of the Parties shall be bound by any conditions,
definitions, warranties, understandings, or representations with respect
to the subject matter hereof other than as expressly provided herein.
The section headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. No oral explanation or oral
information by either Party hereto shall alter the meaning or
interpretation of this Agreement. No amendments or modifications shall
be effective unless in a writing signed by authorized representatives of
both Parties. These terms and conditions will prevail notwithstanding
any different, conflicting or additional terms and conditions which may
appear on any purchase order, acknowledgment or other writing not
expressly incorporated into this Agreement. In the event of any conflict
between the terms and conditions set forth in this Exhibit A and any
other Exhibit of this Agreement, the Exhibit A terms and conditions
shall govern, unless the other Exhibit expressly states that it governs.
This Agreement may be executed in two (2) or more counterparts, all of
which, taken together, shall be regarded as one and the same instrument.
INTEL / ENLIGHTEN CONFIDENTIAL
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EXHIBIT "B"
LICENSED SOFTWARE DESCRIPTION AND SPECIFICATIONS
DESCRIPTION OF LICENSED DELIVERABLES
The following table lists the deliverables classified as Licensed Deliverables.
The relevant sections of Exhibit F (SOW) and the applicable sections of the
License Grant are also shown.
[___]
INTEL UNIQUE TECHNOLOGY
The following table lists the deliverables classified as Intel Unique
Technology. The relevant sections of Exhibit F (SOW) and the applicable
sections of the License Grant are also shown.
[___]
DESCRIPTION OF DEVELOPMENT TOOLS PROGRAM
The development tools required to build the developed source code are a
combination of commercially available tools and Enlighten proprietary tools. The
commercially available tools are:
GNU C Compiler (gcc)
GNU C++ Compiler (g++)
GNU C/C++ Object Module Linker
Microsoft Visual C++ Compiler
GNU make (gmake)
The Enlighten proprietary tools are:
EMK Make - Enlighten's Proprietary build system
DESCRIPTION OF INTEL ENABLING TECHNOLOGY
The following table lists the deliverables classified as Intel Enabling
Technology. The relevant sections of Exhibit F (SOW) and the applicable sections
of the License Grant are also shown.
INTEL / ENLIGHTEN CONFIDENTIAL
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[___]
SPECIFICATIONS
The Licensed Deliverables will meet the specifications set forth in the then
current Enlighten data sheet for respective Licensed Deliverable as augmented by
any applicable specifications set forth in any Statement of Work agreed upon by
the parties under the provisions of this Agreement. Such data sheets and
Statements of Work are made part of this Agreement by this reference.
INTEL / ENLIGHTEN CONFIDENTIAL
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EXHIBIT "C"
COMPENSATION AND PAYMENT PROVISIONS
Subject to Enlighten's compliance with the terms and conditions of this
Agreement and in consideration for the rights and licenses granted by Enlighten
and the obligations assumed hereunder, Intel will compensate Enlighten as
follows:
1.0 INTEL INTEGRATED PRODUCT ROYALTIES: In connection with Intel's
distribution of Intel Integrated Product, Intel will pay Enlighten a
royalty based upon [___] pursuant to the following models. Each model is
exclusive of the others, based upon the final Beta NRE payment made to
Enlighten by Intel pursuant to Section 9 of this Exhibit C. In no case
shall Royalties payable to Enlighten under any of the following Royalty
models exceed [___] from the Intel Integrated Product:
(a) Royalties on the [___] from the Intel Integrated Product(s) will
be [___]. Thereafter and continuing for the lifespan of the
Intel Integrated Product(s), the royalty shall be [___]. This
Royalty model assumes Intel's full payment of the [___] Beta NRE
payment without any penalty deductions.
(b) In the event that the Beta NRE payment is decreased to [___] as
provided in Section 9 (a) below, the royalty on the [___] from
the Intel Integrated Product(s) will be [___]. Thereafter and
continuing for the lifespan of the Intel Integrated Product(s),
the royalty shall be [___].
(c) In the event that the Beta NRE payment is decreased to [___] as
provided in Section 9 (a) below, the royalty on the [___] from
the Intel Integrated Product(s) will be [___]. Thereafter and
continuing for the lifespan of the Intel Integrated Product(s),
the royalty shall be [___].
(d) If, in its sole discretion, Intel packages the Intel Integrated
Product with other Intel Products or third-Party products or
services, and that package is sold as an option, under a single
price, to Intel Product customers, then the royalty for such
Intel Integrated Product distribution as a component of an
"option package" shall be negotiated by the Parties
(e) Notwithstanding the provisions of any of the Royalty Models set
forth above, for an Intel Product bundle consisting of the Intel
Integrated Product with Intel's Remote Server Management card,
the royalty rate shall be [___] by Intel from such bundle. [___]
2.0 QUARTERLY REPORTS AND PAYMENTS: During the Term of this Agreement,
within fifteen (15) calendar days following the end of any calendar
quarter during which Intel sells any Licensed Software in the form of an
Integrated Intel Product, or such Licensed Software is credited for
return, Intel shall provide a brief report ("Report") of such activity
to Enlighten that lists the number of copies of the Licensed Software
sold and the applicable royalty therefor, or, as the case may be,
returned in that quarter, and the total amount of royalty owed to
Enlighten or credited to Intel therefor. If any royalties are due
Enlighten in such calendar quarter, Intel shall remit such payment to
Enlighten with the corresponding report within forty-five (45) calendar
days following the end of such calendar quarter. If any return credits
accrue to Intel and if there are no payments against which such credits
may be offset, such credits may be carried forward indefinitely by Intel
in subsequent accounting periods. Returns: Intel shall be credited the
full amount of any royalty accrued on any returned or destroyed copies
of the Licensed Software that Intel, in its sole discretion, authorizes
for such return or destruction.
3.0 ROYALTY FREE COPIES: Intel shall owe no royalty or other payment to
Enlighten in connection with Licensed Software copies that are given to
end-users as evaluation copies for a limited duration of time (not to
exceed 90 calendar days) and/or for a limited purpose of use. In
addition, Intel shall owe no royalty or other payment to Enlighten in
connection with any Licensed Software copies used
INTEL / ENLIGHTEN CONFIDENTIAL
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<PAGE> 14
internally for development or support or given to third Parties for the
sole and exclusive purpose of testing, reviewing, or promoting
Integrated Intel Products or for philanthropic or charitable reasons.
4.0 CONSULTING SERVICES: The rate for any consulting services provided by
Enlighten to Intel pursuant to this Agreement and lasting less than
thirty (30) consecutive calendar days shall be [___] per consultant per
day plus reasonable travel and lodging expenses (per Intel's standard
travel and lodging guidelines which shall be provided to Enlighten upon
request). For consulting services on engineering projects/tasks lasting
more than thirty (30) consecutive calendar days in duration, the rate
shall be [___] per consultant per month, plus reasonable travel and
lodging expenses (per Intel's standard travel and lodging guidelines
which shall be provided to Enlighten upon request). Additionally, upon
execution of this Agreement, Enlighten agrees, at Intel's option, to
supply Intel with two (2) consultants for a period of up to six (6)
months pursuant to a separate agreement between the Parties. Reasonable
travel includes Enlighten employees returning to their homes once a
week.
5.0 TRAINING: The rate for any training services provided by Enlighten to
Intel pursuant to this Agreement shall be [___] per instructor per day
for onsite training services, plus reasonable travel expenses (per
Intel's standard travel and lodging guidelines which shall be provided
to Enlighten upon request).
6.0 SUPPORT PENALTIES: Under the provisions of Exhibit D (provision A (2)),
if during any quarter, any Support penalties are assessed by Intel, each
such penalty shall result in a royalty reduction of that quarter's total
royalties due from Intel by [___]. Such Support penalties are cumulative
and remain in effect until resolved. Assessment of any Support penalties
will not affect Intel's right to receive and Enlighten's obligation to
provide continued Support and Updates as set forth in the Agreement.
7.0 MFC PRICE: Intel will receive price terms equal to or better than any
such price terms offered to any Enlighten customer for substantially the
same Enlighten products and/or the same services to the products and/or
services being provided to Intel. In connection with this provision,
Enlighten represents and warrants that Intel will receive Enlighten's
Most Favored Customer Price for all services under such designation and
if Intel has a reasonable cause to question such representation and
warranty, Intel will have a limited audit right to require Enlighten to
produce the applicable terms of such agreements with such other
customers upon Intel's request.
8.0 NO OTHER COMPENSATION: Except as specifically set forth in this Exhibit,
no other royalty, compensation, contingent payments or reimbursement
will be due or payable to or on behalf of Enlighten from Intel in
connection with any Enlighten Licensed Deliverable or Derivative Work
therefrom or the distribution thereof, or for any Support, Update, NRE,
or other services rendered hereunder.
9. INITIAL CUSTOM PRODUCT DEVELOPMENT AND INTEGRATION: Intel agrees to pay
Enlighten the sum of [___] for the custom product development and
integration work as set forth in the SOW. Payment shall be made [___]
which shall be due and payable upon Intel's acceptance of the beta
version of the Integrated Intel Product. Upon Intel's acceptance of the
final version of the Intel Integrated Product, Intel shall make [___].
(a) In the event that Enlighten's delivery of the beta version
of the Intel Integrated Product is more than [___] days late as
measured from the scheduled delivery date set forth in the SOW
(Exhibit H), the [___] payment due Enlighten as set forth above
shall be reduced [___]. In the event that such beta delivery is
more than [___] days late, the [___] payment shall be further
reduced [___]. Notwithstanding the foregoing, none of the
foregoing penalties shall be applicable if the failure of
Enlighten to meet the scheduled beta delivery date is directly
attributable to Intel's failure to provide the necessary Intel
technology to Enlighten. Below are listed the anticipated
delivery dates for the respective Intel Enabling Technology:
[___]
INTEL / ENLIGHTEN CONFIDENTIAL
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(b) If Enlighten's Beta Deliverables to Intel are delayed by
Intel's failure to deliver the necessary integrating technology
to Enlighten in accordance with the Intel delivery schedule as
noted in Section 9(a) above, or if Intel is unable to test the
Beta Deliverables for any reason, Intel shall not delay the
acceptance of the Beta Deliverables or the [___]. In such case,
Enlighten will notify Intel within five (5) working days if any
late delivery by Intel will prevent Enlighten from meeting the
Beta Deliverable date. Such notice shall clearly indicate which
of the specific portions of the Beta Deliverables are affected
by the late deliverable. Enlighten will use commercially
reasonable best efforts to reduce the impact of any such late
delivery by Intel, however, the entire Beta Deliverables will be
deemed accepted based on the acceptance of the portions of the
Beta Deliverables which are independent of the delayed portions
of Intel's integrating technology.
10. INITIAL PRODUCT VALIDATION AND INTEGRATION: Enlighten shall provide
Intel with engineering resources to complete the initial product
validation and integration for the Integrated Intel Product(s) pursuant
to the contracted support arrangements. Support prior to the Effective
Date of this agreement shall be considered a cost of gaining Intel as a
customer and no integration/validation payment will be made for the work
done prior to the Effective Date of this agreement.
INTEL / ENLIGHTEN CONFIDENTIAL
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EXHIBIT "D"
SUPPORT REQUIREMENTS
Support for Intel's product support team in issues relating to the
Enlighten Licensed Deliverables incorporated into Intel Products:
1. Intel takes first-line end-user calls. If Intel is unable to solve a
customer's problem, Enlighten will assist Intel by telephone. Such
assistance will be available to Intel continuously, at no cost, during
Enlighten's normal business hours. The escalation procedure for problems
which Intel is unable to resolve is as set forth in provision "A" below.
(A) Enlighten provides escalation path for Intel support
technicians. Note that all time frames listed below assume that
correction of the specified problem is possible within the
allowed time frame. Enlighten commits to meeting these time
frames. If a fix or workaround is not possible within the
allowed time frame, subject to Intel's approval as to timing,
Enlighten will work with Intel product support personnel to
provide an estimate of the time required to correct the problem
and will report regularly to Intel until corrective action is
complete. Penalties will be assessed based on failure to meet
initial response times and failure to show reasonable effort in
correcting problems.
(1) Problem severity and expected response time:
(a) If a [___] occurs in the Enlighten Deliverable,
Enlighten must respond within [___] with an
acknowledgment of the error and provide a fix or
workaround within [___] is one that results in a
user-down situation causing disruption of an
end-user's normal network.
(b) If an [___] occurs in the Enlighten Deliverable,
Enlighten must respond within [___] with an
acknowledgment of the error and provide a
solution within [___] is one that degrades the
basic services of the Intel product and for
which no convenient workaround is available.
(c) If a [___] occurs in the Enlighten Deliverable,
Enlighten must respond within [___] with an
acknowledgment of the error and provide a
solution within [___] is one that causes
end-users to initiate complaints to Intel
relating to incorrect or missing information.
(d) If a [___] occurs in or a [___] regarding an
Enlighten Deliverable, Enlighten must respond
within [___] with an acknowledgment of the [___]
and will categorize it within [___].
INTEL / ENLIGHTEN CONFIDENTIAL
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(e) The milestones below are based on the indicated
working days after the problem is reported to
Enlighten and all required supporting technical
data has been supplied to Enlighten. For
purposes of this provision, the required
supporting technical data shall be deemed to
consist of the following:
(i) A description of the error;
(ii) How to reproduce the error. If the error
consists of a documentation error, where
the error may be found;
(iii) A description of what is believed the
correct result should be; and,
(iv) The severity classification of the
problem discovered.
[___]
(2) Penalties: If Enlighten fails to meet any Support
milestones as set forth in this Provision (A), Enlighten
shall be penalized [___] of the quarterly royalties
which would normally have been due from Intel during
such quarter in which the failure to meet the support
milestone occurs and the respective penalty becomes
applicable. Penalties are per each unique technical
incident and continue to be applicable from quarter to
quarter until such time as Enlighten remedies the
incident giving rise to the penalty.
2. TERM OF SUPPORT OBLIGATIONS
Enlighten agrees to perform the support obligations set forth herein for
the term of the Agreement and for a period of [___] following any
termination thereof as set forth in Exhibit A, Section 8.3 unless the
term of this Exhibit "D' is otherwise extended by the Parties in
writing.
3. Future LICENSED SOFTWARE Requirements and Statements of Work:
During the term of this Agreement, Intel and Enlighten mutually agree to
meet on a periodic basis, but in no event less than semi annually, to
share product directions/roadmaps for their respective products (i.e.,
the Licensed Software and Integrated Intel Product(s)), channels, market
segments and marketing messaging to jointly assess where there may exist
differences in either customer requirements and/or roadmap timelines,
and to provide input to each other regarding development of each Party's
roadmaps/timelines to more effectively align the Licensed Software with
Intel's needs for Integrated Intel Product(s). For features and/or
functionality which are required by Intel for Intel's Integrated Intel
Products and which are not on Enlighten's roadmap for inclusion with the
Licensed Software, at Intel's request, Enlighten and Intel shall
mutually work to develop an appropriate SOW for the development and
inclusion of such features and/or functionality in the Licensed
Software. Engineering NRE rates for such SOWs shall be at the rates set
forth in Exhibit C. If Enlighten and Intel are unable to agree on any
significant aspect of a SOW (e.g., timeline, resources required, price)
for any features/functionality required by Intel which is not on
Enlighten's roadmap, such issues shall immediately be escalated to the
Executive Contacts below for resolution. If the Executive Contacts are
unable to reach
INTEL / ENLIGHTEN CONFIDENTIAL
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resolution, the matter may be further escalated. In the event that Intel
requests Enlighten to pull in the availability/inclusion of a specific
feature and/or functionality which is included on the Enlighten roadmap
for the Licensed Software, the Parties shall, on a case by case basis,
mutually agree upon an appropriate SOW, timeline, and NRE.
Intel Executive Contact: Enlighten Executive Contact:
-------------------------- ---------------------------
Printed Name Printed Name
-------------------------- ---------------------------
Title Title
-------------------------- ---------------------------
Phone Phone
-------------------------- ---------------------------
Fax Fax
4. ADDITIONAL ENGINEERING SUPPORT - Enlighten shall provide the following
additional support to Intel during the Agreement term. Unless expressly
specified otherwise, such support shall be at no additional cost to
Intel beyond that specified in section 4.9:
A. Support for the Initial Integration of the Licensed Deliverables
- Enlighten will provide Intel with all engineering support
necessary to perform the initial integration of the Licensed
Deliverables with the designated Intel Products as set forth in
Exhibit F - Statement of Work.
B. Support for Integration of future Licensed Deliverables releases
- Enlighten will provide Intel with engineering support to
integrate all future Licensed Deliverable releases during the
term of the Agreement and any renewal term thereof. Such future
releases shall be provided on a timely basis, and shall be
"integration enabled" to the same extent as the initial accepted
Licensed Deliverables for the Integrated Intel Product provided
pursuant to this Agreement and at or before such time that
Enlighten makes such release generally available to its other
customers.
C. Timely notification of errors and provision of maintenance
releases - Enlighten shall provide Intel with timely
notifications of any errors, anomalies or other such
irregularities with the Licensed Deliverables and will provide
Intel with all maintenance releases no later than such
maintenance releases are provided to Enlighten's other
customers. If available, Enlighten will provide Intel with their
"beta" maintenance releases to facilitate early issue
identification and testing with the Integrated Intel Products.
5. TRAINING If requested by Intel, for each major release of the Licensed
Deliverables, Enlighten shall provide Intel with up to one week of
training to Intel at the rates set forth in Exhibit C. The parties shall
mutually agree upon the timing and location of such training. At a
minimum, all such training shall be provided in a timeframe that will
support Intel's release of Intel Integrated Products or any Updates
thereto.
6. BETA DELIVERABLE ACCEPTANCE PROCESS - Unless otherwise specified in any
applicable Statement of Work, the following shall constitute the
Acceptance Process for any release of Beta Deliverables. The Parties
agree to jointly meet and collaborate on activities and processes which
will expedite the development and delivery of the Beta Deliverables so
as to meet the dates set forth in the Statement of Work. The provisions
governing Intel's Acceptance are as follows:
A. Initial Intel Response: On delivery by Enlighten of the Beta
Deliverable, Intel has [___] in which to reject or accept the
Enlighten Beta Deliverable. During this period, Intel, if
desired, will evaluate the Enlighten Beta Deliverable and test
it against the relevant Statement of Work, warranty or
specifications, if any. Any testing or acceptance of a Enlighten
Beta Deliverable by Intel, however, shall not
INTEL / ENLIGHTEN CONFIDENTIAL
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constitute a waiver of any right should Intel later discover any
defect, variation, nonconformity or breach with respect to such
Enlighten Beta Deliverable, and neither shall any testing or
acceptance by Intel prejudice any other Intel right or Enlighten
obligation hereunder, including those under indemnification as
discussed in Exhibit A, Section 7.
B. Initial Acceptance: If Intel accepts the Enlighten Beta
Deliverable, it will promptly notify Enlighten of its
acceptance. If Intel fails to accept or reject the Enlighten
Beta Deliverable within [___], the Enlighten Beta Deliverable is
deemed accepted.
C. Initial Rejection: If Intel, for any reason, rejects any
Enlighten Beta Deliverable, its rejection must be in writing and
must specify the nature of the defect.
D. Acceptance Criteria: In order to qualify for acceptance,
Enlighten must provide the Beta Deliverables according to the
criteria defined below and any other requirements contained in
SOW.
1. No known Critical problems remain unresolved;
2. A list of any known Important, Minor or Discretionary
problems with an action plan in place to resolve them;
and
3. The Deliverable is demonstrated to Intel representatives
to illustrate that it meets a satisfactory level of
functionality per the SOW.
4. If Enlighten's Beta Deliverables to Intel are delayed by
Intel's failure to deliver the necessary integrating
technology to Enlighten in accordance with the Intel
delivery schedule as noted in Exhibit C, Section 9(a),
or if Intel is unable to test the Beta Deliverables for
any reason, Intel shall not delay the acceptance of the
Beta Deliverables or [___]. In such case, Enlighten will
notify Intel within [___] if any late delivery by Intel
will prevent Enlighten from meeting the Beta Deliverable
date. Such notice shall clearly indicate which of the
the specific portions of the Beta Deliverables are
affected by the late deliverable. Enlighten will use
commercially reasonable best efforts to reduce the
impact of any such late delivery by Intel, however, the
entire Beta Deliverables will be deemed accepted based
on the acceptance of the portions of the Beta
Deliverables which are independent of the delayed
portions of Intel's integrating technology.
7. LICENSED DELIVERABLES ACCEPTANCE PROCESS - Unless otherwise specified in
any applicable Statement of Work, the following shall constitute the
Acceptance Process for any release of the Licensed Deliverables by
Intel. The Parties agree that Intel's acceptance of the Enlighten
Deliverables is a material condition precedent to Intel's obligations
under this Agreement. The provisions governing Intel's Acceptance are as
follows:
A. Initial Intel Response: On receipt by Intel of any Enlighten
Licensed Deliverable, Intel has [___] in which to reject or
accept the Enlighten Licensed Deliverable. During this period,
Intel will evaluate the Enlighten Licensed Deliverable and test
it against the relevant Statement of Work, warranty or
specifications, if any. In the case of Updates, Intel's
acceptance remains in Intel's sole discretion. Any testing or
acceptance of a Enlighten Licensed Deliverable by Intel,
however, shall not constitute a waiver of any right should Intel
later discover any defect, variation, nonconformity or breach
with respect to such Enlighten Licensed Deliverable, and neither
shall any testing or acceptance by Intel prejudice any other
Intel right or Enlighten obligation hereunder, including those
under indemnification as discussed in Exhibit A, Section 7.
B. Initial Acceptance: If Intel accepts the Enlighten Licensed
Deliverable, it will promptly notify Enlighten of its
acceptance. If Intel fails to accept or reject the
INTEL / ENLIGHTEN CONFIDENTIAL
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<PAGE> 20
Enlighten Deliverable within [___], the Enlighten Licensed
Deliverable is deemed accepted.
C. Initial Rejection: If Intel, for any reason, rejects any
Enlighten Licensed Deliverable, its rejection must be in writing
and must specify the nature of the defect.
D. Intent To Correct: If Intel provides Enlighten with written
notice of rejection, Enlighten must respond to Intel within
[___] of receiving that notice by communicating its intent to
correct the Enlighten Deliverable. If Enlighten fails to
indicate such intent, Enlighten will be deemed to be in breach
of the Agreement.
E. Acceptance Criteria: In order to qualify for acceptance,
Enlighten must provide the Licensed Deliverables according to
the criteria defined below and any other requirements contained
in SOW.
1. No known Critical or Important problems remain
unresolved;
2. A list of any known Minor problems with an action plan
in place to resolve them; and
3. The Licensed Deliverables are demonstrated to Intel
representatives to illustrate high quality per the
functionality of the SOW
F. Enlighten's Cure: After providing notice to Intel of its intent
to correct the rejected Enlighten Deliverable, Enlighten has
[___] from the date of its receipt of Intel's notice of initial
rejection to correct the Enlighten Licensed Deliverable and to
submit the corrected version to Intel for acceptance under the
provisions set forth in this Exhibit D, Section 6. Any
resubmission of a Enlighten Licensed Deliverable by Enlighten
must be made in good faith and must evidence substantial
directed efforts to correct Intel's identified basis of the
defect.
G. Enlighten's Failure To Cure: If at the end of the [___] period,
Enlighten has failed to cure the defect in the Enlighten
Licensed Deliverables and has failed to show reasonable effort
to cure or has failed to secure an executed modification of the
Statement of Work from Intel, warranty or specification for that
Enlighten Licensed Deliverable, Intel, at its sole discretion,
may terminate this Agreement under the provisions of Exhibit A,
Section 8 or may send Intel engineering personnel to Enlighten
where Enlighten shall provide such Intel personnel with access
to the Licensed Deliverable Source Code to assist Enlighten with
its efforts to cure the defect. If Intel accesses the Source
Code, then Intel will receive the Source Code License described
in Exhibit A, Section 2, including the Object Code distribution
rights to the Derivative Work which was the subject of the
Statement of Work, warranty or specification. In such event,
Intel must complete a substantial majority of the work described
in the Statement of Work, warranty or specification. If Intel
fails to complete a substantial majority of work, then Intel
shall receive no license to Enlighten's Intellectual Property
Rights in the Enlighten Deliverables from which the Derivative
Work was created.
INTEL / ENLIGHTEN CONFIDENTIAL
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EXHIBIT "E"
CERTIFICATE OF ORIGINALITY
This questionnaire must be completed by the company official furnishing a
software material (program product or offering and related documentation, or
other software material) for Intel.
One questionnaire can cover one complete product, even if that product includes
multiple modules. However, a separate questionnaire must be completed for the
code and another for its related documentation (if any).
Please do not leave any questions blank. Write "not applicable" or "N/A" if a
question is not relevant to the furnished software material.
1. Name of the software material (provide complete identification,
including version, release and modification numbers for programs and
documentation):
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2. Was the software material or any portion thereof written by any Party
other than Enlighten, or Enlighten's employees working within their job
assignment?
Yes X No
--- ---
If yes, provide the following information:
(a) Indicate if the whole software material or only a portion
thereof was written by such Party, and identify such portion:
[___]
(b) Specify for each involved Party:
[___]
(iv) If the Party is a company, how did it acquire title to
the software material (e.g., software material was
written by company's employees as part of their job
assignment)?
In both instances the products were developed by the
company's employees within the scope of their employment
with each respective company.
(v) If the Party is an individual, did s/he create the
software material while employed by or under contractual
relationship with another Party?
Yes No X
----- -----
If Yes, provide name and address of the other Party and
explain the nature of the obligations: N/A
(c) How did Enlighten acquire title to the software material written
by the other Party?
Both parties were acquired for a combination of cash and
royalties based upon product revenue. As of this writing,
both parties have been fully paid for the
1 Intel Confidential
<PAGE> 22
products and there are no future commitments for royalties or
any other remuneration to either party.
3. Was the software material or any portion thereof derived from any third
party's pre-existing materials?
Yes No X
----- -----
If yes, provide the following information for each of the pre-existing
materials:
(a) Name of the materials:
N/A
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(b) Owner:
N/A
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(c) How did Enlighten get the right to use the pre-existing
material(s)?
N/A
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
4. Identify below, or in an attachment, any other circumstances which might
affect Intel's ability to reproduce and market this software product,
including:
(a) Confidentiality or trade secrecy of pre-existing materials:
N/A
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(b) Known or possible royalty obligations to others:
N/A
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(c) Pre-existing materials developed for another Party or customer
(including government) where Enlighten may not have retained
full rights to the material:
N/A
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(d) Materials acquired from a person or company possibly not having
title to them:
N/A
----------------------------------------------------------------
----------------------------------------------------------------
----------------------------------------------------------------
(e) Other circumstances:
N/A
----------------------------------------------------------------
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INTEL / ENLIGHTEN CONFIDENTIAL
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COMPANY
- --------------------------------
Signature
- --------------------------------
Printed Name
- --------------------------------
Title
- --------------------------------
Date
INTEL / ENLIGHTEN CONFIDENTIAL
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<PAGE> 24
EXHIBIT F
[___]
INTEL / ENLIGHTEN CONFIDENTIAL
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EXHIBIT H
SOURCE CODE PROVISIONS
This Exhibit H is intended to be part of the Software License and Development
Agreement between Enlighten and Intel ("Agreement"). Within thirty (30) days
from the Effective Date of this Agreement, Enlighten and Intel shall execute the
Escrow Agreement set forth below with Data Securities International, Inc. In the
event of any conflict between the terms of the Escrow Agreement and those of the
Agreement, those of the Agreement will control.
THIS AGREEMENT ("Escrow Agreement") is executed as of this _________ day
of __________________, 1999 by and among Enlighten Software Solutions,
Inc. ("Enlighten"), Intel Corporation ("Reseller"), and Data Securities
International, Inc., ("Escrow Agent"), as Escrow Agent. The effective
date of this Escrow Agreement shall be the date last signed below (the
"Effective Date").
WHEREAS Enlighten and Reseller have entered into a Software Development
and License Agreement # 1308605 dated October 15, 1999 thereto
(collectively, the "Agreement") pursuant to which Enlighten has licensed
to Reseller the right to distribute certain Deliverables (as defined in
the Agreement and referred to herein as the "Software") and related
materials for a certain period of time;
WHEREAS the Agreement requires Enlighten and Reseller to enter into an Escrow
Agreement with an escrow agent chosen by Enlighten which provides for
Enlighten's deposit of one copy of the source code of Software (the "Source
Code"), as modified from time to time in accordance with the terms of the
Agreement. The Agreement provides that, under circumstances to be specified in
this Escrow Agreement, Reseller may obtain the escrowed Source Code from the
Escrow Agent solely for the purpose of making modifications, performing
maintenance, providing support to end user customers, or making bug fixes, as
applicable;
WHEREAS Enlighten wishes to insure that development, maintenance and support for
Enlighten's Software, as modified from time to time in accordance with the terms
of the Agreement are available upon the occurrence of an Escrow Event (as
defined in the Agreement); and
WHEREAS Escrow Agent is in the business of providing third party software escrow
protection by storing, retaining and allowing limited access to proprietary
technology, related media and materials.
NOW, THEREFORE, in consideration of the promises and mutual covenants contained
herein, and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties agree as follows:
1. DEPOSIT OF DOCUMENTATION
INTEL / ENLIGHTEN CONFIDENTIAL
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1.1 The term "Source Code" as used in this Escrow Agreement means
the source code, in modifiable form, in human readable format
that will enable a third party programmer skilled in the art to
be able to modify, maintain or enhance the Software without
further assistance or references to other materials.
1.2 Enlighten will place each new release of Software into an escrow
account. Reseller's access to such source and object code will
be allowed only after an Escrow Event has occurred. Cost of
Software Escrow to be borne by Reseller.
1.3 The term "Deposit" as used in this Escrow Agreement means the
Source Code deposited with Escrow Agent by Enlighten pursuant to
this Escrow Agreement.
2. REVISIONS AND MAINTENANCE
2.1 Enlighten agrees to deposit with Escrow Agent a copy of all new versions
of the Source Code prepared by Enlighten within forty-five (45) business
days after such new versions are made available to the general public by
Enlighten. Such revisions shall be deposited in a sealed package
certified by an authorized officer of Enlighten to contain a complete
copy of such new versions.
2.2 Escrow Agent shall acknowledge delivery of new versions hereunder by
sending written acknowledgment thereof to both Enlighten and Reseller.
3. STORAGE AND SECURITY
3.1 Escrow Agent shall act as custodian of the Deposit until the escrow is
terminated pursuant to Section 11 ("Termination") of this Escrow
Agreement. Escrow Agent shall establish, under its control, a secure
receptacle for the purpose of storing the Deposit.
3.2 The Deposit shall remain the exclusive property of the Enlighten,
subject only to the licenses provided in this Escrow Agreement.
3.3 Escrow Agent shall not divulge, disclose or otherwise make available the
Deposit to any parties other than those persons duly authorized in
writing by a competent officer of Enlighten, except as provided in this
Escrow Agreement.
3.4 Escrow Agent shall not permit any person access to the Deposit except as
may be necessary for Escrow Agent's authorized representatives to
perform under this Escrow Agreement.
3.5 Access to the Deposit shall not be granted without compliance with all
security and identification procedures instituted by Escrow Agent.
INTEL / ENLIGHTEN CONFIDENTIAL
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<PAGE> 27
3.6 Escrow Agent shall have no obligation or responsibility to verify or
determine that the Deposit does, in fact, consist of those items which
Enlighten is obligated to deliver, under any agreement, and Escrow Agent
shall bear no responsibility whatsoever to determine the existence,
relevance, completeness, currency, or accuracy of the Deposit.
3.7 Escrow Agent's sole responsibility shall be to accept, store and deliver
the Deposit, in accordance with the terms and conditions of this Escrow
Agreement.
3.8 If any of the Deposit shall be attached, garnished or levied upon
pursuant to an order of court, or the delivery thereof shall be stayed
or enjoined by an order of court, or any other order, judgment or decree
shall be made or entered by any court affecting the relevant Deposit or
any portion thereof, Escrow Agent is hereby expressly authorized in its
sole discretion to obey and comply with all orders, judgments or decrees
so entered or issued by any court, without the necessity of inquiring
whether such court had jurisdiction, and in case Escrow Agent obeys or
complies with any such order, judgment or decree, Escrow Agent shall not
be liable to Enlighten or any third party by reason of such compliance,
notwithstanding that such order, judgment or decree may subsequently be
reversed, modified or vacated.
4. RELEASE OF DEPOSIT
4.1 Upon the occurrence of any Escrow Event, Reseller may deliver to Escrow
Agent a written notice of such Escrow Event (a "Notice"), and Escrow
Agent shall provide a copy of such Notice to Enlighten within one (1)
business day of receipt from Reseller. Unless Enlighten shall have
provided Contrary Instructions (as defined below) to Escrow Agent within
five (5) business days after receipt of Escrow Agent's notice, the
relevant Deposit shall be delivered to Reseller by Escrow Agent within
the next five (5) business days following the end of such five (5)
business day period. Such delivery of the Source Code will terminate all
duties and obligations of Escrow Agent to Enlighten and Reseller with
respect to the Source Code so delivered; provided that if Enlighten
cures the Escrow Event to the reasonable satisfaction of Reseller within
sixty (60) days of the occurrence of the Escrow Event, then Reseller
shall return the Source Code to Escrow Agent for retention under this
Agreement, and Reseller shall have no further right to use such Source
Code unless and until the occurrence of a subsequent Escrow Event.
4.2 "Contrary Instructions" for the purposes of this Escrow Agreement means
a notarized affidavit executed by an official of Enlighten stating that
the Escrow Event or Escrow Events specified in Reseller's Notice have
not occurred, or have been cured.
4.3 Upon timely receipt of such Contrary Instructions, Escrow Agent shall
not release the Deposit, but shall continue to store the Deposit until
otherwise directed by Reseller and Enlighten jointly, or until
resolution of the dispute pursuant to Section 5 ("Dispute Resolution")
of this Escrow Agreement, or by a court of competent jurisdiction.
5. DISPUTE RESOLUTION
INTEL / ENLIGHTEN CONFIDENTIAL
Page 7
<PAGE> 28
Enlighten and Reseller agree that if Contrary Instructions are timely
given by Enlighten pursuant to Section 4 ("Release of Deposit") hereof,
then Enlighten and Reseller shall submit their dispute regarding
Reseller's Notice to arbitration by a single arbitrator who is a member
of the American Arbitration Association, according to its rules and
regulations then in effect. Such arbitration shall take place in San
Mateo, California. The decision of the arbitrator shall be final and
binding upon the parties and enforceable in any court of competent
jurisdiction, and a copy of such decision shall be delivered immediately
to Enlighten, Reseller and Escrow Agent. The parties shall use their
best efforts to commence the arbitration proceeding within ten (10)
business days following delivery of the Contrary Instructions. The sole
question to be determined by the arbitrator shall be whether or not
there existed an Escrow Event at the time Reseller delivered the Notice
under Section 4 ("Release of Deposit"), and, if so, whether such Escrow
Event has been cured. If the arbitrator finds that an uncured Escrow
Event exists, Escrow Agent shall promptly deliver the Deposit to
Reseller. Depositions may be taken and discovery obtained in any such
arbitration proceedings in accordance with California Code of Civil
Procedure ("CCP") Sections 1283.05 and 1283.1. All fees and charges by
the American Arbitration Association and the reasonable attorneys' fees
and costs incurred by the prevailing party in the arbitration shall be
paid by the non prevailing party. Judgment upon the award rendered by
the arbitrator(s) may be entered into any court having jurisdiction
thereof. Notwithstanding the foregoing, either party shall have the
right to obtain a preliminary judgment on any equitable claim in any
court of competent jurisdiction, where such judgment is necessary to
preserve property or proprietary rights under this Escrow Agreement.
Such judgment shall remain effective as long as the terms of the
judgment so provide or until specifically superseded by the action of
the arbitrator(s) as provided above.
6. BANKRUPTCY
Enlighten and Reseller acknowledge that this Escrow Agreement is an
"agreement supplementary to" the Agreement as provided in Section 365(n)
of Title 11, United States Code (the "Bankruptcy Code"). Enlighten
acknowledges that if Enlighten as a debtor in possession or a trustee in
bankruptcy in a case under the Bankruptcy Code rejects the Agreement or
this Escrow Agreement, Reseller may elect to retain its rights under the
Agreement and this Escrow Agreement as provided in Section 365(n) of the
Bankruptcy Code. Upon written request of the Reseller to Enlighten or
the Bankruptcy Trustee, Enlighten or such Bankruptcy Trustee shall not
interfere with the rights of Reseller as provided in the Agreement and
this Escrow Agreement, including the right to obtain the Deposit from
Escrow Agent.
INTEL / ENLIGHTEN CONFIDENTIAL
Page 8
<PAGE> 29
7. ESCROW EVENTS
The term "Escrow Event" as used in this Escrow Agreement means (i) a
material breach by Enlighten of its support obligations under the
Agreement (to the extent such breach entitles Reseller to impose a
penalty pursuant to Exhibit D, Section 1A of the Agreement); (ii)
Enlighten ceases to exist; or (iii) Enlighten becomes insolvent or files
or has filed against it a petition in bankruptcy.
8. INDEMNIFICATION
Enlighten and Reseller jointly and severally agree to defend and
indemnify Escrow Agent and to hold Escrow Agent harmless from and
against any and all claims, actions and suits, whether groundless or
otherwise, and from and against any and all liabilities, losses,
damages, costs, charges, penalties, counsel fees, and any other expense
of any other nature, including, without limitation, settlement costs
incurred by Escrow Agent on account of any act or omission of Escrow
Agent, in respect of or with regard to this Escrow Agreement, except
insofar as such liabilities arise by reason of Escrow Agent's gross
negligence or willful misconduct.
9. LICENSE GRANT FOR USE OF SOURCE CODE; CONFIDENTIALITY
9.1 If, and only if, the Source Code is released to Reseller pursuant to
Section 4 ("Release of Deposit") hereof, Enlighten hereby grants
Reseller and its Personnel (as defined in the Agreement) the right to
use such Deposit solely for the purpose of making and distributing error
corrections, modifications, bug-fixes, and enhancements to the Software,
and performing maintenance and providing support to the Software, for
end user customers of Products (as defined in the Agreement) which
include Software. Reseller agrees that Enlighten shall own any such
error corrections, modifications, bug-fixes, and enhancements to the
Software created by Reseller in accordance with this Section 9.1, and
Reseller hereby does and will assign all right, title and interest in
such error corrections, modifications, bug-fixes, and enhancements to
the Software to Enlighten. Reseller further agrees to provide Enlighten
with a copy of each such error correction, modification, bug-fix, and
enhancement to the Software in source code form within sixty (60) days
of making such error correction, modification, bug-fix, or enhancement
to the Software available to an end user customer.
9.2 Reseller acknowledges and agrees that, in the event that Reseller
obtains the Source Code pursuant to the terms hereof, such Source Code
will be deemed "Confidential Information" under the terms of
Confidential Disclosure Agreement # __________dated ________ and
Supplement # ____________ dated ________ thereto (collectively, the
"CDA"), provided that, with respect to the Source Code, Reseller's
obligation of confidentiality will extend for a period of five (5) years
from the date Reseller obtains the Source Code.
9.3 The rights and obligations of this Section 9 ("License Grant for Use of
Source Code; confidentiality") shall survive any termination or
expiration of this Escrow Agreement.
10. RECORDS
INTEL / ENLIGHTEN CONFIDENTIAL
Page 9
<PAGE> 30
Escrow Agent agrees to keep complete written records of the activities
undertaken and materials prepared and delivered to Escrow Agent pursuant
to this Escrow Agreement. Enlighten and Reseller shall be entitled at
reasonable times during normal business hours and upon reasonable notice
to Escrow Agent during the term of this Escrow Agreement to inspect the
records of Escrow Agent with respect to the Source Code. Enlighten shall
be entitled upon reasonable notice to Escrow Agent and during normal
business hours to inspect the facilities of Escrow Agent with respect to
the physical status and condition of the Deposit.
11. TERMINATION
11.1 This Escrow Agreement shall terminate two (2) years after termination of
the Agreement. Upon such termination, except for termination as a result
of rejection of the Agreement in a bankruptcy case of Enlighten, Escrow
Agent shall return the Deposit to Enlighten after the payment of all
costs, fees and expenses due Escrow Agent.
11.2 Reseller and Enlighten may terminate this Escrow Agreement by mutual
written agreement, upon sixty (60) days written notice to Escrow Agent.
11.3 Escrow Agent reserves the right to resign as Escrow Agent upon sixty
(60) days prior written notice to Enlighten and Reseller. Upon
resignation, Escrow Agent shall return the Deposit to Enlighten only
after having received payment of its fees and costs pursuant to Section
13 ("Fees") of this Escrow Agreement.
11.4 In the event that the sixty (60) day notice period in Section 11.3
elapses without Escrow Agent having received payment from either
Enlighten or Reseller of the remaining fees due, Escrow Agent shall then
have the option, without further notice to either party, to terminate
the Escrow Agreement and to destroy the Deposit. If Escrow Agent
receives payment of the remaining fees due, the party paying the Escrow
Agent may arrange for a commercially recognized escrow agent to serve as
a successor Escrow Agent for the remainder of the term of this
Agreement, such escrow agent to agree in a signed writing to be bound by
the terms and conditions of this Agreement.
12. GOOD FAITH RELIANCE
Escrow Agent may rely and act upon any instruction, instrument, or
signature believed in good faith to be genuine, and may assume that any
person purporting to give any writing, notice, respect, advice, or
instruction in connection with or relating to this Escrow Agreement has
been duly authorized to do so.
13. FEES
13.1 In consideration of performing its functions as Escrow Agent, Escrow
Agent shall be compensated by Supplier as set forth in Exhibit H-1 ("Fee
Schedule"). The fees set forth in Exhibit H-1 ("Fee Schedule") will be
billed annually by Escrow Agent to Supplier. Reseller and Supplier will
equally share responsibility for and payment of any incremental expenses
INTEL / ENLIGHTEN CONFIDENTIAL
Page 10
<PAGE> 31
which may arise pursuant to the terms and conditions of this Escrow
Agreement.
13.2 The fees set forth in Exhibit H-1 ("Fee Schedule") are for Escrow
Agent's ordinary services as Escrow Agent. In the event Escrow Agent is
required to perform any additional or extraordinary services as a result
of being Escrow Agent, including intervention in any litigation or
proceeding, Escrow Agent shall receive reasonable compensation for such
services and be reimbursed for such costs incurred, including reasonable
attorneys' fees.
13.3 Escrow Agent shall be entitled to receive payment of all costs, fees and
expenses due it, prior to release of the Deposit.
14. ENTIRE AGREEMENT
This Escrow Agreement, including the Exhibits hereto, constitutes the
entire agreement among the parties regarding the subject matter hereof,
and shall supersede all previous and contemporaneous communications,
representations, understandings and agreement, either oral or written
between the parties. This Escrow Agreement is intended to be and shall
be treated as an agreement separate and distinct from the Agreement, the
parties acknowledging that Reseller has no substantial performance
obligation hereunder to Enlighten.
15. NOTICE
All notices required or permitted by this Escrow Agreement shall be
sufficiently served by mailing the same by certified or registered mail,
return receipt requested, to the parties at their respective addresses,
as follows:
(a) Escrow Agent:
Data Securities International, Inc.
ATTN: Contract Administration
9555 Chesapeake Drive, Ste. 200
San Diego, CA 92123
(b) Intel Corporation
2200 Mission College Blvd.
Santa Clara, CA 95052
Attn: Corporate Counsel
(c) Enlighten Software Solutions, Inc.:
999 Baker Way, Fifth Floor
San Mateo, CA 94404
Ph. (650) 578-0700
Fx. (650) 524-0118
INTEL / ENLIGHTEN CONFIDENTIAL
Page 11
<PAGE> 32
16. COUNTERPARTS
This Escrow Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which taken together
shall constitute one and the same instrument.
17. GOVERNING LAW
This Escrow Agreement shall be governed by and construed according to
the laws of the State of California, without regard to conflicts of laws
principles.
18. SEVERABILITY
In the event any of the provisions of this Escrow Agreement shall be
held by a court of competent jurisdiction to be contrary to any state or
federal law, the remaining provisions of this Escrow Agreement will
remain in full force and effect.
19. HEADINGS
The section headings in this Escrow Agreement do not form a part of it,
but are for convenience only and shall not limit or affect the meaning
of the provisions.
INTEL / ENLIGHTEN CONFIDENTIAL
Page 12
<PAGE> 33
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement on the date
last signed below.
for Enlighten Software Solutions, Inc.:
By:
------------------------------------------------
Name: David D. Parker
---------------------------------------------
Title: Chief Executive Officer, Enlighten Software
--------------------------------------------
Date: / / 1999
--------------------------------------------
for:
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
Date: / / 1999
---------------------------------------------
for Escrow Agent:
Data Securities, Inc.
By:
------------------------------------------------
Name:
----------------------------------------------
Title:
---------------------------------------------
Date: / / 1999
---------------------------------------------
INTEL / ENLIGHTEN CONFIDENTIAL
Page 13
<PAGE> 1
EXHIBIT 10.36
November 22, 1999
Mr. Bill Bradley
Englewood, CO 80110
Dear Bill:
I am pleased to offer you the position at Enlighten Software Solutions, Inc.
(the "Company") of President and Chief Executive Officer, commencing on January
1, 2000. Your compensation is outlined in Attachment A to this letter, which
will be paid in accordance with the Company's normal payroll procedures.
Continuing as an Enlighten Software Solutions employee, you will continue to
receive, in accordance with each applicable plan document, certain employee
benefits including: incentive stock options (200,000 options granted prior to
this date, 100,000 options granted as of this date in accordance with the Board
of Directors Unanimous Consent dated September 20, 1999, and additional options
may be granted annually), participation in the employee stock purchase plan,
medical insurance, dental insurance, 401(k) plan, an accrued 20 days paid
personal time off during each year of employment (to be used as vacation, sick
leave, etc.), plus paid public holidays recognized by the Company.
You should be aware that your employment with Enlighten Software Solutions is
for no specific period. As a result, you are free to resign at any time, for any
reason or no reason. Similarly, the Company is free to conclude its relationship
with you at any time, with or without cause. Termination benefits are outlined
in Attachment A to this letter.
In the event of any dispute or claim relating to or arising out of our
employment relationship, you and Enlighten Software Solutions agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Francisco, California,
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of Enlighten Software Solutions' trade secrets or proprietary information.
(a) You agree that, while you are an Enlighten Software Solutions employee, you
will not, directly or indirectly, work for, advise, consult, render services to
or invest directly or indirectly in any individual or entity (in any capacity)
which directly or indirectly engages in any business in which Enlighten Software
Solutions is engaged at the time of such work, advice, consultation, rendering
of services or investment. None of the forgoing shall restrict any direct or
indirect investments in any publicly traded company, provided such investment
does not exceed 5% of the company's total voting shares.
(b) You further agree that for a period of two (2) years after termination of
your employment with Enlighten Software Solutions, you will not, directly or
indirectly, hire, or in any other manner persuade an employee, dealer or
customer of the Company to discontinue that person's relationship with or to
Enlighten Software Solutions as an employee, dealer or customer, as the case may
be.
<PAGE> 2
Enlighten Software Solutions, Inc.
Page 2
(c) We both agree that: (i) the services to be rendered by you are special,
unique, and of an extraordinary character; (ii) because of the nature of the
business of Enlighten Software Solutions, and the types of information which you
will obtain with respect to the business of Enlighten Software Solutions, it
would be impractical or extremely difficult to determine actual damages in the
event of a breach of you promises in this letter; and (iii) resulting damages
would not adequately compensate Enlighten Software Solutions.
Accordingly, if you commit such a breach or threaten such a breach the Company
shall have the right to have the provisions of this agreement specifically
enforced by any court having equity jurisdiction without the posting of a bond
or other security, since such a breach or threatened breach would cause
irreparable injury to Enlighten Software Solutions.
(d) The above mentioned right is in addition to, and not in lieu of, any other
rights and remedies available to Enlighten Software Solutions under law or in
equity.
(e) This covenant shall be construed as a series of separate covenants, one for
each of the fifty-eight (58) counties in California, for each state in the
United States, and for each nation outside the United States.
To indicate your acceptance of Enlighten Software Solutions' offer, please sign
and date both letters in the space provided below and return them to me. This
letter, between you and Enlighten Software Solutions, sets forth the terms of
your employment with Enlighten Software Solutions and supersedes any prior
representations or agreements, whether written or oral. This letter may not be
modified or amended except by a written agreement, signed by Enlighten Software
Solutions and by you.
We look forward to working with you at Enlighten Software Solutions. Welcome
Aboard!
AGREED TO AND ACCEPTED AGREED TO AND ACCEPTED
- -------------------------------- --------------------------------
David D. Parker Bill Bradley
Chief Executive Officer and Director President and COO
Dated: / / Dated: / /
------- -------- ------- ------- -------- -------
<PAGE> 3
Enlighten Software Solutions, Inc.
Page 3
ATTACHMENT A
PRESIDENT AND CHIEF EXECUTIVE OFFICER
2000 COMPENSATION PROGRAM
This document defines the compensation program for the position of President and
Chief Executive Officer at Enlighten Software Solutions, Inc. The total targeted
compensation is made up of your base salary and quarterly bonuses.
COMPENSATION
1. Base Salary: Your base salary is $180,000 per year, this will be
paid through the regular semi-monthly company payroll at
$7,500.00 per pay period.
2. Quarterly Bonuses: For the year ending December 31, 2000, your
quarterly bonus program will be as follows:
a) Quarterly bonuses of $15,000 based upon accomplishment of
management objectives established by the Board of Directors and
payable 30 days after the end of the quarter;
b) Additional bonuses may be earned for extraordinary
performance at the discretion of the Compensation Committee of
the Board of Directors.
TERMINATION PROVISIONS
3. Benefits upon voluntary termination: In the event that you
voluntarily resign from you employment with the Company (unless
such resignation is for Good Reason), or in the event that your
employment terminates as a result of your death or disability,
you shall be entitled to no compensation or benefits from the
Company other than those earned through the date of you
termination.
4. Benefits upon other termination: You agree that your employment
is "at will" and may be terminated by the Company at any time,
with or without cause. In the event of the termination of your
employment by the Company for the reasons set forth below, you
shall be entitled to the following:
a) Termination for cause: If your employment is terminated by
the Company for the cause as defined below, you shall be
entitled to no compensation or benefits from the Company other
than those earned through the date of you termination.
For purpose of this Agreement, a termination "for cause" occurs
if you are terminated for any of the following reasons:
(i) theft, dishonesty, or falsification of any
employment or Company records;
(ii) violation of Confidentiality Agreement; or
(iii) any intentional act by you which causes material
loss, damage, or injury to the Company's property,
reputation, employees, or business;
<PAGE> 4
Enlighten Software Solutions, Inc.
Page 4
b) Termination for other than cause: If your employment is
terminated by the Company for any reason other than cause, you
shall be entitled to the following separation of benefits:
(i) a termination package equal to six (6) months of
your then current base salary, or $90,000, whichever is
greater. Such severance package shall be paid in three
equal installments, each due respectively within thirty
(30), sixty (60), and ninety (90) days of your
termination of employment with the Company;
(ii) certain stock options granted to you prior to your
termination date and not yet vested will be accelerated.
The number of shares equal to six (6) months of
accelerated vesting, or 42,000 shares, whichever is
greater.
c) Termination for good reason: If your employment is terminated
by you for good reason, you shall be entitled to the termination
package outlined in paragraph b) above.
For the purposes of this agreement, a termination "for good
reason" occurs if you terminate your employment as a result of
the Company, without your consent:
(i) reducing your salary or benefits, title, or
authority;
(ii) relocating you place of performance of services
outside a thirty (30) mile radius of San Mateo,
California; or
(iii) directing you to violate a reasonable and normal
code of business ethics so as to cause loss, damage, or
injury to your property or reputation, or the property
or reputation of clients or customers of the Company.
5. Termination following a change in control:
a) In the event of a Change in Control and your employment is
terminated by the Company or its successor within ninety (90)
days of such Change in Control, other than for cause, or you
terminate your employment because of a change in duties, you
shall be entitled to the following:
(i). a termination severance package equal to six (6)
months of your then current base salary, or $90,000,
whichever is greater. Such severance package shall be
payable within thirty (30) days of your termination of
employment with the Company.
(ii) For purposes of this Agreement a "Change of
Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change
do not retain, directly or indirectly, at least a
majority of the beneficiary interest in the voting stock
of the Company after such transaction or in which the
Company is not the surviving corporation. For purposes
of this Agreement an "Ownership Change" shall be deemed
to have occurred in the event any of the following
occurs with respect to the Company:
<PAGE> 5
(1) the direct or indirect sale or exchange by the
shareholders of the Company of more than fifty
percent (50%) of the stock of the Company;
(2) a merger or consolidation in which the Company
is a party;
(3) the sale, exchange, or transfer of all or
substantially all of the assets of the Company;
or
(4) a liquidation or dissolution of the Company.
6. Accelerated vesting following a change in control: In the event
of a Change in Control you shall be entitled to full vesting of
all stock options granted to you prior to November 22, 1999 and
shall not include any stock options granted to you on November
22, 1999.
7. Exclusive Remedy: Subject to paragraphs 3, 4, and 5 above, you
shall be entitled to no further compensation for any damage or
injury arising out of the termination of your employment by the
Company.
8. Successors and Assigns: This Agreement shall inure to the
benefit of and be binding upon the Company and its successors
and assigns. In view of the personal nature of the services to
be performed by you under this Agreement, you shall not have the
right to assign or transfer any of your rights, obligations, or
benefits under this Agreement.
<PAGE> 1
EXHIBIT 10.37
December 8, 1999
Mr. Stephen Giusti
Los Gatos, CA 95032
Dear Steve:
I am pleased to offer you a position with Enlighten Software Solutions, Inc.
(the "Company") as Vice President, Finance and Administration and Chief
Financial Officer, commencing on December 8, 1999. Your compensation is outlined
in Attachment A to this letter, which will be paid in accordance with the
Company's normal payroll procedures. Continuing as an Enlighten Software
Solutions employee, you will continue to receive, in accordance with each
applicable plan document, certain employee benefits including: incentive stock
options (40,000 options granted prior to this date, 20,000 options granted as of
this date in accordance with the Board of Directors Unanimous Consent dated
December 8, 1999, and additional options may be granted annually), participation
in the employee stock purchase plan, medical insurance, dental insurance, 401(k)
plan, an accrued 20 days paid personal time off during each year of employment
(to be used as vacation, sick leave, etc.), plus paid public holidays recognized
by the Company.
You should be aware that your employment with Enlighten Software Solutions is
for no specific period. As a result, you are free to resign at any time, for any
reason or no reason. Similarly, the Company is free to conclude its relationship
with you at any time, with or without cause. Termination benefits are outlined
in Attachment A to this letter.
In the event of any dispute or claim relating to or arising out of our
employment relationship, you and Enlighten Software Solutions agree that all
such disputes shall be fully and finally resolved by binding arbitration
conducted by the American Arbitration Association in San Francisco, California,
HOWEVER, we agree that this arbitration provision shall not apply to any
disputes or claims relating to or arising out of the misuse or misappropriation
of Enlighten Software Solutions' trade secrets or proprietary information.
(a) You agree that, while you are an Enlighten Software Solutions employee, you
will not, directly or indirectly, work for, advise, consult, render services to
or invest directly or indirectly in any individual or entity (in any capacity)
which directly or indirectly engages in any business in which Enlighten Software
Solutions is engaged at the time of such work, advice, consultation, rendering
of services or investment. None of the forgoing shall restrict any direct or
indirect investments in any publicly traded company, provided such investment
does not exceed 5% of the company's total voting shares.
(b) You further agree that for a period of two (2) years after termination of
your employment with Enlighten Software Solutions, you will not, directly or
indirectly, hire, or in any other manner persuade an employee, dealer or
customer of the Company to discontinue that person's relationship with or to
Enlighten Software Solutions as an employee, dealer or customer, as the case may
be.
<PAGE> 2
Enlighten Software Solutions, Inc.
Page 2
(c) We both agree that: (i) the services to be rendered by you are special,
unique, and of an extraordinary character; (ii) because of the nature of the
business of Enlighten Software Solutions, and the types of information which you
will obtain with respect to the business of Enlighten Software Solutions, it
would be impractical or extremely difficult to determine actual damages in the
event of a breach of you promises in this letter; and (iii) resulting damages
would not adequately compensate Enlighten Software Solutions.
Accordingly, if you commit such a breach or threaten such a breach the Company
shall have the right to have the provisions of this agreement specifically
enforced by any court having equity jurisdiction without the posting of a bond
or other security, since such a breach or threatened breach would cause
irreparable injury to Enlighten Software Solutions.
(d) The above mentioned right is an addition to, and not in lieu of, any other
rights and remedies available to Enlighten Software Solutions under law or in
equity.
(e) This covenant shall be construed as a series of separate covenants, one for
each of the fifty-eight (58) counties in California, for each state in the
United States, and for each nation outside the United States.
To indicate your acceptance of Enlighten Software Solutions' offer, please sign
and date both letters in the space provided below and return them to me. This
letter, between you and Enlighten Software Solutions, sets forth the terms of
your employment with Enlighten Software Solutions and supersedes any prior
representations or agreements, whether written or oral. This letter may not be
modified or amended except by a written agreement, signed by Enlighten Software
Solutions and by you.
We look forward to working with you at Enlighten Software Solutions.
AGREED TO AND ACCEPTED AGREED TO AND ACCEPTED
- -------------------------------- --------------------------------
Bill Bradley Stephen Giusti
President and CEO Controller and Acting CFO
Dated: / / Dated: / /
------- -------- ------- ------- -------- -------
<PAGE> 3
Enlighten Software Solutions, Inc.
Page 3
ATTACHMENT A
CONTROLLER
1999 COMPENSATION PROGRAM
This document defines the compensation program for the position of Controller at
Enlighten Software Solutions, Inc. The total targeted compensation is made up of
your base salary and quarterly bonuses.
COMPENSATION
1. Base Salary: Your base salary is $100,000 per year, this will be
paid through the regular semi-monthly company payroll at
$4,166.67 per pay period.
2. Quarterly Bonuses: For the year ending December 31, 1999, your
quarterly bonus program will be as follows:
a) Quarterly bonuses of $5,000.00 each calendar quarter based
upon MBO targets to be determined by the CEO.
b) Additional bonuses may be earned for extraordinary
performance at the discretion of the Compensation Committee of
the Board of Directors.
TERMINATION PROVISIONS
3. Benefits Upon Voluntary Termination: In the event that you
voluntarily resign from your employment with the Company (unless
such resignation is for Good Reason), or in the event that your
employment terminates as a result of your death or disability,
you shall be entitled to no compensation or benefits from the
Company other than those earned under paragraphs 1 and 2 above
through the date of your termination.
4. Termination Following a Change in Control:
a) In the event of a Change in Control and your employment is
terminated by the Company or its successor within ninety (90)
days of such Change in Control, other than for cause, or you
terminate your employment because of a change in duties, you
shall be entitled to the following:
(i). a termination severance package equal to six (6)
months of your then current base salary, or $50,000, whichever
is greater. Such severance package shall be payable within
thirty (30) days of your termination of employment with the
Company.
(ii) For purposes of this Agreement a "Change of
Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change do not
retain, directly or indirectly, at least a majority of the
<PAGE> 4
Enlighten Software Solutions, Inc.
Page 4
beneficiary interest in the voting stock of the Company after
such transaction or in which the Company is not the surviving
corporation. For purposes of this Agreement an "Ownership
Change" shall be deemed to have occurred in the event any of the
following occurs with respect to the Company:
(1) the direct or indirect sale or exchange by the
shareholders of the Company of more than fifty
percent (50%) of the stock of the Company;
(2) a merger or consolidation in which the Company
is a party;
(3) the sale, exchange, or transfer of all or
substantially all of the assets of the Company;
or
(4) a liquidation or dissolution of the Company.
5. Accelerated vesting following a change in control: In the event
of a Change in Control you shall be entitled to full vesting of
all stock options granted to you prior to December 31, 1999.
6. Exclusive Remedy: Subject to paragraph 4 above, you shall be
entitled to no further compensation for any damage or injury
arising out of the termination of your employment by the
Company.
7. Successors and Assigns: This Agreement shall inure to the
benefit of and be binding upon the Company and its successors
and assigns. In view of the personal nature of the services to
be performed by you under this Agreement, you shall not have the
right to assign or transfer any of your rights, obligations, or
benefits under this Agreement.
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Enlighten Software Solutions, Inc.:
We consent to incorporation by reference in the registration statement
(No.33-73588) on Form S-8 of Enlighten Software Solutions, Inc. of our report
dated February 4, 2000, relating to the consolidated balance sheets of Enlighten
Software Solutions, Inc. and subsidiary as of December 31, 1999 and 1998, and
the related consolidated statements of operations, shareholders' equity, and
cash flows for each of the years in the two-year period ended December 31,
1999,which report appears in the December 31, 1999, annual report on Form 10-KSB
of Enlighten Software Solutions, Inc.
/s/ KPMG LLP
Mountain View, California
March 27, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-KSB
FOR THE YEAR ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,045,600
<SECURITIES> 247,500
<RECEIVABLES> 1,335,500
<ALLOWANCES> 50,000
<INVENTORY> 0
<CURRENT-ASSETS> 2,639,500
<PP&E> 1,601,800
<DEPRECIATION> 1,199,100
<TOTAL-ASSETS> 3,562,700
<CURRENT-LIABILITIES> 594,400
<BONDS> 0
0
0
<COMMON> 8,410,400
<OTHER-SE> (5,442,100)
<TOTAL-LIABILITY-AND-EQUITY> 3,562,700
<SALES> 3,244,400
<TOTAL-REVENUES> 3,244,400
<CGS> 438,900
<TOTAL-COSTS> 438,900
<OTHER-EXPENSES> 4,938,100
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,962,700)
<INCOME-TAX> (10,400)
<INCOME-CONTINUING> (1,952,300)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,952,300)
<EPS-BASIC> (0.49)
<EPS-DILUTED> (0.49)
</TABLE>
